Cable operators are planning to use the PacketCable architecture and standards. The standard for the cable access is called Data Over Cable System Interface Specification (DOCSIS) developed in the USA.
The cable modem has an integral multi-media terminal adapter that supports both analogue telephone and Ethernet sockets. Two IP addresses are allocated to the adapters so that voice and data packets can be handled on logically separate networks.
4.5 The home of the future
The long term trend for home systems is towards an integrated distributed digital system for all communication, information and entertainment services, based on advanced LAN technology with either a cable, fibre or low power radio transmission medium. This goal is being approached in two directions, from the PC, which is adding entertainment and communication functions, or from the TV, which is adding information functions.
Some of the main drivers are:
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Cost savings and space savings from the use of multi-purpose hardware
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Access to common data from several rooms
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Access to single entertainment sources eg digital radio/TV receivers and cable set-top boxes with access controls
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Internal communications in houses with several rooms
The main constraints on these developments are:
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Concerns from the film industry about copyright violations
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Processing power to handle entertainment quality digital video in real time
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Low cost high performance LAN equipment
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The culture change to build LAN wiring into new housing developments
Copyright concerns are a very significant issue. The film industry is very concerned about the prospect of films being available in unencrypted digital form and also about the potential for distributing them on the Internet. They are therefore likely to oppose any moves that bring unencrypted material and IP based communications closer together. In practice this means that they may lobby the consumer electronics industry to maintain practical incompatibilities that will make copying more difficult. The consequence of this may be that convergence towards an integrated digital home communications and entertainment network is delayed by 2-3 years compared to what developments in technology alone would permit.
5.1 The current UK telecommunications retail market
Liberalisation of the UK telecommunications market began in 1982 and the UK has led liberalisation in Europe in almost all areas. The early policy was to promote the full duplication of network infrastructures20 but this policy has shifted slightly under pressure from Europe21 to one where the infrastructure of the incumbent operator can be re-used in almost all possible ways by other operators and service providers.
The following figures give some basic statistics for the UK market as of June 200022.
In the following figures, the percentages shown in brackets show the proportion of each type of traffic.
Figure 30: Market shares and growth for residential call minutes  Figure 31: Market shares and growth for business call minutes 
Some 19% of the total (residential + business) calls in the category “Other” are to freephone numbers and these calls are growing enormously at 536% pa, and 73% are to local rate numbers and these are growing at 62% pa. This is growth is largely due to Internet access.
The figures for call minutes from residential fixed lines indicate that at least:
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5% of local calls
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7% of national calls
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23% of international calls
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7% of calls to mobiles
are being made using carrier selection. The figures for calls from business lines cannot be deduced accurately but are likely to be higher.
The market is now changing very rapidly with intense price competition that is:
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pushing the prices closer to costs and reducing the distance dependent element of prices
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making on-net discounts more common, because the costs of these calls are lower and because these discounts are seen as ways of attracting customers.
For example, ntl has introduced a distance independent national tariff that makes no distinction between local and long distance calls, and offers some free calls between its own subscribers.
We expect that the distinction between local and national prices will be removed by most operators by the end of 2003. This change will probably reduce the average margins for indirect (carrier selection) service providers.
The user friendliness of carrier selection will be improved from early 2001 with the introduction of carrier pre-selection, where the local exchange stores the identity of the selected indirect operator and routes the call without the user having to input a carrier selection code or use a “smart box” to add it.
Thus there will be both a positive factor (pre-selection) and a negative factor (uniform rates country wide) affecting the growth of carrier selection traffic. In practice the continued commercial viability of carrier selection services will depend very much on the interconnection rates for call origination and termination that are determined by Oftel.
The continuing cost reductions in core networks mean that billing and administration are becoming an increasing proportion of an operator’s costs. This situation plus the marketing attraction of simplicity and reduced uncertainty point to a switch from billing by the call minute to including the price of calls in the monthly subscription. This is already beginning to happen with some tariffs that include a certain number of minutes per month, but is likely to be extended to all national calls and even some international ones. It is also beginning with the new flat rate Internet access tariffs.
The main determinant of when billing by the call minute will cease will be a major change to the interconnection charging arrangements. This has been suggested in the past under the name of capacity based charging but has now been introduced although only for Internet access (FRIACO). The extension of this principle to telephony is not being considered actively at present and its timing is difficult to predict but we think that it will probably be introduced within about three years.
From an economic point of view it is beneficial to have some indicator to the user when their actions are incurring costs, and the loss of per minute billing will remove the economic incentive to terminate calls. However some of the operators who are offering flat rate Internet access are introducing non economic methods of limiting call duration such as an absolute call time limit and an automatic cut off if there is no activity on the line for more than X minutes. These technical methods may prove an adequate way to control costs.
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