1.4 Innovative Technologies and Services

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. Here in economic terms is an example of a “Wave of Creative Destruction,” where from the perspective of the consumer, disruptive technologies can bring wider choices and lower prices.

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). Second, the organizations introducing the new technologies are not members of the traditional ICT/telecommunications community and may not play by the same rules – they are innovators. The new entrants are armed 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 that are 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) provides an example. It disrupts the pre-existing business plans of traditional service providers and is being introduced by organizations outside the traditional community. According to The Economist, “It is now no longer a question of whether VoIP will wipe out traditional telephony, but a question of how quickly it will do so. People in the industry are already talking about the day, perhaps only five years away, when telephony will be a free service offered as part of a bundle of services as an incentive to buy other things such as broadband access or pay-TV services. VoIP, in short, is completely reshaping the telecoms landscape.”[1] Even search engine companies are unexpectedly entering more traditional markets like e-mail and voice services.

Next-Generation Networks (NGNs)[2] capable of transporting all forms of information and services in packets often built around Internet Protocol (IP) are already being deployed. There are three broad NGN platforms: Digital Interactive TV, Online and Mobile Wireless (using various technologies such as DTH, Cable, DSL, 3G, DVB-H, IPTV); each of these platforms are capable of providing six content categories (TV programs, music, film, radio, games, publishing), as well as the full range of Internet services and traditional services.[3]

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, NGNs could be very disruptive. Chief executive officers in many developed economies may face the stark choice between cannibalizing their own businesses or having another company doing it. The threat of NGNs may also cause some strong incumbents to adopt delaying tactics where the extent to which they can do so depends to a large extent on the effectiveness of implementing pro-competitive regulatory frameworks. Disruptive elements also exist on the demand side where local champions (or local action groups) frustrated by existing suppliers are constructing new municipal networks, sometimes using the “open access” model and the “bottom up” development of applications. Such “open access” models are also gaining currency in international networks.[4] These are the technological advances that gave rise to the ICT Regulation Toolkit.

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 but new technologies expand choice immensely. 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 (documentaries, entertainment, news, music, blogs) in the hands of many – 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. Recently, the “Long Tail”[5] of digital content has attracted the attention of many observers. This refers to the huge quantities of content available from digital delivery platforms in comparison to the very limited offerings of traditional platforms, such as analogue broadcasting, music and book stores, and cinemas. With broadband, this “long tail” of niche media content has found a highly receptive audience, witnessed for example, by the popularity of the video-sharing site “YouTube.” The coming abundance of choice of 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.