Although the extent and effects of such convergence are yet to be seen, the phenomenon is already
convergence on competition is likely to be mixed. On the positive side, the move towards next generation
DSTI/ICCP/CISP(2007)2/FINAL
9
networks, able to deliver a wide range of communication services, creates a schism in many traditional
market definitions. While in the past telecommunication companies only offered fixed-line voice, and
policy makers could easily define the specific market and make regulatory decisions, today the
convergence of video, voice and data on next generation broadband networks can lead to more competition
in individual markets for each of these services. As a result, convergence touches the telecommunication,
cable television and broadcasting sectors, and involves a wider range of activities at different levels, going
from manufacturers of terminal equipment, software developers, media content providers, ISPs, etc.
On the other hand, the trend towards horizontal integration of markets and services could lead to
strengthening of market power, as there may be relatively few companies in a country that can provide a
combined video, voice and data offering. This may lead to a reduction in competition for the
communications sector as a whole. In addition, bundling of services may make it more difficult to
determine the extent to which prices are cost-oriented, allowing cross-subsidisation between services.
Service convergence and the shift towards next generation networks could therefore contribute to the
creation of additional bottlenecks and control points, which may need to be addressed by the regulator (see
Box 2). On the network infrastructure side investment in fibre local loops may also create new bottleneck
positions in the market.
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