Key Themes from Point Topic Tim Johnson point-topic

Key Themes from Point Topic

Tim Johnsonwww.point-topic.com

Barriers to Broadband Workshop1 February 2005

2 www.point-topic.com

Key themes

• Broadband stays on course– UK, Western Europe, World

• A good year for the UK• How to bridge the gaps and barriers• Triple play solutions are in demand• Winners and losers for next-generation broadband

3

Broadband stays on course


136m broadband lines worldwide at 30 September 2004

40.6

58.7

37.1

Americas

Asia Pacific

EMEA

Source: Point Topic Q3 2004

Million lines


Broadband lines worldwide

0

20000

40000

60000

80000

100000

120000

140000

160000

Dec-9

8

Jun-

99

Dec-9

9

Jun-

00

Dec-0

0

Jun-

01

Dec-0

1

Jun-

02

Dec-0

2

Jun-

03

Dec-0

3

Jun-

04

Dec-0

4

Th

ou

sa

nd

s o

f b

roa

db

an

d li

ne

s

DSL lines

Cable Modems etc.

Total broadband


Broadband lines in Western Europe

0

5000

10000

15000

20000

25000

30000

35000

40000

Th

ou

san

ds o

f b

road

ban

d li

nes

DSL lines

Cable Modems etc.

Total broadband


Broadband lines in the UK

0

1000

2000

3000

4000

5000

6000

7000

Dec-9

8

Jun-

99

Dec-9

9

Jun-

00

Dec-0

0

Jun-

01

Dec-0

1

Jun-

02

Dec-0

2

Jun-

03

Dec-0

3

Jun-

04

Dec-0

4

Th

ou

sa

nd

s o

f b

roa

db

an

d li

ne

s

DSL lines

Cable Modems etc.

Total broadband


Broadband penetration levels still vary widely

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Pen

etr

ati

on

of p

op

ula

tio

n

France

Germany

Italy

UK

Canada

USA

China

Japan

South Korea

Taiwan


Penetration levels in major countries are converging

0.01%

0.10%

1.00%

10.00%

100.00%

Pen

etr

ati

on

of p

op

ula

tio

n

France

Germany

Italy

UK

Canada

USA

China

Japan

South Korea

Taiwan


Share of broadband lines by technology Q3 2004

63.5%

28.5%

7.6% 0.4%

DSL

Cable modems

FTTx

Others



Share of broadband lines by technology Q2 2004

60.7%

32.0%

7.1%

0.2%

DSL

Cable modems

FTTx

Others



Broadband is growing faster than mobile did (World)

Source: Informa, Ovum, Point Topic, H1 2004

100

1,000

10,000

100,000

1,000,000

10,000,000

1990

1992

1994

1996

1998

2000

2002

2004

Th

ou

san

ds

of

co

nn

ec

tion

s w

orl

dw

ide

(lo

g s

ca

le)

Mobiles

DSL lines

Totalbroadband


Broadband is growing faster than mobile did (UK)


10

100

1,000

10,000

100,000

1990

1992

1994

1996

1998

2000

2002

2004

Th

ou

sa

nd

s o

f c

on

ne

cti

on

s

in U

K (

log

sc

ale

)

Mobiles

DSL lines

Totalbroadband

14

A good year for the UK


Top Ten broadband countries by number of lines: Q204 - Q304

0

5000

10000

15000

20000

25000

30000

35000

Th

ou

sa

nd

s o

f b

roa

db

an

d li

ne

s

in u

se

Q2 2004

Q3 2004



Top Ten broadband countries by penetration Q3 2004

0

5

10

15

20

25

Bro

ad

ba

nd

lin

es

pe

r 1

00

p

op

ula

tio

n

Q3 2004

Source: Point Topic Q3 2004, countries with at least 500,000 population


Second Ten broadband countries

by penetration Q3 2004

0

2

4

6

8

10

12

14

Bro

ad

ba

nd

lin

es

pe

r 1

00

p

op

ula

tio

n

Q3 2004

Source: Point Topic Q3 2004, countries with at least 500,000 population


The UK has been growing faster than Western Europe

10

100

1000

10000

100000

1000000

Th

ou

sa

nd

s o

f b

roa

db

an

d c

on

ne

cti

on

s

World

WesternEurope

UK

Source: Point Topic, H1 2004


UK fourth in DSL, but gaining

DSL lines in the major European countries

0

1

2

3

4

5

6

7

Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04

Mil

lio

n l

ine

s

FranceGermanyItalyUK


UK third in broadband, and also gaining

Broadband lines in the major European countries

0

1

2

3

4

5

6

7

Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04

Mil

lio

n l

ine

s



UK second in broadband penetration; first in 2005?

Broadband penetration in major European countries

0

2

4

6

8

10

12

Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04

Lin

es

pe

r 1

00

po

pu

lati

on



BT has the smallest share of the retail broadband market in the EU

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sh

are

of

bro

ad

ban

d m

ark

et, J

un

e 2

004

Cable modems

LLU

Resale DSL

Incumbent DSL

Source: ECTA, Point Topic


A tale of two telcos: DSL competition in France and UK

0

0.5

1

1.5

2

2.5

Sep-0

1

Dec-0

1

Mar

-02

Jun-0

2

Sep-0

2

Dec-0

2

Mar

-03

Jun-0

3

Sep-0

3

Dec-0

3

Mar

-04

Jun-0

4

Sep-0

4

Mill

ion

DS

L li

ne

s

France unbundled

UK unbundled

France wholesale

UK wholesale

Source: ECTA

24

Bridging the gaps


The geographical divide: an “easy” problem

• Improved technical solutions– new DSLAMs, rate adaptation etc– lower equipment costs– remote concentrators

• Changed installation policies– lower trigger levels– more “can do” approach

• Targeted investment– costs can be low compared with added value and social

benefit


The social divide: a tough problem

• Multiple barriers to Internet and broadband take-up– Old people less than young people– Partly-educated people less than fully-educated people– Women less than men (but the difference is dissolving)– Poor people less than rich people

• Take-up facing a 60% ceiling?– even in Korea only 66% of people use the Internet– most major countries see similar levels– but take-up at 80% and beyond in Scandinavia


UK broadband has been growing fast so far


10

100

1,000

10,000

100,000

1990

1992

1994

1996

1998

2000

2002

2004

Th

ou

sa

nd

s o

f c

on

ne

cti

on

s

in U

K (

log

sc

ale

)

Mobiles

DSL lines

Totalbroadband


UK broadband could crash into the ceiling soon

10

100

1,000

10,000

100,000

Th

ou

sa

nd

s o

f c

on

ne

cti

on

s

in U

K (

log

sc

ale

)

Mobiles

DSL lines

TotalbroadbandCeiling?



BBC ideas to spread “digital inclusion”

• “Provide a compelling reason to get a broadband connection”

• iMP Interactive Media Player– using the Internet as a PVR

• Digital literacy campaign - with others?• Radical reductions in the cost of access

– low-cost access devices– “pay as you go” subscription model


The business gap: issues

• Workplace penetration is very different from firm (SME) penetration– real penetration is much lower than statistics suggest

• Progress of business-quality DSL is slow– barely 10% of business broadband lines - and falling?

• Broadband take-up by business has been static for several years– but signs of an uptick in 2004, at least in the UK


Workplace-based views show much lower levels of take-up

Broadband penetration of workplaces in the UK (Sep 2004)

30%

55%

30% 30%

50%

Retail Offices Factories Warehouses Other

Source: Point Topic estimates


Business-quality DSL is growing only slowly

0

100

200

300

400

500

Lin

es

ins

talle

d a

t y

ea

t e

nd

('

00

0s

)

2001 2002 2003 2004

Installed base of Symmetric DSL

Americas

Asia-Pacific

EMEA

Source: Point Topic


After years of stagnation, Internet trading is growing

0

10

20

30

40

50

Micro Small Medium Large

Share of businesses trading online (UK)

2001

2002

2003

2004

Source: DTI International Benchmarking Study 2004

34

Triple-play trailblazers


Trailblazer ISPs

Bundled DSL, telephone and mobile offering to retain customers and maintain revenue

USASprint

Turbo button to boost download speedsSingaporeSingTel

Voice-over-IP as part of residential triple-play bundles

FranceFree

Strong video and TV element in a triple-play bundle

ItalyFastWeb

Business-focused ISP that aims to make VPNs cheaper and simpler

NorwayCatch Communications

Security services for residential and business customers

CanadaBell Canada

Value-added offeringCountryISP


Video over Broadband: pillar of strategy or bottomless pit?

• Making the business case is an uphill battle– competition, content, technology, opportunity

• Sharp upturn in trials and services 2003-2004– about 50 projects identified worldwide

• Good results where there is weak competition– disappointments where it is strong


How much contribution is broadband video making?

0

20

40

60

80

100

120

140

160

180

Th

ou

sa

nd

s o

f s

ub

sc

rib

ers

, Q

1 2

00

4

PCCW

FastW

eb

Softb

ank

Qwest

Chungh

wa

Trans

ACT


The year when VoIP erupted

• Yahoo Broadband Japan still by far the biggest– over 4m subscribers– next five have only 1m between them

• Over 1,000 other providers up and running• Increasingly led by the desire to offer triple-play

– pure-play VoIP fading, relatively– Skype and imitators settling in a (big) niche?


Some major VoIP players were well established by mid-2004

0

50

100

150

200

250

300

350

Vo

IP s

ub

sc

rib

ers

('0

00

s)

Free

(Fra

nce)

FastW

eb (I

taly

)

Vonag

e (U

SA)

Cable

visi

on (USA)

B2 (S

weden

)

Source: Point Topic; figures mid-2004


The telcos are frightened, but the barriers to VoIP are high

• Major VoIP successes depend on high local tariffs• Price-based competition is vulnerable to price cutting

by big players• Customers are not yet convinced about VoIP quality

and reliability• A disruptive technology - but regulators are only just

starting to tackle the issues, such as numbering• VoIP operators proving slow to leverage the

opportunity of interconnection

41

Technology options


Contents

• VDSL and VDSL2• ADSL2+• Symmetric DSL


Original VDSL: a technology going nowhere?

• Big in Asia-Pacific• mainly distributing FTTB inside MTUs

• 2.2m lines in Korea alone - but levelling off

• large numbers in China (6m?) and Japan

• Very little public network VDSL• old projects not being extended

• few new ones identified (Belgium, Norway, Slovenia)

• “substantially all” shipments into FTTB buildouts


Will VDSL2 be different?

• Standard on a fast track?• first ratification Q3 2005; base standard soon after

• driven by the US RBOCs; compromises to get agreement

• Delivering 30Mbps up to 1.8km - eventually• What RBOCs need to offer full triple play?

• two HiDef TV channels + data + VoIP

• “A major technology in N. America in 2006”– Ramen Cohen, Metalink

• Too disruptive for Europe?


ADSL2+: the right technology

at the right time?• Downstream speeds enough for realistic applications• Better range than original VDSL• Easier to integrate into an ADSL world• Annex J supports business symmetry requirement


Leading-edge operators moving rapidly into ADSL2+

• Sweden and Norway• 60,000 ADSL2+ ports by end-2004

• Free (France) • migrating 1m customers to ADSL2+ “FreeBox”

• 6Mbps downstream for Euro 30/month

• Wanadoo (Netherlands)• 8Mbps/1Mbps for Euro88/month

• BellSouth (USA)• will use ADSL2+ to trial a video offering


Symmetric DSL: many choices, slow take-up

• SDSL– proprietary, mainly USA

• SHDSL– ITU standard, industrial strength, still a niche

• Symmetrical ADSLs– ADSL2+ Annex J could be the preferred choice

• VDSL– some business offerings in special situations?


1.2m Symmetric DSL lines worldwide by end-2004

0

50

100

150

200

250

300

350

400

450

Lin

es

in

sta

lle

d a

t y

ea

r e

nd

('

00

0s

)

2001 2002 2003 2004

AmericasAsia-PacificEMEA

Source: Point Topic


Signs of stronger growth in future

• Some uptick in business broadband in 2004• Arrival of ADSL2+ should make symmetric

broadband cheaper and easier• SHDSL still has technical advantages• IP VPN more recognised as the unifying platform for

business applications• IP-over-Ethernet seen as the coming technology


Tim Johnson

www.point-topic.com

[email protected]+44 (0) 20 7551 9260

Key Themes from Point Topic Tim Johnson point-topic

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