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NGNBN Case StudiesNext Generation National Broadband Network Country Profiles

Booz & Company 1NGNBN-Country-Profiles

EuropeUS

Asia/ Pacific


NGNBN Country Profile: Germany

X

Existing Industry Structure

New Network Co. &SeparationNew Network Co.Financial

IncentivesOwnershipPPP

X

Type of Investment Industry Structure Post Separation

22002009Germany

Investment Per Capita

(USD)

Total Investment (USD Mn)

Date AnnouncedCountry

LAST UPDATE: 31.07.09

Incumbent Position Until beginning of 2009, incumbent Deutsche Telekom had rolled out FTTC in 28 cities (~20% of total HH)DT initially went stand alone, but due to regulatory pressure engaged in infrastructure access and reselling negotiations with competitors (e.g. Vodafone and 1&1)DT is currently trialing cooperative builds with Vodafone in Heilbronn

Competitor Position Key competitors are Vodafone/Arcor, 1&1, Hansenet/Alice and regional cable operatorsVF and 1&1 have indicated willingness to coinvest in NGA infrastructure deploymentTelefonica already operates a large network and is in talks to take over Alice’s retail DSL businessRegional cable operators are increasingly rolling out DoCSIS3Regional alternative carriers are trialing FTTB, e.g. netcologne, M-Net

Regulatory Position In general, regulator BNetzA has indicated a preference for open access modelsRecently, BNetzA has adopted a somewhat softer approach to DT awaiting the outcome of ongoing commercial negotiations about wholesale accessConsultation on the cornerstones of future NGA regulation is currently ongoing“Digital dividend” spectrum grants for LTE are coupled with requirements to cover rural areas

Government Position The Federal Government plans to close existing white spots in DSL coverage by 2010 and to reach 75% of HH with >50mbps by 2014Existing programs provide subsidies and guarantees for broadband projects in rural areas, but no new funds have been committed for NGAA central database for network infrastructure and civil works isbeing set up to encourage sharingA “growth and innovation” oriented regulation approach is promoted on national and EU level

Key TakeawaysCompetition is driving NGA investment in urban areas without Gov’t interventionThreat of regulation convinced incumbent to engage in commercial wholesale agreements

No clear plan on how to ensure NGA coverage beyond urban centersConflict of interest between regulatory objectives and Gov’tinterest as main share-holder in incumbent DT


NGNBN Country Profile: UK





N/AUK


(USD)



Incumbent Position BT launched ADSL 2+ network in first half of 2008, aiming at covering 50% of UK households by the end of the year and 20 million households (75%) by the end of 2010Investment of £1.5bn announced in 2008 for the deployment of super-fast broadband (FTTC, up to 40Mbps) across the UK, aiming at 40% of UK homes by end of 2012 FTTC trial run in Muswell Hill and Whitchurch from Aug ‘09 to Jan 2010; If successful rollout will begin to 500k households Three-way partnership between BT Openreach, Land Securities (Site-Owner) and BSkyB (Service provider) piloting FTTP at Ebbsfleet Valley to test the deployment of super-fast broadband (up to 100 Mbps) for future greenfield sites

Competitor Position Virgin Media launched 50Mbps service based on DOCSIS 3.0 technology, planned to reach 50% homes by mid 2009O2 has not announce concrete plan of NGN deployment; Vodafone announced in 2008 a 5 year deal for BT Wholesale to provide and manage high speed connectivity for core NWDiverse commercial initiatives are already underway inc. H2O rolling out a FTTH network in Bournemouth and DundeeSome local authorities started launching their own NGA deployment, e.g .FTTC network connecting 600k premises in South Yorkshire and FTTH Trial in Manchester in 2009Few community-based projects are also rolling out e.g. 100 FTTH housing associating flats in Glasgow in 2009

Regulatory Position Current focus of Ofcom is on providing regulatory clarity for BT on fiber-to-the-cabinet (FTTC) deployment regarding rival providers who rely on BT’s infrastructure to deliver services5 regulatory principles for next-generation access: – Enable contestable investments so all investors can compete– Optimize the scope of innovative services to maximize the

interests and benefits of consumers and businesses– Require equivalence from dominant operator to provide his

network also to other competitor on same base– Reflect risk in regulated access ensuring investment

incentivised– Provide regulatory certainty to ensure investor make decision

with full necessary information

Government Position Committed to nationwide Broadband at 2Mbps by 2012, announced in Digital Britain interim Report (Jan. 2009)£750m investment announced for emerging technologies; further £250m to fund universal broadband service at 2Mbps£300m Home Access Scheme for low income familiesPlan to create an independent Next Generation Fund, based on a supplement of 50 p/ month on all fixed copper lines from 2010, available for any operator to deploy NG broadbandCommitted to as early as possible release of radio spectrum (900MHz) to support next generation wireless technologyIndependent Networks Co-operative Association (INCA) received £150k grant to support community NW projects

Key TakeawaysClear effort of regulator to achieve both investment and competition to meet consumers’ interests and requirementsLack of government funding leading the agenda or definite incumbent investment has helped inspire many small projects in the commercial and public sector

Fierce competition in the UK has led to very low broadband and consumer bundle pricing making business cases for next generation deployment more uncertain



NGNBN Country Profile: Finland

X


New Network Co. &SeparationNew Network Co.

X

Financial IncentivesOwnershipPPP


20100Q1 2009Finland


(USD)



Country Position Initiative launched in December 2008 aiming to increase the availability of high speed connections (FTTx) by end 2015 also in areas where commercially not profitable - aim to have over 99 percent of population coveredGovernment will support this initiative with about 70M€(100M$)Some fiber-network rollouts started already on high density areas2,6GMz auction will be arranged in Autumn 2009 - after that we know the intensions of operators

Competitor Position Key competitors are TeliaSonera, Elisa, DNA and FinnetPlayers have announced that they would increasingly invest in telecommunication networks based on fiber optic technologiesThese investments will primarily focus on major cities where fiber optic technology will be used to replace or supplement the current networks based on copper cablesMobile network development still open and pending on upcoming LTE license auction

Regulatory Position Regulator favors building a high speed broadband network, as indicated by the Broadband 2015 initiativeNo overall preference for any operator2,6GHz frequency area for LTE granted as license auction

Government Position Government actively supporting high-speed networks developmentGovernment will provide subsidies for building the FTTX network in certain areas of Finland– Only areas that are sparsely populated will receive

subsidies– It is assumed that the commercial offering will cover the

other areas without subsidies

Key TakeawaysActive support from the government for high-speed networksLTE auction takes place soon

Limited rollouts so far in terms of geography

Note: Government investment



NGNBN Country Profile: Norway

Source: Booz & Company analysis; Norwegian Post and Telecommunications Authority; Ministry of Government Administration and Reform

X


X


XX


X

Type of Investment

X

Industry Structure Post Separation

Norway


(USD)



Country Position Broadband penetration high, already 99.8 percent had broadband access in 2008 - this has been made possible by government subsidies4G license auctions (2.6 GHz) have already been carried out in 2007Winners or the 4G auction were Arctic Wireless, Craig Wireless Systems, Hafslund Telekom, NetCom, and TelenorBuilding of FTTx networks started already in 2006 in some regions e.g. Ostlandet (50% of population), Rogaland

Competitor Position Key players are currently Telenor and NextGenTel; also Get, Tele2 and VenteloTelenor and NextGenTel have been testing WiMax already in 2004 when 3.5GHz spectrum licenses distributedNetCom (TeliaSonera’s subsidiary in Norway) has already launched LTE network, being the world’s first commercial LTE network - full network launch expected in 2010Hafslund Telekom is owned by Hafslund energy corp, which is mostly owned by Oslo municipality

Regulatory Position Regulator positive towards developing high speed networkRegulator open towards competition; no particular preference for any operator

Government Position Government positive towards developing high speed network and has provided subsidies even for normal broadbandIn 2006, Government allocated 119 mill NOK and 377 mill NOK in 2007 for broadband developmentGovernment grants have triggered a total investment of NOK 850 mill in broadband expansion and developmentAlso 190 mill. NOK set aside for broadband development in the government’s 2008 budget

Key Takeaways4G auction carried out already in 2007Government positive towards developing next generations network

Country sparsely populated, commercially not profitable to build national network and subsidies are needed

NOT AVAILABLE



NGNBN Country Profile: Denmark

Source: Booz & Company analysis; IT og Telepolitisk Redegoerelse 2009; www.vtu.dk; http://www.itst.dk/teleinfrastruktur/standardtilbud

X



X



1,8009,000FTTx investments in recent yearsDenmark


(USD)



Country Position Denmark has a high penetration of broadband - broadband is available to 99% of population and 100% should be achieved in 2010BB penetration is 37% in 2008Demand for high speed connections (up to 100Mbit/s) increasing, e.g. beginning of 2008 43% increaseLTE-auction expected to come up in Q1 2010TDC, Telenor, TeliaSonera and “3” are expected bidders - so far no network sharing in Denmark

Competitor Position Key players are TDC, Telenor, TeliaSonera, “3”All are expected to bid for LTE-licencesOn the fixed side, TDC might become more aggressive and aim to offer fixed net services to both Telenor and TeliaSonera- who can then pursue a mobile-only strategy in terms of CAPEX investmentsUtility players (owned by municipalities) have invested in Fiberin recent years - but consolidation is expected, and TDC is likely consolidator

Regulatory Position Regulator has provided guidelines for the creation of NGNCompetition is essential in the market as a driver of technological development and fair pricingRegulator will ensure technology neutral approach

Government Position The Danish government submitted a national broadband strategyGovernment sets goals, ambitions and initiatives to drive the development of high speed networkThe government itself is not investing in broadband build-out

Key TakeawaysGovernment actively promotes broadbandHigh penetration of broadband alreadyDemand increasing for high speed connectionsLTE auction to take place soonTDC forced to take an active role in the FTTx investments

TDC so far has not aggressively pursued a FTTx strategy - primarily driven by utility players who now seem unsuccessful



NGNBN Country Profile: Italy





No official announcementItaly


(USD)



Incumbent Position Telecom Italia Chief Executive Franco Bernabe said the company was open to considering shared investment projects with other operators, provided that the solutions proposed would be advantageous in terms of returns on investments. Telecom Italia has pledged to invest €700 million in broadband infrastructure over the next three years and €5-6 billion through 2016.

Competitor Position Key competitors: Fastweb, Wind, H3G, Vodafone, BTFastweb has extensive fiber network for business clients but focusing on DSL for residential triple-play, has expressed interest in joint fiber investments for NGNVodafone prefers an open network model over TI’s proposed duct-sharing model where each operator lays their own fiber

Regulatory Position In July 2009, the head of Italy's telecommunications regulator proposed the creation of a new company to fund the development of a nationwide high-speed broadband network which would include the main operators as industrial partners, could involve public funds, possibly provided by state lender Cassa Depositi e Prestiti

Government Position Italy's center-right ruling coalition has openly backed a spinoff of Telecom Italia's network into a new company, possibly with the participation of state-sponsored fundsThe Italian government has already said it plans to invest EUR1.47 billion to develop broadband coverage in the country, but has not made any firm commitments or passed any budgetary items in this regard.

Key Takeaways160% mobile penetration rate driving demand for content and servicesIncumbent operator positive response to regulator and government suggestions

Growth and penetration rates below European averageNo significant investment plans activated during 2005-2008 timeframe



Limitation of allocation of grants for FTTx to areas with existing BroadbandDominant market position of incumbent due to limited telephony competition from cable TV network operatorsDelays by OTE have caused some obstruction for rival broadband players

NGNBN Country Profile: Greece

X




X


1bn2008Greece


(USD)



Incumbent Position In July 2006 OTE started to build an ADSL2+ IP DSLAM metro Ethernet network with Huawei equipment; total budget €946m (2006-08)By Aug 2008 >500K ADSL2+ ports installed, allowing up to 24Mbps

• OTE planned to build a WiMAX-certified 3.5GHz network to offer broadband internet access and data services to consumers and businesses in rural and remote areas, pilot deployment at Mount Athos in 2007

Competitor Position Hellas On Line (HOL) & Vodafone provided in 2007 ADSL2+ services in Athens with transfer speeds of up to 20Mb/s; HOL had plans to extend metro fiber covering 30 cities by end ‘09Tellas unveiled package in May ‘08 inc. unlimited ADSL2+ at speeds of up to 24Mbps (where available) and extended the capacity of its trunk networks from 2.5 to10 Gbps in 2008Forthnet implements a a four-year €250m investment plan to develop its broadband and fiber-optic infrastructure in 2006On Telecoms rolled out early 2007 the first phase of its metropolitan fiber network as did VivodiCraig Wireless began deploying a national mobile WiMAX network with initial focus on Attica

Regulatory Position EETT’s current regulation prefers rural areas without broadband in terms of allocation of grantsFor areas with existing broadband current regulation focuses on cost efficient FTTx deployment through:– Regulation of “Rights of Way”– Regulation of the use of existing infrastructure in the public

domain– Obligation for utilities players/other players performing civil

works either to install directly or to allow other players to install empty ducts

– Introduction of incentives and standards for providing vertical wiring in buildings

Government Position Tendered licenses in 2006 for 7 regional fixed and wireless broadband networks and a national WiMAX network to be valid for a period of 10 years with a budget of €210m, 50% to be funded by public money, 50% by private participants“5-year broadband strategy” released in ‘08 with 2 focuses:– Push forward FTTx deployment – Drive high speed broadband in rural areasApproved a seven-year € 2.1 bn plan to build FTTx networks covering two million homes (direct fiber connections up to 100Mbps e.g. in Athens and Thessaloniki), aimed at rollout in 2010, with two-thirds of its funding from the private sector

Key Takeaways• Broadband penetration rates have

grown significantly on the back of increased competition

• Active intervention from regulator to ensure fair competition



NGNBN Country Profile: Austria





N/AAustria


(USD)



Incumbent Position Incumbent Telekom Austria is rolling out NGA trials in Vienna (FTTH/B) and Villach (FTTC) targeting 150k HH by end of 2010Further rollout of FTTH/B to all of Vienna and major urban centers reaching 35-40% of total HH until 2016 is considered likelyIncumbent is currently pursuing a stand alone strategy, but is engaged in discussions with local utility companies

Competitor Position Key competitors are cable operators (esp. UPC) and alternative carriers (esp. Tele2)UPC is planning to roll out DoCSIS3 in 2009, while other cable companies currently lack the required financial resourcesAlternative carriers do not have sufficient financial strength to consider an NGA (co-)investment

Regulatory Position Regulator RTR has recently initiated the consultation process on NGA regulationRTR is keen to preserve existing competition with alternative carriersFiber infrastructure seen as a direct substitute for copper infrastructure – extension of copper regulatory regime considered likely

Government Position Government is keen to address “digital divide” and ensure high speed broadband access in rural areasRecently proposed legislation requires owners of passive infrastructure (ducts) to grant access for NGA deployment purposes and provides for faster approval processes for use of public infrastructureNo federal funds have been committed to NGA build to date

Key TakeawaysInfrastructure competition from cable is driving incumbent to build NGA in urban centersLegislation will facilitate access to existing ducts and reduce NGA deployment costs

No clear plan on how to ensure NGA coverage beyond urban centersLate/ cautious investment in NGA due to lack of regulatory foresight and clarity



NGNBN Country Profile: Ireland

X




Type of Investment

X


€79.8 MnDec.2008Ireland


(USD)



Incumbent Position eircom plans to invest $1.32bn over three year in a FTTC network upgrade to enable broadband speeds of up to 25Mbps; initial trial underwayInitial discussions held with ComReg and other operators on technical detailsSigned a $13.2m deal with Siemens and ADVA Optical Networking to improve it’s national network capacityPlans underway to launch first fiber to the home (FTTH) trial in Sandyford

Competitor Position 3 won the contract at the end of 2008 to implement and operate the National Broadband Scheme (NBS), aiming at areas which broadband services are not available. Max. 5 Mbps download speed of the mobile broadband service (I-HSPA) at launch, upgrade to 10.4Mbps planned by 2012Mobile rival O2, has invested in next generation mobile networks to enable speeds of up to 14.4MbpsUPC announced its fiber Power programmes in 2009 to upgrade its network to DOCSIS 3.0; €90m spend will enable speeds of up to 120 Mbps in 2010 BT too is planning to commit significant investment to build an advanced network with broadband speed of up to 24Mbps

Regulatory Position Regulatory framework provided by ComReg to facilitate collaborative models of engagement among operators as well as to provide a fair, sustainable, dynamic and innovative competition in the telecommunication sector“‘Test and trial’ spectrum management systems established by ComReg to develop innovative uses of the wireless spectrumRegulation supportive of alternative operators as eircom continues to have significant share of fixed line market

Government Position Broadband seen as key enabling infrastructure for future prosperity in Government framework “Building Ireland’s Smart Economy”NGN deployment being supported by a number of different measures:

– Promoting private sector investment– Ensuring optimal regulation– Providing innovative spectrum policy– Providing targeted government action, incl. NBS (total

investment € 223m,Government contribution of €79.8m)Social networking Forum established to collect constructive opinions and ideas around NGB

Key TakeawaysA stable and supportive regulatory and policy environment Significant investment in the ICT sector also from Science Foundation (total €700 Mninvestment in ICT and Biotechnology Research)

Disadvantageous impacts of 40% population in rural areas on the economics of broadband infrastructureAvailable fixed copper lines in rural areas not qualified for high speed broadbandEconomic crisis hinders large-scale infrastructure investments



NGNBN Country Profile: Switzerland





N/ASwitzerland


(USD)




Incumbent Position Until end of 2008, Swisscom had rolled out FTTC to >60% of total HH in stand alone modeCompetition from utility companies has prompted Swisscom to halt FTTC deployment in cities and move to FTTH insteadSwisscom is now promoting a cooperation model with coinvestment based on 3 spare dark fibers per homeHowever, discussions with local municipalities and utilities have turned out to be very difficult

Competitor Position Strong competition from cable operators (esp. Cablecom) covering 85% of HH and currently upgrading to DoCSIS3 in urban areasLocal utility companies and municipalities are rolling out FTTH in major cities (e.g. Zurich) and have formed an alliance “openaxs” to coordinate investment and realize synergiesAlternative carrier sunrise has announced a trial, but is likelyto lack the resources for a full scale roll-out

Regulatory Position Overall, regulator BAKOM wants to avoid regional monopolies and ensure efficient investment from a macro-economic point of viewBAKOM has established an “FTTH roundtable” to develop standards for FTTH deployment and interoperability, e.g. inhouse wiring, access

Government Position Federal Government is taking a wait-and-see approach, but facilitating discussions between the various parties

Key TakeawaysInfrastructure competition is rapidly driving NGA roll-out across the countryRegulator is promoting standards to ensure interoperability across regional passive infrastructure deployments

Risk of fragmented deployments and patch-work infrastructures if agreement on standards cannot be reached


NGNBN Country Profile: France

N/A


N/A



X

Type of Investment

N/A


43.52,6762006-07France


(USD)



Incumbent Position Began an FTTH pilot in May 2006 to households in Hauts-de-Seine and Paris.Announced in Dec-06 it would invest €270m - Reduced to €121m, no target for 2009 given new regulatory frameworkSigned agreement in March 2008 to connect 800,000 homesNow has a 100 Mbps symmetrical access in Paris, extended to major cities. Planning to have passed 1m homes by end of 08 and capture 1/5th as subscribersPartnerships with SFR and Iliad to share access

Competitor Position Iliad

Plans to pass 4m homes in French cities by 2012Initial budget of €1B, estimate of cost of €1,500 / FTTH connection for old customers, +€350 for new customers

SFR / Neuf CegetelEnd of 07, passed 130k homes and 20k subscribersIntends to pass 1m homes by end of 2009, and connect 250k customers - €450m for 2007-2009Invested €2.8b to lay 45k km of cable for optical MAN

Numericable (FTTB + HTC network) - 12,000 subscribersPlan was to pass 5m homes by end of 2008 - €365m invested in 2008, €250-260m in 2009

Regulatory Position ARCEP defined the conditions of shared access to building in Jan 2009Recently supported the multifiber option proposed by Iliad and SFR against FTSeeks to reduce the number of parties involved in the installation on private properties by encouraging shared access - first operator on premise required to grant access to ‘all reasonable demands’ from 3rd party telcos

Government Position Published plans in May 2008 (“France Numérique 2012”) to make broadband internet available to all citizens by 2012 (including roll-out of fiber-optic broadband to 4m subscribers by 2010)Current economy recovery plan include a digital dimension, which includes investment to deploy optical fiber in areas where it can be profitable if mutualized - aims at gathering investment of €750m over three years

Key Takeaways


Solid progress with 170,000 subscriptions at the end of 2008Regulator’s position in favour of fair competitionGovernment actively supporting progress

Deployment slow-down due to talks between operators on sharing infrastructure


NGNBN Country Profile: Spain

N/A


N/A


X


Type of Investment

N/A


351,4202007Spain


(USD)




Incumbent Position FTTC network in every city with >50k inhab.Total investment for fiber access ~€1bn in 07-10 (15% already spent)May 2008, conducted 30Mbps pilot testsPlans to launch 100Mbps service, tested mid-08, in early 09Investing heavily in wireless broadband, acquiring WiMAXoperator Iberbanda in Jul-06 - covers 30% of population, through >800 base stations)

Competitor Position Few competitors actively engaged on NGN broadband networksEuskatel is operating a WiMAX network with investment of €550m over 2004-2010 to enhance fiber backbone and WiMAX infrastructureOno trialling high speed broadband in Valladolid, with speeds up to 100Mbps through DOCSIS 3.0Vodafone and Orange challenging the decisions of CMT through legal or lobbying means

Regulatory Position CMT has been slow to issue rulings on fiber-optic, delaying publication from Jan-08 to Jan-09The CMT does not oblige Telefonica to share access to its fiber network, but access to ductsFinally, it authorized TEF to launch commercial offers and requested TEF to provide wholesale bit stream access for services up to 30 Mbps, not aboveAnticipating up to 3 competitors + TEF in large cities (Madrid, Barcelona) and 1 in smaller cities

Government Position National Programme of Broadband Infrastructure Deployment in Rural and Isolated Areas (PEBA) launched in 2005 (invest €280m) limited to extending DSL reach to remote areas (bandwidth required 256/128 kbps)First announcement in April 2009 approving a law to expedite the launch of fiber-optics networks, by obviating the need for “telecharging” (i.e. for service providers to provide electricity via headends)

Key TakeawaysGood infrastructure in place at Telefonica

Regulator favorable to Telefonicaand slow to react and favor developmentNo competition facing TelefonicaNo push from Government


Europe

USAsia/ Pacific


NGNBN Country Profile: USA

Source: Booz & Company analysis

X




X


247,2002009USA


(USD)



Incumbent Position AT&T has >13m broadband subscribers (20% of the market)All three pre-merger entities SBC, AT&T Corp and BellSouth were investing heavily in the broadband services, including SBC’s U-verse initiative which has survived the merger to deploy FTTN to 30m householdsCost of deployment is less than anticipated due to falling equipment prices (estimated today at $250 per customer)Investment continues with nearly $18 billion Capex spending in 2009 including enhancing AT&T’s mobile broadband network with 2,100 new cell sitesAT&T reluctant to take advantage of government investment funds in order to avoid governmental interference

Competitor Position Broadband market leader Comcast (15m subs) launched DOCSIS3.0 internet service to 20% of its footprint by 2008Verizon has spent over $23bn on its FTTP now deployed passed 19m households in 16 states2008 Qwest announced plans to build 6 fibre-optic rings outside its traditional footprint Cable companies including Time Warner and Cox Communications are also investing billions of dollars in advanced fibre-optic infrastructureLocal telephone companies are also investing in fibre-optic cable in order to compete with their cable rivals

Regulatory Position Stated goal of Federal Communications Commission is to provide access to robust broadband services for all US citizensRegulatory policies that surround broadband “must promote technological neutrality competition, investment, and innovation to ensure that broadband service providers have sufficient incentive to develop and offer such products and services

Government Position The Recovery and Reinvestment Act of 2009 seeks “to ensure that all the people of the United States have access to broadband capability”Under the Act a national broadband plan is due from the FCC by Feb 2010 aiming to help extend broadband to underserved areas– $2.5 billion to RUS* to support grants and loans to

providers for rolling-out broadband infrastructure– $4.7 billion for NTIA** to implement “Broadband

Technology Opportunities Program” to award grants to States, non-profit organizations and providers in order to accelerate broadband deployment and adoption

Key TakeawaysClear financial and regulatory support from the Government for the nationwide deployment of broadbandKey market players are continuing to invest in rolling-out fibre-optic infrastructure

* RUS: the Department of Agriculture’s Rural Utilities Service ** NTIA: the Department of Commerce’s National Telecommunications and Information Administration

Increasing pressure of being behind other markets in uptake of broadband servicesStructure of the market with strong regional-focused players means nationwide service can only be delivered by many providersGeographical scale makes true national coverage drives significant costs



Europe

US

Asia/ Pacific


NGNBN Initiatives in Asia Pacific: Overview


XX152700Sep. 2008 & Apr. 2009Singapore

XX233980March 2009New Zealand

XX27680August 2008Malaysia

XX311,5001995-2009 (multiple

initiatives)Korea

XXX22672006Japan

XXn/an/a2004-2007 (multiple

initiatives)Hong Kong


X



X


1593,300April 2009Australia


(USD)

Total Investment (USD Mn1)


1) Refers only to state-aid financial supportSource: Booz & Company analysis


NGNBN Country Profile: Australia



X



X


1593,300April 2009Australia


(USD)



Incumbent Position Telstra initially submitted a proposal for participating in country’s national broadband network deployment plan; its proposal has been rejected as non-compliant to the tender documentationSince, Telstra is examining its possible options vis-à-vis the recently announced government’s NGNBN plan: it can either proceed in building own fiber access network, reduce fixed Capex and migrate customers gradually to NGNBN and/or vend fixed network into the NGNBN and in return possibly receive a stake in the NGNBN network

Competitor Position All key fixed and mobile competitors, either on a stand-alone basis or by forming consortia, have submitted proposals to participate in government’s NGNBN planHowever, all have been rejected on the grounds of lacking “fully developed project plan” or not proving “value-for-money”Currently, they are all preparing to participate in government’s NGNBN PPP plan, by bidding for network rollout in individual territories/areas

Regulatory Position The open access NGNBN network will naturally transform the competition dynamics in AustraliaUntil the network roll-out, the government is determined to improve competition through regulatory reformThe government initiated a comprehensive public consultation process in April 2009 and is considering key options for reform including: access regulation processes by ACCC, stronger ACCC powers to tackle anti-competitive conduct and measures to better monitor Telstra’s functional separated entity

Government Position Government’s intentions to proceed with NGNBN build-up have been mainly triggered by the lack of high-speed fiber access in the country, lack of effective competitive landscape in broadband markets and challenges faced by operators in achieving 100% fiber access population coverageHence, government decided to establish a new independent company responsible for building the next-generation broadband access network, targeting to cover 100% Australian households by 2017

Key TakeawaysExpected to reach 100% broadband coverage and speeds approx. 100 times faster than current speeds, by 2017Targeting to create around 25,000 jobs per year for the duration of the projectGovernment will finance only 11% of the total AUD 43bn (US$ 30.2bn) project; PPP scheme

Possible network duplication in the country especially if Telstra does not cooperateDifficulty in achieving effective competition for the coming 8 years



NGNBN Country Profile: Hong Kong


X



X



n/an/a2004-2007Hong Kong


(USD)



Incumbent Position Although incumbent operator PCCW has been the last, of the four to launch its national NGNBN network, it currently controls around 60% of the broadband marketPCCW tries to remain competitive in the market by launching new and innovative services and applications (e.g. quad-play, digital pay-TV), fully leveraging its own high-speed access network and customers’ loyaltyIt currently enjoys very healthy operational margins, in excess of 25%

Competitor Position Currently three operators, HKBN, HGC, HKCTV, in addition to PCCW, cover most of the territory through independent networksAs such the competition in the market is mainly “facilities-based” rather than “services-based”HKBN was one of the first operators in the world to launch FTTH deploymentHKBN offers world’s fastest connection that could reach up to 1 Gbps for residential customers; it has invested HK $ 2.6Bn in establishing its own network

Regulatory Position OFTA has in general adopted a “hands-off” approach, allowing market dynamics to lead sector growthIts role is to restrict anti-competitive behavior and ensure all end-users enjoy innovative servicesIt has been one of the first countries to examine regulations inthe new NGN environmentIn parallel, OTFA has undertaken a number of initiatives to increase the expansion of broadband use within the community (e.g. it launched an education program about the use of PCs and internet in home)

Government Position The government of Hong Kong, as early as 2000, set a policy to push for NGNBN and licensed several facility based providers to competeGovernment’s role, in general, is limited to creating and maintaining a healthy environment for investors to compete fairly and obtain reasonable return; it has not imposed any restrictions on foreign ownershipTelecommunication infrastructure and services are predominately operated by the private sector

Key TakeawaysHong Kong’s geography along with the government’s early policies succeeded in making the country a global ICT leaderAvailability of four highly competitive, private-owned high-speed access networks allows end-users to enjoy new and innovative services and applications

Regulatory burden in mandating and defining interconnection and access to NGN infrastructure for the provision of services, applications and contentLack of government’s control in operators’ decision making process



NGNBN Country Profile: Japan




XX


Type of Investment

X


22672006Japan


(USD)



Incumbent Position Incumbent operator NTT deployed the first fiber network across the country, excluding rural areasIt has invested JPY 1.8Bn (US$ 18 Mn) on its own FTTH network, offering retail services to its end-users as well as fiber access wholesale services to ISPs

Competitor Position Several competitor operators and utility companies have deployed their own fiber access and backhaul networkKey characteristic for all of them is their focus only in commercial areas, not covering rural areasExamples of TTNet, Chubu Telecom Network, Osaka Media Port offering services in Kanto, Kinki, Chubu as well as Tokyo Electric Power (TEPCO) and Usen, utility companies, in similar regions

Regulatory Position Ministry of Internal Affairs and Communication (MIC), also acting as country’s regulator, played a pivotal role in establishing “U-Japan” policy in the countryIts main focus has been on the one hand to regulate open wholesale access on operators’ fiber access networks, enabling ISPs to compete on fair grounds, while on the other to ensure that rural areas are not excluded from the transition to the digital eraHence, it launched relevant policies to eliminate broadband-zero areas by 2010

Government Position Triggered by country’s low broadband penetration, low speeds and very high prices, government launched in 2004 the “U-Japan” policy, further complementing previous “e-Japan and “e-Japan II” strategies“U-Japan” targets to eliminate broadband zero area by 2010 and make 90% of households to access ultra high-speed interactive broadband by 2010 Grant-in-aid was provided for local self-governing bodies to establish next-generation broadband network companies in their respective areas, offering open access to service providers

Key TakeawaysJapan’s early vision along with its focus on broadband coverage in rural areas helped Japan become an ICT leaderGovernment played a complementary role in operators’deployments in commercial areasIn parallel, it stimulated demand through promoting ICT literacy, facilitating e-commerce, subsidizing rollout

Lack of ability to put pressure on operators to also deploy networks and offer services in rural areasHigh project’s investment risk as demand and services uptake in rural areas not yet proven



NGNBN Country Profile: Korea


X



X



311,5001995-2009Korea


(USD)



Incumbent Position Incumbent operator, KT, became a privately owned company in 2002 and since began concentrating on building its own broadband networkKT is the main broadband provider in the country, controlling around 45% of the marketDue to its rather late privatization, government played an important role in ensuring the creation of a national broadband champion in the countryIt also recently merged with its mobile arm (e.g. KTF), in an attempt to offer converged services

Competitor Position KT main competitors include SK Broadband, MSO and LG Powercom (market shares of 22%, 18% and 14% respectively)They all compete on speed, price, reliability and customer service in urban areas, being able to offer services of up to 1Gbps Intense competition on the high-speed broadband access allows end-users to enjoy new and innovative services as HDTV, telemedicine etc., in low prices

Regulatory Position The newly established regulatory entity, Korea Communications Commission (KCC) has been in close cooperation with the Ministry (MIC) in implementing national broadband strategyOne of the primary goals is to enable both wireline and wireless broadband technologies diffusion; it supports WiBrotechnology for wireless accessOverall, infrastructure investment is enabled by the minimization of regulatory risk, through the creation of a stable and transparent regulatory environment

Government Position The Korean government has established a comprehensive plan for the Korea Information Infrastructure (KII), as early asMarch 1995The initial plan was to provide broadband networks to all households in the form of FTTH by 2015; target date was brought forward to 2010 in 1999The entire plan was estimated at US$ 24.5bn out of which government would invest US$ 1.5bnGovernment also provided low interest rate loans, of up to US$ 1bn, to private entities for NGNBN deployment

Key TakeawaysKorea’s geography and demographics along with its conducive regulatory regime helped it become a leader in ICT developmentGovernment has contributed in NGNBN development but allowed market forces to pave the wayIn parallel, it stimulated broadband demand by embarking several initiatives

Late privatization of the incumbent operator, has given KT a competitive advantage, in the broadband market, compared to other operators Current policies and regulations are possibly not sufficient to significantly alter market structure, on the way forward



NGNBN Country Profile: Malaysia


X




X


27680August 2008Malaysia


(USD)



Incumbent Position In August 2008, Malaysian Government announced that TM will undertake the RM 11.3bn ($3.3 Bn) High-Speed Broadband (HSBB) project, under PPP schemeThe government will invest RM 2.4 Bn ($0.68 Bn), over the first 3 years (phase 1) matching TM’s contribution; phase 2 will be fully financed by TMTM plans to connect 1.3 Mn households to HSBB by 2012 (phase 1) and 2.2 Mn households by 2018 (phase 2) - all in high economic impact areasHSBB project is in line with TM’s strategic aspirations to become the domestic broadband champion

Competitor Position High Speed Broadband Technology (HSBT) is another company that has announced the built-up of a fiber access network, targeting to connect more than 0.57mn users in the area of KuantanHSBT is backed by the Pahang government (third largest state in Malaysia), Japanese and Korean vendorsWith regards to other key ISPs (around 20), when TM published HSBB project’s Indicative Terms & Conditions (ITC), in May 2009, they all expressed their interest in purchasing wholesale services

Regulatory Position MCMC has been quite supportive of the HSBB plan, trying to ensure in parallel a competitive landscapeIncumbent operator, TM, is obliged to offer a set of wholesale services to all qualified licensed operators, based on commercial negotiationsOverall principles of “open and equal access at competitive pricing” will apply, over the course of the projectHowever, TM, will be obliged to operate under a regulated “open access” regime after 2015

Government Position HSBB is part of the government’s 2000 Master Plan of transforming the country from production-based to knowledge-based economy by 2020Government expects to achieve 0.6% GDP growth (approx. $1.5bn) and create 135 thousand new jobsAlso, it targets to increase broadband penetration to 50% by 2010 (approx. 10% fiber access)Allocating HSBB project to TM has been justified on the grounds that TM is the best suited operator to undertake the deployment of the national fiber access network

Key TakeawaysIn line with Government’s Master Plan to transform country into a knowledge-based economy by 2020Expected project to yield to 0.6% GDP growth and create 135 thousand new jobsTarget to increase broadband penetration to 50% by 2010

No transparency in assigning contract to incumbent operator, TMLack of warrantees for a fair access on fiber network, at wholesale levelLack of transparency on wholesale pricing (first 7 years)Not ruled out the possibility of other operators deploying fiber access networks (investment duplication)



NGNBN Country Profile: New Zealand



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X


233980March 2009New Zealand


(USD)



Incumbent Position In March 2008, incumbent operator Telecom New Zealand (TNZ) created its functional separated entity, ChorusTNZ planned that Chorus would play a key role in offering equivalent passive and active NGN wholesale services, on a nationwide scale; however, its suggestion was rejected by the governmentTNZ is currently examining its positioning on whether to proceed with its fiber access plans or participate and co-invest on government’s CFIC (Crown Fiber Investment Co.) project

Competitor Position Country’s three major mobile operators have been highly critical of the plan (commissioned joint study with TNZ), arguing that market forces should predominately drive fiber access deploymentOther ISPs, alternative operators and utility companies have been strongly supporting government’s proposal and they have all expressed their interest in participating in LFCs (Local Fiber Companies) scheme

Regulatory Position The state-owned investment company, Crown Fiber Investment Co, (CFIC) will drive the government's investment and will work alongside private sector co-investors, Under a PPP scheme, 25 regional Local Fiber Companies (LFCs) will be established, mandated to offer wholesale dark fiber access services to providers, under an open access regimeNecessity for regulatory intervention and price controls is yet to be defined

Government Position The newly elected government of the National Party has decided to proceed with its NZ $3 Bn (US$ 1.9 Bn) FTTH plan, as of early-2009It targets to reach 75% FTTH population coverage by 2019 while yielding annual economic benefits of NZ$2.4 Bn (US$ 1.6 Bn) to $4.4 Bn (US$ 2.9bn) Government speculates that a radical plan, like the creation of CFIC is needed in order to assist the country reach its goals and create a truly competitive market

Key TakeawaysGovernment realized that a radical move is requested to change market dynamics; hence it launched the state-owned CFIC projectIt is expected to yield to 75% FTTH population coverage by 2019, create economic benefits of US$ 1.6bn-2.9bn and assist country move out of the financial recession

Lack of transparent legal and regulatory framework with regards to ownership / governance structure of regional LFCsStill have not ruled out the chance that incumbent also deploys its own fiber network (duplication)



NGNBN Country Profile: Singapore


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X


152700Sep. 2008 & Apr. 2009Singapore


(USD)



Incumbent Position SingTel, Singapore’s incumbent operator, has been the main shareholder of the consortium (OpenNet) that has won government’s NetCo tenderIn addition to the three-tier model suggested by the government (NetCo: wholesale wireline, OpCos wholesale bandwidth services and Retail service providers), SingTel further proposed to separate asset ownership into OpenNetand AssetCo, that would lease SingTel’s passive infrastructureSingTel will receive subsidies of up to SDG 750 mn (US$ 525mn)

Competitor Position Second mobile operator, StarHub, has been the winning entity of the OpCos RFP, based on its Nucleus Connect proposalNetCo (e.g. SingTel consortium) has been forbidden in owning OpCo, in order to ensure independenceOpCo will be subject to price controls through an Interconnection Offer (ICO)StarHub will receive subsidies of up to SDG 250 mn (US$ 175mn)Other competitors have also bid for the two tenders (NetCo, OpCo) with no further success

Regulatory Position As part of iN2015 announced in 2006, the IDA identified a need to develop a next generation fixed National Broadband NetworkThe fixed National Broadband Network (NBN) is intended to be nationwide and reach across Singapore, targeting to offer a minimum of 50 Mbps uplink and 100 Mbps downlink per end-user connection, scalable up to 1 GbpsIDA is now requested to enforce all necessary regulatory levers in order to monitor project’s successful implementation

Government Position Launch of NGNBN project is in line with Singapore’s iN2015 strategy to constitute country No.1 in harnessing infocomm, adding value to the economy and societyGovernment, in conjunction with IDA, has adopted the most innovative business model, enforcing both functional and structural separation to industry playersGovernment has committed to invest up to SGD 1,000 mn(US$ 700mn) in supply and demand initiatives (e.g. network rollout / waive installation charges etc.)

Key TakeawaysTwo-tier governmental intervention in order to ensure supply as well as boost demandAdoption of an innovative business model to ensure open, fair and transparent access to high-speed broadband access networkStimulate demand through educating communities and fostering next-gen applications

No precedent of such business model worldwideRequirement for close regulatory monitoringCreation of extra layers of relationships that are time consuming


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