Voice Over the Internet Protocol: Voice Over the Internet Protocol: Cultural, Technological, Business and Cultural, Technological, Business and
Policy ChallengesPolicy Challenges
A A Presentation at the Beijing University of Post and Telecommunications
December, 2004
Rob Frieden, Pioneers Chair and Professor of Telecommunications Penn State University
[email protected]; http://www.personal.psu.edu/faculty/r/m/rmf5/
Pre-Convergence World View Pre-Convergence World View source: Kevin Werbachsource: Kevin Werbach
Telephony
Data
Cable
Broadcast
Wireless
Current World View Current World View source: Kevin Werbachsource: Kevin Werbach
Telephony
DataCable
Broadcast
Wireless
Current RealityCurrent Reality source: Kevin Werbachsource: Kevin Werbach
DataVoice
Web
Video
File Transfer
Content
Cable
Wire
less
Satellit
e
Fiber
Devices
Apps
Users
The Main PointsThe Main Points
Converging technologies and markets prevent effective Converging technologies and markets prevent effective regulation and fair competition based on fixed definitions. regulation and fair competition based on fixed definitions.
National Regulatory Agencies (“NRAs”) cannot assign new National Regulatory Agencies (“NRAs”) cannot assign new and convergent technologies such as Internet access and and convergent technologies such as Internet access and Voice Over the Internet Protocol (“VoIP”) into a single Voice Over the Internet Protocol (“VoIP”) into a single regulatory classification.regulatory classification.
In a future Internet-based telecommunications environment, In a future Internet-based telecommunications environment, new, horizontal regulations based on current market new, horizontal regulations based on current market conditions should replace old, “top-down” “legacy” conditions should replace old, “top-down” “legacy” regulations.regulations.
Currently, Many National Regulations Fall Into Vertical “Silos”
Title II Title III Title III Title VI
VOICE
WirelineTelephony
VOICE
WirelessTelephony
VIDEO
CableTelevision
AUDIO /VIDEO
BroadcastRadio / TV
Silo-Based Regulation Can’t Work in an Internet-Centric Environment
A digital environment makes it possible to send, receive and process bits A digital environment makes it possible to send, receive and process bits that translate into many different types of services that previously that translate into many different types of services that previously consumers had to receive via different media. consumers had to receive via different media.
In an increasingly converging, Internet-centric environment, users may In an increasingly converging, Internet-centric environment, users may employ a single access platform to provide many different services. employ a single access platform to provide many different services.
Silo-based regulation shoehorns anything that fits within a service Silo-based regulation shoehorns anything that fits within a service definition into a specific “legacy” regulatory regime regardless of changed definition into a specific “legacy” regulatory regime regardless of changed competitive conditions.competitive conditions.
The existing definition driven regulatory system forces NRAs and The existing definition driven regulatory system forces NRAs and reviewing courts to classify services into mutually exclusive regulatory reviewing courts to classify services into mutually exclusive regulatory silos regardless of whether the service functionally provides a competitive silos regardless of whether the service functionally provides a competitive alternative to other services similarly defined, or to other services fitting alternative to other services similarly defined, or to other services fitting into a different definition.into a different definition.
Horizontal Technical Layers
Content Rides on the Top Layer asContent Rides on the Top Layer as
Text, Speech, Music, Pictures, Video, etc.
Utility Protocol Layer
Transport Layer
Network Layer
Link Layer
HTTP, SMTP, FTP, DNS, etc.
TCP, UDP
IP, ICMP, IGMP
Interface to the Physical Layer
Physical LayerEthernet, Modem, DSL, Cable, T1, Fiber Optics, Satellite, Bluetooth , Wi-Fi, etc.
Application / Services Web Browsers, Email Client Software, MP3 Software, Word Processors, etc.
.
Logical / Code Layer
TCP / IP Protocol Suite
The Layered Regulation Alternative
Calibrate regulation based on the current degree of competition using a Calibrate regulation based on the current degree of competition using a 7- layered technological model used for conceptualizing 7- layered technological model used for conceptualizing telecommunications and information networks into hierarchy of telecommunications and information networks into hierarchy of functions. functions.
At the bottom on this model lie the physical links, e.g., cables and At the bottom on this model lie the physical links, e.g., cables and wireless, and the transport technologies used to provide the transmission wireless, and the transport technologies used to provide the transmission of information, communications and entertainment (“ICE”) services. of information, communications and entertainment (“ICE”) services.
In the middle lie several layers that identify and manage the delivery of In the middle lie several layers that identify and manage the delivery of ICE traffic, e.g., the Internet Protocol, which provides an addressing ICE traffic, e.g., the Internet Protocol, which provides an addressing system for identifying traffic senders and recipients, and the system for identifying traffic senders and recipients, and the Transmission Control Protocol, which manages the complete link of Transmission Control Protocol, which manages the complete link of sender and recipient via different networks.sender and recipient via different networks.
At the top of the layered stack are software applications that provide the At the top of the layered stack are software applications that provide the intelligence needed to shape the link into one that provides electronic intelligence needed to shape the link into one that provides electronic mail, telephony, and a user-friendly multi-media interface for access to a mail, telephony, and a user-friendly multi-media interface for access to a variety of ICE content.variety of ICE content.
Problems With the Layered Regulation ApproachProblems With the Layered Regulation Approach
Some beneficiaries of light or non-regulation, based on Some beneficiaries of light or non-regulation, based on applicable service definitions, face the likelihood of applicable service definitions, face the likelihood of regulation, even if they later can secure forbearance of their regulation, even if they later can secure forbearance of their new regulated status.new regulated status.
In an age of technological convergence, many stakeholders In an age of technological convergence, many stakeholders seek to serve as many markets as possible and provide seek to serve as many markets as possible and provide services that seamlessly integrate vertically through many services that seamlessly integrate vertically through many layers; andlayers; and
Vertically integrated operators have incentives to favor Vertically integrated operators have incentives to favor affiliated ventures and to disadvantage competitors.affiliated ventures and to disadvantage competitors.
National Regulatory Authorities Could Calibrate Regulation as a Function of Competitiveness in Each
Layer
Content Transactions Layer: Competitive, therefore no regulation
Applications Layer:
Competitive, therefore no regulation
Logical Network Layer:Likely to be competitive
Physical Network Layer:
May not be competitive and may require regulation
Partial Solution to Problems With Partial Solution to Problems With the Layered Regulation Approachthe Layered Regulation Approach
Require operators to conduct business in single, discrete layers Require operators to conduct business in single, discrete layers and to separate one layer’s activity from others that the same and to separate one layer’s activity from others that the same operator pursues.operator pursues.
In lieu of a separate subsidiary requirement, use accounting and In lieu of a separate subsidiary requirement, use accounting and auditing procedures to provide some degree of segmentation auditing procedures to provide some degree of segmentation between various layered services while also providing some after between various layered services while also providing some after the fact detection of discriminatory and anticompetitive conduct.the fact detection of discriminatory and anticompetitive conduct.
Reduce or eliminate regulatory requirements on a company-Reduce or eliminate regulatory requirements on a company-specific public interest assessment, or for an entire layer where specific public interest assessment, or for an entire layer where competition thrives. competition thrives.
Case Study: Internet TelephonyCase Study: Internet Telephony
Many NRAs consider non-commercial, computer-to-computer Many NRAs consider non-commercial, computer-to-computer Internet telephony an information service.Internet telephony an information service.
These NRAs want to insulate the Internet, including Internet-These NRAs want to insulate the Internet, including Internet-mediated telephony, from “legacy” telecommunications service mediated telephony, from “legacy” telecommunications service regulation.regulation.
However VoIP impacts universal service funding, emergency However VoIP impacts universal service funding, emergency services, access by people with disabilities and homeland services, access by people with disabilities and homeland security.security.
The layered approach recognizes that VoIP is a software The layered approach recognizes that VoIP is a software application on top of a broadband link: don’t regulate the application on top of a broadband link: don’t regulate the software application, but don’t ignore the possible need to software application, but don’t ignore the possible need to regulate the providers of the broadband link as different layers regulate the providers of the broadband link as different layers may have vastly different marketplace conditions.may have vastly different marketplace conditions.
The Layers Concept and VoIP source: Robert Cannon
TelecommunicationsVoice
Transport
Voice
Transport
TCPIP
Apps
Information Service
Transport
TCPIP
AppsVoice
Internet Voice over IP
Traditional Telecom
Convergence Requires Inter-cultural CompetencyBellheads Netheads Contentheads
Slogan The System is the Solution
The Net Rules Content Rules
Mindset Traditional; conformist Iconoclastic; nonconformist
Creative
Political Philosophy Conservative Libertarian Liberal
Business Strength Effective mgm’t of large organizations;
Aggressive; entrepreneurial
Creative
Business Weakness Lack of innovation; nimbleness
Lack of follow through; appreciation for laws, limitations
Lack of business fundamentals
Favorite Locale Company HQ Silicon Valley Hollywood
Technology Adoption Mainstream Early Adopters Early Adopters
Gets Excited About Retained earnings and profit
Killer Apps and the Next Best Thing
Movie treatments; ratings; box office receipts
Attitude About Regulation
A necessary evil that can be exploited for private gain
Disdain Upset when it affects creative expression
Favorite Car Cadillac BMW Porsche
Business Implications of VoIP Business Implications of VoIP
Moore’s Law Applies to Both Information and Moore’s Law Applies to Both Information and Telecommunications Technologies.Telecommunications Technologies.
Digitization and “Killer” Applications are Disruptive Digitization and “Killer” Applications are Disruptive Technologies that Ruin Business Plans.Technologies that Ruin Business Plans.
On the Other Hand Technological Innovations Have to On the Other Hand Technological Innovations Have to Enhance the Value Proposition as Faster, Better, Smarter, Enhance the Value Proposition as Faster, Better, Smarter, Cheaper and More Convenient. Cheaper and More Convenient.
Convergence Can Be Difficult to Implement and Exploit.Convergence Can Be Difficult to Implement and Exploit. Most Installed Technologies Still Have High Sunk Costs.Most Installed Technologies Still Have High Sunk Costs. Irrational Exuberance Can Create a Bubble and Irrational Exuberance Can Create a Bubble and
Bandwagon Mentality.Bandwagon Mentality.
The Impact of Moore’s Law on Data Processing
aa
1G
100M
10M
1M
100K
10K
1K
1970 1974 1978 1982 1986 1990 1994 1998 2002
1000
100
10
1
0,1
0,01
0,001
10000
100000
cost for1 MByte RAM($)
Transistorper chip
µELAB.
$ 3,15
$0,003
MERCED$ 41
RAM
$ 62,500
1k
256k
64k
16k4k
1M
256M
64M
16M4M
1,7G
8080 80858086
68000
6806080486
6804080386
6802080286
PENTIUM 2
Moore’s Law Applied to Telecommunications
a
1
TAT-9
Transmission capacity increase
Cost per circuitin dollars
10.000
1000
100
10
1
2010200019901980197019601950
Years
Number ofvoice circuits
10.000.000
1.000.000
100.000
10.000
1000
100
10
Bit rate(Gbit/s)
1000
100
10
1
0.1
0.01
0.001
Telegraph
COPPER TAT-12
TAT-8
TAT-7TAT-6
TAT-4
TAT-5
TAT-3TAT-2
TAT-1 FIBER
TAT: TransAtlantic Telephone Cable
NEAR TERM OUTCOMESNEAR TERM OUTCOMES Incumbents Leverage Investment in Exchange for Favorable Incumbents Leverage Investment in Exchange for Favorable
Deregulation and Relaxed Antitrust Enforcement.Deregulation and Relaxed Antitrust Enforcement. Legislatures and NRAs Appear Willing to Abandon Legislatures and NRAs Appear Willing to Abandon
Procompetitive Policies in Exchange for Network Investment Procompetitive Policies in Exchange for Network Investment Promises by Incumbents.Promises by Incumbents.
Telecommunications has Lost Its Public Utility, Low Risk Status Telecommunications has Lost Its Public Utility, Low Risk Status as Well as Its Growth Market Cache.as Well as Its Growth Market Cache.
Technological and Technological and marketplacemarketplace convergence has become a reality, convergence has become a reality, but some of the winners win by exploiting inconsistent but some of the winners win by exploiting inconsistent regulations, e.g., VOIP, Internet access via cable television vs. regulations, e.g., VOIP, Internet access via cable television vs. telephone networks.telephone networks.
Convergence ruins regulatory regimes based on mutually Convergence ruins regulatory regimes based on mutually exclusive categories, e.g., streaming video vs. broadcasting.exclusive categories, e.g., streaming video vs. broadcasting.
Incumbents must strive to Incumbents must strive to retainretain market share and relevance. market share and relevance.
THE WAY FORWARDTHE WAY FORWARD
•• Regulators need to maintain a “level” competitive playing Regulators need to maintain a “level” competitive playing field.field.
•• While properly striving for regulatory symmetry between While properly striving for regulatory symmetry between competing technologies, regulators should not abandon competing technologies, regulators should not abandon procompetitive interconnection and facilities access policies.procompetitive interconnection and facilities access policies.
•• The EU horizontal regulatory model makes sense in a The EU horizontal regulatory model makes sense in a convergent environment: emphasize competition policy convergent environment: emphasize competition policy rather than regulate by category.rather than regulate by category.
•• Legislatures should concentrate on creating incentives to Legislatures should concentrate on creating incentives to invest in the sector through coherent ICT development invest in the sector through coherent ICT development strategy.strategy.
ConclusionsConclusions
Promoting near term availability of nearly ubiquitous broadband Promoting near term availability of nearly ubiquitous broadband infrastructure does not require “heavy handed” “command and infrastructure does not require “heavy handed” “command and control” centralized management by the federal government.control” centralized management by the federal government.
It requires a cohesive “top-down” vision coupled with “bottom-It requires a cohesive “top-down” vision coupled with “bottom-up” community champion projects that aggregate supply of up” community champion projects that aggregate supply of services and demand for them.services and demand for them.
Incumbents should not be allowed to leverage future investment Incumbents should not be allowed to leverage future investment in exchange for even more regulatory forbearance.in exchange for even more regulatory forbearance.
Governments achieve ICT incubation success through diverse Governments achieve ICT incubation success through diverse funding strategies including direct underwriting, loans, favorable funding strategies including direct underwriting, loans, favorable tax treatment, financial support for research, development and tax treatment, financial support for research, development and technology demonstration projects (as was done with NSFnet).technology demonstration projects (as was done with NSFnet).
Government can train people to become suppliers and consumers Government can train people to become suppliers and consumers of network-mediated services.of network-mediated services.
