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Moving towards the Next Generation Networks(NGN)
(Technical, economic and regulatory study) Summary / October 2002
Study published by Arcome Office for l'Autorité de régulation
des télécommunications
 En téléchargement (doc
/ rtf)
The move to NGN – Study summary
1 Preamble: context and objectives
The evolution of networks and services towards the
Next Generation Networks or NGN is a major trend in telecoms, and
of great interest to the market. We see manufacturers demonstrating their
new products at trade shows and conferences, while debates on the move
to all IP and on the conditions of implementing viable economic models
for operators and service providers, in the framework of UMTS, fill the
columns of the specialized press.
Regulatory authorities have to ensure that the market
emerging from this evolution is equitable, open and competitive. They
also have to be able to identify as quickly as possible future areas of
interest related to their activity in order to best fulfil their missions.
In the hope of better understanding the technical, economic and regulatory
issues dealing with this evolution (which appears to be a long-term trend),
ART held a study examining several areas:
A technological study to describe and understand all new concepts,
which are globally known as NGN.
A qualitative study of next generation manufacturers and the NGN
equipment market to understand the position of players and to measure
the availability, maturity and cost of offers.
An economic study of NGN in order to determine the position
of players already in place and of new entrants (operators and
service and content providers) on French and European markets
and their strategy regarding NGN, and to understand their migration
approach and the new economic models resulting from this evolution.
An analysis of the areas of action for market regulation, to
identify a number of possible routes for implementing an environment
favourable to NGN, all with the perspective of the new European regulatory
framework.
This prospective study, conducted by the telecommunications
consulting firm Arcome, is based on major documentary searches
and interviews held with a panel of 11 manufacturers and nine operators
or service providers, who were chosen for their high degree of involvement
in next generation solutions or for their significant influence on the
telecommunications sector.
The general conclusion of this study is that the move
to NGN is still a relatively far-off concern, in particular for
operators and service providers. Moreover, the current economic situation
has a strong influence on their positions with respect to NGN: players
have financing and durability concerns, putting them in a situation not
suitable to technical evolutions and developing new business models.
2 Network intelligence and third-party services
The progressive migration of the telecommunications sector
to next generation networks and services is a major trend generating interest
among most players. It is the result of a combination of favourable and
motivating factors:
Major structural changes to the telecoms market: deregulation
of the local loop and long distance markets, network optimisation and
cost reduction, outsourcing, etc.
Major changes in services and uses: explosion of data services,
in particular Internet and multimedia, mobility and accessibility, needfor
operators and service providers to develop new markets.
Major technological evolutions, in particular with the
development of very high-speed access and transport networks, the generalisation
and evolution of IP in favour of differing levels of quality of service.
This context has generated the need for—and technical
feasibility of—a move to new networks and services model called
NGN (Next Generation Networks). NGN is based on a progressive evolution
to end-to-end "all IP" in order to adapt to major trends:
convergence and flexible network evolution, distribution
of network intelligence, and openness to third-party services.
The NGN system will offer key convergent multimedia services
using a shared network characterised by several essential elements:
A unique and shared core network for all types of access
and services.
A core network architecture divided into three layers: Transport,
Control and Services.
Development of packet mode transport (IP flow transport
in native IP, or on ATM in the short term with a progressive convergence
to IP).
Open and standardised interfaces between each layer,
and in particular for the Control and Services layers in order to allow
third parties to develop and create services independent of the network.
Support for multiple applications—multimedia, real-time, transactional,
total mobility—adaptable to the user and growing and varied capacities
of access networks and terminals.
Figure 1: General principle of NGN architecture (Source: Arcome)
Traditional telecommunications networks will evolve to
an open, distributed model, firmly based on IP and packet mode transmission,
in general, which is transparent to users.
NGN services, with strong potential for new uses, will
be based on models for transparent network execution (the Internet "Web
services" model) or with network contribution (Open Service Architecture
model from telecoms). the complexity and diversity of new multimedia
services will pull the market towards the software world . While associated
technologies are mature or almost mature, uses must still be created.
3 Varying degrees of maturity and technological
complexity
Currently available NGN offers are of a varying degree
of maturity:
a number of NGN equipment still have not reached full maturity
or stability, and special attention must be paid the quality of
service management which is seen as a key technological challenge, to
the initial capacities of NGN switching solutions, and to transition
solutions based on proprietary protocols or those which would disappear
in the medium term.
In the short term, this still low degree of maturity of solutions
will most likely require the use of single-manufacturer solutions
(at least by NGN type of equipment).
While the mobile field shows more visible signs of a move towards
the NGN (high visibility on the development of terminals and networks,
since UMTS, in its second phase, is the first complete system using
an NGN architecture), the first effective deployments of NGN solutions
are in the of fixed networks domain (voice transit, voice on IP,
xDSL).
These new converging and ever changing technologies highlight
the essential role of standardisation. Indeed, the openness of
networks and services require the use of standardised and interoperable
solutions and interfaces. What’s more, in the short term, the NGN
implementation of will result in the appearance of architecture variants
and successive generations of protocols, which creates interoperability
issues and divergence risks. In this context :
Internet standardisation bodies (in particular IETF)
will play a dominant role in setting the specifications of protocols
and technological blocks of NGN.
standardisation bodies (ETSI and ITU) will have a role to play
in this movement, in federating these initiatives, establishing a common
general architecture, ensuring accessibility and sharing of applicable
standards, and consolidating interoperability test suites.
In a time of accelerating technological development where operators
and service providers tend to depend on manufacturers to set the specifications
of future solutions, the regulator will have a leadership role to
play in coordinating the interests and advances of all players at
the national level.
One of the issues would be how to resolve the paradox
of a network and services model which is supposed to be open, but whose
technological complexity could prevent the effective implementation
of this openness, thereby impeding the freedom of choice of the end
user, especially in terms of services. This difficulty is added to
that of adopting new economic models, which requires an upheaval of relations
among the players of the entire electronic communications sector.
4 Several migration approaches
Migration towards the NGN appears to be an inevitable
evolution due to the dual convergence of voice/data/image and fixed/mobile.
It has already been initiated due to a number of players in France,
Europe and on other continents, and its impacts will therefore have
to be analysed. Still, it will likely be long (a timetable
of 10 to 20 years seems reasonable), incomplete (inevitable coexistence
with so-called traditional architectures) and difficult in the short
term because of the existence of competing solutions with different
features and maturity, and end-to-end interoperability issues.
The pertinence of NGN solutions varies according to
the players :
Operators and service providers for which the NGN solutions seem the
most pertinent are future new players (not yet established),
data players wanting to diversify their activities (in particular
ISPs), operators anticipating strong growth and/or a rapid diversification
of their activities (e.g.: WLL or xDSL operators), operators expecting
a strong decrease in their voice traffic because of data traffic,
and mobile operators.
The players who seem the furthest behind with respect to NGN solutions
are those having recently invested heavily in traditional TDM voice
switching infrastructures, and operators already having low-speed local
loop access and access switches.
It is also interesting to note that the move to NGN
is not mandatory, despite the opinion to the contrary expressed by
some players.
Even though players see new form of uses and value
creation (introduction of new services and markets) as major incentives
to move to NGN, immediate arguments put forward in the framework of
the migration of operators and service providers to NGN are strongly
influenced by the current economic situation:
Technical (convergence of voice and data networks, optimisation
of networks) and economic arguments (improved acquisition
and operating costs, with a quick return on investment) take precedence
over the marketing argument of moving to new multimedia services,
which is emphasized by manufacturers, but which is secondary for operators.
The weight of existing infrastructures and return on investment
concerns are at the heart of their upgrading decisions.
The dilemma players face is how to develop their services offering
when customers have a relatively constant global expenditure
budget. This means that they have to save on network technical costs
in order to maximise services revenues.
These financial constraints are in theory less important for companies
than for the general public, and companies’ needs for services change
more quickly. Major account users could push operator networks towards
the NGN.
Finally, it is important to note that some services layer players
(in particular ISPs diversifying to "voice" activities
and pure content/services suppliers) consider that their current
networks are already NGN.
The expected financial savings of NGN offers
must also be balanced in the short term:
While in the medium/long term, everyone expects a major decline in
the purchase costs of NGN solutions, in the short term these
amounts will depend strongly on operators’ existing infrastructures
and on their commercial relations with manufacturers. Investment savings
induced by NGN are only effective for initial deployment with no pre-existing
network.
As for recurring costs related to NGN solutions, although
manufacturers almost unanimously say that NGN solutions would
produce major immediate savings, operators and service providers
are less enthusiastic and more divided, in particular because
of the possible indirect surcharges linked to migration.
The migration towards the NGN of well-established
operators having a large network will be even longer and
more progressive. Most of those interviewed agree that already established
operators favour a slow migration based on ATM transport, although new
operators are more "all NGN" oriented and favour native IP infrastructures.
5 Deep evolution of market players relationship.
NGN Development T will permit network opennessand
content and services development :
These activities represent major potential for new specialised
players, in particular in outsourcing (ASP, MVNO, Centrex, network
administration, etc.). This potential must be encouraged through favourable
economic and regulatory conditions. We can also expect to see the emergence
and growing role of trusted third parties (authentication, payment,
kiosque and portal services, etc.).
With services increasingly linked to new terminal capacities and with
commercial visibility important, the control of client operating
systems and software applications will be a major advantage in the
positioning of major software publishers as NGN service providers.
Despite a foreseeable initial growthof new small players, this
phase will probably be followed by groupings to improve customer
visibility. These legitimate the recent positioning of major software
publishers as NGN service providers, and lead us to expect a key
role for portals and content aggregators.
The modification of relations among players will make interconnection,
revenue redistribution and cross billing concerns, etc. increasingly
sensitive.
NGN will be opportunity for far-reaching transformation
of players relationship, and in particular among operators and service
providers:
The key element for success in an NGN context is customers control.
This is an historic strength of operators, but also the source of legitimacy
in the potential positioning of certain players from the software field,
or service and content providers.
Competition on access networks is still a real priority in
the short term for most players: there is still strong demand for a
move to high speed, for extending the unbundling offer, etc. which will
have to be resolved in relation with regional development issues. However,
this focus on access concerns is not linked solely to NGN, and may very
well be concealing the current absence of openness among networks and
services.
The redistribution of revenues among players is the key to
success: consumers’ global communications budgets do not expand sufficiently
to allow players to avoid having to change revenue models. Nor will
it prevent a redistribution of revenues among all players along the
chain, all the way up to the service provider.
This medium-term redistribution along the value chain (from
access to services) is a trend identified by all. However, its implementation
will depend on the willingness of operators, although it seems
inevitable in the medium term in order to guarantee the long-term loyalty
of customers and the durability of revenues.
Another problem to be overcome is finding suitable ways to price
content, and implement new billing modes suited to
customers’ uses, all in an environment of converging voice/data, even
though these two worlds use very different methods on this point.
The openness of services to third party suppliers raises various technical,
operational, strategic and economic concerns:
New economic models will have to be found. The closed "no
door" / portal model is foreseeable, but will it be sufficient?
The applicability of open kiosque models will have to be evaluated
with respect to the difficulty of pricing new services. Payment dependent
on generated traffic would be the easiest model to understand, but
operators strenuously avoid this subject. The market will therefore
likely evolve towards combined economic models. In parallel with
these models, service provider direct billing could be combined
with operator billing of third parties.
The impacts of these new partnerships on information systems
(billing, provisioning, process automation, micro-payments, repayments,
trusted third parties, customer relations, partnership management, interconnection,
etc.) are a problem that is underestimated at the technical level
(and dealt with very little in standardisation) and at the economic
and operational level.
However, we note a major difference between the theoretical sharing
of roles in the framework of NGN, and reality: established players
(operators) support this open model in principle, but in reality, they
still exhibit a certain degree of procrastination and protectionism
which lead us to expect implementation problems. What’s worse,
operators have a de facto hold over the future of all players,
in particular service and content providers.
Thus, the openness of networks to third-party service providers seems
to be more a problem of willingness and business model rather than a
technical obstacle. This is why the regulator could try to encourage
openness right away, without necessarily waiting for the implementation
of standardised multi-network interfaces (e.g.: in mobile, the SMS kiosque
service being developed by the three French operators is a start to
openness).
6 Regulation Issues :
The move by players to NGN will turn the technical
and economic landscape of electronic communications upside down, and inevitably
affect the nature of regulation missions and the means of fulfilling them.
Players do not see the regulator playing a strong interventionist
role, but rather see a strengthening of its leadership role in discussion
(working groups) and its participation in standardisation activities,
market surveillance and facilitating a necessary convergence to
unified architectures and protocols.
The regulator is asked to set up a technical and economic
context favourable to NGN, with in particular:
Strong demand for a technologically neutral regulatory framework,
allowing the players freedom of choice, in accordance with the new European
regulatory framework
In the short term, the resolution of current difficulties, in particular
concerning local loop unbundling and the move to Internet Broadbandaccess
offers
The implementation of a regulatory framework favouring players’
long-term investments, as well as the sharing of infrastructures
in a broad sense (among players and among activities of a single player)
The players ask that the adaptations to the regulatory
context of NGN be guided above all by market demand. Therefore,
they ask for, more than anticipation, high regulation reactivity
and a strong operational approach. These needs for adapting the regulatory
context must therefore be, if not anticipated, at least prepared for through
studies and/or the creation of working groups.
Several areas for evolution to legislation and regulation
were identified in the course of this study:
In legislation :
- The rapid transposition of new European directives ("package
2000") in France.
- The definition of the status of future NGN players, in particular service
providers, and their rights and obligations (in particular authorisation
regimes and interconnection conditions).
In regulation :
- The foreseeable development of market surveillance, with special
attention to quality of service (within an IP network, and end-to-end),
which is identified as a major risk and an indicator of a lack of maturity.
- Increased facilitation role in technical and operational discussions.
In technology watch, in preparation for a possible evolution
of the regulatory and regulation framework :
-
In-depth discussions on the evolution of resources and management mechanisms
for numbering, naming and addressing on NGN networks
(evolution to IP).
- The necessary evolution of certain corporate services to take into
account a converging voice/data and fixed/mobile environment,
such as portability, emergency services (in relation with geographic location
concerns) the perimeter and the technical definition of "basic"
services, legal interception.
- The evolution of the interconnection of networks, services and information
systems, which raises concerns for interface standardisation, interoperability
and strategic willingness of players to open their networks to partners.
It seems wise, in preparing for the move to NGN, to already actively
encourage the openness of operator networks to third-party service providers,
whether for mobile (e.g.: GPRS) or fixed networks and services. |
