Transcript Industry Trends

Communications Industry
Trends – A Look Ahead
September 2008
By
Paul Brigner
Executive Director, Internet and Technology Policy
Verizon Communications
Major Paradigm Shifts
Redefine Telecom Market
 The Wireless Paradigm
—
—
—
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Anytime/anywhere/high bandwidth connectivity
Lifestyle/business personalization
“On-net/off-net” vs “Local/LD” pricing
Consumer electronics lifecycle for handsets are shorter than
traditional telco product lifecycles
 The IP Paradigm
—
—
—
—
Universal connectivity and standards
Greater control by users at the “edge”
Voice as an IP application vs basic service
Value creation through broad-based investment
 The Broadband Paradigm (wireline and wireless)
— Accelerates and intensifies the impact of wireless and IP
— Extends high-capacity capabilities from hubs to endpoints
— Drives interactive applications and services – platform to help
address key social concerns – energy efficiency, environment,
education, health care
— Convergence
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Communications Metrics
 54 percent of all homes now have broadband
 82 percent of all Americans have a cell phone
 16.1 million African American homes had broadband in 2007–
40.2 million African Americans in total
— Increased from 5.6 million in 2005 to over 16 million last year
— About 40 percent of all African American homes had broadband –
more than 54 percent of white homes
 Number of poor (those making less than $30,000 annually)
connected to broadband – 10 million last year
— Thirty percent growth last two years
 71 percent of African Americans, 74 percent of whites and 84
percent of Hispanics have cell phones
— Yet half of all African Americans do some sort of non-voice data
service every day and only 38 percent of whites do
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The World Has Changed
From…
To…
 Wireline

Mobile and Converged
 Narrowband

Broadband
 Voice-centric

Multi-media
 Circuit-switched

Packetized
 Copper infrastructure

Optical Infrastructure
 Proprietary architecture

Open architecture
 Traditional Regulation

Market-based regulation
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Telecom Sector Changes
POTS – plain old telephone service
“Old World”

Common carrier regulation – no competition
—

Today – Competition in communications markets

Evidence? Line loss by telephone carriers


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Wireless cannibalization
VoIP offered by cable operators
8-10% annual line loss across sector
In 2007 VZ had 4% lines loss to cable VoIP plus another
4% lost to wireless
–
–
33M Households in Verizon footprint
2M lines per year lost
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U. S. Market is Very
Competitive in Broadband
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Verizon’s Strategy
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Verizon Largest Cap Ex
Investor in the U. S.
Capital Expenditures (in US$ billions)
Year Ending Sept./Dec.
Source: Yahoo Finance data
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Verizon’s Broadband Deployment
 No company has committed more resources to network upgrades –
more than $63B in since 2004
 FTTP – Undertaking a very ambitious roll-out of passive fiber optic
cable to customer’s homes and businesses
 DSL – Continuing to extend the reach of DSL
— Nearly 80% of our lines are DSL-capable; 90% in urban areas
 EV-DO (wireless broadband) – Reaches 228 million people today
— LTE by 2010 with possibly 75 megabits down
 Other technologies – exploring innovative and cost-effective ways to
bring broadband to more customers
— Partnerships with non-profits such as One Economy to bring broadband
to low income customers living in subsidized housing
— New highly-flexible fiber from Corning allows tighter bends for
installations in cities
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FiOS Redefining
Interactivity
Applications and Media Bandwidth
Web Surfing
Video Conferencing, Premises Surveillance, Two-way Signing
SDTV Video-on-Demand, Telecommuting
File Sharing, Home Video Sharing/Streaming
Real-Time SDTV, Network PVR
Multi-Player Gaming, Interactive Distance Learning
Premises Web Hosting
Telemedicine
Large File Sharing
Upstream Speed Increasing
in Importance!
HDTV Video-on-Demand
Network Hosted Applications and Storage
Next Generation 3D TV
FTTP
FiOS Fiber to the Home
Cable Modem
ADSL
Dial-Up
100
25 20 15 10 5
Upstream
0 5 10 15 20 25
Mbps
100
Downstream
Platform for current and future content and applications
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FTTP/FiOS Bandwidth – A Quantum Leap
•100 Meg Service Being Trialed
•50/20 Meg Service available
•20/20 Meg Service
available
Niagara
Falls
•15/15 Meg Service for $65
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FTTP - FiOS Architecture
Super
Head
End
Video
Hub
Office
Internet
Interactive
Services
Broadcast
Services
Local CO
(Video Serving Office)
POTS
ONT
Verizon
Broadband
Network
Data
SER
OLT
TDM
Switch
Network
Video
Transport
Switching/Routing
Power
&
Battery
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Wireless Evolving to An
Ever Faster Platform
2010
2007
2004
Voice
Today
CDMA
Text Messaging
Photo Messaging
E-Mail and PIM
Small File Transfer
Streaming Video
Video Conferencing
VCast
High Speed Access
Video Conferencing
Music and Video Content
Multi-Media
Multi-Player Gaming
Large File Transfer
1XRTT
EV-DO
LTE
(40-80 Kbps)
(300-500 Kbps)
(Multimegabits)
Compatibility, Simplicity
Platform for mobile content and applications
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Key Metrics Will Change
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Open Development Initiative:
a Key Driver of Innovation
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How is the U. S. Doing?

The World Economic Forum ranks the U.S. 4th in “networked readiness,”
which measures ICT development, taking into account the environment and
individual and corporate usage and readiness. Denmark is 1st, Japan is
19th.

The Fiber to the Home Council estimates that North America has 2.91M fiber
connections and has been growing annually at a rate of 97 percent. The
number of FTTH connections continues to almost double annually in the U.
S. This compares to just 1M subscribers in all of Europe. Japan has far
more subscribers but has been deploying fiber for far longer than any other
country.

More than 12 million homes in the U. S. and Canada are passed by fiber
networks compared to only five million in Europe. Nevertheless, as IDATE, a
major European analyst firm put it “fiber to the home is still concentrated
in only a few countries as Europe remains far behind leaders such as
Japan and the US (emphasis added)”.

Verizon has more than 70% of the North American fiber connections and
accounts for more than 11 million homes passed in the U. S.
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What Kind of Traffic Does
Today’s Internet Handle?

Over 1 Billion Internet Users Worldwide; growing by 10 million each
month.

In 1996, 1.5 million gigabytes traveled through major U.S. Internet
connection lines per month. By 2006, 700 million gigabytes traveled
through major U.S. Internet connection lines per month.*Daily email
traffic is expected to grow from 90.4 billion emails in 2007 to 102
billion emails in 2009.** Half of all email contains image spam, which
is five times the size of traditional text spam.***Backbone traffic is
doubling every 12-15 months

The amount of traffic, type of traffic, number of users and length of
connection time are all increasing so traffic is expanding rapidly.
*the University of Minnesota Digital Technology Center
**IDC
***MSNBC
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Broadband is a Platform
for Helping Solve Key Challenges
 Health Care – Ninety percent of medical
records are still paper
 Energy Efficiency – Thirteen percent
reduction in energy use from real time
information on energy usage
 Education – Truly individualized approaches
and “learning communities”
— Thinkfinity a major leap forward in this regard
 Environment - Prudent use of technology
could reduce human-induced global
emissions by 15 per cent by 2020
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