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Unclassified DSTI/ICCP/TISP(2005)13/FINAL Unclassified DSTI/ICCP/TISP(2005)13/FINAL Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 20-Mar-2006 ___________________________________________________________________________________________ English - Or. English DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY COMMITTEE FOR INFORMATION, COMPUTER AND COMMUNICATIONS POLICY Unclassified DSTI/ICCP/TISP(2005)13/FINAL Working Party on Telecommunication and Information Services Policies POLICY CONSIDERATIONS OF VOIP English - Or. English JT03206036 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format DSTI/ICCP/TISP(2005)13/FINAL FOREWORD This report was discussed by the Working Party on Telecommunication and Information Services Policies in December 2005. The Working Party agreed to recommend its declassification to the ICCP Committee. The Committee declassified the report in March 2006. The report was prepared by Mr. Jaebum Lee of the ICCP secretariat. It is published under the responsibility of the Secretary-General. c OECD / c OCDE 2006. 2 DSTI/ICCP/TISP(2005)13/FINAL TABLE OF CONTENTS MAIN POINTS............................................................................................................................................... 4 I. PURPOSE, SCOPE, DEFINITION......................................................................................................... 6 II. THE ECONOMIC IMPACT OF VOIP.................................................................................................. 6 1. The Potential Impact of VoIP Application Providers.......................................................................... 6 2. Impact on Telecommunication Operators............................................................................................ 6 3. The Impact on Non-Telecommunication Companies.......................................................................... 9 4. The Impact on Consumers................................................................................................................... 9 III. POLICY RECOMMENDATIONS FOR VOIP SERVICES.............................................................. 10 1. General Recommendations ................................................................................................................... 10 Application of Technology Neutrality Concept to VoIP....................................................................... 10 Light Regulation.................................................................................................................................... 11 Consumer Protection for Informed and Free Choice............................................................................. 11 2. Specific Policy Recommendations for VoIP......................................................................................... 11 Ensuring Impartial Management of Internet Access and Use ............................................................... 11 Carrier Selection (CS) and Carrier Pre-Selection (CPS) ....................................................................... 12 Relevant Markets for ex-ante Regulation .............................................................................................. 12 Numbering Policy.................................................................................................................................. 13 Access to Emergency Services .............................................................................................................. 15 Market Entry.......................................................................................................................................... 16 REFERENCES ............................................................................................................................................. 17 ANNEX ........................................................................................................................................................ 18 Circuit-based Access Channels ................................................................................................................ 18 Broadband Access Lines ........................................................................................................................... 19 Total mobile cellular subscribers per 100 inhabitants............................................................................... 20 NOTES ......................................................................................................................................................... 21 3 DSTI/ICCP/TISP(2005)13/FINAL MAIN POINTS This paper reviews the economic impact of Voice over Internet Protocol (VoIP) applications and provides policy recommendations for VoIP as a follow-up to the previous OECD paper on VoIP (DSTI/ICCP/TISP(2005)3/FINAL). Economic impact: This paper employs a broad definition of VoIP when discussing the economic impact of VoIP. This definition includes the conveyance of voice, fax and related services partially or wholly over packet-switched IP-based networks, including peer-to-peer VoIP services and VoIP services connected to PSTN. VoIP applications have the potential to reduce prices for voice communications and enhance competition in voice markets by lowering entry barriers to these markets. Some incumbent PSTN operators are responding to VoIP competition by transforming their networks into IP-based networks, offering new, additional services such as broadband Internet access, video, flat-rated call packages, and their own VOIP services. In some less competitive markets incumbents require consumers to buy a bundled service that include DSL Internet access service tied to analogue PSTN voice running over the same copper wire, raising fixed monthly charges for lines. A few cases have occurred where PSTN operators have used network management technology to block or slow data packets to and from competitors over their broadband access networks. In more competitive markets, market forces would preclude such behaviour. Even in less competitive areas, these strategies may not always be successful and will depend on the subscribers’ price elasticity of demand, their perception of service quality and the level of competition in the market. Many customers are using VoIP services, often with no fixed monthly charges, while retaining their PSTN services. In order to challenge VoIP providers unaffiliated with an operator, some PSTN operators are requiring customers to buy analogue voice service along with their DSL-based Internet access service. Customers in some markets are increasingly demanding DSL Internet access service alone, without analogue voice (often called naked DSL). Where other platforms for broadband access service (e.g., cable modem or wireless) are available as a competitor to DSL, competition has required PSTN operators to introduce the naked DSL access. Where unbundling is available with regulated wholesale tariffs, competitive DSL offers consisting of broadband access, voice and video (TV) services exist. Internet-related companies such as Microsoft, Yahoo, Google, AOL, and eBay have added VoIP capability into their existing software or hardware. Some Internet-focused companies started to make their instant messaging (IM) services interoperable to differentiate their service offerings, enlarge coverage, form strategic alliances with content providers (video or game) and broadband access providers. Network operators, in turn, are challenged to add differentiating features to their bundled offerings, leading to active competition between “centre” and “edge” providers. Policy recommendations: In this section, VoIP is defined more narrowly as a voice application over IP-based networks that enables a VoIP subscriber to call and to be called by a party subscribed to a traditional PSTN service. This is done in order to focus on VoIP services which function most like the PSTN. It may take some time for consumers to perceive peer-to-peer VoIP service as PSTN replacements since they currently lack features such as the ability to make emergency calls. Therefore such applications are not discussed in this section. In the context of specific recommendations on economic regulation, this 4 DSTI/ICCP/TISP(2005)13/FINAL paper does not recommend classifying VoIP services as a PSTN substitute. This market definition issue may be best dealt with on a case-by-case, empirical basis. Some, but not all OECD members, have technologically neutral regulation as a goal. Technology neutral regulation implies that regulations neither impose nor discriminate in favour of a particular type of present or future technology. Technological neutrality does not necessarily imply that the existing set of regulations (economic and social) for PSTN voice services should be imposed automatically on VoIP services. When it comes to economic regulation, technology neutrality may mean that the same competition criteria, rather than same regulations, apply to VoIP and PSTN voice services. The social regulations applied to PSTN voice including emergency calls1 may be generally applied to VoIP service if consumers begin to regard VoIP as a PSTN replacement. However, the idea of technology neutrality should not be used to suppress technological innovation. If the existing regulations crafted for PSTN are transposed directly to VoIP, VoIP services could become illegal or subject to onerous requirements that would
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