Persistent Connectivity: Emerging Opportunities Based on DSL C. Douglas Jarrett, Esq. Keller and Heckman LLP Washington, D.C 202.434.4180 Jarrett@khlaw.com
Overview What is persistent connectivity? What are Emerging Opportunities Based on DSL? ILEC Business DSL Opportunities ILEC Consumer Wireless Broadband Strategies
Persistent Connectivity Based on Internet Protocol Sophisticated, declining cost CPE Multiple Last Mile Transport Technologies
Persistent Connectivity Always on Internet Access w/ at least 256 kbps upstream and downstream Accommodates bursty POS transactions and client-server communications of varying data rates and file sizes Data rates will increase over time
Persistent Connectivity Winners ILECs w/ DSL Fixed wireless providers Cable operators Mobile wireless carriers Losers Entities w/out last mile infrastructure IXCs Internet Backbones Resellers/ISPs
Business Customer Profiles Historically Underserved Locations Retail SoHo Small facility Temporary sites Chronically Overpriced Locations Low speed frame relay Low density secure requirements Need to participate in E-Commerce
Market Drivers; Erosion of IXC Data Services Frame relay is not a dynamic service Businesses moving to IP-VPNs Declining costs and enhanced functionality of Integrated Devices Cost advantage of DSL services over frame relay services
Service Components The DSL Bundle At least 256 Kbps upstream and downstream Internet access Managed Service (multiple grades) POTS line for Integrated Device (out ofband management) VoIP Service (Near term)
CPE Components Integrated Firewall/VPN/Router ( Integrated Device ) Integrated Device Sale/Rental DSL Modem Modem for POTS line Integrated Device Maintenance VoIP Upgrade/Replacement Module?
Revenue Streams Business DSL Service Components DSL + Internet Access Managed Service Analog line (out-ofband management) VoIP Recurring Revenues $105/Mo, plus Internet Access (poss. Bundled) $50 - $100/Mo. Tariffed 1FB rate To be determined
Revenue Streams Business DSL CPE Components Integrated Device Sales/Rental Maintenance Modem sales Revenues Retail Wholesale Discount ILEC as maintenance support org. Retail Wholesale Discount
Persistent Connectivity Challenges Bundled DSL Service, CPE and managed services is a different business Marketing Challenges Large companies w/ multiple sites want one solution ILEC may sell only part of the bundle ILEC may sell bundle as redundant back-up Local companies/governments/medical-related businesses may be best opportunities
Multi-Grade Business Offerings (High End) Full service retail, multiple locations (Low End) Wholesale DSL, Integrated Device maintenance (Break/Fix, NBD,w/in 4 hrs) (Mid-Range) Retail DSL, Internet Access, DSL modem and Integrated Device sales, maintenance, outsource management, POTS line
Service Relationships Internet Access infrastructure or relationship w/ backbone services provider DSL modem resale agreement Integrated Device resale agreement and maintenance certification Network management Contract w/ managed services provider, or Obtain certification and deploy management and reporting capabilities (possibly jointly)
ILEC Consumer Wireless Broadband Strategies Why should an ILEC Care? Demographics, technology and regulation driving Wireless broadband deployment WiFi and WiMax (Unlicensed spectrum) Focus of Technology Industry Modest capital investment, no rate or entry regulation for providers Mobile Broadband Verizon Wireless Most powerful telecom company in USA
ILEC Consumer Wireless Broadband Strategies DSL: Local backbone for WiFi Hotspots ILEC as WiFi Hotspot Systems Integrator ILEC Branded/Co-Branded WiFi Hotspots
ILEC Consumer Wireless Broadband Strategies DSL Backbone-only for WiFi Hotspots Recurring revenue DSL Service Other revenue Possibly sale of modem
ILEC Consumer Wireless Broadband Strategies ILEC as WiFi Hotspot Systems Integrator One-time and recurring revenues Sell the WiFi hardware Install, test and maintain the WiFi connectivity Deliver Backbone DSL No contact w/ end-users
ILEC Consumer Wireless Broadband Strategies ILEC Branded/Co-Branded WiFi Hotspots Similar to WiFi Systems Integrator, except ILEC manages the billing with debit/credit card and rents the Hotspot hardware Business hosts for Hotspots are paid revenue share (less rent and DSL)
Service Relationships DSL Business Service Relationships (above) WiFi Hardware/Systems Suppliers Enhanced or new credit/debit card infrastructure