8.3.1 Next Generation Networks

In Module 7 Section 1.4, the term Next Generation Network (NGN) is used both broadly, to cover new technologies and services, and narrowly, to refer to a network using IP to deliver multiple services with quality of service guarantees. This section uses the term narrowly in looking at the effects of Next Generation Networks (NGNs) on universal access and service (UAS); the effects of new technologies such as WiFi and WiMAX are described in Section 8.2.5 and new services such as VOIP in Section 8.3.3.

In the past, different services have been supported by different networks: specific transmission and switching networks have carried specific services. By contrast, NGNs support different services independent of the transmission network: they separate the services from the transmission network by using the transmission network to carry IP and the IP network to carry the services. Changing networks into NGNs gives them separate layers for transmission, IP, services and content. The figure below illustrates what happens when networks are migrated to NGNs.

Figure: The separation of network layers in NGNs

 Source: ICT quality of service regulation: practices and proposals, Robert Milne, ITU, August 2006.

NGNs’ relevance to UAS is discussed extensively in What Rules for Universal Service in an IP-Enabled NGN Environment? and NGN and Universal Access. Issues with NGNs that may offer opportunities and changes are:

• Separation of services from networks. NGNs allow services to be independent of networks. This can separate the role of service provider from the role of network operator. In this environment, service providers are best able to determine rural revenues and business opportunities, but network operators make the main investments in NGNs.
  
  This can lead to a situation where one or several service providers might be willing to provide services but no network operator is willing to build a rural network. In these circumstances, policy-makers might consider distributing Universal Access and Service Fund (UASF) finance to either network operators to build networks or service providers to provide services; the latter then could in turn entice network operators to invest. Migration to NGNs will likely lead to additional hurdles to overcome and challenges for coordination between potential operators in rural areas and this may call for regulatory intervention.
  
  The degree of separation between service providers and network operators will vary between countries depending on the case and how NGNs actually evolve. UAS policies for use of funds need to be decided on a country-by-country basis.
  
  Service providers (fixed and mobile) in developing countries are aware of cost saving efficiencies associated with NGNs in core networks. In Brazil, India, Mongolia, Kazakhstan and Vietnam, providers have already announced plans to migrate to NGNs for their core networks. Also, in Argentina, Bangladesh, Brazil, Bulgaria, Pakistan, Venezuela and Vietnam providers have initiated fibre to-the-x (FTTx) projects. At this stage, however, the high costs and uncertain returns limit such projects to high population, high-income areas.
• Deepening of the digital divide. NGNs are expensive to build, even in urban areas. In fact, some network operators (e.g., in the United States) plan to sell rural assets to finance building NGNs elsewhere. Business cases for NGNs that depend on increasing revenues (not just on decreasing costs) are likely to assume that new services are provided only in selected urban areas. Other areas will not benefit from the NGNs unless their access networks can also support the new services. In particular, the data rates available in urban areas may need to guide the design of wireless networks for rural areas to avoid deepening the digital divide between urban and rural areas
• Requirement for broadband. Universal access to NGNs requires universal access to broadband. Though the impetus to increase the ubiquity of broadband networks has its own origins and does not depend on NGNs, many UAS policies have concenrated on increasing last mile access to telephony at low data rates. This is changing, but if rural areas are to benefit from NGNs, the NGNs are likely to require broadband backhaul, at least from district centres, public access points and educational institutions. The backhaul could terminate at Internet eXchange Points (IXPs) that themselves might depend on UASF finance.
• Need for suitable content. Introducing NGNs raises the importance of telecentres and other forms of public access to the Internet relative to payphones, provided that they make suitable audio and video content available (e.g., in relevant languages). If NGNs are to offer more than what is already available through telephony and broadcasting, the IP applications should fulfil the user requirements outlined in Section 8.3.5.
• Elaborate implementation. The standards for NGNs are complicated because they cater to fixed and mobile networks and for old and new services with good security and quality of service. Expertise in this area could take years to develop. Developing countries with very limited and old networks could find it difficult to leapfrog and implement these standards. On the other hand, precisely because many developing countries do not have extensive circuit-switched networks, they could possibly leapfrog to implement directly a fully IP-enabled NGN from the outset, as opposed to making a slow migration as in the case of more advanced countries. Irrespective of this, of course the complexity of technically implementing NGN standards as well as concerns regarding the level of investment needed remain.
• New interconnection arrangements. The introduction of NGNs typically changes the locations and functions of points of interconnection and requires interworking with legacy networks.  Points of interconnection move from expensive town centres to less expensive business parks, and include equipment to convert between data recognised by IP networks and data recognised by other networks. The costs of these changes need to be shared equitably. Ultimately, both parties to the interconnection agreement are likely to benefit.
  
  Introducing NGNs also opens up the possibility of changing the pricing of interconnection to arrangements such as sender keeps all (as adopted in Internet peering).  These arrangements are usually unsuitable for rural network operators, especially if they have historically enjoyed asymmetric interconnection pricing. Interconnection arrangements are examined in Interconnection Challenges in a Converging Environment: Policy Implications for African Telecommunications Regulators and NGN Interconnection and Access.
• Requirements to reduce regulation or to introduce regulatory forbearance. In some countries incumbent service providers have requested that regulators encourage investment in NGNs by reducing the effects of regulation. In Hong Kong, China, there have been suggestions that the cost of UAS provision should be calculated by combining the cost of the existing network and the cost of the NGN. The regulator has rejected these suggestions and will consider the cost of the NGN only where the change to the NGN stops the existing network from providing UAS [1]. 
  
  Generally, investments in NGNs are motivated by the benefits derived from the convergences of dedicated networks such as the PSTN, broadcast networks and the Internet onto a single network. This convergence saves costs through network consolidation and elimination of local exchanges, which means customer premises can be connected with higher-level data switching capabilities. NGNs also allow operators to increase revenues by making it possible to offer multiple services (e.g., voice, video, data) and innovative new services, over a unified network. Investments in NGNs should not affect UAS requirements (except, perhaps, by lowering cost). Regulators need to determine where the issues lie in each case.
• Scale, scope and monopoly. The EU regulators views expressed on these issues for access networks are provided in the ERG Opinion on Regulatory Principles of Next Generation Access. The ERG identifies as a significant issue for regulators the fact that economies of scale and scope are reinforced by NGNs. The report indicates that in some locations, there could be natural monopolies “in certain areas of the electronic communications value chain”; for example, one fibre, cable or duct, controlled by one service provider, might be enough for fibre to the curb. Since the effects of scale and scope will vary from country to country and even within countries, the ERG concludes that it is unlikely that a common regulatory approach would work for all countries – or even for all regions within a country. The impact of scale effects in different parts of a country could make the market structure more heterogeneous since NGNs would not be rolled-out everywhere simultaneously.
• Compliance with normal regulatory requirements for services: The transition to NGNs will be accompanied by increased use of VoIP whether a fixed line network or a mobile network is used. In the context of UAS, the migration to VoIP raises a number of issues that revolve around quality of service (QoS) and access to emergency services. Currently, VoIP calls differ in terms of quality and reliability from voice over the PSTN; VoIP is more susceptible to Internet-related technical problems and, in the case of fixed line VoIP, reliant on electrical power supply for calls. VoIP services normally do not include free calls to emergency numbers, the automatic rerouting of emergency calls to the nearest emergency call centres, or caller identification (see also Section 8.3.3).
  
  The shortcomings of VoIP in comparison to voice over the PSTN have led regulators to introduce a variety of different measures regulating the provision of VoIP [2]. But mandating VoIP to have the same QoS and emergency related features as voice over the PSTN increases the cost of providing the service. Given that the affordability of VoIP’s makes it very attractive, light-handed regulatory measures may be more suitable to strike a balance between meeting consumer expectations and lowering costs.
• Enhanced competition. The expected advantages of NGNs are that users will have access to an increasing variety of service providers, assuming the number of viable service providers increases when they do not have to provide their own networks. This should stimulate price competition and incentives to provide new services.
• Fixed-mobile convergence: NGNs will also tend to increase the availability of multiple services through any kind of device, assuming the basic infrastructure becomes common to all. The Telecommunications Regulatory Authority of India [3], for example, estimated that 70 per cent of mobile calls are originated and terminated inside fixed locations. If NGN is implemented in end-to-end networks, such in-building or fixed-location mobile calls could possibly be completed on fixed networks, resulting in cost savings and more efficient utilization of scarce resources like spectrum. Of course, such concepts assume that users would be interested in switching from fixed to mobile on a price-basis [4].

End notes

1. See Review of the Regulatory Framework for Universal Service Arrangements (OFTA, June 2007), .
2. For example, in Canada the Canadian Radio-Television and Telecommunications Commission (CRTC) mandated VoIP providers to offer emergency 911 services. In addition, they were obliged to notify customers about limitations to their services.
3. TRAI, Consultation Paper on Issues Pertaining to Next Generation Networks (NGN), 12 January 2006, Consultation Paper No: 2/2006.
   
4. For further reading on this issue, consult the ITU’s Trends in Telecommunications Reform 2007: The Road to Next Generation Networks (NGNs), Chapter 4 (Fixed-Mobile Convergence.)