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APEC Telecenter Workshop, Taipei, 2005 Challenges in Telecom Regulation

APEC Telecenter Workshop, Taipei, 2005 Challenges in Telecom Regulation. Dr. C. K. Mao Chair Professor National Chiao-Tung University. Observations, Vision and Propositions. Observations – a perfect storm is forming PSTN-based telephony business’ ever difficult position

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APEC Telecenter Workshop, Taipei, 2005 Challenges in Telecom Regulation

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  1. APEC Telecenter Workshop, Taipei, 2005Challenges inTelecom Regulation Dr. C. K. Mao Chair Professor National Chiao-Tung University

  2. Observations, Vision and Propositions • Observations – a perfect storm is forming • PSTN-based telephony business’ ever difficult position • Saturating Mobile Voice Service • Emerging Wireless technology – disruptive innovation • Regulatory regime at crossroad • Vision – A Structure Change • The Convergence of Fixed, Mobile, Wireless, Broadcasting, and Information Services • Industry Structure: from vertical to horizontal • Propositions • Regulatory solutions going forward

  3. PSTN --- Endangered Spicy • Voice Empire -- Collapsing • Price Cap, ILD Price Competition Shrinking pie • Traffic shift – Fixed Mobile Substitution20% to 50% • Hi-growth VOIP business10% to 20% evaporated, up to now • Core Network – Obsolete and Vulnerable • Expanding IP Network – PSTN marginalized • Venders Maintenance Capacity – divested • Access Network -- Challenged • Bandwidth: Cable and Fiber vs. ADSL • Deployment Cost: WiFi (WiMax) vs. ADSL • Regulation -- Unfriendly • Asymmetric Regulation vs. Mobile and Wireless Businesses’ • USO, Interconnection charge, UNE (for incumbent), … • Business – Stalled • Broadband VAS not taking off, no promising new revenue stream

  4. Sub-base unable to support full scale network operation Incumbent abandons PSTN service? PSTN VOIP 1 mn/5-month (by Skype alone in Chinese Taipei) Jan ‘10 July ‘04 Jan ‘06 Jan ‘07 Jan ‘08 Jan ‘05 Jan ‘09 PSTN’s Vanishing Point ? Market Share* 100% Chinese Taipei:13 mn 75% ? 50% Chinese Taipei:1 mn *The fixed-mobile substitution effect not included.

  5. Regulator PSTN Wireless hunter w/ sling shot cicada oriole mantis Interplay among Alternative Technologies • The Game • The mantis is seizing the cicada not knowing the oriole just behind • The hunter has the power to decide who wins • What the hunter should really do is the creation of a win-win-win situation Mobile

  6. Lines between vertical markets blurred • Industry structure Change • Horizontal “Integration”; Vertical Division Vision: Horizontal Convergence Wireless Services, Broadcast Mobile Content Electronic Communication Content Fixed-Line Content Mobile Application Electronic Communication Application Fixed-Line Application Evolve Mobile Infrastructure Electronic Communication Infrastructure (Fixed+Mobile+Wireless+Broadcast) Fixed-Line Infrastructure Vertical Regulatory Regime Horizontal Regulatory Regime

  7. Propositions for New Regulatory Policy -- 1 • Don’t work against Technological Trend • It’s useless to prevent a trend from happening • Don’t naively copy other countries’ practices • Differences in infrastructures’ status, competition intensity, consumer spending, calling pattern, … • Set Clear Goals • Reconcile the interests of governments, incumbents, new entrants, and consumers • Provide incentives to promote investment and infrastructure-based competition, and continued development of networks and technological innovation

  8. Propositions on New Regulatory Policy -- 2 • Policy Refocus • Fixed-line incumbent’s last mile monopoly had been broken by mobile and other wireless technologies • Transferring the incumbent’s profit to consumer or competitor is no longer a “real” issue going forward • Mobile, wireless, cable, fiber, and the old fixed-lines should be all put into regulatory regime’s overall picture in the future • From asymmetric to symmetric regulation, e.g., USO issue • For Developed Economies • Horizontal integration (interconnection) of various electronic communication technological platforms • New form of Virtual Network Operators (VNO) and Content Providers to use new hybrid infrastructure to provide broad-band multi-media seamless services at market cost • More market competition force than regulation power • For Developing Economies • Parallel deployment of alternative electronic communication technological platform • Watch the digital divide between urban and rural areas

  9. Telecom Infrastructure Composition F% M% W% 0% 100% Hi Fixed-Line -- ADSL, Cable, Fiber Income Level Mobile Wireless Hi Deployment Cost Lo Lo Technology Novelty Lo Hi Infrastructure Deployment Strategy • Hi-end B-band • Mobility • Ubiquity Value Proposition • USO • Basic Voice

  10. Info-communication Service in the future Network-Centric Systems Machine-Centric Systems Web-Based Application Systems Mainframe + LAN Contents App Module App Module App Module Domain-Specific Application Platform Global Web-based Platform Global Electronic Communication Platform Client/Server + WAN

  11. Thank you ckmao@mail.nctu.edu.tw

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