The World Broadband Access Market

The European way to think the Digital World www.idate.org 8 th edition Trends in 2005 & forecasts up to 2009 Leading players strategies The World Broadband Access Market Loïc LE FLOCH Vincent BOREL M44105-2005 Edition IDATE BP4167 34092 Montpellier cedex 5 Tel : +33(0)467 144 444 Fax : +33(0)467 144 400 info@idate.org

Table of contents Executive Summary... 3 1. State of the access market in 2005... 15 1.1. Growth of the subscriber base... 15 1.1.1. Regional analysis... 16 1.1.2. Analysis by country... 17 1.1.3. Future prospects... 20 1.2. Access technologies... 21 1.2.1. Narrowband access still a significant user base... 21 1.2.2. DSL driving broadband... 22 1.2.3. The cable modem alternative... 24 1.2.4. Advent of very high-speed (VHS)... 27 1.2.5. Deployment of alternative technologies... 33 2. Internet access development environment and public policies... 37 2.1. Regulatory initiatives... 37 2.1.1. Narrowband access... 37 2.1.2. Broadband access... 38 2.2. Government initiatives and public policies... 39 2.3. Existing infrastructures... 42 2.4. Access platforms: technical evolution... 43 2.4.1. Cable modem... 43 2.4.2. Overview of the latest possibilities offered by DSL technologies... 44 2.4.3. FTTx... 46 2.4.4. Other access technologies... 48 3. Competition and industry organisation... 51 3.1. Infrastructure-based competition in the broadband market... 52 3.2. DSL competition: unbundling, bitstream access and naked DSL... 54 3.2.1. The situation in Europe... 56 3.2.2. USA: redefinition of the scope of unbundling altering players strategies... 63 3.2.3. Japan: unbundling s champion... 64 3.2.4. Naked DSL... 65 4. The broadband market s players...67 4.1. Broadband player ranking... 67 4.2. Incumbent carriers... 68 4.2.1. Incumbent carriers dominance of the broadband market... 68 4.2.2. Incumbent telcos reintegration of their ISPs... 69 4.2.3. International expansion... 69 4.3. Alternative operators... 70 4.3.1. From a virtual ISP model to a broadband operator model... 70 4.3.2. State of unbundling... 71 4.3.3. Mergers & acquisitions... 72 2005 Edition IDATE 7

4.4. Cable operators... 73 4.4.1. Mergers and acquisitions... 73 4.4.2. Will European cablecos turn to unbundling?... 74 4.4.3. The VoIP opportunity... 74 5. Broadband offers: positioning and strategy... 75 5.1. Access offer tariffs and bitrates... 75 5.1.1. Bitrates: higher and higher!... 75 5.1.2. Access tariffs: are prices levelling off?... 76 5.2. Multiple play offers... 77 5.2.1. All for multiple play?... 78 5.2.2. VoIP... 79 5.2.3. DSL as a TV distribution channel... 81 5.2.4. From triple play to quadruple play... 84 6. Countries... 87 6.1. China... 87 6.2. France... 97 6.3. Germany... 107 6.4. Italy... 121 6.5. Japan... 131 6.6. South Korea... 143 6.7. Spain... 153 6.8. Sweden... 167 6.9. The Netherlands... 179 6.10. The United Kingdom... 195 6.11. The United States... 207 7. Players... 223 7.1. America Online (Time Warner)... 223 7.2. BT... 231 7.3. China Netcom Group Corp... 237 7.4. China Telecom Corp.... 243 7.5. Comcast Corp.... 249 7.6. Deutsche Telekom/T-Online... 255 7.7. France Télécom/Wanadoo... 263 7.8. KT Corp... 273 7.9. NTT Corp... 277 7.10. SBC Communications... 285 7.11. SoftBank Corp/Yahoo!BB... 291 7.12. Telecom Italia... 296 7.13. Telefónica... 303 IDATE presentation... 311 DigiWorld Catalogue 2005... 313 8 2005 Edition IDATE

Tables Table 1: Top 20 countries in terms of broadband user base (000s) 17 Table 2: Top 10 countries in terms of new broadband subscriptions between 18 Table 3:Top 20 countries in terms of broadband penetration 19 Table 4: Dial-up s share of the internet access market, by country 22 Table 5: Recent merger-acquisitions in Europe s cable industry 25 Table 6: World s top 10 broadband cable operators 26 Table 7: Overview of the very high broadband in the world 28 Table 8: RBOCs involvement in very high-speed 30 Table 9: Leading VHS players and projects in Europe 31 Table 10: Deployment of alternative technologies in the countries being examined 33 Table 11: Regulatory and operational implementation of unbundling in a selection of countries 38 Table 12: Government intervention in broadband s development in Asia 39 Table 13: A selection of broadband projects instigated by local authorities 41 Table 14: Investment per connected household (USD), by access technology 43 Table 15: Main technical properties of the DOCSIS standard 43 Table 16: Properties of DSL technologies 44 Table 17: ADSL2+ deployment in Europe 45 Table 18: VDSL deployment in Europe 46 Table 19: Public optical networks 47 Table 20: Properties of LMDS technologies 48 Table 21: Wi-Fi, WiMAX and their respective technical evolution 49 Table 22: Changes in the competitive environment in Europe s broadband sector 51 Table 23: Rate of DSL and cable modem coverage, by country, at the end of 2004 (% of the population) 53 Table 24: State of unbundling and wholesale DSL offers 54 Table 25: Growth of unbundled DSL in Europe (K) 57 Table 26: State of unbundling in the EU at the end of March 2005 58 Table 27: Changes in unbundling tariffs in Europe, by country 59 Table 28: Copper pair unbundling tariffs in Japan 64 Table 29: Principal naked DSL offers 65 Table 30: Top 20 players in terms of broadband lines in their domestic market (mid-2005) 67 Table 31: Growth of incumbent carriers share of their domestic broadband market, by country 68 Table 32: European incumbent carriers reintegration of their ISP subsidiaries 69 Table 33: Incumbent carriers international broadband operations 69 Table 34: Main networkless ISP takeovers of network operators 70 Table 35: Investments and coverage announced by unbundling operators 71 Table 36: The leading unbundled operators 72 Table 37: Cable operators mergers and acquisitions 73 Table 38: A selection of cablecos VoIP subscriber base 74 Table 39: Bitrates offered by a selection of leading broadband ISPs in Europe, Asia and the US (May 2005)* 75 Table 40: PPP for entry level broadband cable access (USD) 76 Table 41: PPP for entry level DSL access (USD) 77 Table 42: VoIP development in Europe 79 Table 43: State of development of DSL TV services in Europe s leading markets (as of 30/6/2005) 82 Table 44: Leading DSL TV services in Europe (June 2005) 82 Table 45: Selection of announced IP TV services in Europe 83 Table 46: Leading IP TV services in Asia (June 2005) 83 Table 47: Partnership agreements between players in the US aimed at building quadruple play bundles 84 Table 48: Growth of China s internet access base, by access technology 87 Table 49: Leading broadband operators in China 92 Table 50: A selection of DSL access tariffs in China (CNY/month, 09/2005) 95 2005 Edition IDATE 9

Table 51: Growth of France s internet subscriber base, by access technology 97 Table 52: Growth of unbundled and wholesale access in France 98 Table 53: Copper pair unbundling tariffs in France (EUR) 98 Table 54: Leading unbundling operators deployments and broadband subscriber bases 101 Table 55: Growth of infrastructure-based competition 102 Table 56: Leading broadband operators in France 102 Table 57: France s leading broadband ISPs 103 Table 58: A selection of access tariffs in France (EUR/month, 09/2005) 104 Table 59: Growth of the internet access base in Germany, by access technology 107 Table 60: Growth of unbundled and wholesale access in Germany 108 Table 61: Copper pair unbundling tariffs in Germany (EUR) 108 Table 62: Leading broadband operators and ISPs in Germany 114 Table 63: A selection of access tariffs in Germany (EUR/month, 10/2005) 118 Table 64: Growth of Italy s internet subscriber base, by access technology 121 Table 65: Growth of Italy s base of unbundled and wholesale lines 123 Table 66: Copper pair unbundling tariffs in Italy (EUR) 123 Table 67: Growth of infrastructure-based competition 126 Table 68: The leading broadband operators and ISPs in Italy 127 Table 69: A selection of access tariffs in Italy (EUR/month, 10/2005) 129 Table 70: Growth of Japan s internet subscriber base, by access technology 132 Table 71: Growth of the unbundled access base in Japan ( 000) 132 Table 72: Copper pair unbundling tariffs in Japan (JPY) 132 Table 73: Leading alternative operators deployments and broadband subscriber bases 133 Table 74: Growth of infrastructure-based competition ( 000) 136 Table75: The leading broadband operators in Japan 137 Table 76: Leading broadband ISPs in Japan 139 Table 77: Access tariffs in Japan (EUR/month, 09/2005) 141 Table 78: Leading broadband players service coverage 143 Table79: Growth of South Korea s internet access base, by access technology 144 Table80: Copper pair unbundling tariffs in South Korea 144 Table 81: Leading broadband operators in South Korea 149 Table 82: Access tariffs in South Korea (EUR/month, 09/2005) 150 Table 83: Growth of the internet access base in Spain, by access technology 153 Table 84: Growth of unbundled and wholesale access in Spain 155 Table 85: Copper pair unbundling tariffs in Spain (EUR) 155 Table 86: Leading broadband operators and ISPs in Spain 160 Table 87: A selection of access tariffs in Spain (EUR/month, 10/2005) 165 Table 88: Growth of Sweden s broadband subscriber base, by access technology 167 Table 89: Growth of the unbundled access and wholesale base in Sweden 168 Table 90: Copper pair unbundling tariffs in Sweden (EUR) 169 Table 91: The leading broadband operators in Sweden 173 Table 92: A selection of access tariffs in Sweden (EUR/month, 10/2005) 177 Table 94: Growth of the Dutch broadband subscriber base, by access technology 179 Table 95: Growth of the Netherlands unbundled access and wholesale base 180 Table 96: Incumbent carrier s copper pair unbundling tariffs in the Netherlands 181 Table 97: The leading broadband operators in the Netherlands 186 Table 98: Breakdown of KPN subscribers by bitrate 191 Table 99: A selection of access tariffs in the Netherlands (EUR/month, 09/2005) 192 Table 100: Growth of the UK s internet subscriber base, by access technology 195 Table 101: Growth of the unbundled access and wholesale base in the UK 196 Table 102: Copper pair unbundling tariffs in the UK (EUR) 197 Table 103: The leading broadband operators and ISPs in the UK 202 10 2005 Edition IDATE

Table 104: A selection of access tariffs in the UK (GBP/month, 10/2005) 205 Table 105: Growth of the United States internet subscriber base, by access technology 207 Table 106: Leading broadband operators in the US 217 Table 107: Leading ISPs in the US 219 Table 108: A selection of access tariffs in the US (EUR/month, 10/2005) 221 Table 109: AOL s primary holdings as of 31/05/2005 226 Table 110: Time Warner financial results (million USD) 227 Table 111: Time Warner bases 227 Table 112: The Time Warner group s broadband access offers, as of 31/05/2005 227 Table 113: BT s main internet access shareholdings, as of 31/05/2005 233 Table 114: BT s financial results (million GBP)(1) 233 Table 115: BT s bases (1) 234 Table 116: BT s broadband access offers in the UK, as of 31/10/2005 234 Table 117: China Netcom s international presence in the internet market as of 31/07/2005 240 Table 118: China Netcom s financial results (million CNY) 240 Table 119: China Netcom s bases 240 Table 120: China Netcom s ADSL offers in China, as of 30/06/2005 241 Table 121: China Telecom Corp s financial results (million CNY) 246 Table 122: China Telecom Corp s bases 246 Table 123: China Telecom Corp s ADSL offers in China, as of 30/06/2005 247 Table 124: Comcast s financial results (million USD) 251 Table 125: Comcast s bases 252 Table 126: Comcast s broadband access offers in the US, as of 31/05/2005 252 Table 127: Deutsche Telekom s international internet access operations, as of 31/07/2005 258 Table 128: Deutsche Telekom s financial results (million EUR) 258 Table 129: Deutsche Telekom s bases 259 Table 130: T-Online s ADSL access offers in Germany as of 31/07/2005 259 Table 131: T-Online s ADSL offers in Spain via Ya.com and in France via Club Internet, as of 31/07/2005 260 Table 132: France Télécom s principal internet access holdings, as of 31/05/2005 267 Table 133: France Télécom s financial results (million EUR) 267 Table 134: France Télécom s bases 268 Table 135: France Télécom s broadband access offers in France as of 31/08/2005 268 Table 136: France Télécom ADSL offers in foreign markets, as of 31/05/2005 269 Table 137: KT s financial results (billion KRW) 275 Table 138: KT s bases 275 Table 139: KT s broadband access offers in South Korea as of 31/05/2005 275 Table 140: NTT s principal internet access holdings, as of 31/07/2005 280 Table 141: NTT s financial results (million JPY) 280 Table 142: NTT s bases 281 Table 143: NTT s ADSL offers in Japan, as of 31/07/2005 (tariffs include tax) 281 Table 144: NTT s FTTx offers in Japan, as of 31/07/2005 (tariffs include tax) 282 Table 145: SBC s financial results (Million USD) 287 Table 146: SBC s bases 288 Table 147: SBC s broadband access offers in the US as of 31/05/2005 288 Table 148: SoftBank Corp s principal internet access holdings, as of 31/05/2005 293 Table 149: SoftBank Corp s financial results (million JPY (1)) 293 Table 150: Yahoo!BB s bases 293 Table 151: Yahoo!BB s broadband access offers in Japan as of 31/05/2005 294 Table 152: Telecom Italia s principal internet access holdings as of 31/05/2005 298 Table 153: Telecom Italia s financial results (million EUR) 298 Table 154: Telecom Italia s bases 299 Table 155: Telecom Italia s broadband access offers in Italy as of 31/05/2005 299 2005 Edition IDATE 11

Table 156: Telefónica S.A. s principal internet access holdings 306 Table 157: Telefónica s financial results (million EUR) 306 Table 158: Telefónica s bases 307 Table 159: Telefónica broadband access offers as of 31/05/2005 307 12 2005 Edition IDATE

Graphs Figure 1: Growth of the world s broadband subscriber base 15 Figure 2: Growth of the broadband subscriber base, by geographic zone (million) 16 Figure 3: Breakdown of the world s broadband subscriber base in mid-2005, by geographic zone 17 Figure 4: Growth of broadband penetration in the countries being examined 19 Figure 5: Gowth of the broadband subscribers by geographic zone (million) 20 Figure 6: Growth of broadband penetration by geographic zone (% of the population) 20 Figure 7: Composition of the broadband access base, by technology and by geographic zone (million) 21 Figure 8: DSL s share of the broadband base, by country 23 Figure 9: Cable modem s share of the broadband base, by country 24 Figure 10: US cablecos infrastructure-related expenditures and upgrades (billion USD) 26 Figure 11: FTTx/Ethernet LAN user base, by country 27 Figure 12: South Korea s very high-speed deployment plan 29 Figure 13: Very high-speed architectures deployed in Japan: for apartment buildings (ETTx/FTTX+VDSL) and individual dwellings (GE-PON) 29 Figure 14: Very high-speed deployment scenarios 32 Figure 15: Hotspot deployment forecasts, by geographic zone 35 Figure 16: Breakdown of line length (distance from the central office) 42 Figure 17: Evolution of infrastructure-based competition, by country 52 Figure 18: Breakdown of the different wholesale DSL offers used by ISPs (2Q2005) 57 Figure 19: Unbundled access tariffs in the largest European countries in 2005 (EUR/month) 60 Figure 20: Principal options made available to alternative operators for delivering broadband 61 Figure 21: Breakdown of the DSL base by country (mid-2005) 62 Figure 22: Breakdown of the main lines owned by CLECs in the US at the end of 2004 63 Figure 23: Fibre unbundling in Japan 65 Figure 24: The players evolving service offering 78 Figure 25: Operators bundling strategy objectives 79 Figure 26: Price of a selection of players monthly IP telephony subscription (EUR) 80 Figure 27: Growth of market share for the different access technologies in China 88 Figure 28: DSL access market share in China in June 2005 89 Figure 29: Chinese operators share of the FTTx market, in number of lines (06-2005) 90 Figure 30: Breakdown of China s broadband access market, 2004 to 2010 96 Figure 31: Growth of market share for the different access technologies in France 98 Figure 32: ISPs share of France s broadband subscriber base (06-2005) 102 Figure 33: Breakdown of France s broadband access market by technology, 2005 to 2010 105 Figure 34: Growth of market share for the different access technologies in Germany 108 Figure 35: Operators market share, in number of DSL subscribers (06/2005) 110 Figure 36: German cablecos share of the cable modem access market (06/2005) 111 Figure 37: Breakdown of Germany s broadband access market by technology, 2004 to 2010 (million) 119 Figure 38: Growth of the different access technologies market share in Italy 122 Figure 39: Italian operators market share, in number of DSL subscribers (06/2005) 124 Figure 40: Breakdown of Italy s broadband market by technology, 2004 to 2010 (million) 130 Figure 41: Growth of the different access technologies market share in Japan 132 Figure 42: Operators market share in number of DSL (06/2005) 133 Figure 43: Operators market share in number of FTTx lines (06-2005) 134 Figure 44: Breakdown of Japan s broadband market by access technology, 2005 to 2010 (million) 142 Figure 45: Growth of market share for the different access technologies in South Korea 144 Figure 46: South Korean players share of the DSL access market (06/05) 145 Figure 47: Operators share of South Korea s broadband cable market (06/05) 146 Figure 48: Apartment LAN access providers market share (06/05) 147 Figure 49: South Korean ISPs share (06/05) 148 Figure 50: Breakdown of South Korea s broadband market by access technology 2005 to 2010 151 2005 Edition IDATE 13

Figure 51: Growth of market share for the different access technologies in Spain 154 Figure 52: Operators market share, in number of DSL (06/2005) 156 Figure 53: Cablecos share of Spain s broadband cable market (06/2005) 157 Figure 54: Breakdown of Spain s broadband market by access technology, 2004 to 2010 (million) 166 Figure 55: Growth of the different access technologies market share in Sweden 168 Figure 56: Operators market share in number of DSL (06/2005) 169 Figure 57: Cablecos share of Sweden s broadband cable market (06/2005) 170 Figure 58: Breakdown of Sweden s broadband market by access technology, 2004 to 2010 (million) 178 Figure 59: Growth of the different access technologies market share in the Netherlands 180 Figure 60: Operators market share in number of broadband lines (06/2005) 181 Figure 61: ISPs share of the Dutch broadband access retail market (6/2005) 184 Figure 62: ISPs share of the Dutch DSL retail market (6/2005) 184 Figure 63: Breakdown of the Netherlands broadband market by access technology, 2004 to 2010 (million) 193 Figure 64: Growth of the different access technologies market share in the UK 196 Figure 65: Operators market share in number of DSL subscribers (06/2005) 198 Figure 66: The leading broadband access providers (broadband cable and DSL) share of the UK market (06/2005) 201 Figure 67: Breakdown of the UK broadband market by access technology, 2004 to 2010 (million) 206 Figure 68: Growth of market share for the different access technologies in the US 208 Figure 69: US operators market share, in number of DSL (06/2005) 210 Figure 70: Percentage of homes passed eligible for broadband, 2000-2005 211 Figure 71: Cablecos market share, in number of broadband cable subscribers (06/2005) 212 Figure 72: ISP market share in the US, mid-2005 216 Figure 73: Breakdown of broadband access offers in the US by bitrate class 221 Figure 74: Breakdown of the US broadband market by access technology, 2004 to 2010 (million) 222 14 2005 Edition IDATE