Interkoneksi

Modul-05

Unbundling & Internet Interconnection

What is Unbundling?
Unbundling refers to the provision of components on a stand-alone basis. Therefore, interconnecting carriers can obtain access to single unbundled component without an obligation to buy other components as part of an interconnection package Unbundling is the mandatory offering by network operators of specific elements of their network to other operators, on terms approved by a regulator or sanctioned by a court
Unbundling of network elements allows competing operators to enter the market and roll out services with considerably less sunk investment in some or all components of a competing network. For example:
A new entrant might initially install switches in central business districts only, and lease those components of the incumbent carriers network needed to directly serve customers in other areas, or An entrant might lease just those network elements needed to offer competing retail services (such as DSL services). In this way the entrant can offer competing services to customers without duplicating all components of the incumbent carriers infrastructure, and without simply reselling the incumbents service offering
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Why Require Unbundling?

Some inputs are available only from certain network operators, and cannot easily be duplicated. Unless those inputs are available at appropriate prices, competition in downstream telecommunications markets would be difficult or impossible The emergence of competition from alternative technologies such as wireless, cable telephony, and VoIP is eroding this rationale for mandatory unbundling Unbundling can be an enormous task for regulators. The administrative costs of defining, and setting prices for, a range of network elements can be high. In addition, unbundling can impose high compliance costs on incumbent carriers. Regulators should carefully consider the merits of unbundling on a case-bycase basis, with a thorough assessment of the likely costs and benefits

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Regulatory Approaches to Unbundling

Given the potential disadvantages of a mandatory unbundling policy, some regulators have adopted modified approaches to such a policy. These approaches are intended to achieve some advantages and avoid some disadvantages of policies that require unbundling of all network components. Some of these approaches may be summarized as
Transitional Unbundling Requirements Selective Unbundling Requirements

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Transitional Unbundling Requirements

Access to certain types of unbundled components may be required for a limited period of time. This approach can apply, for example, to access lines (loops) in urban areas. Unbundling of access lines might be required for the first five years after a market opening. Thus, competitors can use the incumbent's access lines to "jumpstart" competition. However, they will have to construct their own access lines by year five, in order to maintain network connections with their customers. In theory, this approach will encourage the development of competition in the short term. At the same time it should promote development of complete facilities-based competition over the mid to longer term.

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Selective Unbundling Requirements

Some unbundling policies distinguish between network components. They require unbundling of some and not others. Unbundled access may be required only for certain types of components. For example, unbundled access may be required for network components in cases where construction of duplicate components would cause environmental damage or public inconvenience. Thus, incumbents might be required to provide access to towers, poles, conduits, ducts, aerial access lines and inside wiring, where a proliferation of such facilities would degrade the environment, disrupt public roads, and/or otherwise inconvenience the public. The same may be true of access lines or switching facilities in architecturally or culturally important areas. Such access might be required over the long term as well as the short term

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Some Possible Unbundled Network Component and Service

Network access line (local loop and related functions) Local switching function Tandem switching functions Inter-exchange transmission Access to STP (Signaling Transfer Point ) Access to call-related databases Central office codes Subscriber listing Operators Services Directory assistance functions Operating Support Systems

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Local Loop Unbundling

Local access markets are generally less competitive compared to long distance and international markets Wireless services currently provide an alternative means of local narrowband access in many markets, and broadband competition is starting. However, wireline services still provide the main means of local access around the world. There, high entry costs and low margins have discourage competition. Mandatory unbundling of local loops is increasingly being used as a regulatory tool to accelerate competition in local access markets Competition in local access is increasingly seen as an important policy objective. One reason is the perceived need to provide more competition in high speed access markets in order to roll out of Internet, e-commerce and video services. Many regulators and policy makers see such competition as necessary to maintain or increase the competitiveness of their national economies Regulators have now mandated unbundled access to local loops in a range of different economies

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Types of Local Loop Unbundling

1. Full Unbundling-Local Loop
Link re-routed from incumbents switch to new entrants

MDF

Incumbent Local Switch

PSTN

To New Entrants Switch

PSTN

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Types of Local Loop Unbundling

2. Full Unbundling-Two Local Loop

First Local Loop

MDF
XDSL Modem Second Local Loop New Entrants DSL Access MUX

Incumbent Local Switch

PSTN

PC or other Customer Equipment.

New Entrant

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Types of Local Loop Unbundling

3. Shared Use of Copper Local Using Splitter

Splitter Local Loop

M D F

Incumbent Local Switch

Tel

PSTN

ADSL Modem

Data

PC or Other Customer Equipment.

DSL Access MUX

New Entrant

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Types of Local Loop Unbundling

4. Provision of High Speed Bit Stream Access
Customer of Incumbent Data Service

Local Loop

Local Loop
Customer of New entrant Data Service

M D F

Splitter

PSTN

DSL Access MUX Operated By Incumbent

High Speed Bit stream service provided to One Or more New Entrants

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How Much Unbundling

The extent of unbundling has significant effects on the development and nature of telecommunications competition. If there is not enough unbundling, entry by efficient competitors may be inhibited. If there is too much unbundling:
Entrants may focus on arbitrage opportunities, by obtaining services at attractive wholesale prices and reselling them to customers, instead of designing innovative product mixes that give customers greater choice Entrants may delay investing in infrastructure and focus instead on expanding re-bundled services as quickly as possible Incumbents may have fewer incentives to invest in unbundled parts of the network. This can lead to inadequate capacity, lower quality, and slower development of new technology (such as high capacity broadband)

Some jurisdictions require incumbent operators to only unbundle network components that are essential facilities
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Essential Facilities
Essential facilities are resources or facilities that have the following properties:
They are critical inputs to retail production. Essential facilities are located at the wholesale level of the production chain, and are essential inputs in the production or supply of the retail product or service They are fully owned and controlled by vertically integrated incumbent firms. The owner of the facility participates in the retail as well as the wholesale stage of the market They are a monopoly. Retail competitors can only acquire an essential facility from the incumbent firm that owns and controls it It is not feasible, either economically or technologically, for retail competitors to duplicate the essential facility or develop a substitute for it

At the wholesale level the incumbent supplies other firms with a critical input, and those firms are dependent on the incumbent for that input. At the retail level, the incumbent competes with those same firms. The owner of an essential facility may seek to use its position to prevent or impede competition, by implementing a price squeeze or even refusing to supply the facility
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Essential Facilities at Retail Level

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Costs and Benefits of Unbundling

Benefits
Increases, and brings forward, entry by reducing entry costs Increases competition in the provision of services supported by the existing network Can bring forward the introduction of new services that rely on the incumbents network technology (such as DSL services) and competition in those services

Costs
Potentially high administrative and compliance costs (costs increase with the extent of unbundling) May reduce incentives for incumbents to invest in new infrastructure. Enables incumbents to obtain legislative and regulatory relief, by making investment in next generation networks contingent on such relief May reduce incentives for entrants to invest in new infrastructure. Entrants may focus on reselling the incumbents services, instead of designing innovative new service offerings

The magnitude of these costs and benefits will vary depending on: The form of unbundling, and Whether regulated prices for unbundled network elements reflect economic costs
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INTERNET INTERCONNECTION
I

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Overview of the Internet

The Internet is a world-wide collection of interconnected networks. It is capable of switching, routing, and transmitting digital packets of information corresponding to a variety of voice, data, text, audio, and video services. The Internet allows any computer (or other device) with an Internet connection to communicate with any other device that is connected to the Internet

Internet

Network Surfer

Digital Subscriber Link, Cable Modem, or Wireless Network

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ISP

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Evolution of the Internet

Phase 1 Active Government Stewardship (1980s1995) Government administration first through the United States Defense Department, and later through the United States National Science Foundation and universities and research institutes around the world

Phase 2 Entry Leads to Network Expansion (1995-1998) Privatization of government financed networks and the ascendancy of former government contractors and other major carriers

Phase 3 Dotcom Boom Stimulates Overinvestment (1998-2001) The dotcom boom, which triggered irrational, excessive investment and overcapacity

Phase 4 Retrenchment (2001-present) The dotcom bust, followed by market re-entrenchment and resumed growth
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Hierarchical Structure of the Internet

The Internet today operates as a hierarchy
Thousands of small, local, regional and small country ISPs operate at the bottom of an Internet pyramid. These operators typically have to pay for access to the networks and customers operated by larger ISPs. At the middle of the pyramid are several dozen Tier-2 ISPs that typically pay to transit the networks of the largest ISPs. Tier-2 ISPs seek to interconnect on a "peering" basis with other, Tier-2 ISPs. At the top of the pyramid are a handful of Tier-1 ISPs that typically peer with other Tier-1 ISPs

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Internet Exchange Point

Internet Exchange Point (IXP): Point that interconnect ISP with each other and with Internet Backbone Provider and some times call as Network Access Points (NAPs) IXPs provide Switching and Routers that permit interconnection of various internet networks Due to the rapid development of internet provider, IXPs provide also : Collocation services, providing services as well as equipment for internet routing, transmission, web hosting and other service. Each ISP pays for its own cost of transmission, routing, and other equipment, or shares the cost on a negotiates basis
ISP ISP ISP IXP ISP ISP
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Larger ISP or Internet Backbone Provider

Models for Internet Interconnection

Internet Service Providers (ISPs) use different models for interconnection pricing, depending on the specific characteristics of the ISPs concerned. Broadly, ISPs can either:
Enter into peering arrangements, or Enter into a transit arrangement

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Peering
Peering, also known as Sender Keep All or Bill and Keep, is a zero compensation arrangement by which two ISPs agree to exchange traffic at no charge. This kind of arrangement makes sense where the two ISPs have roughly the same characteristics and traffic volumes, such that net financial burden from traffic flows between them is likely to be small The process by which an ISP qualifies for peering remains private. ISPs negotiate terms and conditions privately. They only rarely publicly disclose the criteria they use to qualify for peering.

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Transit
Transit is an arrangement in which larger ISPs sell access to their networks, their customers, and other ISP networks with which they had negotiated access agreements. Under a transit arrangement, the sender pays the full cost of interconnection. Transit charges are set by commercial negotiation, and are generally not disclosed. Internet transit access arrangements provide a much greater geographical access than telecommunications transit arrangements. In telecommunications, transit arrangements typically secure an indirect link to one carrier in one location (primarily because a small carrier is unable to secure a direct link). Internet transit arrangements typically provide access to a vast array of networks, not limited to one country.

Pays

Large ISP IXP

Charges
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Small ISP

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Charging Variables
Internet interconnection charges are typically based on one or more of the following variables:
Traffics flow or usage, based on the increasing capacity of internet routers and other equipment to measure traffic Imbalance of traffic flows between ISPs Distance or geographical coverage Number of point of interconnection; and Other cost-based interconnection charges

The trend toward cost-based interconnection charges is consistent with development in other telecommunication services US is the leader of internet industry, so many ISPs in other country have paid US ISPs for transportation to and from the US to their home country

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International Internet Interconnections

Noting the rapid growth of internet and internet protocol-based international services : It is recommended that administrations involved in the provision of international internet connection negotiate and agree bilateral commercial arrangements applying to direct international internet connections where each administration will be compensated for the cost that it incurs in carrying traffic that is generated by the other administration.
(Rec. D.iii adopted by ITU SG 3)

The recommendation has been opposed by the US and Canada. They argue that the North American bias of Internet routing will decrease over time, as competition and market development reduce costs and increase Internet facilities in other regions. Local Interconnection charges are also important to the viability (able to exist) of ISPs, Local internet access providers will be principal beneficiaries of the move to unbundling of local loop
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THANK YOU

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