1. Key Themes from Point Topic Tim Johnson www.point-topic.com Barriers to Broadband Workshop 1 February 2005

2. 2www.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. 3 Broadband stays on course

4. 4www.point-topic.com 136m broadband lines worldwide at 30 September 2004 Source: Point Topic Q3 2004 Million lines

5. 5www.point-topic.com Broadband lines worldwide

6. 6www.point-topic.com Broadband lines in Western Europe

7. 7www.point-topic.com Broadband lines in the UK

8. 8www.point-topic.com Broadband penetration levels still vary widely

9. 9www.point-topic.com Penetration levels in major countries are converging

10. 10www.point-topic.com Share of broadband lines by technology Q3 2004 Source: Point Topic Q3 2004

11. 11www.point-topic.com Share of broadband lines by technology Q2 2004 Source: Point Topic Q1 2004

12. 12www.point-topic.com Broadband is growing faster than mobile did (World) Source: Informa, Ovum, Point Topic, H1 2004

13. 13www.point-topic.com Broadband is growing faster than mobile did (UK) Source: Informa, Ovum, Point Topic, H1 2004

14. 14 A good year for the UK

15. 15www.point-topic.com Top Ten broadband countries by number of lines: Q204 - Q304 Source: Point Topic Q3 2004

16. 16www.point-topic.com Top Ten broadband countries by penetration Q3 2004 Source: Point Topic Q3 2004, countries with at least 500,000 population

17. 17www.point-topic.com Second Ten broadband countries by penetration Q3 2004 Source: Point Topic Q3 2004, countries with at least 500,000 population

18. 18www.point-topic.com The UK has been growing faster than Western Europe Source: Point Topic, H1 2004

19. 19www.point-topic.com UK fourth in DSL, but gaining

20. 20www.point-topic.com UK third in broadband, and also gaining

21. 21www.point-topic.com UK second in broadband penetration; first in 2005?

22. 22www.point-topic.com BT has the smallest share of the retail broadband market in the EU Source: ECTA, Point Topic

23. 23www.point-topic.com A tale of two telcos: DSL competition in France and UK Source: ECTA

24. 24 Bridging the gaps

25. 25www.point-topic.com 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

26. 26www.point-topic.com 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

27. 27www.point-topic.com UK broadband has been growing fast so far Source: Informa, Ovum, Point Topic, H1 2004

28. 28www.point-topic.com UK broadband could crash into the ceiling soon

29. 29www.point-topic.com 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

30. 30www.point-topic.com 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

31. 31www.point-topic.com Workplace-based views show much lower levels of take-up Source: Point Topic estimates

32. 32www.point-topic.com Business-quality DSL is growing only slowly Source: Point Topic

33. 33www.point-topic.com After years of stagnation, Internet trading is growing Source: DTI International Benchmarking Study 2004

34. 34 Triple-play trailblazers

35. 35www.point-topic.com 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

36. 36www.point-topic.com 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

37. 37www.point-topic.com How much contribution is broadband video making?

38. 38www.point-topic.com 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?

39. 39www.point-topic.com Some major VoIP players were well established by mid-2004 Source: Point Topic; figures mid-2004

40. 40www.point-topic.com 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. 41 Technology options

42. 42www.point-topic.com Contents VDSL and VDSL2 ADSL2+ Symmetric DSL

43. 43www.point-topic.com 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

44. 44www.point-topic.com 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?

45. 45www.point-topic.com 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

46. 46www.point-topic.com 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

47. 47www.point-topic.com 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?

48. 48www.point-topic.com 1.2m Symmetric DSL lines worldwide by end-2004 Source: Point Topic

49. 49www.point-topic.com 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

50. 50www.point-topic.com Tim Johnson www.point-topic.com tim@point-topic.com +44 (0) 20 7551 9260