Regulatory Trends: New Enabling Environment

International Telecommunication Union Workshop on ‘Future of Voice’GenevaJanuary 15-16, 2007

Gary Madden Joachim Tan

Aniruddha Banerjee

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What the Workshop Established --- Markets

“Voice market” is more complicated than “voice” Voice revenues are important but declining Mobile is major source of revenue growth Broadband revenue is smaller but growing rapidly DSL and cable modem dominate broadband access Mobile, fibre, and satellite access solutions evolving

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What the Workshop Forecast --- Market Structures

Structural separation of networks, services, and applications

Possible consequences Network access bottleneck avoided by inter-modal

competition Strategic positioning of firm in single or multiple markets New business models required to identify and maintain

revenue sources

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What the Workshop Forecast --- Network Intelligence

Intelligence moves to the network’s edge Possible consequences

Consumer is sovereign --- determines access, service and application bundle

Service provider/application developer can reach targeted consumer

Innovations in applications stimulated

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What the Workshop Established --- Broadband

Broadband technology is scalable Possible consequences

Barriers to entry attenuated Aggregated demand for under-serviced markets VoIP market growth Other applications stimulated

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What the Workshop Established --- Convergence

Convergence Networks / platforms Terminals / devices Markets / services

Possible consequences Competition at all “levels” Innovation at all “levels”

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An Economist’s Spin on the Forecasts

Suggest effective competition can occur “naturally” Access markets --- inter-modal competition Structural separation --- makes maintenance of vertically

integrated markets more difficult Scalable technology --- encourages strategic entry More competitive access markets Easier entry with less vertical structure creates

Price competition (static) Innovation in all markets (dynamic)

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Market Structure and Regulatory Policy

Dynamic Competition and Efficiency Technology-driven and disruptive Price-incremental cost disequilibria Long run resource allocation Innovation, short-term rents, first-mover

advantages

Standards and Multi-Sided Markets Direct and indirect network effects Large installed bases Sunk and switching costs Geography Co-evolution/co-existence if

interconnection

Market Structure/Policy Competition among few,

but effective Proportional to Scalability Control within/edges of

access network Resist reflexive

(especially ex ante) regulation or mandating single standard

Maintain interconnection