The Global Telecommunications Industry Facing the IP Revolution: Technological and Regulatory Challenges

The Global Telecommunications Industry Facing the IP Revolution: Technological and Regulatory Challenges

Harald Gruber (European Investment Bank, Luxembourg)
DOI: 10.4018/978-1-61520-611-7.ch112


Technological innovation in the telecommunications sector is a key contributor to the rapid diffusion of e-business. The steady drive towards semiconductor miniaturisation leads to a continuous decline in the price of telecommunications equipment and increase in performance. Technological change therefore continues to transform the way telecommunications services are provided and used. Telecommunication networks are subject to a technological switch from so called circuit switched technology to packet switched technology. In fact, digitalisation of audio and video signals has led to the convergence of telecommunications, data processing and broadcasting technologies into a single service platform based on Internet Protocol (IP). This has strong implications on legacy networks of existing operators, because they need to support during a transition period both technologies in the network, but this duplication is inefficient. This is more so as the incumbent telecommunications operators are subject to sector specific regulation. This regulation was motivated by the externalities that telecommunications generate and the concern that operators would exploit market power to the detriment of users. This appears to be less the case when there is a multiplicity of telecommunications networks.
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2 Market Overview

The market dynamics in telecommunications are characterised by rapid technological change and the introduction of new services. This leads to a rapid and increasing penetration of telecommunications infrastructure, in particular for mobile and broadband services. Telecommunications infrastructure is an important input for sustained economic growth (Röller and Waverman, 2001) and thus there is a strong public interest in good performance of this sector.

Key Terms in this Chapter

Internet Protocol Television (IPTV): A mode of transmitting system television service using Internet Protocol over any broadband communications infrastructure, instead of being delivered through traditional broadcast and cable formats.

Digital Subscriber Line (DSL): A family of technologies that provides digital data transmission over the wires of a local telephone network and allows “always on” connection to the Internet. Typically, the download speed of consumer DSL services ranges from 256 kilobits per second (kbit/s) upwards.

Internet Protocol (IP): A key protocol on which the Internet is based. It is a standard that describes software that keeps track of the Internet’s addresses for nodes, routes outgoing messages and recognizes incoming messages.

Voice Over Internet Protocol (VoIP): A general term for delivery of voice communications over the Internet. This implies that traditional geographical numbering systems as well as traditional charging rules (e.g. time, distance) may not apply.

Ladder of Investment: Regulatory concept according to which mandated access to network infrastructure components should lead to increasing investment in competing networks.

Fiber To The Home (FTTH): A network architecture that uses optical fiber to replace the usual copper local loop used for telecommunications.

Next Generation Network (NGN): A broad term to describe some key architectural evolutions in telecommunication networks (both for core and access) that will be deployed during the next decade. NGNs are commonly built around the Internet Protocol, and therefore the term “all-IP” is also sometimes used to describe the transformation towards NGN.

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