VoIP - The Challenge for Regulators

Chris Mulley 30

th

November 2005 VoIP in The Public Sector

©Ofcom

VoIP – The Challenge for Regulators

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Section 1 – Introduction and Market Background

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Section 2 – Regulatory Principles

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Section 3 – VoB Challenges for Regulators

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Section 4 –NGN Challenges for Regulators

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Section 5 - Conclusions ©Ofcom 1

Introduction - VoIP: A Service Level View

• • • VoIP provides the ability to carry voice over IP networks, such as the Internet or a Next Generation Network (NGN).

VoIP is wide ranging – VoIP does not imply any particular user experience, service provider, business model or terminal equipment – The technology spans a wide range of applications Some services support interconnection to the Public Switched Telephone Network (PSTN) to allow subscribers to talk to traditional telephone users ©Ofcom 2

Introduction - VoIP: A Network View

Switch Switch Switch • Traditional voice networks such as the PSTN use “circuit switching” to get signals across the network Circuit • Packet voice networks, such as VoIP, divide the voice into small chunks or “packets” and send each separately • There is no dedicated path across which the data can travel - each packet is sent individually by the route which seems most efficient at the time • Each call has a dedicated pipe or “circuit” set up across the network through which all its traffic flows. The circuit ensures that calls can be made without interruption or interference • At the far end, the arriving packets are assembled back into continuous speech • There is no guarantee that the packets will arrive in the correct order, at the right time, or even that they will arrive at all Internet Packets ©Ofcom 3

Market Background - The Challenges of VoIP for the Market

• VoIP provides a number of challenges to the existing voice market • Increasing competition is impacting the market of traditional PSTN service providers – Lower Barrier to Entry – Reducing Costs – Disruption

“It’s probably the most significant paradigm shift in the entire history of modern communications, since the invention of the telephone” Former FCC Chairman Powell

©Ofcom 4

Market Background - Challenges for the Consumer

• For the consumer there is an expectation that a telephone service is a telephone service, however, this is not necessarily the case.

• VoIP services can be provided a part of a bundle of services, for example a “triple play” bundle, provided by an Internet Service Provider impacting the consumer’s choice of voice service provider.

“If it looks like a telephone and I use it like a telephone, then it is a telephone”

©Ofcom 5

Market Background - Two Key Areas of Regulatory Challenge

There are two distinct areas where the regulation of VoIP are a challenge

• • • •

Voice over Broadband (VoB)*

End-to-end VoIP service provision Phone to phone services are now available in the UK These should look like a standard telephone service to the end user But capabilities and reliability might differ from a traditional telephone service

To what extent should these services be regulated in the same way as traditional telephone services?

• • •

NGN - BT 21st Century Network (21CN)

VoIP in the core network Complete replacement of BT’s network with an IP based Next Generation Network (NGN) could take up to 10 years Key decisions about the architecture of this network are currently underway

What does this mean for the future of interconnection and the industry structure?

Nomadic

NI

Head Office

Internet * VoB encompasses IP voice over the Internet, Intranets and cable networks ©Ofcom

Branch Office Data Centre

Multi service access node Metro node Core node

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VoIP – The Challenge for Regulators

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Section 1 – Background •

Section 2 – Regulatory Principles

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Section 3 – VoB Challenges for Regulators

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Section 4 – NGN Challenges for Regulators

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Section 5 - Conclusions ©Ofcom 7

Ofcom’s Key Regulatory Principles

Regulatory Impact Assessment

• Ofcom’s principle duty under the Communications Act 2003 is to further the interests of citizens in relation to communication matters and further the interests of consumers in relevant markets, where appropriate by promoting competition • Ofcom also has duty to protect consumers against detriment and the promotion of consumer awareness

1. Define Market 5. If necessary, determine remedies 4. Determine whether intervention is necessary 2. Determine if Significant Market Power 3. Determine if Abuse Regulatory Withdrawal

©Ofcom 8

Regulatory Background for Voice Services

• A set of legal obligations and rights for service providers is defined by the General Conditions of Entitlement (GCoE) • • • Implemented to be in line with EC Communications Directives Referenced by s45 and s46 of Communications Act 2003 GCoE consist of 21 conditions some or all of which must be met depending on the category to which a provider wishes to belong – Based on the obligations and rights they wish to have • All providers of Electronic Communications Networks/Services (ECN/ECS) fall into one of three categories defined under GCoE: – – – Providers of ECN/ECS Providers of Publicly available ECN/ECS (PECN/PECS) Publicly Available Telephone Services (PATS) providers Provider of ECN/ECS Provider of Publicly available ECN/ECS PATS Provider Increasing number of applicable conditions ©Ofcom 9

Obligations and Rights under GCoE

Category

Provider of Electronic Communications Network/Services (ECN/ECS) Providers of Publicly Available Electronic Communications Network/Services (PECN/PECS) Providers of Publicly Available Telephone Services (PATS)

Characteristics Obligations

All providers of electronic communication networks/services, both public and private networks, mobile and fixed, voice telephony, data and internet, as well as service Conditions: 1.2/1.3, 2, 6, 7, 17, 18, 19, 20

Rights

This category excludes not available to the public All of the conditions those providers of networks applicable to providers of and/or services which are ECN/ECS plus: Conditions: 1 (all parts), 9 11.1/11.2, 14, 21 This category applies to those providers which enable the public to make and receive phone calls.

All of the conditions applicable to providers of PECN/PECS plus: Conditions: 3, 4, 5, 8, 10, 11, 12, 13, 15, 16 The right to request number portability from another network/service provider.

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VoIP – The Challenge for Regulators

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Section 1 – Background

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Section 2 – Regulatory Principles •

Section 3 – VoB Challenges for Regulators

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Section 4 – NGN Challenges for Regulators

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Section 5 - Conclusions ©Ofcom 11

Issues Identified So Far

Many Voice over Broadband regulatory issues identified but some more significant than others

Reviews Disputes Stakeholder Input Identify potential issues Consultation ©Ofcom •

Numbering Arrangement

•Number Portability •

Availability of Emergency Calls

•Location Information for Emergency Calls No problem Provide guidance for clarification Integrate into existing work Develop policy and consult •

Network Integrity

•

Line Powering

•Interconnection •Retail pricing of calls to VoB •Tone Dialling •

Naked DSL

•Text Relay •Quality of Service •Lawful Intercept •Extra territorial service providers 12

Numbering Arrangements

• VoB is location independent, while geographic numbering is location dependent • Ofcom received applications from several VoB service providers towards the end of 2004 for large quantities of geographic numbers on a nationwide basis • VoB services have low barriers to entry and are not geographically restricted to physical points of connection • This is having an impact on number allocation and availability • Consequently, Ofcom consulted on Numbering Arrangements for VoB Services • The allocation of geographic numbers (01 and 02) to VoB Service providers was allowed. • An additional new 056 number range was introduced for use by VoB service providers • Making available numbers to support innovative services whilst ensuring adequate consumer protection is part of Ofcom’s numbering strategy • Germany and Spain have followed a similar approach to the UK. France and Italy have followed a different strategy ©Ofcom 13

Emergency Calls and PATS Providers

• The PATS provider category is where the regulation of VoB is most significant. Why?

– Because they it can provide a direct replacement for PSTN service.

– Other forms of VoB service are second line services, provided by PECN/PECS category of providers. The consumer still has assured access to Emergency Calls via their existing PSTN service.

– • A consumer replacing their existing PSTN service with a VoB service expects a similar set of capabilities to their previous PSTN service.

Following the “If it looks like a telephone and I use it like a telephone, then it is a telephone” philosophy – – The most significant of these capabilities being Emergency Call access VoB does not easily support PSTN “like” Emergency Call capability ©Ofcom 14

Emergency Calls and Policy Objectives

Following Ofcom’s

New Voice Services – Consultation and Interim Guidance

of Sept. 2004, when VoB was still considered a nascent technology, Ofcom took an “Interim” approach to the provision of Emergency Calls on VoB services.

• Policy Objective Not stifle innovation – allow a range of business models to be tried/tested – Avoid excessive obligations on VoB – services Allow access to number portability • Encourage max availability of good quality 999 – Remove disincentive to offer 999 What we did – ‘Liberal’ Approach • PATS Policy in Sept 2004 – • Providers had flexibility to Not offer 999 services and so • avoid PATS obligations Offer 999 services but Ofcom would forebear from the other – • obligations Have number portability if PATS criteria met in full Approach reduced disincentive to offer 999 services ©Ofcom 15

Emergency Calls and Consumer Protection

Policy Objective • Ensure consumer well protected – … expectation that if the service looks like a phone should behave like a phone … (unless customer clearly informed otherwise) – No expectation of Emergency Access provision, if it is not – available Well informed buyers and users What we did – ‘Liberal’ Approach • Consumer Protection – Consumers to be advised by VoB providers of the constraints when – – using a service is not equivalent to PSTN expectations Industry guidelines drawn up by Internet Telephony Service Providers Association Critical to have strong consumer policy to ‘allow’ more liberal policy approach ©Ofcom 16

Other Key Issues

•

Network availability and line powering

are two areas which also impact the provision of emergency calls – VoB service capability may differ greatly from those of PSTN service provision – PSTN telephones are powered from the copper local-loop, whereas VoB telephones require mains power for terminal adaptors and modems –

Current Regulatory Position

• A VoB provider falling into the PATS category is required to meet the network availability requirements, unless the service is not offered at a fixed location • • Line powering is not feasible for VoB services

Additional consumer guidance is essential to draw attentions to the difference in capability between PSTN and VoB services

•

Naked DSL

is an up and coming issue – Some VoB providers want to offer a broadband product to their customers where the customer does not have to pay for narrowband line rental Internet ©Ofcom 17

VoIP – The Challenge for Regulators

•

Section 1 – Background

•

Section 2 – Regulatory Principles

•

Section 3 – VoB Challenges for Regulators •

Section 4 – NGN Challenges for Regulators

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Section 5 - Conclusions ©Ofcom 18

Challenges for Regulation - Next Generation Networks

Different economic characteristics of Next Generation Networks will mean new challenges for regulation

• Technical and economic characteristics of ‘Next Generation Networks’ are likely to be very different from traditional PSTN networks: • • Voice services are implemented as VoIP Networks will be converged multi-service platforms • Network functions can be dispersed into different layers and potentially to the network edge • Economics of each function may have very different economic features, e.g. barriers to entry and economies of scale compared to traditional networks • • Costs will be reduced Rapid service innovation and product diversity will possible • Regulatory Challenge • Ensuring Equivalence of Access at all areas of the network which form economic bottlenecks

Network functionality layers of BT 21CN Customer handling Service assurance Network management Account functions Service fulfilment

Service management Intelligence Multi service core Multi service access ©Ofcom 19

VoIP – The Challenge for Regulators

•

Section 1 – Background

•

Section 2 – Regulatory Principles

•

Section 3 – VoB Challenges for Regulators

•

Section 4 – NGN Challenges for Regulators •

Section 5 - Conclusions

©Ofcom 20

• • • • •

Conclusions

VoIP is a disruptive technology that provides challenges for the market, consumer and regulation.

While VoB was considered a nascent technology Ofcom took an “interim” position to its regulation. Ofcom now needs to develop regulation beyond this “interim” position as VoB becomes more pervasive.

A key area of this policy development is: – To maximise the availability of 999 access to consumers and awareness of the difference in the capabilities of some VoB services and traditional PSTN 999 services.

Further policy development will depend on two approaches: – Further consultation and guidance on the provision

New Voice Services (Voice over IP)

and possible consultation and updating of the General Conditions of Entitlement NGN are raising a whole new range of issues for regulators – Ofcom has been consulting on these issue in our Next Generation Networks Consultation and Next Generation Networks: Further Consultation – The main challenge for regulation of NGNs is ensuring Equivalence of Access ©Ofcom 21