November 2005Presentation to Pegasus Corp. 1 GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | CANTO...

November 2005 Presentation to Pegasus Corp.1GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM

CANTO CONFERENCECARIBBEAN UNITY THROUGH

CONNECTIVITY July 13-16, 2008

Atlantis Conference Center, BahamasIP DRIVERS OF BROADBAND CONVERGENCE:

THE DILEMMA OF NET NEUTRALITY

Presented by Judith O’Neill, Esq. 15th July 2008

©2008, Greenberg Traurig, LLP. Attorneys at Law. All rights reserved.

Judith O’Neill, Chairman Telecom Dept. NY. Office Greenberg Traurig, LLPTel: +212 801 9387

Email: [email protected]

18th June 2008 2

An International Law Firm of More than 1800 Attorneys

An international law firm with 1,800 attorneys in 34 offices on 3 continents An international law firm with 1,800 attorneys in 34 offices on 3 continents

serving clients in all major industries.serving clients in all major industries.

TMT Group specializes in Telecommunications, Media and Technology and TMT Group specializes in Telecommunications, Media and Technology and

teams with Entertainment and M&A Groups to advise clients on strategies teams with Entertainment and M&A Groups to advise clients on strategies

for their future, based on industrial and regulatory trends.for their future, based on industrial and regulatory trends.

Legal precision and excellence with a thoughtful, responsive, practical and Legal precision and excellence with a thoughtful, responsive, practical and

entrepreneurial approach.entrepreneurial approach.

18th June 2008 3

IP DRIVERS OF THE CONVERGENCE DILEMMA

BROADBAND IN THE AMERICAS & US BROADBAND POLICY

BROADBAND/IP MOVE TO WIRELESS APPLICATIONS

STRANGE “BED-FELLOWS”

CONCLUSION

Contents

18th June 2008 4

THE ONLY CONSTANT IN THE TELECOMMUNICATIONS INDUSTRY IS CHANGE…

18th June 2008 5

IP Drivers of The Convergence Dilemma

Now that technology allows voice, data and video to

travel seamlessly and reliably over a single “pipe”, only

the speed of the signal and imagination are the limits to

life-changing products; and how we regulate access.

IP Broadband deployment is thus the logical, necessary

focus in the development of ever-more efficient, socially

supportive, and financially sound means of providing

converged communications, social, entertainment and

community welfare services.

What is the best policy to achieve the level of investment

that it takes? Is there a solution to the so-called net

neutrality dilemma?

18th June 2008 6

IP Drivers of the Convergence Dilemma

“Cap-Ex” Statistics (Based on IP Broadband)

Network Capex Est. FTTN by 2009 per op.* $4.5 billion (Infonetics)

Network Capex Est. FTTH/2009 per op* $18-23 billion (MRG)

IPTV Global Subs Est. 2009 53.7 million (Infonetics)

IPTV Global Subs Est. 2009 36.8 million (MRG)

IPTV Revenue Anticipated/’09 $38 - 44 billion (MRG)

Anticipated IPTV growth/U.S. 13% y-o-y/’09 (Infonetics)

*Capital Markets react to combined factors: Credit Suisse downgraded Verison and AT&T, Inc to “Neutral” in March due to a variety of factors including slowing broadband expansion, capex, greater wireless competition driving flat rate offerings and possible tighter regulation.

18th June 2008 7

IP Drivers of the Convergence Dilemma

Based on Information by

Goldman, SDA Asia, PR Newwwire US,

Multimedia Research Group,

IDC,

Infonetics

Expected service revenues in 2009: $38 to 44 billion

IPTV Subs Per Region (in Millions)

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009

Western EuropeAsia (ex. Japan)North America

18th June 2008 8

Overall Efficiency of IP Platform

Bundling of Services-one-stop shop

Two-way transmission

Allows full range of new aps

Can select content when you want, where you want

Personalization

Take your TV with you everywhere

Microsoft 2006

One-size fits all Personalization

Tw

o-w

ayO

ne-

way

IPTV

IP Drivers of the ConvergenceDilemma

Reasons for Growth of IPTV

18th June 2008 9

IP DRIVERS OF THE CONVERGENCE DILEMMA

BROADBAND POLICY IN THE AMERICAS: THE FOUNDATION OF THE NET NEUTRALITY DEBATE



CONCLUSION

Contents

18th June 2008 10

US broadband policy and penetrationBroadband Policy in the Americas: The Foundation of the Net Neutrality Debate

Note: Total World Internet Users estimate is 1,319,872,109 for year-end 2007

Copyright © 2008, Miniwatts Marketing Group – www.internetworldstats.com

Note: Total World Internet Users estimate is 1,319,872,109 for year-end2007 Copyright © 2008, Miniwatts Marketing Group – www.internetworldstats.com

18th June 2008 11


Source: www.internetworddstats.com Copyright©2008, Miniwatts Marketing Group

18th June 2008 12


Note: Total World Internet estimate is 1,319,872,109 for year-end 2007. Copyright © 2008, Miniwatts Marketing Group – www.internetworldstats.com

18th June 2008 13


Rank 2006-2007 Rank 2001-2002 Rank 2006-2007 Rank 2001-2002

United States 7 1 -6 United States 6 1 -5

Korea, Rep. 19 20 1 Korea, Rep. 24 28 4

Malaysia 26 36 10 Malaysia 26 24 -2

Chile 31 34 3 Chile 27 27 0

España 32 26 -6 España 28 26 -2

India 44 54 10 India 43 48 5

Mexico 49 44 -5 Costa Rica 53 37 -16

Brazil 53 38 -15 Panama 57 53 -4

Costa Rica 56 45 -11 Mexico 58 42 -16

Uruguay 60 37 -23 El Salvador 61 48 -13

El Salvador 61 55 -6 Colombia 65 51 -14

Argentina 63 32 -31 Brazil 66 45 -21

Colombia 64 57 -7 Argentina 69 44 -25

Panama 65 48 -17 Uruguay 73 46 -27

Peru 78 52 -26 Peru 74 47 -27

Guatemala 79 68 -11 Guatemala 75 66 -9

Venezuela 83 50 -33 Venezuela 88 53 -35

Honduras 94 72 -22 Ecuador 90 58 -32

Ecuador 97 71 -26 Honduras 93 70 -23

Network Readiness Index Growth Competitiviness Index

Evolución Evolución

Note: Total World Internet estimate is 1,319,872,109 for year-end 2007. Copyright © 2008, Miniwatts Marketing Group – www.internetworldstats.com

27

18th June 2008 14

Broadband Policy in the Americas: The Foundation of the Net Neutrality Debate

Source: Copyright 2004, Pyramid Research, LLC

18th June 2008 15


POLICY

MEASUREMENTREGULATIONS CAPITALEXPENDITURES MARKET

BEDFELLOWS

18th June 2008 16


“To preserve the vibrant and competitive free market that presently exists for the Internet and to promote the continued

development of the Internet…Congress charges the Commission with encouraging the deployment on a reasonable and timely

basis of advanced telecommunications capability—broadband—to all Americans.”

In order to preserve and promote the open character of the Internet, the Commission also stated in its Policy that “accordingly, we are not adopting rules in this policy

statement. The principles we adopt are subject to reasonable network management.”

CC: Docket No. 02-33, Policy Statement by the Federal Communications Commission, released September 23, 2005

18th June 2008 17


HISTORIC BACKGROUND

TELRIC REGULATION ENCOURAGED CLEC COMPETITION IN 1990’s

PRESSURE TO REDUCE ELEMENTS OF UNE-P’s SUBJECT TO TELRIC ERODES IT AS A MARKET AND BUSINESS MODEL

CARRIER MORATORIUM ON BROADBAND INVESTMENT FURTHER GUTS TELRIC

2002 DEREGULATION OF BROADBAND AND ENSUING DEBATE OVER NET NEUTRALITY

HISTORIC BACKGROUND

18th June 2008 18


NET NEUTRALITY INITIATIVES

Cap-ex Required for Broadband Build-out Limits

Ownership to Few Companies

Concern that Excessively “Slow” Internet Means “No”

Internet Pushes Consumer Groups to Lobby FCC For

Regulated Access to Broadband, With Claims as Urgent as

Unconstitutional Censoring of Content on the Internet

Congress Intervenes with Democrats Generally In Favor of

Rules and Republicans Generally Opposed

Congressional Statement by Rep. Markey (Mass. Dem.)

Suggesting Principles Rather Than Rules, “Internet Freedom

Preservation Act of 2008”.

18th June 2008 19


THE COMPETITION OF STATISTICS

OECD Statistics (Dec. ’06) Show U.S. With Largest No. of

Internet Subs at 58.1 Million But Only 19.6%

Penetration; 15th Among OECD Countries

FCC/CTIA (Dec. ‘6) Show U.S. With 21.4% Penetration

PEW/INTERNET (Jun ’07/Adult) and Internet World

Stats (Dec. ’07/Home) Show U.S. With 47% Penetration

18th June 2008 20

Broadband Policy in the Americas: The Net Neutrality Debate

20 HIGHEST INTERNET BROADBAND PENETRATION RATES GLOBALLY

# Country or RegionBroadband

Penetration RateBroadbandSubscribers

Population( 2007 Est. )

Source and Dateof Usage Data

1 Bermuda 36.5 % 23,600 64,574 ITU - Sept./07

2 Netherlands 32.8 % 5,388,000 16,447,682 ECTA - March/07

3 Denmark 31.8 % 1,728,359 5,438,698 OECD - Dec./06

4 Iceland 29.3 % 87,738 299,076 OECD - Dec./06

5 Switzerland 28.5 % 2,140,309 7,523,024 OECD - Sept./06

6 Liechtenstein 28.1 % 10,000 35,622 ITU - Sept./06

7 Monaco 28.1 % 9,400 33,443 ITU - Sept./06

8 Finland 28.0 % 1,474,605 5,275,491 ECTA - March/07

9 Korea, South 27.4 % 14,042,728 51,300,989 OECD - Dec./06

10 Norway 27.4 % 1,278,346 4,657,321 OECD - Dec/06

11 Sweden 27.2 % 2,478,003 9,107,795 ECTA - March/07

12 Hong Kong 25.1 % 1,796,200 7,150,254 ITU - Sept./06

13 Luxembourg 23.8 % 110,317 463,273 ECTA - March/07

14 Canada 23.7 % 7,675,533 32,440,970 OECD - Dec./06

15 United Kingdom 23.1 % 13,957,111 60,363,602 ECTA - March/07

16 Belgium 22.4 % 2,353,956 10,516,112 OECD - Dec./06

17 France 22.3 % 13,677,000 61,350,009 Teleco - March/07

18 Singapore 21.8 % 796,500 3,654,103 ITU - Sept./07

19 United States 21.4 % 64,614,000 301,967,681 FCC/CTIA - Dec./06

20 Faroe Islands 20.3 % 10,100 49,760 ITU - Sept./07

TOP 20 Countries 23.1 % 133,651,805 578,139,479 IWS - Sept.30/07

Rest of the World 2.7 % 160,454,692 5,996,526,938 IWS - Sept.30/07

Total World - Users 4.5 % 294,106,497 6,574,666,417 IWS - Sept.30/07

Source

18th June 2008 21

MEASUREMENT

Speed Based on

Definition of Broadband

(256Kbps vs 200Kbps)

Home Usage vs Total

Usage

Accuracy of

Measurement System

MEASUREMENT SYSTEM

Broadband Census of

America Act (Oct ’07

Markey, House Energy &

Commerce--NTIA to create

interactive map at 9-digit

zip code level

Broadband Data

Improvement Act (Inouye,

’07 Senate), develops

concept of “second

generation broadband”

focus on speed


18th June 2008 22


Consumer Adoption Time

Growth Rate in Broadband

Source: PEW Internet Project 2008

18th June 2008 23

IP DRIVERS OF CONVERGENCE – BROADBAND REVOLUTION




CONCLUSION

Contents

18th June 2008 24

Pervasive Migration to NGN Technology

• In access networks, IP-based services by wire and wireless ops (3G and 4G) increasingly overlap voice, data and video and support integration of critical network parts (IMS), with lower opex and capex

UMA and IMS contribute to renewed excitement over seamless flowing of Fixed and Mobile networks into each other.

Fixed – Mobile Applications/Convergence

Broadband/IP Move to Wireless Applications

18th June 2008 25

Mobile VOlP

VoIP allows voice to be subsumed into data stream, supporting

feature rich services over a single pipe. IP based and hosted IP

telephony ultimately replaces TDM. Video, voice and data ride

together presently.

VoIP started as a fixed service went wireless through WiFi and

has now gone mobile.

Mobile VoIP is becoming feature rich: does it compete head-on

with fixed? Is this an opportunity or a threat to either/both?

E.g., Vonage goes to the UK with UK WiFi provider, The Cloud,

with free VoIP calls.


18th June 2008 26

Business market: Unified Communications (UC)

• Cisco, Microsoft, Vista Office 2007 Exchange Servicer 2007

• Microsoft good study: Interoperability (like Cisco), software and services, ad-supported revenues (Microsoft buys aQuantitative opposed by Google whose attempt to buy DoubleClick continues under FTC antitrust scrutiny.

Competitive OS for mobile data/voice

• Microsoft Mobile OS and planned Mobile Windows 6.0

• Symbian OS V9 and Nokia Series 60 and 80

• Palm and Palm Source

• Linux (Motorola, Trolltech, Monta Vista, Access Palm, RIM, Java)

• Google and Yahoo compete with MS on mobile internet.

Interoperability of Networks/Platforms


18th June 2008 27

2727

Fixed line penetration (ITU 2006)

50.1%

43.5%38.0%

24.8%18.9% 18.0%

14.7% 12.7% 12.0% 10.1%7.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Pen

etra

tion

%

18th June 2008 28

Mobile penetration (ITU 2006)

2828

135%

106% 106%

77%

61% 59%52%

44% 41% 37%

1%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Pe

ne

tra

tio

n %

18th June 2008 29

2929

Estimated number of Internet users per 100 population (ITU 2006)

1.7%

7.0% 7.1% 8.4%

14.1%16.8%

19.0%21.3% 22.5%

31.9% 32.8%35.6%

59.5%

0%

10%

20%

30%

40%

50%

60%

70%

Inte

rne

t u

se

rs/ 1

00

po

pu

lati

on

18th June 2008 30

Country Mobile Fixed Line Internet

Seychelles 86.50 25.40 35.67

Reunion 75.51 --- 27.99

South Africa 71.6 9.97 10.75

Mauritius 61.50 28.45 14.49

Botswana 55.67 7.78 3.40

Gabon 54.39 2.60 5.76

Mauritania 61.50 28.45 14.49

Mayotte 28.80 --- ---

Gambia 25.99 3.40 3.82

Senegal 24.50 2.37 5.45

Namibia 24.37 6.84 3.97

Swaziland 24.30 4.28 4.03

Nigeria 24.05 1.26 5.95

Ghana 23.09 1.58 2.70

*Source: ITU 2006 Report


Dominance of Wireless in Africa

18th June 2008 31

IP DRIVERS OF CONVERGENCE – BROADBAND REVOLUTION




CONCLUSION

Contents

18th June 2008 32

Strange Bed-Fellows

Apple Computer/Google

Competitors Collaborating: Google CEO on Apple Board, combining Apple Interface with Google “Brain” and possibly Advertising, Monthly Subscriptions…Google brings macro-computer to the table and Apple brings the microcomputer, or as one commentator puts it, the vision and the detail. Reports and logic indicate that struggles are likely before combined products surface but potential is alluring.

Apple Computer/YouTube

Also a Google deal, providing content to Apple TV using You Tube video streaming. Following the deal, Apple announced its second line of video, this time with 160GB (vs 40GB) storage, making YouTube videos available on Apple TV. Quality is the issue. YouTube quality is lacking on a PC and remains to be seen on Apple; as does whether this new bed-fellow will keep Apple TV from falling out of bed entirely. HD content will be essential to success.

18th June 2008 33

Strange Bed-Fellows

LaGrange, Georgia/Charter Communications

PPP’s in cable TV are unheard of in the U.S.. But, facing competition, need

for capex upgrades, and cash crunch, Charter teams up with the City to

upgrade the network and release new services-- remote meter-reading,

energy load management, lifeline services, upgraded cable TV and

telephony to the City’s 27,000 residents. City invests appx $7 Million and

Charter leases city’s spectrum for its video services, with remaining

spectrum used by the City for its utility services and high speed internet.

Microsoft/Novell: Bed-fellows with flannel pajamas

Competitors team in lab to solve interoperability issues on Microsoft and

Linux systems, a bit of a departure from the Microsoft culture. Trust and

hives are big issues as secrets are shared.

18th June 2008 34

Strange Bed-Fellows

Fox/Google/YouTube/MySpace/News Corp

Competitive and teaming bed-fellows, entangle in a subpoena by Fox to

YouTube for user lists of “suspects” who uploaded 2 Fox TV series

without authority, where MySpace owned by Fox’s parent, News Corp.

enjoys a lucrative partnership with Google who owns YouTube.

Likelihood is Fox subpoena of YouTube user list will be quietly handled

among the family.

Sprint Nextel/Clearwire/Intel

Common issue for bed-fellows is money. On-again-off-again WIMAX deal

with Clearwire was stalled last year for that but may be on again with

recent report of Intel Capital’s consideration of a $2 billion investment in

the venture, which would increase its already unusually high $600 million

in Craig McCaw’s Clearwire. Additional bedfellows could make the team

very interesting if SK Telecom and Google join as is rumored.

18th June 2008 35

Strange Bed-Fellows

Qwest/TBA Wireless Data Co

Qwest, whose agile CEO announced last week that his focus will be on user

interface not massive roll-out to capture market share in broadband

services, is searching for a bed-fellow to provide broadband data

capability. Qwest’s announced strategy is to own only the network into the

home and the killer interface, yet to be developed, while its partners own

content and network infrastructure.

FT/Sagem Communications/Thomson

Very recently announced a software JV to rival Microsoft, to enhance

links between STBs TV’s, phones and other electronic devices. While

Microsoft and Novell figure out how to trust each other, the “Soft At

Home” alliance hopes to set the industry standard for and license its

seamless software.

18th June 2008 36

Strange Bed-Fellows

Regulators/Television Content

Historically distributors of television (and now internet and mobile)

content have negotiated private contracts with their customers unfettered

by regulators in the sale of their privately-owned rights. As M&A

(notably Rupert Murdoch and others) challenged access to national

viewing jewels, such as the national football team, the EU stepped in as did

the US FCC to constrain private deals that could negatively affect the

public’s right to afford and see key sports (and other content) offerings.

This is an unusual role for telecoms regulators unaccustomed to ruling on

content auctions for exclusive contracts to seasonal shows, movie channels,

ethnic programming and most crucially, sports programs.

The FCC in the U.S. is considering regulations on this as is ICASA in

South Africa, where 3 new providers of IPTV, including Telkom SA’s

Telkom Media were licensed last August.

18th June 2008 37

Acquirer Target Value Purpose

Cisco Systems Arroyo (a VOD software

company)

$92 Mil. Supply IPTV Market

Motorola Kreatel (STB mfr) Apprx. $600

Mil

Better position in IPTV supply

market

Motorola Broadbus (VOD Systems

supplier)

Appx. $186 Mil Better position in IPTV supply

market

Tandberg Televsion Zetools, Inc. Appx. $80 Mil. Obtain larger market share

Verizon Communications,

Inc.

Super Computer Intl., Inc.,

gaming company

Not Disclosed Quintuple Play gaming, IPTV,

internet, bus. IP

Avista Capital Partners WOW Approx. $800

Million

IPTV play and television market

expansion

Avista Capital Partners SIGECOM, overbuilder

network company

Appx. $115

Million

IPTV market

Nokia Siemens Aperito EU 140 mil Real time subscriber data aps.

Landline purchase Marine Jermenti

FairPoint Verizon Landline $2.7 bil New Hampshire, Maine, VT

Microsoft? others? Yahoo? Est. $44 bil Portal Play

Strange Bed-Fellows

18th June 2008 38

IP Broadband is a paradigm changing technology which will cause a

shift in the economics of subsumed industries

Pure telephony is subsumed within and commoditized by multiple ap,

interoperable networks and platforms

Mobility and enormous investment required in broadband will be key

factors

Best certainty is: Mobility is essential; mobile subs will continue to

grow (to saturation); fixed will continue to upgrade, to support

maximum richness of features, the 2 will either team or the M&A

lawyers will be the biggest winners. Latter looks good so far, very

few operators will be able to address level of investment needed.

But bottom line right now is that fixed services dominate the bottom

line, but that line shifts daily and the direction is with broadband, so

access policy will control whether competition will exist or not.

Access/net neutrality regulation are key to growth and competition.

Conclusion

18th June 2008 39

THANK YOU

THANK YOU

Judith O’NeillGreenberg Traurig, LLPChairman Telecom DepartmentNew York OfficeTel: +212.801.9387Mobile: +212-977-4424E-mail: [email protected]

November 2005Presentation to Pegasus Corp. 1 GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | CANTO...

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