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ACCC 2004 Regulation Conference 29-30 July, 2004

ACCC 2004 Regulation Conference 29-30 July, 2004. Competition in a IP World Martin Cave Warwick Business School martin.cave@wbs.ac.uk. The question:. What is the scope for competition in a post-PSTN/first generation broadband world? The (UK) starting point:

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ACCC 2004 Regulation Conference 29-30 July, 2004

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  1. ACCC 2004 Regulation Conference29-30 July, 2004 Competition in a IP World Martin Cave Warwick Business School martin.cave@wbs.ac.uk mec1128

  2. The question: What is the scope for competition in a post-PSTN/first generation broadband world? The (UK) starting point: Dominant PSTN operator extending dominance into burgeoning broadband markets (subject to cable modem competition); little or no access competition; limited unbundling; rival networks principally serving business data needs. mec1128

  3. Issues in voice • What is the degree of fixed (mobile subscription)? • Fixed and mobile found to be in different markets in Europe • Transition to VoIP technologies in both will affect this. How does VoIP operate? mec1128

  4. Circuit PSTN – traditional circuit-switched voice Customer Premises Equipment(CPE) Customer Premises Equipment(CPE) Core Transit Transit Access Access Narrowband Narrowband DMSU Digital Main Switching Unit DLE Digital Local Exchange mec1128

  5. Packets PC-to-PC VoIP Core Transit Transit Access Access CPE CPE DSLAM ISP ISP Broadband DSL orcablemodem Internet Narrowband Narrowband Router DLE Modem mec1128

  6. Packets Circuit Phone-to-phone VoIP Core Transit Transit Access Access CPE CPE VSP DSL orCableModem Broadband Internet Broadband VSP ATA VoIP user Router PSTN Gateway Narrowband PSTN user mec1128

  7. Packets Circuit VoIP in the PSTN Core Transit Transit Access Access CPE CPE Narrowband Narrowband DLE Digital Local Exchange Incumbent-owned private IP network mec1128

  8. Voice Data Office LAN Desks Packets Circuit VoIP in the corporate network Voice over LAN mec1128

  9. Implications for competitive process • Existing operators can migrate their customers to VoIP at will; they may not notice. • Winning new customers to be achieved by selling broadband access and offering VoIP as an additional service mec1128

  10. Importance of promoting ADSL competition • Sought via ‘ladder theory of investment’ • First make intermediate wholesale broadband access – bitstream - available • Then increase price of / withdraw WBA and lower price of (high frequency) unbundled loops • Apply severe margin squeeze tests ex ante to prevent deterrent to further investment mec1128

  11. The cost structure of PSTN and of IP • There is evidence that • Minimum efficient scale of IP network much smaller percentage of market than mes of PSTN as percentage of (declining) fixed voice market This creates scope for competition – in core networks mec1128

  12. However, the scope for competition is backhaul is limited, especially is less densely populated geographies this creates an argument for geographically differentiated markets – again directed at encouraging investment mec1128

  13. Access Competition No apparent silver bullet providing country-wide competition to incumbent’s copper wire Instead likely to be a patchwork quilt of (primarily) wireless technologies, UMTS, WiMax etc. mec1128

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