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© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
The end of core:
Chintan Vaishnav, ESD, [email protected]
Should disruptive innovation in telecom invoke discontinuous regulatory response?
© Chintan Vaishnav, All Rights Reserved
May 31, 2007Philadelphia, PA
2© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
VoIP bridges PSTN and the Internet! Should we care?
Router
Router
Router
Router
VoIP -- Packet-SwitchedCommunication
Switch Switch
The PSTN Circuit-SwitchedTelephony
END-DEVICES
CORE
Regulated
Unregulated
The broad regulatory question: Should VoIP be regulated like the PSTN, unregulated like the Internet or should there be a third approach?
3© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Modes of VoIP
Mode Service Example Regulatory Term
Phone-to-Phone VoCable, VoDSL, Vonage, 8x8
“interconnected” service
(i.e. PSTN interconnection)
PC-to-Phone SkypeOut,Net2Phone “interconnected” service
PC-to-PC Skype, Yahoo, IM, Google Chat
“unmanaged” service
(i.e. no PSTN interconnection)
4© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Regulatory Response PSTN vs. VoIP
US Telecom Regulation
Paradigm Traditional Regulation
Objective PSTN Phone-to-
Phone VoIP
PC-to-Phone VoIP
PC-to-PC VoIP
Social Regulation
911/E911 Public Safety
Wiretapping (CALEA)
Law Enforcement Capability
Disability Access
Equal Opportunity
Economic Regulation
Universal Service
Economic Development
Access Charges
Competition
“Light Touch” Regulation: Traditional 911/E911 and CALEA regulation extended only to “interconnected” VoIP services
5© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Why is this Interesting?
Public Safety and Law Enforcement are perceived to be more relevant today then ever before…
Question:
Is 911/E911 and CALEA regulation of “interconnected” VoIP service…
- adequate and sustainable? - mindful of technical and human complexities?
6© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Observation: Telecommunications regulation assumed a network core that…
- could be engineered to fulfill regulatory objectives- was controlled by an industry structure that could do the engineering
Argument: Disruptive trends such as VoIP erode assumed control in the core
Hypothesis:
With eroding control in the core meeting regulatory objectives will increasingly require discontinuous regulatory responses
Observation and Hypothesis
7© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
e.g. Ciscoe.g. Dell, Palm,User-innovatore.g. municipal
broadband
e.g. earth link(Pkt-switching)
e.g.SkypeOut,User-innovator
Observing and Conceptualizing The End of Core
CoreEndDevice
END-DEVICE
PROVIDER
APPLICATION
PROVIDER
SERVICE PROVIDER
ACCESS
PROVIDER
EQUIPMENT
PROVIDER
Communications Value Chain
VoIP
PSTN e.g. Lucente.g.AT&T, MCI, Sprint
(Circuit-switching) e.g. Uniden
1
Functions of a typical voice call
Setup & terminate the call (call signaling)
2 Voice transport (bit transport)
3 Secure the channel
4 Maintain user privacy
5 Billing forvoice service
1 2 3 4 5
12 3 45
8© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
The End of Core
Functionality is Dispersing to End-Device
+
The Ownership of the Core is Fragmenting
=
The End of Core
9© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
The implications of the End of Core for Regulation
The End of Core can cause…
Regulatory misalignment (Static Complexity): Between those who must meet the regulatory requirements versus those who control the functionality necessary to meet them
Regulatory Misalignment can cause… may require…• Inefficiency in achieving regulatory compliance• Regulatory capture by new players
Discontinuing access-centric regulatory thinking…and understanding the complexity of the value chain
10© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
The implications of the End of Core for Regulation
The End of Core can also cause…
Circum-innovation (Dynamic Complexity): By user-innovators (a customer with the necessary knowledge to innovate) who can introduce innovations that might, intentionally or otherwise, circumvent regulatory objectives
Circum-innovation can cause… may require…• arms race between proponents of compliance and non-compliance
Discontinuing command-and-control regulatory thinking…and understanding a collaborative model of regulation
11© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Research Method
System Dynamics Model
• Refine the Causal Structure
• Construct Validity using real-world data
• Analysis
Field Research
• Internal Validity of the Model Causal Structure
• Understanding Circum-Innovation
12© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Causal Structure of the System Dynamics Model
Compliance Gap
Actual RegulatoryCompliance
-
DesiredRegulatoryCompliance
+
Compliance GapRegulation
Actual RegulatoryCompliance
+
-
DesiredRegulatoryCompliance
+
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
-B1
Current RegulatoryRationale
DesiredRegulatoryCompliance
+
Deployment ofCompliant
Technology+
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
-B1
Current RegulatoryRationale
DesiredRegulatoryCompliance
+
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
Deployment ofCompliant
Technology+
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
-B1
Current RegulatoryRationale
Cost ofCompliance
DesiredRegulatoryCompliance
+
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
Deployment ofCompliant
Technology+
+
Attractiveness of"Interconnected"
VoIP
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
-B1
Current RegulatoryRationale
Cost ofCompliance
-
DesiredRegulatoryCompliance
+
Attractiveness of"Unmanaged" VoIP
+
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
Deployment ofCompliant
Technology+
+
Attractiveness of"Interconnected"
VoIP
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
-B1
Current RegulatoryRationale
Cost ofCompliance
-
DesiredRegulatoryCompliance
+
Attractiveness of"Unmanaged" VoIP
+
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
Deployment ofCompliant
Technology+
+
innovation forcompliance cost
reduction
-
-
Compliance CostReduction
B2
Attractiveness of"Interconnected"
VoIP
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
+
-B1
Current RegulatoryRationale
Cost ofCompliance R1
Loss of Compliance throughDisincentive for
"Interconnected" Service
-Firms entering
"interconnected"VoIP market
DesiredRegulatoryCompliance
+
Attractiveness of"Unmanaged" VoIP
+
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
"Interconnected"VoIP Adoption
+
+
Deployment ofCompliant
Technology+
+
innovation forcompliance cost
reduction
-
-
Compliance CostReduction
B2
Attractiveness of"Interconnected"
VoIP
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
+
-B1
Current RegulatoryRationale
Cost ofCompliance R1
Loss of Compliance throughDisincentive for
"Interconnected" Service
-Firms entering
"interconnected"VoIP market
DesiredRegulatoryCompliance
+
Attractiveness of"Unmanaged" VoIP
Firms entering"Unmanaged"VoIP market
++
R2
Loss of Compliance throughIncentive for "Unmanaged" Service
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
"Interconnected"VoIP Adoption
+
+
"Unmanaged"VoIP Adoption
+
-
Deployment ofCompliant
Technology+
+
innovation forcompliance cost
reduction
-
-
Compliance CostReduction
B2
Attractiveness of"Interconnected"
VoIP
Compliance GapRegulation
Actual RegulatoryCompliance
+
+
+
-B1
Current RegulatoryRationale
Cost ofCompliance R1
Loss of Compliance throughDisincentive for
"Interconnected" Service
-Firms entering
"interconnected"VoIP market
DesiredRegulatoryCompliance
+
Attractiveness of"Unmanaged" VoIP
Firms entering"Unmanaged"VoIP market
Innovation inVoIP
++
R2
Loss of Compliance throughIncentive for "Unmanaged" Service
RegulatoryMisalignment
FunctionalityDispersion toEnd-Devices
+-
OwnershipFragmentation of
the Core
+
+
Circum-innovation
Circum-innovationFraction
+
-
+
"Interconnected"VoIP Adoption
+
+
"Unmanaged"VoIP Adoption
+
-
R3
Loss of Compliancethrough
Circum-Innovation
Deployment ofCompliant
Technology +
+
+
innovation forcompliance cost
reduction
-
-
Compliance CostReduction
B2
<FunctionalityDispersion toEnd-Devices>
+
# - quantitative data
#
#
#
#
#
#
#
#
- Field Research
13© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Summary of Field Research
Involving: Firms offering “interconnected” and “unmanaged” VoIP service
Investigate:1. How and why does the regulatory misalignment affect the deployment
of compliant technology?
2. How and why does the compliance cost affect the choice of technology to develop?
Field Study 1
Involving: Circum-innovations affecting 911/E911 and CALEA Compliance
Investigate: 1. How and why circum-innovations impact the regulatory compliance?
Field Study 2
14© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Description of Data Collection
Theoretical Construct Proxy Type
Functionality Dispersion % Voice Traffic that is PC-to-Phone + PC-to-PC VoIP
Time Series
Ownership Fragmentation Market share of PC-to-Phone + PC-to-PC VoIP
Time Series
Desired Regulatory Compliance
Number of “interconnected” VoIP Firms
Time Series
Actual Regulatory Compliance Number of 911 and CALEA compliant “interconnected” Firms
Quant.
Level of Compliant VoIP Use % Voice Traffic that is “interconnected” VoIP
Time Series
Innovation Rate TBD Time Series
Compliance Cost Average Cost of a PSTN Wiretap
Quant.
Quantitative data from FCC, industry reports and trade magazines
15© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Desired Contribution
ESD / Telecom Policy
1. Explaining dynamic complexity involved in the regulation of VoIP2. Increasing the ability to communicate risks and opportunities in regulating
the emerging communications technologies from the perspective of socio-technical systems
Innovation Theory Literature
3. A framing paper on the dynamics of regulation and innovation
Internet Architecture Literature
4. Extending the “tussle in cyberspace” work by one step with a paper on “tussle for surveillance and its impact on the Internet architecture”
System Dynamics Literature
5. A comprehensive paper on the system dynamics modeling of the communications industry
© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
The end of core:
Chintan Vaishnav, ESD, [email protected]
Should disruptive innovation in telecom invoke discontinuous regulatory response?
© Chintan Vaishnav, All Rights Reserved
Committee:
Prof. Charles Fine (Chair)
Dr. David Clark
Prof. John Sterman
Thank You!
17© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
System Dynamics Model
AdoptionSector
Innovation Sector
Ind. Struct. Sector
Ind. Struct. Sector
Regulatory Compliance Sector
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
ComplianceGap
-
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
FragmentingOwnership
DispersingFunctionality
++
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Unmanaged-Interconnected
Migration
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Price ofInterconnected VoIP
Price ofUnmanaged VoIP
-
-
Attractiveness ofInterconnected
Service
Attractiveness ofUnmanaged Service
-
+
-
+
Unmanaged-Interconnected
Migration
+
+
<Price ofInterconnected
VoIP>
<Price ofUnmanaged
VoIP>
+
+
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Price ofInterconnected VoIP
Price ofUnmanaged VoIP
-
-
Attractiveness ofInterconnected
Service
Attractiveness ofUnmanaged Service
-
+
-
+
Unmanaged-Interconnected
Migration
+
+
Number of VoIPInnovators
Innovators in Firm
User-Innovators
+
+Innovation Rate+
Circum-innovationFraction Available
Circum-InnovationsCircum-innovaiton
Origination Rate
+
+
VoIP Firms
VoIP Users
+
+<Price of
InterconnectedVoIP>
<Price ofUnmanaged
VoIP>
+
+
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Price ofInterconnected VoIP
Price ofUnmanaged VoIP
-
-
Attractiveness ofInterconnected
Service
Attractiveness ofUnmanaged Service
-
+
-
+
Unmanaged-Interconnected
Migration
+
+
Number of VoIPInnovators
Innovators in Firm
User-Innovators
+
+Innovation Rate+
Circum-innovationFraction Available
Circum-InnovationsCircum-innovaiton
Origination Rate
+
+
+
ObsolescenseSeverity
+
VoIP Firms
VoIP Users
+
+
Circum-InnovationAdoption
-
AdoptionProbability
+
<Price ofInterconnected
VoIP>
<Price ofUnmanaged
VoIP>
+
+
FragmentingOwnership
DispersingFunctionality
++
18© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
References
VoIP1. Goode, B. (2002). "Voice over Internet protocol (VoIP)." Proceedings of the IEEE 90(9): 1495-1517.
Technology History2. Fagen, M. D., A. E. Joel, et al. (1975). A History of engineering and science in the Bell System. [New York], The
Laboratories.3. Temin, P. and L. Galambos (1987). The fall of the Bell system : a study in prices and politics. Cambridge ; New
York, Cambridge University Press.4. Abbate, J. (1999). Inventing the Internet. Cambridge, Mass, MIT Press. Telecommunications Regulation (PSTN and VoIP)5. (1934). Communications Act of 1934. 47. U.S.C.6. (1994). Communications Assistance for Law Enforcement Act. 47. U.S.C.7. (1996). Telecommunications Act of 1996. 47. U.S.C.8. (2004). Notice of Proposed Rulemaking: Communications Assistance for Law Enforcement Act and Broadband
Access and Services. WC Docket No. 04-295.9. (2004). Notice of Proposed Rulemaking: IP Enabled Services. WC Docket No. 04-36.10. (2005). E911 Requirement for IP-Enabled Service Providers. WC Docket No. 05-196.11. Nuechterlein, J. E. and P. J. Weiser (2005). Digital crossroads : American telecommunications policy in the Internet
age. Cambridge, Mass., MIT Press.12. Laffont, J.-J. and J. Tirole (2000). Competition in telecommunications. Cambridge, Mass., MIT Press.
The End of Core (Internet Architecture and Industry Structure)13. Clark, D. D. (1988). "The design philosophy of the DARPA Internet Protocols." SIGCOMM Comput. Commun. Rev.
25(1): 102-111.14. Saltzer, J. H., D. P. Reed, et al. (1984). "End-to-end arguments in system design." ACM Trans. Comput. Syst. 2(4):
277-288.15. Blumenthal, M. S. and D. D. Clark (2001). "Rethinking the design of the Internet: the end-to-end arguments vs. the
brave new world." ACM Trans. Inter. Tech. 1(1): 70-109.
19© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
16. Clark, D. D., J. Wroclawski, et al. (2002). Tussle in cyberspace: defining tomorrow's Internet. Proceedings of the 2002 conference on Applications, technologies, architectures, and protocols for computer communications. Pittsburgh, Pennsylvania, USA, ACM Press: 347-356.
17. Clark, D. D., W. Lehr, et al. (2005). The Growth of Internet Overlay Networks: Implications for Architecture, Industry Structure and Policy. Technology Policy Research Conference, Arlington, VA.
18. Vaishnav, C. (2005). Voice over Internet Protocol (VoIP): The Dynamics of Technology and Regulation. Technology and Policy Program. Cambridge, Massachusetts Institute of Technology: 166.
19. Vaishnav, C. and C. H. Fine (2006). A dynamic assessment of VoIP innovation, adoption and their interaction with CALEA regulation. Technology Policy Research Conference, Arlington, VA.
Innovation20. Utterback, J. M. and W. J. Abernathy (1975). "Dynamic Model of Process and Product Innovation." Omega-
International Journal of Management Science 3(6): 639-656.21. Abernathy, W. J. and J. M. Utterback (1978). "Patterns of Industrial Innovation." Technology Review 80(7): 40-47.22. Dosi, G. (1982). "Technological Paradigms and Technological Trajectories - a Suggested Interpretation of the
Determinants and Directions of Technical Change." Research Policy 11(3): 147-162. 23. Anderson, P. and M. L. Tushman (1990). "Technological Discontinuities and Dominant Designs - a Cyclical Model of
Technological-Change." Administrative Science Quarterly 35(4): 604-633.24. Henderson, R. M. and K. B. Clark (1990). "Architectural Innovation - the Reconfiguration of Existing Product
Technologies and the Failure of Established Firms." Administrative Science Quarterly 35(1): 9-30.25. Christensen, C. M. and R. S. Rosenbloom (1995). "Explaining the Attackers Advantage - Technological Paradigms,
Organizational Dynamics, and the Value Network." Research Policy 24(2): 233-257.
Research Methods26. Sterman, J. (2000). Business dynamics : systems thinking and modeling for a complex world. Boston, Irwin/McGraw-
Hill.27. Fine, C. H. (1998). Clockspeed : winning industry control in the age of temporary advantage. Reading, Mass.,
Perseus Books.28. Nelson, R. R. and S. G. Winter (1982). An evolutionary theory of economic change. Cambridge, Mass., Belknap
Press of Harvard University Press.
References (Contd.)
20© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
Description of Data Collection
Theoretical Construct Proxy Data (Unit) Type Source
Functionality Dispersion % Voice Traffic that is PC-to-Phone + PC-to-PC VoIP
• Number of PC-to-Phone Users (Users)• Number of PC-to-PC Users (Users)• Number of Phone-to-Phone Users (Users)• Number of PSTN Users (Users)• Average PSTN MOU (MOU/Month)• Average PC-to-PC MOU (MOU/Month)
Time Series
• Industry Report (triangulation)• Industry Report (triangulation)• FCC• FCC• FCC• Industry Report (triangulation)
Ownership Fragmentation Market share of PC-to-Phone + PC-to-PC VoIP
• Price of PC-to-Phone Service ($/Min)• Price of PC-to-PC Service ($/Min)• Price of Phone-to-Phone Service ($/Min)• Price of PSTN Service ($/Min)
Time Series
• Industry Report (triangulation)• Industry Report (triangulation)• FCC• FCC
Desired Regulatory Compliance
Number of “interconnected” VoIP Firms
• Number of Phone-to-Phone Firms (Firms)• Number of PC-to-Phone Firms (Firms)
Time Series
• Industry Report (triangulation) + FCC
Actual Regulatory Compliance
Number of 911 and CALEA compliant “interconnected” Firms
• FCC CALEA Compliance Filings (Firms)• FCC 911/E911 Compliance Filings (Firms)• % Authorized Wiretaps Successful (%)
Quant. • FCC• FCC• US Courts
Level of Compliant VoIP Use
% Voice Traffic that is “interconnected” VoIP
• Number of PC-to-Phone Users (Users)• Number of Phone-to-Phone Users (Users)• Average PSTN MOU (MOU/Month)
Time Series
• Industry Report (triangulation)• FCC• FCC
Innovation Rate TBD • VoIP Patents• VoIP Product Announcements
Time Series
• USPTO• Trade Magazines
Compliance Cost Average Cost of a PSTN Wiretap
• Average of Cost per Wiretap Order ($/Order)
Quant. • US Courts
Qualitative Understanding from Case Studies
Compliance Cost Effect of Regulatory Misalignment on Deployment of Compliant Technology
Effect of Compliance Cost Technology Choice Effect of Circum-innovation on Compliance
21© 2007 Chintan Vaishnav, Engineering Systems Division, Massachusetts Institute of Technology
System Dynamics Model
AdoptionSector
Innovation Sector
Ind. Struct. Sector
Ind. Struct. Sector
Regulatory Compliance Sector
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
ComplianceGap
-
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
FragmentingOwnership
DispersingFunctionality
++
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Unmanaged-Interconnected
Migration
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Price ofInterconnected VoIP
Price ofUnmanaged VoIP
-
-
Attractiveness ofInterconnected
Service
Attractiveness ofUnmanaged Service
-
+
-
+
Unmanaged-Interconnected
Migration
+
+
<Price ofInterconnected
VoIP>
<Price ofUnmanaged
VoIP>
+
+
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Price ofInterconnected VoIP
Price ofUnmanaged VoIP
-
-
Attractiveness ofInterconnected
Service
Attractiveness ofUnmanaged Service
-
+
-
+
Unmanaged-Interconnected
Migration
+
+
Number of VoIPInnovators
Innovators in Firm
User-Innovators
+
+Innovation Rate+
Circum-innovationFraction Available
Circum-InnovationsCircum-innovaiton
Origination Rate
+
+
VoIP Firms
VoIP Users
+
+<Price of
InterconnectedVoIP>
<Price ofUnmanaged
VoIP>
+
+
FragmentingOwnership
DispersingFunctionality
++
PSTN Users
InterconnectedVoIP Users
UnmanagedVoIP Users
PSTN-UnmanagedMigration
PSTN-InterconnectedMigration
Interconnected-Unmanaged
Migration
Level of Use ofCompliant VoIP
-
+
Demand forUnmanaged VoIP
Demand forInterconnected
VoIP
+
+
UnmanagedVoIP Firms
InterconnectedVoIP Firms
UnmanagedMarket Entry
UnmanagedMarket Exit
InterconnectedMarket Entry
InterconnectedMarket Exit
+
+
ActualRegulatoryComplianceCompliance
Deployment Rate
ComplianceObsolescense Rate
DesiredRegulatoryCompliance
+
ComplianceGap
-
+
+Time toDeploy
-
Compliance Cost
+
+
-
Price ofInterconnected VoIP
Price ofUnmanaged VoIP
-
-
Attractiveness ofInterconnected
Service
Attractiveness ofUnmanaged Service
-
+
-
+
Unmanaged-Interconnected
Migration
+
+
Number of VoIPInnovators
Innovators in Firm
User-Innovators
+
+Innovation Rate+
Circum-innovationFraction Available
Circum-InnovationsCircum-innovaiton
Origination Rate
+
+
+
ObsolescenseSeverity
+
VoIP Firms
VoIP Users
+
+
Circum-InnovationAdoption
-
AdoptionProbability
+
<Price ofInterconnected
VoIP>
<Price ofUnmanaged
VoIP>
+
+
FragmentingOwnership
DispersingFunctionality
++