Multimedia over DSL: the way to new growth?

1
Multimedia over DSL the way to new growth?
2
An early state of development of Broadband
Serviceson Telecom Networks

• Penetration to be only about 8
• of households in Europe by end 2002
• Only PC users can have access
• Speed is generally limited
• to a few hundred Kbs/s
• Service is only rapid access
• to existing Internet services

3
Fixed broadbandsubscription rate evolution

• Actual 2002
• North America 18 M broadband customers
• Europe 13 M broadband customers
• Expectations
• North America (Probe Research, Forrester
  Research)
• 7 - 10 M new broadband users / year
• ? 4 - 6 of homes switched to broadband per
  year
• Europe 4 per year or more?

4
Technically a lot more is possible

• Speed can be 5Mbs/s for 70 of Europeans,
• directly from the telephone exchange
• Video compression at 2Mbs/s and lower,
• allows multi-channel video services
• Access to both PC and TV set
• allowed by reduced costs of set top boxes
• Service offering can be much richer

5
ADSL ADSL from COBitrate vs. reach
Downstream bitrate Mbit/s
VDSL
remote
ADSL
ADSL
Distance km
0.5 1.0 2.0 3.0 4.0 5.0
8 7.4 6.2 5.5 3.0 1.0
14.5 13 10 5.9 3.0 1.0
12.0 10.0 7.2 3.5 1.0 0
22 15 3.5 0 0 0
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A healthy investment cycle goes hand in hand with
expected revenue stream evolution
total annual broadband revenues
FTTU
Revolution for existing, End game for
greenfield
FTTCab electronics at copper cross connect (JWI
Junction Wire Interface)
FTTArea electronics at centralized remote
location
Pay today
Evolution Pay be paid as you Play
FTTEx electronics at CO
More of the same
Year
7
Small medium size businesses
8
Small BusinessesDSL is becoming the standard
CAGR 2000-05
2005
2004
2003
2002
2001
2000
DSL Penetration
18.0
69
62
56
48
40
29
ALL SBs
Source AMI Partners 2000 U.S. Small Business
Strategy Forecast 2000 - 2005
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DSL Services for Business Access

• LAN to LAN networking
• Intranet and extranet solutions for SMEs
• Private line services
• Complement to Leased line solutions
• Multipair IMA/G.shdsl
• Multiservice/multivoice lines (VoDSL)
• IP services and solutions
• IP connectivity
• IP peering
• intranet/Extranet
• IP-VPN (GRE, IPsec, virtual routers, MPLS-VPN
  (RFC2547bis)
• IP services IP QoS, intranet access, firewalling
  , portals, virus scanning

10
Residential customers
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New services through ADSL video
PC users
TV users
existing business
High Speed Internet Access
- E-Mail - Infotainment - Enhanced Teletex -
Internet (customized for TV) - Portal / Kiosk
services
TODAY !
Premium Internet
P2P applications (intensive downloads)
- T-commerce - Games (on-line gambling)
Basic Video Services
- Set-Top-Box rental - 30 broadcast channels
Premium Video Services
- Premium broadcast channels - Video-on-Demand -
Pay-per-View / Time shifted TV - Entertainment /
Gaming
NEW !
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Revenue per user evolution
2001
PC owners
TV owners
Voice 45
Moving to
Moving to
Voice 45
Low speed Internet 15
Hi-speed Internet 35
2009
Voice 35
TV Basic 35
Hi-speed Internet 15
TV Premium 25
Voice 35
TV Basic 35
Internet on TV 10
TV Premium 25
New !
New !
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A three step approach?

• New services to the PC broadband specific web
  sites, videoconferencing, teleworking, gaming,
  video on demand
• Interactive video to the TV set internet access,
  video on demand, pay TV, time shifted TV, gaming,
  e-commerce one channel
• Full multimedia including broadcast channels two
  to three simultaneous channels

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A combination of technologiesa way to speed up
broadband penetration?
Packaged Content (This Operator is a Broker)
Production, Edition and Contribution
Vidéo distribution
VoD SERVER
Customer and Service Management

• No limitation of the number
• of channels
• Interactivity
• Open system access to all
• content providers

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Is the customer willing to pay?

• US Video Services Revenues in 2001
• (per subscriber / month)
• Cable Network 53
• penetration rate 70
• DBS 63
• penetration rate 15
• Video purchase rental 16 (household/month)
• penetration rate 100

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V-o-D penetration on US Cable(source Forrester
Research)

• Now 8 Million
• (revenues 20/ months per user)
• 2004 24 Million expected
• 2007 40 Million expected

In 2007, half of US homes are expected to have
V-o-D because of additional offering over DSL
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What are the bottlenecks?

• Telecom Operators have high debt and declining
• wireline revenues
• only invest if short term financial return is
  assured
• The regulatory environment is confused because
• of debates and court cases
• operators slow down investment in an uncertain
  environment

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What are the bottlenecks?

• No level playing field between Telecom Operators
  and Cable Operators
• Other actors (content providers, aggregators,
  software houses, set top box manufacturers, etc.)
  are slowing down investment, uncertain about the
  time scale and content protection issues
• the potential of technology is not realised
• Early entrants experience heavy losses because of
  low revenue (single service) and high costs (no
  volume)
• negative image is projected

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What competitive environment?

• What is the objective of regulation lowest
  price?
• Maximum competition? Broad service offering?
• Strong service penetration?
• Where should competition exist at all levels?
• Where there is most added value?
• When should regulation happen at the start of
  the service or when there is a market?
• Is there a need to go beyond competition law?

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The Actors
Content Providers Aggregators Service
Providers ATM/IP Network Providers Access
Providers Telecom Operators Customer Set Top Box
Providers
a a a a a a a a
b b b b b b b b
c c c c c c c c
d d d d d d d d
e e e e e e e e
f f f f f f f f
g g g g g g g g
The customer should ideally be able to choose any
combination of actors to get access to a certain
content
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A model based on new added-value

60
50
MARGIN
40
SERVICES
30
SERVICES
SERVICES
20
TRANSMISSION
TRANSMISSION
TRANSMISSION
COSTS
10
ACCESS
ACCESS
ACCESS
ADSL OFFER
HIGH SPEED ACCESS
BUSINESS ACCESS
RESIDENTIAL MULTIMEDIA
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An ideal revenue sharing model?
i-Mode or Minitel model

• Operators
• - provide access
• - billing
• - keep part of billed revenue
• Service or Content providers
• - advertise services
• - provide services
• - collect part of billed revenue

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Looking back from the future

• All homes will have wired broadband connectivity
• (copper lines, cable)
• Additional broadband connectivity will be
  provided by mobile networks, wireless LANs,
  DTT, satellite
• Service will be truly multimedia voice, data,
  video, gaming, e-commerce)
• value of service will be at least as high as the
  value
• of connectivity
• This multimedia broadband environment will be a
  major driver for related industries consumer
  electronics, content, software, IT services ...

Present policy should be determined by this view
of the future
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Regulation in a multimedia environment new
objectives

• Increase dramatically the level of service
  available to enterprise and residential users
  higher speed, more content, greater
  interactivity.
• Create an open service environment with
  appropriate revenue sharing models.
• Encourage investment in broadband
  infrastructure.
• Create a level playing field for competition at
  the transport layer using competing platforms
  (copper, cable,) and loop unbundling.

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ARCHITECTS OF AN INTERNET WORLD