Long abstract

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This paper provides an overview of the economic and policy implications of various technologies available to provide local telecommunication access. This part of the network is referred to as the "local loop". For the purposes of this document the switching functions in local access networks are assumed to be part of the local loop. Building and maintaining local access networks has traditionally constituted the bulk of costs associated with the public switched telecommunication network (PSTN) not least because of its ubiquitous nature and, because it constitutes a bottleneck, the local loop is important from a regulatory and policy perspective. Management of frequencies, permission for laying cables (rights of way), for sharing physical resources and interconnection are highly important in the transition towards a competitive communication market and overcoming the local loop bottleneck. Until a decade ago the transmission medium for the local loop was mainly based on copper. Telephone service was provided via a twisted pair of copper wires. While terrestrial wireless technologies had been used in some countries to provide communication access services, particularly in remote areas, the introduction of cellular networks for telephony raised greater possibilities for deploying radio as an economic alternative technique for the local loop. A great deal of the incentive to look for innovative alternative access technologies has been due to liberalisation. The growth of mobile cellular communication added impetus to the technical development of radio based systems for fixed connections in the local loop (wireless access). Existing coaxial cable television networks also came to be thought of as potential platforms to provide local telecommunication access although technical upgrades have to be made to allow bi-directional point-point communication, such as telephony and Internet access. Another technology for the local loop is optical fibre, of great importance to both television broadcasters (including cable companies) and public telecommunication operators (PTOs). For broadcasters fibre optic technology became a potential alternative to satellites from the moment that it was demonstrated that analogue television signals could be transported using this medium. Hybrid Fibre Coaxial Cable networks developed as another option, as they combine the advantages of both: fibre between head-end and street cabinet (shared use) and coaxial cable for the final connection to residential premises (lower costs). In the PSTN optical fibre technology was first deployed for long distance transmission (the inter-exchange networks) because the costs were high, but more recently fibre optic cable has also been introduced for distribution networks and for connections for some relatively high volume users. In the late 1980s and early 1990s much attention was devoted to the question of when fibre optic technology would become the standard medium of choice for the local loop. While this debate continues it is increasingly recognised that fibre optic local loop connections are only one of several paths the industry may follow. One reason for this has been the development of techniques which compress signals such as Asymmetrical Digital Subscriber Line (ADSL) and High-bit-rate Digital Subscriber Line (HDSL) and thereby increase the transport capacity of the copper network. This offers possibilities to provide video services over the existing twisted pair copper network. Consequently most companies are cautious about investing in fibre to the home. For those building broadband local loop connections today a hybrid network consisting of fibre to the curb and from there over the existing copper loop, seems to be preferred. Due to digital coding techniques, the difference which once existed between transporting telephony data, computer data, audio and video, has disappeared. Communication services no longer need separate dedicated networks. This has led to a general trend whereby policy makers and industry prefer regulation that is 'technologically neutral'. As a general rule any remaining restrictions over what type of technology can be used to provide communication service should be eliminated in order to stimulate innovation and the provision of communication service over the most efficient local loop technologies available. Although some local loop technologies require certain regulation, such as management of the radio spectrum and laying cable, this should aim to be technologically neutral. The distinction between local access networks and long distance networks are blurring. The architecture and capabilities of modern communication switches has changed over the past decade. Today central office switches can handle many more lines via a number of remote switches and serve larger areas than in the past. A corollary of this is that local access networks have become larger. Moreover, technologies such as direct satellite connections and terrestrial wireless technologies, once used mainly for transmission but now being introduced for "local access" connections, provide further evidence of this trend.