All ICT organizations have legacy assets, some more than others. The evolving regulatory frameworks have facilitated or even encouraged the introduction of new technologies and services. Ideally, ICT organizations would like to manage the transition to new technologies in a way that allows them to optimize their returns on legacy assets. The reason is that new technologies disrupt (or make obsolete) pre-existing business plans and thereby the value of legacy assets. In economic terms, this is an example of a “Wave of Creative Destruction” in which disruptive technologies can bring wider choices and lower prices for the consumer.
Innovative technologies and NGNs may offer substantial opportunities for incumbents with limited legacy assets, as is the case in many developing economies. But for those with significant legacy assets, innovative technologies and services could be very disruptive if the incumbents do not remain competitive and continue to innovate. Chief executive officers in many developed economies may be forced to choose between competing with their own businesses and having another company doing it. The threat of innovation may also cause some strong incumbents to adopt delaying tactics. The extent to which they can adopt such tactics depends largely on the effectiveness of implementing pro-competitive regulatory frameworks. However, innovative technologies and NGNs can benefit incumbent service providers through the lower costs of using more efficient technology. They also allow providers to compete in new service areas to offset declines in tradition lines of business.
Incumbents are also facing disruptive elements in cases where, frustrated by existing suppliers, local governments and municipalities are constructing their own networks, sometimes using the “open access” model and the “bottom up” development of applications. For example in Ottawa, Canada, local residents are able to purchase their fiber connections directly from the municipal government, which has built and continues to subsidize fiber network. Such “open access” models are also gaining currency in international networks.[1] These are the technological advances that gave rise to the ICT Regulation Toolkit.
The process of managed transition is becoming more difficult in the current ICT environment for at least two reasons. First, the rate of change in technology is increasing (see Module 5, Radio Spectrum Management and Module 7, New Technologies and Impacts on Regulation). Secondly, the organizations introducing the new technologies are not necessarily members of the traditional ICT/telecommunications community, but innovators that may not play by the same rules. Established organizations as well as new entrants are arming themselves with different business models like “triple/quad play,” “always on,” “flat charges,” “all you can eat,” or even “free.” These business models differ from the more traditional models where a limited range of services or a single service are offered at prices based on distance and time. In some instances, the provision of voice services is ancillary to the main line of business of the new entrant. For example, the voice version of Yahoo! Instant Message service is not the core business of the company.
Voice over Internet Protocol (VoIP) is an example of an innovative and disruptive technology. VoIP demonstrates that the basic premise of traditional voice telephony – the network and voice services must be owned and operated by the same firm – is no longer relevant. VoIP is disrupting the pre-existing business plans of traditional telephone service providers and is being introduced by firms outside the traditional community.[2] For instance, Google launched its Google Voice service in March 2009. Rather than own or operate any part of the underlying network, Google simply offers an application that gives users one phone number for all of their phones, provides free long distance within the United States and has low international calling rates.
Another innovative and disrupting technology is Internet Protocol television (IPTV). By providing video services, such as live television channels and video-on-demand (VOD), as well as interactive services, over an IP platform, IPTV allows traditional telephone service providers to compete with terrestrial over-the-air broadcasters, cable television operators and satellite television providers.
ICTs have transformed many other activities, notably the media and the creative industries. Traditional broadcast media offer limited “mass fare” to mass audiences, due to the economics of the sector and radio spectrum restrictions. Cable and satellite platforms have expanded choice for television and radio by offering services such as video-on-demand. However, new technologies expand choice immensely and are able to cater to targeted audiences. The combination of broadband (wired or wireless), the digitalization of media content, and the falling costs of producing digital content herald an age of abundance. The falling costs of producing media has placed digital content production, including documentaries, entertainment, news, music, blogs, in the hands of many and has created a bottom-up trend.
The introduction of broadband and the switch to digital from analogue broadcasting will increase delivery capacity enormously in comparison to traditional broadcasting. New content producers have a means of distributing their creations instantly and globally. Content can be customized to the personal tastes of an individual rather than be defined for a mass audience. Many observers are focusing on the “long tail”[3] of digital content in which a large number of unique services, content or applications are sold in relatively small quantities. Although there are still services and items that large numbers of people will wish to purchase, many small providers and developers can become successful by selling their products to niche markets. With broadband, this “long tail” of niche media content has found a highly receptive audience, for example, through the popularity of the video-sharing site “YouTube.” Apple’s iPhone App Store provides another example of how small developers are finding great success by targeting the “long tail.” After a developer completes a relatively simple process for developing and getting approval for a new application, iPhone subscribers are able to search through and download these specialized applications at fees set by the developer. By the end of 2009, there were more than 125,000 developers in Apple’s iPhone Developer Program and subscribers had downloaded over two billion of their applications.[4] This continued abundance of choices in existing and new digital content, produced and distributed at rapidly falling costs on converged platforms, presents new disruptive challenges to both existing players or “majors” (content producers and distributors) and regulators.
The rapid increase in content choices for consumers and the speed of delivery through broadband Internet are also transforming social and cultural landscapes. For example, broadband helps to reduce carbon emissions through environmentally-friendly business practices such as remote management of equipment, telecommuting and live video-conferencing and can result in a reduction of carbon emissions five times greater than the emissions that the ICT industry produces.[5] The growth of innovative technologies, NGNs and convergence promises to become a disruptive force for the way individuals interact with one another in society.
endnotes
[1] Mike Jensen, Open Access Lowering the Costs of International Bandwidth in Africa (2006) at http://rights.apc.org/documents/open_access_EN.pdf.
[2] GSR 2009 Discussion Paper, Rudolf Van der Berg, The Future of VoIP Interconnection at http://www.itu.int/ITU-D/treg/Events/Seminars/GSR/GSR09/doc/GSR09_VoIP-interconnect_VanderBerg.pdf.
[3] Wired, Chris Anderson, The Long Tail (2004) at http://www.wired.com/wired/archive/12.10/tail.html.
[4] Apple, Press Release, Apple’s App Store Downloads Top Two Billion (2009) at http://www.apple.com/pr/library/2009/09/28appstore.html.
[5] infoDev, Broadband as a Platform for Economic, Social and Cultural Development: Lessons from Asia at
http://www.infodev.org/en/Publication.565.html.
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Module 7, New Technologies and Impacts on Regulation