1. Dennis Weller Chief Economist, Verizon Trans-Atlantic Forum IDATE, Montpellier 22 November 2005 Policies for Next-Generation Infrastructure

2. 2 Policies For Next-Generation Infrastructure 3How 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?

3. 3 Universal Connectivity in the Old World 3Regulatory framework for the circuit-switched world äTheodore Vail and the Kingsbury commitment, 1913 äObligation to interconnect äRegulation as a necessary result äEnsured that anyone who had a phone could call anyone else with a phone, because networks were interconnected

4. 4 Universal Connectivity in the New World 3Development of the Internet äHuge value to consumers, the economy, society äIncome, jobs, productivity 3Worldwide connectivity on the Internet äAchieved without any obligation to interconnect, or any regulation äHow has this been possible?

5. 5 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

6. 6 When Worlds Collide..Interconnection Traditional Telephone t Obligation to Interconnect t Heavily regulated by FCC and States t Declining market t Arbitrage, bad incentives Internet 3No obligation to Interconnect 3No regulation 3Growing market 3Market incentives to invest, create value

7. 7 Policies for Next-Generation Infrastructure 3What does openness mean in the new world, and how will it be achieved? 3Openness to third party service provision in the old world äServices tied to the network platform äThird party provider rents part of network äPolicy instruments have included open network architecture (ONA), equal access, unbundling

8. 8 What does openness mean in the new IP world? 3Openness to third party service provision in the new IP world äServices can be independent of the network platform äOpenness means customer’s ability to reach third party sites

9. 9 Connectivity Principles 3Proposed by High-Tech Broadband Coalition two years ago 3Broadband consumers should be able to: äReach content of their choice on the net äRun any software äAttach any device äObtain information about these abilities 3As the High-Tech Coalition predicted, the market has observed these principles 3Adopted by the FCC in August 2005 äWithout any ex-ante rules to enforce them

10. 10 Connectivity Principles in the market t Why has the market observed the connectivity principles? 1) Platform competition tBroadband customers have choices tIf a provider limits customer’s use of broadband, customer will take business elsewhere 2) Added value tThe value to the customer of the broadband connection is increased by the vast array of choices available on the Net tWould the IBM PC have been a success if it only ran IBM software?

11. 11 When Worlds Collide…Net Neutrality Traditional Telephone t Services linked to the network t To provide service, third parties must rent part of the network Next-generation Networks t IP-enabled services can be separate from the network t Customer can reach services over open pipe to the Internet

12. 12 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 t Open pipe to the Internet 3Wireline: FiOS, DSL 3Wireless: EVDO card for laptop t Best-effort services 3VOIP 3Video streaming 3Shopping 3Others t Wireline services: 3FiOS TV 3Managed VOIP 3Shopping on our platform t Wireless services: 3Get-it-now 3Vcast