Bottleneck of last mile.

Any solution?

組員 : 丁婉涵、賴暐昌、蔡秉辰 指導老師 : 黃光渠老師

Outlinelast mile introductions

Industry Characteristics

Bottleneck introductions

Background

Fixed–line existing situation

Government views

Competitors views

Chunghwa Telecom views

Foreign solutions

Conclusion

What is last mile?

• the local loops between the city's Telecommunication Local Switch main distribution frame(MDF) to the Customer Premise Equipment(CPE)

Categories of last mileWired systems

1.cooper twisted line

2.Cable

3.Optical fiber( FTTx)

4.Power Line

Wireless systems

1.Wifi

2.Wimax

3.1G~4G LTE

4.Satellite communications

The last mile-defined by NCC

• Directorate General of Telecommunication (DGT) era laid “telephone line”=>“cooper twisted line ”(XDSL).

• "open the last mile" =>

• Not including the fiber-optic

Industry Characteristics

Natural Monopoly

Vertical integration

Public Utility

Capital Intensive

Bottleneck

What’s bottleneck?

1.Themselves unable to build in a reasonable period

2. No other feasible alternative technologies

3. competitors can ask for share the facilities

Fixed Communications Business Management Rules

The reasons of bottlenecks

• Subscriber loop :difficult to achieve effective competition • Others can’t have the same economies of scale in short

period • No "alternative service" concept• Not including the fiber-optic

in order to facilitate voice and datarelated to cost reduction and market competition

Background

1996: pass the 電信三法 :three-stage opening of telecommunications services, mobile, satellite, fixed-line business liberalization.

2000: apply the licenses

2001: issue licenses

2002:CHT 、 Eastern Broadband 、 Asia Pacific Broadband 、 Taiwan Fixed Network 、 New Century InfoComm (FET)

The industry started to toward privatization.

Background

• Governing Fixed Network Telecommunications Businesses ( 22 、 22-1):

1.must provide one million fixed-line number in six years 2. switching equipment and connected CPE of the subscriber loops . • Funds: Eastern Broadband 65.7 billion / Taiwan Fixed Network 92.2

billion /New Century InfoComm 47.5 billion• Last mile lines no future but to invest the FTTx , so government ask

CHT to take over• Scandal: PEWC: 孫道存 embezzled17.1 billions/Asia Pacific 王又曾

embezzled 27.2 billions• pressure the government to claim last mile

Fixed–line existing situation

• 2013 FTTx subscribers annual growth rate of 10.49 %, ADSL decline to 12.69%• fixed broadband business benefited from fiber grow. • cut tariffs / increases the speed service automatically

• draft amendments to the "last mile" of Telecommunications Law has not passed• Equipment depreciation costs highest proportion

(26.41%)

Local phone Broadband 0.00%

10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%

100.00%

94.80%78.10%

5.20%21.90%

FIXED LINE MARKET SHARE(2013 Q2)

CHT Others

The Government views ─NCC(1/4)• In Taiwan, when the building is being constructed, the pipeline almost

will be constructed in order to give operators pull the line, but the pipeline is designed to Chunghwa Telecom specifically and other carriers need to pay additional fee to the building or construction company.

The Government views ─NCC(2/4)

• the laying of the pipeline to each household, which belongs to the "critical facilities" of the network building

• to avoid monopolize, the owners of critical facilities should provide equal opportunities for all entrants closing to the facility

This is the "Telecommunications Law "draft intent

The Government views ─NCC(3/4)

• "The draft amendments to the Telecommunications Law," added

requires the last mile of Chunghwa Telecom to be set up an "independent sector" or "independent company."

regulates Chunghwa Telecom must release the subscriber loop (Local Loop) infrastructure of pooling conduit, manholes, hand holes and other pipelines used cost price by law.

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The Government views ─NCC(4/4)

• After returning the Act to NCC to redraft by the Executive Yuan

“Accounting Separation”

The costs of last mile, revenues and other accounts should be independently calculated, in other words, An independent accounting statements cannot be combined with other services in the CHT accounting items.

supporte

d

The Government views ─the Ministry of Transportation(1/1)

1.Releasing last mile only let them enjoy the public goods.

2. Other carriers coveted is probably financing several hundred billion continued laying fiber-optic network.

3.Chunghwa Telecom is a listed company, the business separation could harm shareholders' equity.

Opposed

The Government views ─the Executive Yuan(1/1)

• the government invested NT $ 30 billion to promote the "M-Taiwan Plan" for other carriers to rent but they actually rented only about 1800 km.

Low willingness

The performance of implementation is ineffective supporte

d

Competitors views -Government

• Background of Government• paid by the national tax and the fee was budgeted by the government • Government hold stocks about 35.29%

Competitors views -laying pipes

• Road-smoothing project

• Social costs• More complete network construction provide better services • Unreasonable tariffs of CHT.

Competitors view -the buildings’ pipeline occupied by CHT

• most of the pipeline were designed to China Telecom. • need additional pay to the builders. • Bottleneck=> resulting in the new entrants of fixed-line were acquired

by mobile service operators.

Chunghwa Telecom views(1/3)

• Income of fixed line in Taiwan accounted 32.2% of CHT’s revenue in the first half of 2013, it’s about NTD 36.2 billion.

Chunghwa Telecom views(2/3)

• Other operator didn’t want to participate in construction and maintenance.

Chunghwa Telecom views(3/3)

• CHT have devoted a significant amount of money, which ups to 300 NTD billions to build the networks connecting to its customers for 15 years since 1999, and it is unfair to demand them to share their networks with other competitors.

Foreign solutions─Japan:

•According to the ITU's report, the development rate of broadband in Japan is the world's highest, the price is lowest in the world. The key to success lies in a completely open of last mile market.

urging the Type I & Type II telecommunications business to become convergence.

allows the broadband speed different by each Japan’s ISP and product differentiation occurs

Foreign solutions─Korea:

• The government pick winning carriers to build the basic network construction used specific and the government also gives financial assistance.• The carrier owns a bottleneck facility is limited to use

symmetric for all public network access to all carriers and cannot discriminate.• The market of cable networks facilities also be regulated, the

provision is that the construction of network should adopt competing way in the new apartments.

Foreign solutions─United Kingdom:

• They implement functional separation to establish Openreach, the competitive carriers are reluctant to invest to build fiber-optic networks due to existing low circuits available.

causes the costs increased

it hikes up the circuit price from 82 pounds three years ago to 91.5 pounds last year

NCC CHT

Operators

Conclusion(1/3)

• NCC needs to consider the pros and cons about enforcing CHT to offer its local loop to its rivals at cost price or farm out the company’s last mile service to an independent company.

Conclusion(2/3)

• According the NCC's plan, CHT should also break up and create a separate and independent division or a subsidiary to handle the services related to the “last mile” sector.

Conclusion(3/3)

• Recently there’s a news claims that Institute for Information Industry(III) is to develop Superwifi, which communicate in the white space of spectrum.

Thank you for listening