new technologies and services in telecommunications€¦ · 2x data frame/atm data ... n1 99 7 ja...

© 2006 AT&T Knowledge Ventures. All rights reserved. AT&T is a registered trademark of AT&T Knowledge Ventures.

New Technologies and Services in Telecommunications:

Effects on Competition and Investment

© 2006 AT&T Knowledge Ventures. All rights reserved.

AT&T is a registered trademark of AT&T Knowledge Ventures.

The Way We Communicate Has Changed

Local exchange company access lines have declined 9% in Florida since 2001, while wireless subscribership has grown 40%.

87 100 111 120 123 126

210 199

184 165

142

0

50

100

150

200

250

2000 2002 2004 2006 2008 2010 0

50

100

150

200

250

U.S. Total Access Lines (Millions) U.S. Wireless Subscribers (Millions)

Cell Phones Outnumber Wireless

Source: Kaufman Brothers, “A General Flavor of Mild Decay,” July 14, 2003

Wireless Surpasses Landline!

U.S. W

ireless Subscrib

ers (Million

s)

U.S. Total Access Lines (Millions)

Source: Responses to 20012006 FPSC data request & FCC Report on Local Telephone

12.0 11.8 11.7

11.7 10.9 10.9

9.5 8.9

13.2 12.5

0

6

12

18

2001 2002 2003 2004 2005 FL Local Exchange Company Access Lines FL Wireless Subscribership

FL Local Exchange Access Lines v. FL Wireless Subscribership

(Millions)



The Way We Communicate Has Changed

For the period 20022005, Florida accounted for approximately 7% of all U.S. broadband lines.

29.6

40.1

49.7

55.4

62 65.7

69.4

63.8

88.2

109.2

121.9

136.3 144.6

152.8

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007 2008 2009 2010

50

100

150

200

Residential Broadband Households Residential Broadband Users

Residential Broadband Forecast Source: Yankee Group, 2005

(Millions)

(Millio

ns)



Yesterday… Regulation was based on preconverged network models

Title III Wireless Networks used cell towers to relay voice calls

Title VI Cable networks used coaxial cable to provide video

Title II Wireline networks used landlines to carry voice calls

Regulation Network

Cable Companies

Wireless Companies

Wireline Companies



Factors Driving Network Convergence

Technological Change

Consumer Demand for Bundled Services

Providers Seeking Increased Efficiencies



Technological Change: From One Network/Service => Many Services/One Network

Today

2X

Frame/ATM Data Data

Video Video

Internet Access

IP Backbone

Internet Access

Wireless MTSO & Circuit Hierarchy

Wireless

Voice Class 5 & 4 Hierarchy

Voice

Tomorrow Multiple Access

Technologies & Services on One Backbone

Video

Data

Internet Access

Wireless

Voice Voice

Wireless

Internet Access

Data

Video

IP / MPLS Backbone



Technological Change: Silos to Integration

Past

Voice

Video

Internet Access

Entertainment

Applications

Guides/Directories

CPE

Internet Protocol (IP)

Broadband Connection

Future

Network

SONET Frame ATM

Voice Video Data

Operator Services

Directory

Vertical Services

CPE

Network

Content

Guide

CPE

Network

Past

Voice

Video

Internet Access

Entertainment

Applications

Guides/Directories

CPE

Internet Protocol (IP)

Broadband Connection

Future

Network

SONET Frame ATM

Voice Video Data

Operator Services

Directory

Vertical Services

CPE

Network

Content

Guide

CPE

Network



Consumer Demand Drives Development of Bundled Services

ISPs Cable Providers

“TRIPLE PLAYS”

OvertheTop Applications

Wireless

Wireline Providers

“QUADRUPLE PLAYS”



The Internet An Enormous Growing Data Network

North American Revenues by Source Category 2005 2006 2007 2008 2009 2010 CAGR

Broadband Music Revenues 1 $6.5 $10.8 $15.3 $20.5 $24.7 $29.1 35% Online Gaming 2 $0.9 $1.3 $1.9 $2.4 $2.9 $3.3 30% VoD Revenues 3 $0.5 $1.0 $1.9 $3.0 $3.8 $4.4 54% IPTV Revenues 4 $0.1 $0.4 $0.7 $1.3 $2.1 $2.9 97%

$8.1 $13.6 $19.9 $27.2 $33.4 $39.7 38%

1 Ovum, Aleksandra Bosnjak and Michelle MacKenzie, September 2006 2 Ovum, Aleksandra Bosnjak and Jonathan Arber, August 2006 3 Ovum, Aleksandra Bosnjak, August 2006 4 Ovum, Aleksandra Bosnjak and Annelise Berendt, August 2006

Number of Hosts Advertised in DNS

0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000 400,000,000 450,000,000

Jan1993

Jan1994

Jan1995

Jan1996

Jan1997

Jan1998

Jan1999

Jan2000

Jan2001

Jan2002

Jan2003

Jul2004

Jul2005

Source: Internet Systems Consortium, Internet Domain Survey, January 2006

Global users growing by >10M per month

Websites growing by >40M per month

Backbone load doubles every 1215 months

Global Internet User Estimate April 2002 December 2006

y = 10.405x + 508.58 R 2 = 0.9866

0

200

400

600

800

1000

1200

0 10 20 30 40 50 60

Millions of U

sers

Source: http://www.allaboutmarketresearch.com/internet.htm

Months



Exponentially More Volume: IP Traffic Mar02

May02

Jul0

2

Sep02

Nov02

Jan03

Mar03

May03

Jul0

3

Sep03

Nov

03

Jan04

Mar04

May04

Jul0

4

Sep04

Nov04

Jan05

Mar05

May05

Jul0

5

Sep05

Nov05

Jan06

Mar06

Internet Growth as seen

by AT&

T

Web File Sharing (P2P) Real time Multimedia NetNews Mail ftp Gaming Expon. (Web)

Mar02

May02

Jul0

2

Sep02

Nov02

Jan03

Mar03

May03

Jul0

3

Mar02

May02

Jul0

2

Sep02

Nov02

Jan03

Mar03

May03

Jul0

3

Sep03

Nov

03

Jan04

Mar04

May04

Jul0

4

Sep04

Nov04

Jan05

Mar05

May05

Jul0

5

Sep05

Nov05

Jan06

Mar06

Internet Growth as seen

by AT&

T

Web File Sharing (P2P) Real time Multimedia NetNews Mail ftp Gaming Expon. (Web)

Mar02

Jul0

2

Nov02

Mar03

Jul03

Nov03

Mar04

Jul04

Nov04

Mar05

Jul0

5

Nov05

Per Su

bscriber Growth Web Real time Multimedia Expon. (Web)



Impact on Investment

Increased usage is driving more bandwidth needs on the backbone.

Increased applications (triple play) are driving more bandwidth needs in the last mile.



Impact on Investment & Competition

With no guaranteed return on investment, companies are looking for efficiency and innovation as ways to differentiate themselves.

At the same time, consumers and application providers continue to innovate in ways that affect the network.

Network Providers Competing & Seeking

Efficiencies

Consumer Behavior Changing

Innovation



Convergence Allows for Efficiency

Managed Network Applications

Packet Size

“Burstiness”

Delay Tolerance

VoIP Video

Conf

Gaming

HQ Audio

Bulk File Transfer

High Quality Video Download

ECommerce

Streaming

Video

Voice Msg

Web Browsing

EMail

HD

Telemedicine/

Teletraining

Real Time HQ Video

Common Internet Applications

Growing Internet Applications

Key:



Impact on Consumers Broadband: Competition has resulted in lower prices and increased speed and quality.

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

Jan 01

Apr 01

Jul 01

Oct 01

Jan 02

Apr 02

Jul 02

Oct 02

Jan 03

Apr 03

Jul 03

Oct 03

Jan 04

Apr 04

Jul 04

Oct 04

Jan 05

Apr 05

Jul 05

Oct 05

Jan 06

Apr 06

Jul 06

Oct 06

256K 1.5M 3M 6M

6M 9%

3M 31%

1.5M 34%

256K 38%

• Customers can purchase FastAccess DSL at prices up to 34% lower than they could five years ago.

• These lower prices represent permanent price reductions and not limited time promotions.

Broadband Pricing as a Function of Speed 20012006



Impact on Consumers

Bundle Discounts: Discounts offered by local service providers and cable providers that provide customers with a “triple and quadruple play” bundle (voice, video, wireless and data).

Video: Competition for Internet and telephony services is expected to continue and expand into video services.



Tomorrow… We must ask ourselves “should we regulate” before considering “how we regulate”.

Regulatory Impact



Legislative Impact: Why update laws to encourage video entry?

IPTV is an innovative new service that will benefit consumers a suite of entertainment, information, and communication services delivered to consumers using advanced Internet technologies and various Audio/Video devices in the home.

Archaic regulations (e.g.," mustbuild” obligations) that have not kept pace with technological progress and product innovation have slowed IPTV deployment. • Regulation should not be a barrier to competitive choice for consumers.

Updating laws to facilitate video choice will have a positive impact on consumers and municipalities. • Video choice means significant savings for consumers.

• Competition works quickly to produce lower prices and sizable consumer benefits.



Take Aways

We are just beginning to realize the explosion of innovation that convergence will bring.

Multiple players from varied backgrounds will all be competing in this “converged” space – telcos, cablecos, ISPs, and wireless providers.

Regulation has the power to unleash or hamper investment, innovation, and convergence.

new technologies and services in telecommunications€¦ · 2x data frame/atm data ... n1 99 7 ja...

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