Telecommunications, Media, and Technology Economics

Hot Topics in NGN Economics

A next generation network or NGN is a generic term used to describe emerging Internet protocol (or packet-based) networks. In its initial stages, the IP data networking technology used by the Internet could not be relied upon to deliver high quality, real-time voice services. A voice call had to be converted from analog to digital, the transmission divided into packets before being sent over the IP data network, and then reassembled and converted back to analog at the destination point. The delays generated by the different stages of this process initially led to unsatisfactory quality for end users—it sort of resembled walkie-talkie communications rather than the high quality enjoyed when using the “plain old telephone system” (POTS).

However, relatively recent technological progress and the increasingly rapid deployment of broadband data networks have made it possible to achieve such low delays in packet delivery that end users can no longer tell the difference between a voice call placed over a circuit-switched or a packet-switched network. Consequently, IP networks have increasingly complemented, or become substitutes for, the traditional PSTN. Fully or partially IP-based networks are often referred to as next generation networks or NGNs. They operate on non-fixed route connections, which makes call setup, the physical location of originating and terminating parties, and the duration of a call, less important as factors driving access costs. Rather, in NGNs costs are driven by the capability of the IP network to handle voice, data, and video using compression, encoding, and packet switching.

The migration of the PSTN to an IP-based NGN is one of the most dramatic technological events of our time. Most fundamentally, this network evolution will result in an enormous increase in network capacity, which, in turn, allows operators to offer video services and consolidate many different networks into one converged network. NGNs have the potential to create many new opportunities and services, such as IPTV, and will fundamentally affect the way businesses operate and individuals lead their lives. While NGNs are a relatively new phenomenon, there is already significant demand for their services.

NGNs are also vital to a country’s economy and global competitiveness. Often seen as a way to bridge the digital divide, NGNs provide access to digital technologies, information, and tools, which is particularly important to the poorer countries of the world.

In order to participate in this global trend, governments and regulators must gain a thorough understanding of the market implications of NGNs. Particularly, regulators must understand:

• The supply of NGNs, that is, the current and future deployment of NGNs by the country’s operators

• The demand for NGN services and with it the type of services offered

• The business model underlying NGNs

• The competitive and regulatory implications of NGNs

• The possible scenarios and associated risks by which NGNs could develop

Want to discuss any of these topics? 

Please let me know if you would like to discuss any of these or other topics that affect the economics of NGNs. Most of these topics are related and a thorough understanding of the entire communications industry is crucial in correctly analyzing strategy questions or legal and regulatory claims.

Interested in another topic? 

Yes, there are many other issues that affect NGNs, but I hope that I have listed the most important above. Please feel free to send me an email if you think I have missed a current hot topic or would like me to comment on another.