Verizon s Corporate Profile

Transcription

1 The Next Generation Challenges for markets and policy Dennis Weller Chief Economist Verizon 17th Biennial Conference of the ITS Montreal 25 June Verizon. All Rights Reserved. PTE /07

2 2 Verizon s Corporate Profile Verizon Wireless U.S. wireless customers States w/wireless presence 67.2 million 49 plus D.C. Verizon Telecom U.S. wireline access lines Wireline broadband connections FiOS triple-play Verizon Business Premiere international provider of enterprise voice, Internet, data and managed services 40.5 million 8.5 million 1.8 million Internet 1.2 million Video 150 countries 446,000 route miles of cable over six continents Most connected IP network Figures as of 1Q 2008

3 3 Deploying Fiber-to-the-Premises Office Parks Small Businesses ONT ONT Residential ONT Copper Distribution ONT FTTP Overlay Small Businesses SAI X Circuit Switch ONT Splitter Hub Copper Feeder FTTP Full Build ONT ONT Splitter Hub ONT ONT ONT ONT OLT New Buried Development

4 4 Capacity in the GPON Network: Three Laser Systems Capacity at each splitter hub Can serve as many as 32 customers

5 5 Fiber Deployment Status 2007 Deployment: Over 9.3M premises passed in 17 states 2008 Deployment Objectives: Pass 12.3M premises 2010 Deployment Objectives FTTP Deployed Pass 18M premises by 2010

6 6 FiOS Internet Results Verizon FiOS Internet Subscribers and Penetration 1.5M % % % % 50% 40% 375K % 687K % 15% 21% 30% 20% 10% 0 0% Subscribers 2007 Offers at: 10/2 Mbps 20/5 20/20 50/ Objective: 35-40% penetration Penetration 70% of subscribers are new to Verizon broadband

7 7 Comparisons Platform Competition Percentage of Broadband Market Composed of DSL versus other Platforms U.S. Canada Korea Hong Kong Denmark Netherlands Belgium Sweden DSL Switzerland Other Japan Israel Australia Norway Finland Taiwan Iceland The category Other includes cable, fiber/lan, and additional non-dsl platforms including satellite and BPL. Source: ITU World Telecom/ICT Indicators Database (2006), supplemented by OECD Broadband Statistics (Nov. 2007).

8 8 FiOS TV Results Verizon FiOS TV Subscribers 1,200, K Expanded Basic % subscribe to movie or sports package About two-thirds came from 348K cable 2010 Objective : 25% of milllion FiOS TV customers (1Q2008) 99.8% subscribe to homes passed 3K Q 2008

9 9 Linear and VOD Content Offerings 350+ linear channels 10,000+ VOD titles Genres General Entertainment Sports Free News Basic Channels and Niche Interests Local, Sports, News, Info & Education, Women, Shopping, Home & Leisure, Pop Culture, Music, Movies, Family, Children Free with Digital STB (e.g., Disney, Discovery, Nickelodeon, ESPN, MTV, A&E, HGTV, History, BET, Gospel Music, Expo TV) Information & Education Women s Entertainment Shopping Subscription Home & Lifestyle Music Family Standalones WWE 24/7, Here!, Karaoke Free with subscription to Premium Services Pop Culture Movies Premiums HBO, Cinemax, Starz, Encore, Showtime, The Movie Channel, Sundance, IFC Transactional Studio Movies Universal, Paramount, MGM, Fox, Sony, DreamWorks, New Line Pay Per View Sports & Events Events Wrestling, Boxing, European Soccer ESPN GamePlan, Full Court, Boxing Children Events Ultimate Fighting Championship, Jerry Springer People and Culture Religious Multicultural

10 10 Transforming the Home Today 2008 and Beyond New wiring Existing wiring Cost Per Premises Connected $1,220 $933 $880 $700 'Jan 06 'Aug 06 'Dec 06 'proj. 10 New wiring Existing wiring Simplified in-home network - no new wires Enhanced customer experience & customer interaction Simplified installation process Evolution toward remote service activation and maintenance

11 11 Transforming Interaction Applications and Media Bandwidth Web Surfing Video Conferencing, Premises Surveillance, Two-way Signing SDTV Video-on-Demand, Telecommuting File Sharing, Home Video Sharing/Streaming Real-Time SDTV, Network PVR Multi-Player Gaming, Interactive Distance Learning Premises Web Hosting Telemedicine Large File Sharing Upstream Speed Increasing in Importance! HDTV Video-on-Demand Network Hosted Applications and Storage Next Generation 3D TV FTTP Cable Modem ADSL Dial-Up Upstream Mbps 100 Downstream Platform for current and future content and applications

12 12 Energy Use: Fiber vs. Copper Office Parks Small Businesses ONT ONT Residential ONT Copper Distribution ONT Splitter Hub Copper Feeder Central office power consumption Copper DSL: 32 KW hours/year/line Fiber FiOS: 12 KW hours/year/line Outside plant feeder troubles 91% less Fewer truck rolls Central Office DSLAM OLT

13 13 Wireless Revenue per Minute in Developed Countries

14 14 Monthly Wireless Minutes Per Handset, 1Q07

15 15 Wireless Penetration Handsets per 100 population: Europe: 110 US:81 Percent of population with wireless service: Europe and US: Both about 80% What accounts for the difference? Multiple accounts per user This takes two forms: Professionals with PDAs and laptop cards (About the same in Europe and US) Extra accounts/sim cards to avoid high roaming charges (Only in Europe)

16 16 US Wireless Subscription by Age Cohort (Estimated 2010)

17 17 Next-Generation Wireless Broadband Verizon Wireless has been US market leader in 3G Verizon has announced it will begin deployment of 4G in 2010 A CDMA network. Broadband provided over EV-DO (Rev A) 3G available to over 240 million in the US Data revenues growing about 50% annually Verizon s 4G will use the LTE standard Fast becoming a global standard (AT&T, Vodaphone, China Mobile) Estimated 24 million subscribers worldwide (Juniper) Will use spectrum recently acquired in 700 mhz auction LTE opens up new opportunities Much higher speeds mbps average, 50 peak. (DoCoMo reports 250mbps in test lab) More devices The Internet of things goes cellular Will blur boundaries, increase substitution Wireless vs wireline LTE vs Wimax

18 18 New Business Models For the US Mobile Market On November 28, 2007, Verizon announced a new open network model All handsets that meet basic technical standards will be accepted on Verizon s network Customers will be able to choose the model they prefer: A managed service, with subsidized handsets Third-party handsets, applications Provides a basis for a varied 4G marketplace

19 19 Investment by US Companies and OECD Telecoms Capital Expenditures (in US$ billions) Year Ending Sept./Dec. Source: Yahoo Finance data

20 20 Metrics for Major Telecoms DT 200 FT VZ 150 T empl Employment Rev Revenues Figures in millions for 2007 lines Lines

21 21 CAPEX Per line, Major Telecoms capex/line capex/line DT FT VZ US dollars in 2007 T

22 22 CAPEX as Percentage of Revenue, Major Telecoms capex/rev capex/rev DT FT VZ Figures for 2007 T

23 23 Policy Goals Competition Investment Innovation No single model will deliver best outcome for all countries Policy should adapt to market conditions

24 24 Investment Drivers Product differentiation in platform competition Ability to deliver on plan Meet expectations of financial markets Real options value Integration of services

25 25 Regulatory Challenges Franchise to provide video Access to apartment buildings Access to poles, ducts, conduits Policy toward competitive practices Requirements for sharing

26 26 ICTs, Productivity, and Policy Evidence shows that ICT adoption does not directly contribute to productivity Instead, ICTS make possible structural adaptations that increase productivity Policy that affects the economy s ability to adapt affects the productivity gains from ICTS Labor and capital mobility Competition policy Foreign direct investment

27 27 Productivity and Regulation Results from the OECD

28 28 Three Dimensions of Convergence Horizontal Across platforms Vertical Along the value chain Between NGNs and the Internet No longer any dividing line NGN brings the IP world to the customer s door

29 29 Traffic Flows Among 20,000 Autonomous Networks on the Internet

30 30 STM-1 IP Transit Prices In London

31 31 Challenges for Future of IP Market Threat of regulation As next-generation platforms converge with Internet, collision between Internet traffic model and traditional regulation of voice traffic exchange Adding new dimensions to internet market model Quality SMS VOIP Content Security and privacy

32 32 Network Resources Scarcity and Abundance Managing network resources To improve customer experience Especially for sensitive applications Pricing Network Resources Customers prefer unlimited offers Challenge to provide economic incentives without disturbing this model One side of the market or both? Pricing and network management are complements, not substitutes Moving the Possibility Frontier P4P A cooperative effort Improves efficiency by sharing routing information between network operator and P2P provider Tests show up to sixfold improvement

33 33 The Way Forward Ex-ante regulation holds great risks Presumption about market structure Preemption of market development Ex-post remedies if needed Focus on actual outcomes for consumers, not on arbitrary market structure Deal with specific instances of behavior Challenge for policy makers and participants to adapt to ex-ante mode Possible opportunities for self-regulation

34 34 It s a Mistake to Presume Too Much About the Future