The consumer’s thirst for bandwidth –A cable operator’s perspective

Eric J. TveterManaging Director, Cablecom GmbH

EUROFORUM December 2nd / 3rd 2009

We can do better than that

2

33

The digital home is here today – but consumers ask for more

44

New applications require an increase in bandwidth

Video on demand

HDTV

File sharing

Video streaming

Online gaming

55

Today’s innovators tell us what will be standard tomorrow

Generation “Born Digital”

Trendsetters: e.g. iPod, iPhone

Heavy users: 80 % of bandwidth is consumed by less than 10 % of users*

The key is to fulfill customer needs.Today and tomorrow.

* Source: Bain & Company report “Next Generation Competition – Driving Innovation in Telecommunications”

66

How can we fulfill customers’ needs?

How much bandwidth is enough and what will it cost?

Evolution vs. revolution

Demand drives evolution

Sound economic modelSatisfying needsWith reasonable costsWithin a reasonable timeframe

77

High bandwidth applications growing fastest

Source: Bain & Company report “Next Generation Competition – Driving Innovation in Telecommunications”

High bandwidth applications

”What activity do you engage in when accessing the internet?”

Low bandwidth applications

0

20

40

60

80

100%

% of respondents

Surf theweb

2008

2006

E-mail Onlinebanking

Downloadsoftware

Onlinegaming

Buy/reserve/

sell products/services

Down-loadmusic

Streaming Chat Down-load

videos

Maintainwebsite/weblog

5% 50% -8%8% 21% 76% 38% 15% 30% 35% -9%Increase 06-08(as % of 06)

88

Note: Assumes MPEG 4 video compression

Concurrent usage will likely not exceed 40 Mbit/s

Upper range

Source: Bain & Company report “Next Generation Competition – Driving Innovation in Telecommunications”

0

10

20

30

40

Phone0.2

Email

1.0

Gaming

1.5

Data

8.0

P2P

2.0

IP-TV

VoDSDTVHDTV

8.0

AllApplica-tions

~20

8.0

8.0

Fullhousehold

~30-35

(Cumulative) download bandwidth (Mbit/s)

Extra HDTVor parallelrecording

Extravideo

Simulation

Demand will vary by segment andby country

The ”consumer sweet spot”is 40 – 50 Mbit/s

99

ADSL2+25 Mbps

LTE>

Theoretically 100 Mbps

HSPA+42 Mbps

UMTS2 Mbps

EDGE384 kbps

= fixed line = wireless/mobile = cable

DOC-SIS 2.0~25-30 Mbps

ADSL8 Mbps

VDSL50 Mbps

= other

Today

DOC-SIS 3.0 100-200

Mbps

Technology is just one major limit – time for rollout is the other

Source: Bain & Company report “Next Generation Competition – Driving Innovation in Telecommunications”

Illustrative

0.10.2

0.512

51020

50100200

5001,000

2005 2010 2015

Fixed line and mobile bandwidth advances (Mbit/s)

FTTH>500 Mbps

ISDN128 kbps

2000

GPRS140 kbps

Sat

HSPA14 Mbps

Power-line

DOC-SIS 3.0

400 Mbps

Note: Maximum bandwidth shown for network technologies

10

Global Backbone

Head end

Data + TVBackbone

CoaxFiber

Local nodeHub

Cablecom’s network is 95% fiber – today!

1111

Migration to fiber bandwidths will thus be spearheaded by cable

Note: Likely cost is consensus of experts and current experience; High end of cable build-out assumes green field network* For fiber/cable per subscribed household;

Bottom estimateUpper estimateLikely cost

Rural areaUrban area

Source: Bain & Company report “Next Generation Competition – Driving Innovation in Telecommunications”

Estimate

0

750

1,500

2,250

FttH

375

~930

CableDocsis 3.0

98

~975

LTE

240

~2’250

FttH

577

2’250+

CableDocsis 3.0

120

~1’200

LTE

240

~1’950

Economics oftechnologies

different(CHF

access per subscriber*)

12

Cablecom is ”present proof” and rolling out high bandwidths today

Q4/ 12

100

Q3/ 12

Q2/ 12

Q1/ 12

Q4/ 11

Q3/ 11

100

Q2/ 11

100

Q1/ 11

96

Q4/ 10

95

Q3/ 10

95

Q2/ 10

30%

Q1/ 10

90

Q4/ 09

86

Q3/ 09

81

Q2/ 09

76

Q1/ 09

70

Q4/ 08

58

Q3/ 08

54

90%

46

Q1/ 08

38

80%

70%

60%

94

50%

40%

20%

10%

100%

0%Q2/ 08

Video on DemandFiber PowerCapacity expansion

ForecastFttH-coverage

Today

12

1313

Switzerland is ”top of Europe” in terms of speed

% above 2 Mbit/s % above 5 Mbit/s

AveragespeedQ1/2009

6.9 5.4 5.1 5.7 4.9 5.0 4.7 4.2 4.4 3.7 3.6 3.4 3.7 4.1 3.4 2.8 2.8 2.6

0

20

40

60

80

100%

Swe-den

79%

Nether-lands

81%

Den-mark

85%

Switzer-land

92%

Bel-gium

90%

CzechRepublic

78%

Norway

77%

Ger-many

85%

Iceland

81%

Austria

68%

Por-tugal

76%

Finland

50%

UK

80%

Ireland

52%

France

78%

Greece

53%

Italy

66%

Spain

64%

49%

36% 36% 34% 34% 33%

25% 23% 25%19% 19% 19%

11% 10% 10% 8%5% 4%

Source: Bain & Company report “Next Generation Competition – Driving Innovation in Telecommunications”

14

Fiber Power bandwidth is available today

1515

Competition assures efficient allocation of funds

Source: Handelszeitung, November 18th, 2009, Pg. 3

Discussion around FttH is getting more differentiated

Bain: ”Prices to rise by 60%”Avenir Suisse: ”Mid-term bandwidth demand can be covered by both FttHand cable.”

Competing infrastructures will make sure money is spentwisely

We expect public discussion to start focusing on economics ofboth FttB and FttH

1616

A number of challenges remain

Maintain infrastructure competitionGuarantor for bandwidthLong-term back to monopoly

Fair competitive environmentWho pays so that ”de facto” subsidiesdo not distort competition?

Advanced digital services choice for rural areas

How can digital divide be prevented?

1717

Cablecom is ”Changing for You”

Invested over CHF 1 bio intoSwiss infrastructure

Launched Fiber Power 100Mbps

Completes rollout by early 2011

Carefully examines consumer demand

Focuses on people and service

Launched ”Changing for You”

1818

Thank you for your attention