Antonio Garcia Zaballos is advisor to the Inter-American Development Bank. He has operated as a senior advisor on regulatory issues to numerous national regulatory authorities. Natalija Gelvanovska is head of networks and access division at the Communications Regulatory Authority of the Republic of Lithuania (RRT). An independent expert in regulatory matters, she is author of a number of reports on behalf of the ITU and RRT. The views expressed in this roundtable discussion do not necessarily represent the views of the RRT. Hugh Roberts is a UK-based independent telecoms strategist specialising in the areas of business strategy, market positioning and technology exploitation. He works closely with service providers, suppliers and vendors. Philippe Millet is chairman of the i3 Forum, which has been working with the GSMA and other industry bodies to encourage and accelerate an industry-wide transition to IP-based interconnections for all services.
Where do you expect IPX take-up to be greatest over the short-to-medium term, by market verticals and regions, and what commercial, operational and technical factors will drive its adoption – especially in making IPX an attractive model for carrier’s carriers and other players outside the mobile market?
Philippe Millet: In the short-to-medium term, we’re seeing the greatest interest in IPX among very large mobile operators and mobile groups. Some of these early adopters are looking to create their own “on-net” voice communities among group companies, while others want to access efficiencies from using one converged network for IP, voice and signalling services. At the other end of the spectrum, we’re also seeing interest in IPX from application providers, who like the idea of having increased control over application performance and the end-user experience.
For both of these segments, there’s a compelling value proposition even without a well-developed ecosystem. When combined with the number of carriers that have launched IPX offerings, we see a strong potential for a scenario where a group of compelling anchor early adopters can drive momentum towards IPX throughout the mobile ecosystem.
Antonio Garcia Zaballos: An IP-enabled NGN makes the bundling of services a common approach to competition among service providers. This change in commercial strategy is encouraged by the transformation underway in access and transport networks, which enable service convergence but at the same time force a review of the regulatory framework that is in place across the different National Regulatory Agencies (NRAs). NGN deployment cannot occur homogeneously across a country because economic and socio-demographic conditions vary.
We will see that telecoms operators may well find it attractive to deploy an NGN in highly-populated areas where adoption of NGN-enabled services is higher, but in rural or less populated areas, the deployment of an NGN may not make economic sense.
It is also important to consider that rising traffic volumes and broadband services (mobile and fixed) delivered over current telecoms networks will reach saturation unless operators complete their NGN deployments. Significant investment will therefore be required by network operators to upgrade and migrate their platforms, and those that own key infrastructures, such as fibre trunk lines, will have a competitive advantage. This means NRAs must act accordingly so that alternative operators and investments are encouraged.
Hugh Roberts: The question as to whether VoIP is a “voice” or a “data” service is polarising the world’s regulators. No one seems to have considered the reality that systems convergence makes either a “yes” or a “no” answer entirely irrelevant, just as the channel independence of service delivery in multi-play markets is increasingly making the distinctions based on delivery technology within service-oriented architecture (SOA) definition sets a nonsense from the customer perspective.
Which types of carrier are ideally placed to benefit from IPX, and what factors dictate whether they will likely participate as a provider or user of connectivity? Indeed, is IPX migration a given for carrier’s carriers, or are there viable alternatives for IP interconnection? If so, what are the opportunities and threats to the current business models of players that choose alternative migratory paths?
Both application and infrastructure providers need IPX or something similar to minimise systems integration costs, increase flexibility and permit the rapid roll-out of new services and service bundles.
Philippe Millet: The wholesale providers most ideally placed to benefit from IPX are those with both the traditional strengths of a carrier’s carrier – many relationships and interconnections with mobile operators and other providers for signalling and voice termination – and also a global MPLS backbone, which they will have most likely built out to serve an enterprise client base. That said, we’re still in the early stages of the adoption curve and waiting to see what the market will demand. We’re also waiting to discover what sort of partnership models we may see in the marketplace.
It is important to remember that IPX is just one of several possible models for IP interconnection. In the voice space, we in the i3 Forum have developed guidelines for interconnecting over public IP, private IP and IPX, and our members report customer demand and applications for all three models – something that isn’t likely to change any time soon.
Antonio Garcia Zaballos: There are three different operational layers within the interconnect model that will define the strategy of a network operator in relation to the adoption of IPX as a provider or user of connectivity: who manages the point of control; who manages the network capabilities; and who manages the services.
Depending on how regulatory measures, if any, are applied at these three operational layers, the conventional value chain recognised by the NRA in question might be altered as a consequence of new types of user agent (ie any software that retrieves, renders and supports interaction with internet-based applications) being introduced. The result is that interconnection relationships between the IPX service provider and its customers might change at any time, thus the debate on net neutrality could well become more extensive.
Core regulatory concerns in developing national IP interconnection frameworks are said to be technical interoperability, points of interconnection and interconnection charging. What do you see as being the key challenges within these areas, how are they being addressed, and what progress is needed to ensure a uniform approach across national regulators?
Antonio Garcia Zaballos: The IP framework has a clear impact on market definition. The main challenge for regulators is therefore to adjust the regulatory policies to the existing competition framework. Identifying the control points will be key, since the operator that manages these points could execute some market power. For example, this situation occurs when a service provider is able to execute control over the network’s capabilities, which goes back to the debate of net neutrality and open access.
For regulators, the other major challenge is deciding to what extent a new service delivered via IP technology can be considered an emerging service and and therefore not belonging to any existing market definition. The debate on structural/functional separation might also come to the fore.
Natalija Gelvanovska: The regulator’s key role is to provide an open forum to discuss both the aims and requirements of all players, ensuring that relevant issues are identified, described, agreed and resolved in a timely manner. The role of the industry is to dedicate resources for these activities. The result of this work should be an effective regulatory framework that is both timely and adaptable to national circumstances.
In the context of ensuring a uniform approach across NRAs, there are a number of regulatory concerns (technical interoperability, open access, etc) that may be addressed during the standardisation process. Areas where standardisation is needed to achieve socially desirable objectives and increase competition should be identified in advance. The active participation of regulators in such work is essential. The role of the industry is to consider identified regulatory requirements from the very beginning of the standardisation process. In my opinion, regulators should be more active in defining these requirements.
Hugh Roberts: There are two factors that aggravate the evolution of IP standards at the network layer from a business perspective. The first is the lack of the concomitant development of customer data management methodologies that will allow operators to take full advantage of the convergent infrastructure environment which is slowly being created. One danger for evolving IP exchange standards is that as all-IP networks become ubiquitous, far too high a percentage of the overall cost of deployment will be regulatory compliance with “artifactual” data constructs.
The second challenge is that as services become increasingly significant revenue drivers for telcos, the measurement of QoS becomes increasingly subjective and less dependent on network-derived metrics. While these will continue to provide a base line for fault reporting and underpin SLA management for enterprise and wholesale customers, managing customer perspectives of quality in price-sensitive environments becomes an entirely different challenge. The danger here is that service providers will forget the relevance of customer experience in determining competitive success in favour of adherence to a set of network-derived QoS processes as a part of IP exchange standards.
There are concerns that if interconnection pricing at an IPX is not regulated or made public, it will not be possible to judge whether its prices are fair or sustainable to smaller operators and/or service providers. In addition, some commentators believe there is a danger of a model such as IPX simply replicating TDM bilateral and direct interconnection models in an IP environment, potentially creating a private club that is not so open to innovative players with disruptive business models. How can industry bodies and players collaborate to ensure a fair and open operating environment that is accessible to all?
Natalija Gelvanovska: Interconnection under IPX agreements is public, standard and widely accessible. Nevertheless, it does indeed exclude the settlement rates agreed. If prices are fair, why are they not disclosed publicly? How can we discuss the fairness of interconnection conditions without this information? Insufficient transparency is the basic concern here. Industry bodies and players should firstly collaborate in order to ensure the transparency of all the conditions of interconnection to IPX. This measure may potentially resolve any suspicions of discrimination related to IPX interconnection. The second issue is the lack of competitive international interconnection alternatives to the IPX model for mobile operators. In cases where there are no functionally comparable alternatives, operators may have no other option than to adopt IPX. It is therefore essential that industry bodies and players agree on and ensure efficient and transparent mechanisms to review the provisions of standard interconnection agreements in an open and nondiscriminatory environment.
Antonio Garcia Zaballos: So far, NRAs seem to fail to realise the impact of their decisions on financial markets. Indeed, we have seen in the past how new regulation impacts the stock price and, subsequently, the market capitalisation of the telecoms companies. It is therefore time to include financial impact considerations within regulatory policy and ensure a strategic dimension to regulation, thus encouraging the entrance of new alternative network operators.
A major area in this respect is that of the regulatory methodology applied to ensure fair pricing policies among service providers. The convergence of services that IP technology enables means that traditional costing models – either top down or bottom up – may need to be adjusted. Indeed, there are several differences between telecoms and the internet in respect of the pricing policies applied for settlement. ISPs agree commercial terms (peering or transit, settlement or settlement-free) depending on their market position. However, traditional telecoms operators apply the same bilateral model to all interconnect agreements regardless of their size and traffic volume. Regulators therefore need to decide whether the service providers that are internet-based offer services equivalent to those offered by the traditional telecoms operators and, with this in mind, consider whether they should pay the same access fees as other operators.
Philippe Millet: As pointed out earlier, we foresee that IPX will be one interconnection model among several within the IP voice ecosystem.
