Competition and Regulation in the Telecommunications Industry in ...

More documents

Recommendations

Info

Competition and Regulation in TelecommunicationsFigure 1.1: A telecommunications networkCustomer premisesCustomer premisesFIXED LINELocalLoopLocalSwitchLocalSwitchLongdistancePoPCustomer handsetCustomer handsetBaseStationBaseStationMOBILELocalSwitchLongdistancePoPCustomer premises equipment (CPE)The concern here is the retail supply of customer premises equipment and not themanufacture of the items. CPEs include fixed line telephones, mobile handsets, andPABXs (private exchange equipment for business use). Each of these can beconsidered a separate market. In the heyday of public monopoly, the customerpremises equipment had to be supplied by the incumbent PSTN. This monopolyposition, on what is essentially a service with no natural monopoly features,represented an opportunity for abnormal profits to be made. Almost without fail thefirst step in any deregulation process is to liberalise this part of the supply chain.Local AccessLocal access can now be provided by a number of different technologies, each withdifferent cost structure and therefore different degrees of substitutability with thetraditional public switched telephone network (PSTN). The focus below will be onfixed line (PSTN, data networks, cable TV) vs. wireless (fixed or mobile) options.Although local access is being handled as one stage of production, it should be notedthat this stage can be broken down further. In particular,• connection of premises to local loop• local loop• local exchange (switch)In the search for greater competition at the local access level, it may be desirable tofurther unbundle the production process and find ways to inject competition. Forinstance, the SA White Paper on telecommunications suggests allowing communitygroups and SMMEs putting in local loops that then connect to the Telkom PSTN. Inthe USA, Competitive Access Providers (CAPs) have emerged to connect largecustomers directly to the long distance networks points-of-presence (PoPs),4
Competition and Regulation in Telecommunicationseffectively bypassing the PSTN (these access lines are point-to-point and have noswitching capacity) (Laffont & Tirole 2000).Fixed LineWithin the group of network providers that use fixed line infrastructure, networks werehistorically built to focus on one of three different types of transmission – voice, dataor image. However, increasingly networks are offering all three. This is feasiblebecause almost all networks now use a digital format.In voice, the traditional PSTN consists mainly of copper or coaxial cable transmissionequipment at the local access level and switching equipment that allows two-waytransmission between two individual points on the network by establishing adedicated line between two points for the duration of a call. The transmissionmediums have low capacity or network speed (measured in bits per second) makingthem inadequate for video transmission and a slow but adequate medium for datatransmission. However, recent technological developments in data compression havesubstantially increased the speeds available on these wires (in particular theasymmetrical digital subscriber line systems – ADSL – and other DSL technologies).Upgrading the networks to provide greater speed does require additional investmentsin the local access infrastructure. An alternative is the use of fibre optic, which has afar greater network capacity. Due to the higher cost of fibre optic, it is only costeffective with large businesses and not residential homes in the local accesscomponent of the network. It is used extensively in the long-distance andinternational networks. Either way, it is increasingly possible for PSTN networks to beupgraded to offer video services too. In fact, growing use of capacity for datatransmission (i.e. the Internet and intra-corporate transfers) make the investments infibre optic or ADSL increasingly worthwhile, offering the springboard to broadcasting.Cable TV (CATV) networks (video networks) use a coaxial cable with broadcastquality network speeds as their transmission medium. Initially these networks wereonly focused on broadcast and so were established with one-way, one-to-manytransmission (tree-and-branch structure), disqualifying one-to-one communication.However, where cable operators have entered telephony, they have upgraded theirnetworks to handle two-way transmission. This has enabled the creation of the new‘pay-per-view’ television services, and also allowed them to actively enter the Internetproviders and telephony market.Dedicated data networks may be private or public (Internet). Data can be run overany network and in fact, most local access to dedicated data networks occursthrough either the PSTN, the cable TV network or a mobile service. As such, thediscussion of data networks is largely a long-distance issue. However, largerbusinesses are increasingly being connected directly to these long-distance datanetworks making it worth a mention here. The switching equipment of data networksdoes not establish a dedicated line and instead routes ‘packets’ of data on commonusage lines from one point to another through the path of least resistance. This isefficient for data but as line traffic congestion can delay packets, this has previouslybeen unsuitable for quality voice or image transmission. However, recentInternational Telecommunications Union (ITU) agreements on a common gatewayprotocol for passing multimedia from telephone networks to data networks shouldgreatly improve the quality in the near future (ITU 1999). This will see priority beinggiven to voice and image packets, avoiding the problem of congestion.5
Page 1: Competition and Regulation in theTe
Page 4: Competition and Regulation in Telec
Page 7: Competition and Regulation in Telec
Page 11 and 12: Competition and Regulation in Telec
Page 59 and 60:
Competition and Regulation in Telec
Page 61 and 62:
Page 63 and 64:
Page 65:
show all

Competition and Regulation in the Telecommunications Industry in ...

Create successful ePaper yourself

Delete template?

Save as template?