Pipes – yours, mine, theirs or ours?

James Enck
October
- 1 -2006
 The changing shape of access

• A number of challenges are arising in the

traditional access order, which pose uncomfortable
questions for telcos, MSOs, utilities, and
regulators:
– How broad does broadband need to be?
– What is broadband connectivity for?
– Who should offer it? What should “offer” mean?
– How does the incumbent respond?
– How does regulation change?
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Thanks for telling me about your planet…

Recent study from Arthur D. Little came to the following

conclusions about European broadband in 2011:
? “Not more than 10% of broadband households are
expected to exceed 30Mbps”;
? Upload speed of 8Mbps will be sufficient;
? “FTTH will mostly be relevant at a local/regional
level, assuming it is able to offer more than superior
bandwidth.”

-3-
…now let me tell you about mine

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Virtual worlds, real money

-5-
I mean REAL money

-6-
 On my planet people like to contribute
AS WELL AS consume
40%

35%

30%

25%
Mar-06
20%
Aug-06
15%

10%

5%

0%
Blogging Satellite radio Web radio Instant messaging Video gaming

Source: BigResearch, August 2006

-7-
 Frequently, in some cases
Frequency of video uploading
35%

30%

25%

20%

15%

10%

5%

0%
Every day A few times a Less than a few This is the first time A few times a
week times a month month

Source: Interpublic Group Emerging Media Lab, User Generated Content Generator Motivation Study, June 2006
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They use free, sophisticated tools

-9-
 They remix, modify, mash-up

Source: Fark

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They find DIY distribution

- 11 -
They create micro-markets

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 Li
ve

0%
10%
20%
30%
40%
50%
60%
70%
80%
c on
Li c er
ve ts
s po
rti
ng
ev
en
Fu ts
Vi
ll-
l d eo
en
gt po
h dc
m as

Source: AOL/AP September, 2006

ov ts
ie
so
rT
V
sh
Co ow
nc s
er
Types of online video watched

th
ig
hl
ig
ht
Am s
ate
ur

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vi
de
Sp o s
or
ts
hi
gh
lig
ht
s
M
us
ic
vi
de
TV o s
or
m
ov
ie
c lip
s

Ne
w
s
Sometimes they find a sweet-spot
 Sometimes they do naughty things
Weekly and normalized monthly download figures, top ten global video titles
70,000,000

60,000,000

50,000,000

40,000,000
Weekly total
M onthly run rate
30,000,000

20,000,000

10,000,000

0
D 05

Se 06
Se 05
M 05

O 05

M 06

06
Ja 4

Ja 5
Fe 05

Fe 6
A 05

A 06
N 05
Ju 5

Ju 6
A 5

A 06
M -05

M -06
Ju 5

Ju 6
-0

-0
0
0

0
l-0
-0

-0
-

-
b-

p-

b-

p-
n-

n-
-

-
ct-
n-

n-
l-
ug

ov

ug
ec

ec
ar

ar
pr

pr
ay

ay
D

Source: Daiwa, from p2pnet.net and BigChampagne data

- 14 -
They will demand true broadband

- Kenjiro Cho, 2005

AND THESE ARE JUST THE APPLICATIONS WE

KNOW ABOUT – THINK OF WHAT MIGHT COME
ABOUT BETWEEN NOW AND 2011!!!
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Will the current formula deliver?

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 Look at the Dutch market

• Seemingly a perfect example of the EU

vision of facilities-based competition:
– DSL vs. cable 60/40 split
– ULL takes c.30% of the DSL market
– Among the highest broadband penetration rates
in the OECD
But…

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 …times do change
• KPN has acquired a number of other smaller players, now
c.75% of the retail DSL market
• Two of the three largest MSOs now under control of
private equity – expecting to merge
• KPN moving from 1,350 C.O.s to 28,000 local access
nodes for FTTC – project to be funded by sales of the old
C.O.s (OPTA has placed some safeguards as of yesterday)
• The market becomes more, not less, concentrated. Is this a
triumph of regulation?
• Besides, if everything is working so well, why are there so
many signs of unrest?

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The sleepy Dutch town of Hillegom…

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The bustling city of Rotterdam…

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Economic/social policy collide with the telco
raison d’etre

"...future proof data infrastructure is for Rotterdam just as

important as a good connection by means of water, road and
railtrack. A fiber network has proven to be an important
settlement criterion for young professionals, knowledge-intensive
companies, port-related companies and companies in the medical-
technological sector. A high-quality communications network is
essential as well for cultural institutions.”
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In Singapore…

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Liberte, egalite, et fibre

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Mañana this!

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The sewers are alive, with the sound of…

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 Springtime for muni-utility fiber

Currently paying DT €30m Needs to inspect and renew

p.a. for copper access municipal sewer system

Will spend €200m over Will progressively push

five years for FTTH fiber as it goes
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And even in Yorkshire

Three way tender process

pitting BT Group against
Easynet/Sky and
Kingston/Alcatel/Thales

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 Summary points
• The traditional model for access is going to be
fundamentally challenged:
1. Municipalities/regions see broadband access as a
social/economic policy tool;
2. Players with backgrounds in construction and
infrastructure management can be credible players;
3. Regulatory Pandora’s box may open – i.e., how do
you maintain national regulation when the national
incumbent has 15% market share in certain areas?
4. What is the rational response from the incumbents –
fight, flight, or pragmatism?

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