Dennis WellerChief Economist, VerizonTrans-Atlantic ForumIDATE, Montpellier22 November 2005

Policies for Next-Generation Policies for Next-Generation InfrastructureInfrastructure

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Policies ForNext-Generation Infrastructure

How do policy objectives from the old world translate into the new world?

1) What does universal connectivity mean in the new world, and how will it be achieved?

2)What does openness mean in the new world, and how will it be achieved?

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Universal Connectivity in the Old World

Regulatory framework for the circuit-switched worldTheodore Vail and the Kingsbury commitment,

1913Obligation to interconnectRegulation as a necessary resultEnsured that anyone who had a phone could

call anyone else with a phone, because networks were interconnected

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Universal Connectivity in the New World

Development of the InternetHuge value to consumers, the economy, societyIncome, jobs, productivity

Worldwide connectivity on the InternetAchieved without any obligation to interconnect, or any

regulationHow has this been possible?

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Why has the market for exchange of traffic worked on the Internet?

1)Different culture

2)Different structure

3) IP really is different

4)No regulation

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When Worlds Collide..Interconnection

Traditional Telephone

Obligation to Interconnect

Heavily regulated by FCC and States

Declining market Arbitrage, bad

incentives

Internet

No obligation to Interconnect

No regulation

Growing market

Market incentives to invest, create value

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Policies for Next-Generation Infrastructure

What does openness mean in the new world, and how will it be achieved?

Openness to third party service provision in the old world

Services tied to the network platformThird party provider rents part of networkPolicy instruments have included open network

architecture (ONA), equal access, unbundling

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What does openness mean in the new IP world?

Openness to third party service provision in the new IP worldServices can be independent of the network

platformOpenness means customer’s ability to reach

third party sites

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Connectivity Principles

Proposed by High-Tech Broadband Coalition two years ago

Broadband consumers should be able to: Reach content of their choice on the net Run any software Attach any device Obtain information about these abilities

As the High-Tech Coalition predicted, the market has observed these principles

Adopted by the FCC in August 2005 Without any ex-ante rules to enforce them

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Connectivity Principles in the market

Why has the market observed the connectivity principles?

1) Platform competition Broadband customers have choices If a provider limits customer’s use of broadband, customer

will take business elsewhere

2) Added value The value to the customer of the broadband connection is

increased by the vast array of choices available on the Net Would the IBM PC have been a success if it only ran IBM

software?

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When Worlds Collide…Net Neutrality

Traditional Telephone

Services linked to the network

To provide service, third parties must rent part of the network

Next-generation

Networks

IP-enabled services can be

separate from the network

Customer can reach services

over open pipe to the Internet

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Broadband consumer chooses which services, and what integration, to buy, and from whom

Customer buys Internet access service from Verizon

Connectivity principles apply

Customer chooses proprietary services from Verizon

Connectivity principles don’t apply

Open pipe to the Internet Wireline: FiOS, DSL Wireless: EVDO card for laptop

Best-effort services VOIP Video streaming Shopping Others

Wireline services: FiOS TV Managed VOIP Shopping on our platform

Wireless services: Get-it-now Vcast