1. The European way to think the Digital World www.idate.org Multiplay on Broadband IDATE International Conference Montpellier (France), 23 November 2005 Roland Montagne Head of Broadband Practice, IDATE r.montagne@idate.org

2. The European way to think the Digital World www.idate.org Is the broadband market still growing?

3. IDATE © 2005 www.idate.org 3 Multiplay on Broadband 23 November 2005 Broadband: global overview  Over 180 Million broadband subscribers Worldwide in mid-2005 vs. 130 M in mid-2004  Forecasts indicate over 200 Million subscribers by the end of 2005 Growth of the world’s broadband subscriber base (in millions) Source: IDATE  Steady growth: 51.5 Million new broadband subscribers between mid-2005 and mid- 2004 vs. 51 M for the same period one year earlier

4. IDATE © 2005 www.idate.org 4 Multiplay on Broadband 23 November 2005 Broadband: regional analysis  At the start of 2005, European broadband subscribers outnumbered North American subscribers for the first time  Growth in North America down slightly in recent months Source: IDATE  Between mid-2004 and mid-2005, Europe reported more new broadband subscribers than Asia Pacific (20.6 M vs. 18.6 M)  But Asia Pacific remains the world’s largest broadband market, accounting for over 40% of the globe’s broadband subscribers Growth of the Broadband subscribers base, by geographic zone (in millions)

5. IDATE © 2005 www.idate.org 5 Multiplay on Broadband 23 November 2005 Broadband penetration by country  In Europe, the Netherlands & Denmark are reporting penetration rates close to Korea’s (1) Number of broadband subscribers per 100 inhabitant Source: IDATE  South Korea remains the reference in terms of broadband penetration (25%)  Mid-2005, France reports a higher penetration rate than the US (14%) Growth of Broadband penetration by country (mid-2003 – mid-2005) (1)

6. IDATE © 2005 www.idate.org 6 Multiplay on Broadband 23 November 2005 Broadband access technologies  Migration from dial-up to broadband stepped up in in 2005  In 2005 DSL remained the number one broadband access technology in Europe and Asia  Only exception: the USA where DSL is gaining ground but still behind broadband cable Percentage of broadband subscribers / dialup subscribers Source: IDATE

7. The European way to think the Digital World www.idate.org Broadband’s hot issues in 2005

8. IDATE © 2005 www.idate.org 8 Multiplay on Broadband 23 November 2005 From Broadband to Very High-Speed  The bandwidth race likely to continue -Continuing fierce competition and roll-out of new technologies: ADSL2+, FTTN + VDSL2, FTTH/Ethernet, plus DOCSIS2 for cable modem -Several applications will drive demand for bandwidth: HDTV, multiple video channels, Home Gateways, videophony, video IM,…  In Korea and Japan migration to very high-speed is already a reality -Population density -Government support -Attractive prices  In the US, RBOCs are deploying FTTx architecture -FCC’s decision not to unbundle fibre -Competition with cable modem -Length of the local loop -1.6 M homes passed by FTTx in mid-2005 (chiefly SBC and Verizon)  In Europe, following the pioneers (Fastweb, B2) first deployments by local authorities and public utilities  Incumbents taking a keen interest in FTTx technologies  Recent major announcement by Deutsche Telekom (VDSL)

9. IDATE © 2005 www.idate.org 9 Multiplay on Broadband 23 November 2005 Competition & Consolidation in Europe  Disparate situations around Europe -DSL dominates (little competition except Benelux, Austria, Portugal, the UK) -European incumbents’ market share varies a great deal -Consolidation underway, but mainly on a national scale  Unbundling now the primary means of development for alternative operators in Europe… from shared access to full unbundling in 2006  After a major drop over 2 years, broadband prices appear to be levelling off  Should LLU obligations be upheld for VDSL/FTTx platforms? DSL Market shares end 2004 Growth of Unbundled DSL Source: IDATE Source: IDATE for DG InfSo

10. IDATE © 2005 www.idate.org 10 Multiplay on Broadband 23 November 2005 Ubiquitous Triple Play? And even Quadruple Play?  Triple play bundles are increasingly common around the globe... distinguishing oneself from the competition and moving beyond mere pipeline operator  Often initiated by new entrants (Fastweb, Softbank, Free), with a major contribution from VoIP in Japan,… significant impact on TV package distribution in France, stand-off with cable in the US and with DTH in the UK  Beyond common trends, it is interesting to note what distinguishes the offers: pricing, pick-up of existing satellite packages vs. packages created by telcos, HDTV, rights acquisition, VoD... How far will operators go?  Prominence of home networking offers, integrating Wi-Fi/Bluetooth interfaces in the routers, DECT and cellular telephony (Quadruple play), interconnection of TVs, cameras, music, hard drive... Value no longer resides in the abundance of content, but in user-friendliness and interoperability,  Devising the right positioning for triple play bundles, going head to head with internet heavyweights (compete or share with Google, Yahoo! Skype/eBay, MSN…)  Two major areas of uncertainty for telcos: 1) Percentage of broadband subscribers opting for Triple Play 2) increasing ARPU (from 30 EUR to 80 EUR) Source: IDATE Trends in the positioning of the various players in terms of the service offering

11. IDATE © 2005 www.idate.org 11 Multiplay on Broadband 23 November 2005 Japan: Key points  16% broadband penetration rate at the end of June 2005. DSL comfortably in number one spot  ASDL services marketed in Japan offer bitrates of up to 50 Mbps, with sizeable decreases in tariffs, especially for such high speeds  8.3 million IP telephony users in March 2005 (+57% YoY), with a 64.8% market share for Softbank  Growth of FTTx subscribers higher than DSL growth since the start of 2005 (+ 100K/month)  With a base of 3.2 million subscribers in mid-2005, FTTH is the number two broadband access mode in Japan, and has overtaken cable  Regulation: both copper pair and fibre optic unbundling (up to the final active optical gear). NTT seeking changes to current regulations DSL market share (‘wholesale’) in Japan (June 2005) Source: IDATE Market share, by technology (June 2005) Growth of broadband subscribers

12. IDATE © 2005 www.idate.org 12 Multiplay on Broadband 23 November 2005 Key questions HDTV, VOD... Changing relationship between access providers and broadcasters? Impact on ARPU? 123 Strategy/partnerships with Internet portals: Google, MSN, eBay/Skype... Very High-speed broadband (FTTx): For which applications? Who will invest and under what conditions ? Will telcos succeed in their bid to market & manage Digital Home Gateways: user-friendliness/interoperability/security issues ? 45 Impact of fixed-mobile convergence: 3G/WiFi today & WiMAX (802.16e) soon? Quadruple play?