Germany s broadband networks - innovation on hold

Transcription

1 International Telecommunications Society Helsinki, August 23, 2003 Germany s broadband networks - innovation on hold Dr. Stefan Heng

2 Germany s broadband networks Agenda 1 Where do we stand? 2 Where are we heading? 3 Conclusion Heng_Broadband_ITS_23o8o3_ page 2

3 Germany s broadband networks Agenda 1 Where do we stand? 2 Where are we heading? 3 Conclusion Heng_Broadband_ITS_23o8o3_ page 3

4 Germany's cable jungle - a tough legacy G Telephone and TV cable networks were in the hands of the stateowned Deutsche Bundespost (later DTAG). G TV cable network used only for transmission of radio signals, phone network for bi-directional communication. G DTAG ran up a loss in TV-cable business. This should not be seen as argument against profitability, but as a consequence of a failure to innovate. G Since the investment in the 1980s the German TV cable network has had a high density but... G... by order of the regulatory authority the network is strictly divided into a four-level hierarchy. Heng_Broadband_ITS_23o8o3_ page 4

5 TV cable network, 2000 USA Germany UK France Population, ' Households, ' TV households, % of total 98,2 98,7 97,0 93,6 Number of channels received by 70% of population Households passed by cable, n.a. 77,5 51,9 36,8 % of TV households Households connected 70,6 53,3 13,6 13,2 Digital TV subscribers, 11,0 5,1 25,8 13,6 % of TV households Sources: Nielsen, GfK, ITC, Mediametrie Heng_Broadband_ITS_23o8o3_ page 5

6 Four-level hierarchy in TV cable network, Germany Level 1 TV and radio studios Level 2 TV and radio transmitters Satellites Radio relay systems Level 3 Level 4 Head-end Broadband amplifier Distribution network to enduser premises Inhouse cable network Apax et al., Iesy, Ish More than 5,000 cable network operators, e.g. local housing companies, Bosch, Primacom, Tele Columbus Heng_Broadband_ITS_23o8o3_ page 6

7 Delays in restructuring of TV cable network G In the 1990s the German cartel authority forced DTAG to split cable business on Level 3 among independent regional branches. This was the first step towards privatisation of the cable network. G Spinning off began in NRW, BaWue, Hesse. In 2002 Liberty-Media applied for the remainder at Level 3 & 4. The cartel authority stopped this deal in view of market dominance. G The next candidate (consortium Apax, Goldman Sachs, Providence) swung the deal in March 03. Apax et al. paid only a fraction of the Liberty-Media bid - a severe loss for DTAG. Heng_Broadband_ITS_23o8o3_ page 7

8 TV cable network operators, Level 3, Germany Buyer Iesy Ish Apax et al. Region HES NRW, BW All states except HES, NRW, BW Purchase price EUR bn Dwellings, m 1.6 / / / 10.4 (passed/ connected) Internet and Planned Planned Decison still to cable telephony be announced Heng_Broadband_ITS_23o8o3_ page 8

9 Germany s broadband networks Agenda 1 Where do we stand? 2 Where are we heading? 3 Conclusion Heng_Broadband_ITS_23o8o3_ page 9

10 Two working hypotheses for transmission technologies G Advances in technology whip up competition between formerly unrelated segments. G Telephone networks are challenged by broadband TV cable. Heng_Broadband_ITS_23o8o3_ page 10

11 Network technologies, Europe 1,0 Telephone (analogue) 0,9 0,8 DSL 0,7 0,6 Heng_Broadband_ITS_23o8o3_ page 11 ISDN TV broadband Other Breakdown of use by households and small and medium-sized enterprises Source: Business Data Resource Company, ,5 0,4 0,3 0,2 0,1 0,0

12 DTV services, UK, 2000 Electronic programme guides 73 "Favourites" function 46 Games 44 Online shopping Internet access 9 Online banking 6 Using no interactive services 13 % Base: homes with digital TV (n=250) Heng_Broadband_ITS_23o8o3_ page 12

13 Internet access via TV cable network, 2003 USA 112 Japan Norway Sweden Finland Denmark W. Europe UK France Germany Modems per households Heng_Broadband_ITS_23o8o3_ page 13

14 Security - obstacle to business G Security is crucial for all transmission technologies, especially TV cable broadband. G Star topology networks provide a level of security that a tree topology can only achieve by encryption. Star structure Tree structure Head-end Head-end with switch G Business models in which only certain parties can use services and content are interesting for e-business via TV cable. Heng_Broadband_ITS_23o8o3_ page 14

15 Niches instead of mega business G Outdated TV cable network is obstructing new business; infrastructure must be totally restructured. G Upgrading can proceed only step by step starting with profitable regions. G Division between Levels 3 and 4 should be eliminated. G Operators are increasing their share in niches (e.g. private entertainment). Cable only has prospects in the private-customer sector. Heng_Broadband_ITS_23o8o3_ page 15

16 Germany s broadband networks Agenda 1 Where do we stand? 2 Where are we heading? 3 Conclusion Heng_Broadband_ITS_23o8o3_ page 16

17 Acceptance of cable - Pros & cons Arguments for a broader acceptance of TV cable: G Most German households are on cable. G Cable offers stable data transmission with high bandwidth and always-on convenience. G The data encryption required for e-business is already practised in (cable) pay-tv. Heng_Broadband_ITS_23o8o3_ page 17

18 Acceptance of cable - Pros & cons Arguments against a broader acceptance of TV cable: G TV cable network designed for large-scale, general dissemination rather than individual contact. G Cost of upgrading the network to bi-directional, interactive communication is enormous. G Due to the fragmented market it has not been possible to market cable's value as a modern internet-access technology. G Big companies have their own transmission networks. So TV cable usually is not attractive for them. Heng_Broadband_ITS_23o8o3_ page 18

19 TV cable network: not a serious rival at present G The TV cable network is handicapped by its obsolete technical structure and fragmented ownership. G Only big players with long-term business models have a chance (but only in niches). G Pay-TV and video-on-demand remain operators' cash cow. G In the medium term, the telephone will remain the main access channel to the internet. Heng_Broadband_ITS_23o8o3_ page 19

20 International Telecommunications Society Helsinki, August 23, 2003 Germany s broadband networks - innovation on hold Dr. Stefan Heng stefan.heng@db.com