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

Abstract

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.