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intend to provide services) in the shareholding of the rm that owns the infrastructure ensures that the rm has little incentive to vertically integrate and provide services in competition with its owners If this consortium is regulated, this alternative can also potentially lead to a viable long-term competitive market structure 8575 Migration to desired industry structure Most telecommunications markets in the United States presently have the following xed infrastructures: the public switched telephone network (PSTN) and the cable infrastructure, owned by the ILECs and Cable MSOs respectively The assumption of oligopoly rents (or for some services, monopoly rents) accruing to the network owner have increased the valuation of these network assets considerably, as merger and acquisition activity in this industry has duly re ected time and again An arrangement that lowers the barriers to entry and promotes competition will have a dramatic impact on these valuations Therefore, it should come as no surprise that incumbents are likely to oppose any industry structure which reduces barriers to entry by service providers, and to lobby aggressively to frustrate any migration towards such a structure Indeed, the ILECs have successfully persuaded the FCC that they should be free of any obligation to provide UNEs over newly constructed FTTH networks [7], and the FCC has a pending Notice of Proposed Rule Making which would relieve them of providing open access as well [8]
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86 Summary
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Today, apart from telcos, municipalities, communities and power utilities are at the forefront of FTTH deployment; mostly with the intention of creating a competitively neutral platform that other service providers can use to deliver voice, video and data services In a market full of vendors that offer different avors of FTTH technology, most FTTH infrastructure builders (like municipalities and communities) face hard decisions when it comes to selecting a platform (architecture and link layer) and a vendor; the decision being especially hard since they have little or no interest (or expertise) in voice, video and data service provisioning Our work addresses precisely that predicament: we submit that infrastructure builders should build FTTH infrastructure that is technologically and competitively neutral; where voice, video and data service providers can deploy the technology of their choice to support the services they plan to offer This chapter suggests that the natural monopoly is in the FTTH infrastructure only; therefore, while facilities-based competition is unlikely, it is feasible to have service level competition It further shows that OFAP PON architectures not only have the lowest costs, but also are technologically and competitively neutral, in that they support both UNE-based competition and open access OFAP not only allows higher layer service providers to deploy different types of PON with different link layers and port speeds simultaneously, but also provides an economical real option for the deployment of point to point (active star and home run) facilities as well
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1 Reed, D (1992), Residential Fiber Optic Networks: An Engineering and Economic Analysis, Artech House, Boston 2 Kramer, G and Pesavanto, G (2002), Ethernet Passive Optical Networks: building a next generation optical access network, IEEE Communications Magazine, 40(2), 66 73 3 Klimek, M (2002), ATM passive optical network, Alcatel Telecommunications Review, 4, 258 261
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4 O Donnell, S (2000), Broadband Architectures, ISP Business Plans and Open Access, 28th Annual Telecommunications Policy Research Conference, Arlington, VA, September 2000 5 Beard, TR, Ford, GS and Spiwak, LJ (2001), Why ADCo Why Now An Economic Exploration into the Future of Industry Structure for the Last Mile in Local Telecommunications Markets, Phoenix Center Policy Paper Number 12, November 2001 6 St Arnaud, B (2001), Customer Owned, Community & Municipal Fiber Networks FAQ, CANARIE, Inc, http://wwwcanet3net/library/papershtml 7 US Federal Communications Commission (2003), Triennial Review Order, FCC 03 36, August 21, 2003 8 US Federal Communications Commission (2002), NPRM Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, FCC02 42, February 14, 2002
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