A Fiber Future. Challenges for markets and policy. Dennis Weller Chief Economist Verizon OECD Workshop Stavanger, Norway 10 April 2008

Transcription

1 A Fiber Future Challenges for markets and policy Dennis Weller Chief Economist Verizon OECD Workshop Stavanger, Norway 10 April Verizon. All Rights Reserved. PTE /07

2 Verizon s Corporate Profile Verizon Wireless U.S. wireless customers States w/wireless presence 65.7 million 49 plus D.C. 2 Verizon Telecom U.S. wireline access lines 41.4 million Wireline broadband connections 8.2 million FiOS triple-play 1.5 million Internet In early 943,000 January, Video Verizon surpassed 1 million FiOS video customers! Verizon Business Premiere international provider of enterprise voice, Internet, data and managed services Investment in Vodafone Italia 150 countries 446,000 route miles of cable over six continents 94% of Fortune 500 Statistics as of 12/31/07

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

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

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

6 FiOS Internet Results Verizon FiOS Internet Subscribers and Penetration M 687K 375K 21% 15% 12% Subscribers Penetration 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007 Results: FiOS Internet customers rose to 1.5 million Average penetration about 21% in all markets Monthly churn less than 1.5% 2010 Objective: 35-40% penetration 70% of subscribers are new to Verizon broadband 6

7 Comparisons Platform Competition Percentage of Broadband Market Composed of DSL versus other Platforms U.S. Canada Korea Hong Kong Denmark Netherlands Belgium Sweden Switzerland Japan DSL Other 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). 7

8 FiOS TV Results Verizon FiOS TV Subscribers 0 3K 348K Objective: 25% penetration 943K 2007: 943,000 FiOS TV customers Monthly churn less than 1.42% 99.8% subscribe to Expanded Basic 60% have HD and/or DVR 37.3% subscribe to movie or sports package 10.3% of gross sales have included Home Media DVR About two-thirds of customers came from cable 8

9 Linear and VOD Content Offerings 350+ linear channels Genres General Entertainment Sports News Free 10,000+ VOD titles 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 Home & Lifestyle Subscription Premiums HBO, Cinemax, Starz, Encore, Showtime, The Movie Channel, Sundance, IFC Free with subscription to Premium Services Standalones WWE 24/7, Here!, Karaoke Pop Culture Music Movies Family Children Transactional Studio Movies Universal, Paramount, MGM, Fox, Sony, DreamWorks, New Line Events Ultimate Fighting Championship, Jerry Springer People and Culture Religious Multicultural Pay Per View Sports & Events Events Wrestling, Boxing, European Soccer ESPN GamePlan, Full Court, Boxing 9

10 Demand for Bundles FiOS TV Customer Base FiOS TV Only FiOS TV + Data 8% 6% FiOS TV+ Voice Triple Play 85.3% Bundles are common in the U.S. marketplace not just through telco offerings, however, cable operators and resellers offer them (i.e., wireless resale), Verizon Freedom and DIRECTV 98.8% of FiOS TV base has 2nd product 77.3% of FiOS TV sales include FiOS Internet 10

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

12 Transforming the Maintenance Process Network Trouble Report Rate -- Outside Plant (per 100 subscribers) % 0.20 Voice & DSL FiOS Total field maintenance dispatches and OSP-related dispatches are already showing solid declines 12 * Percentages reflect 2006 data

13 Transforming Interaction Upstream Speed Increasing in Importance! FTTP Applications and Media Bandwidth Cable Modem ADSL Dial-Up 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 HDTV Video-on-Demand Network Hosted Applications and Storage Next Generation 3D TV Upstream Mbps Downstream Platform for current and future content and applications 13

14 Investment by US Companies and OECD Telecoms Capital Expenditures (in US$ billions) Year Ending Sept./Dec. Source: Yahoo Finance data 14

15 Metrics for Major Telecoms DT FT VZ T Employment Revenues Lines empl Rev lines Figures in millions for

16 CAPEX Per line, Major Telecoms capex/line capex/line DT FT VZ T 16 US dollars in 2007

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

18 Policy Goals Competition Investment Innovation 18

19 Investment Drivers Product differentiation in platform competition Ability to deliver on plan Meet expectations of financial markets Real options value Integration of services 19

20 Regulatory Challenges Franchise to provide video Access to apartment buildings Access to poles, ducts, conduits Policy toward competitive practices Requirements for sharing 20

21 Policy Choices for the Future Is policy free? No single answer Can we have platform competition? Is separation a solution? For access? For investment? Who will choose the technology? 21