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Commercial in confidence The economic challenges of reaching broadband ubiquity Speeding up NGN ubiquity: a pillar for digital growth Athens, 13 February 2014 Dr Matt Yardley
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Commercial in confidence Introducing Analysys Mason 2 ▪ EC – Digital Agenda (costs, benefits, funding models, incentive policies) ▪ ITU – PPPs for universal broadband ▪ EIB – market development and funding models ▪ Operators – NGA strategy ▪ Governments – national broadband plans and state aid ▪ Regulators – competition issues in NGA ▪ Investors – NGA transactions
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Commercial in confidence Ubiquity costs 3 First 75% homes Last 25% homes € N bn Source: Analysys Mason, typical fixed NGA cost analysis
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Commercial in confidence Rural costs vary strongly depending on technology – fixed vs wireless … 4 Wireless Fixed Cost % of homes covered Indicative
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Commercial in confidence … and these two critical aspects are highly market-dependent 5 Wireless Fixed Cost % of homes covered Indicative
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Commercial in confidence The final 5% is now a hot topic in the UK 6 UK Government target Government funding Coverage (premises) Broadband service specification End 2017 target £250m committed 95%Superfast (>24Mbit/s) End 2018 target Not yet committed At least 99% Not yet defined Government will explore how to solve this with industry using “more innovative fixed, wireless and mobile technologies”
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Commercial in confidence UK FTTC speed variability is narrower than in 1 st gen. broadband – good news for the DA 7 Source: Ofcom data, 2013 Speed (Mbit/s) 8-10pm weekdays 30.6 3.5 24 hours 30.9 3.5 Max 33.1 3.0 Av min Av variance 81% of headline 8-10pm weekdays 59.3 3.4 Speed (Mbit/s) 24 hours 60.4 3.5 Max 64.2 3.3 Av variance Av min 78% of headline 38Mbit/s packages 76Mbit/s packages
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Commercial in confidence Outcomes will also depend on how Member States implement policy ▪ There is some latitude in interpreting the DA targets which will impact solutions across Member States – A very rigid view on 30Mbit/s, i.e. to all users under all conditions, would effectively eliminate wireless (by driving up costs to levels higher than fixed) ▪ There is an inherent tension between playing it safe with incumbent operators vs stimulating new competition – The sustainability risks are greater in rural areas – driven by cash-flow issues more than set-up costs ▪ Member States need to think hard about geographic carve-ups – This can have unintended consequences 8
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Commercial in confidence Public policy questions still remain ▪ Funding: Our EC work suggests a funding gap of €60 billion to meet DA 30Mbit/s coverage & 100Mbit/s take-up targets ▪ Demand-side: – Connecting “the unconnected” (see below) remains a major challenge, with multiple issues involved 9 Source: Ofcom CMR 2013
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Commercial in confidence These are exciting times! ▪ Future of UHF radio spectrum (EC High Level Group) ▪ Media consumption uncertainties: – Broadcasting to mobile networks – Prospects for linear TV distribution on fixed networks (e.g. using multicast) ▪ Drivers for QoS in networks (e.g. cloud, public services) and business model implications ▪ Growing day-to-day reliance drives need for resilience – perhaps less well understood that it should be 10
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Commercial in confidence Thank you 11 Dr Matt Yardley Partner (UK) matt.yardley@analysysmason.com +44 7766 058 242
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