U.S. Telecommunications Regulation and Market Developments September 2008

U.S. Telecommunications Regulation and Market Developments

September 2008

23.0

100.9

4.1

15.8

65.3

9.2

32.0

42.5

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006

Mill

ion

s

Power Line and Other

Satellite and Wireless Devices

Fiber

Cable Modem

SDSL and Traditional Wireline

ADSL

High Speed Line Growth (2000 – 2007)*

• All figures as of June 30th. Source: FCC’s High Speed Services for Internet Access Report, March 2008, at 6.

2007

High-Speed Lines in the US by Technology as of June 30, 2007

Source: FCC’s High Speed Services for Internet Access Report, March 2008, at 6.

Fiber1%

All Other37%

Cable Modem34%

ADSL27%

SDSL & Traditional Wireline 1%

U.S. Investment in Fiber Networks

Telecommunications companies expect to make $50 billion in capital expenditures in 2008-2009 regarding broadband investment.

Verizon has said it expects to invest $18 billion in net capital from 2004 -2010 in deploying their FiOS network.

Spending by carriers on telecommunications equipment in 2008:

Fiber: $10.6 billion

Industry-wide, spending on fiber-related telecommunications equipment is estimated to grow almost $13.5 billion annually in the next three years.

2001 2007

$10

$20

$30

$40

$50

$60

768 kbps - 1.5Mbps

1.5Mbps

Wireline Broadband Prices and SpeedsDeclining Prices, Increasing Speeds

Source: US Telecom: The Broadband Association, Wireline Broadband Pricing 2001-2007, June 2008

(Based on Maximum Advertised Price Downstream Speed Tier)

Wireline Broadband

2001 2002 2003 2004 2005 2006 2007

Year

Source: USTelecom: The Broadband Association, Wireline Broadband Pricing 2001-2007, June 2008

Increasing Speeds for $50

(Speeds based on Maximum Advertised Price Downstream Speed Tier)

768 kbps1.5 mbps

Up to 3 mbps

Up to 7 mbps

Up to 15 mbps

Promoting an Open Internet

In 2005, the Commission adopted an Internet Policy Statement that

set forth four consumer-based principles:

Consumers are entitled to access the lawful Internet content of their choice;

Consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement;

Consumers are entitled to connect their choice of legal devices that do not harm the network; and

Consumers are entitled to competition among network providers, application and service providers, and content providers.

FCC Affirms Its Authority to Protect Vibrant and Open Internet

Peer connections Terminated with

False “reset” message

All Internet Users Affected

ISP #1

ISP #2

ISP #3

?

?

user seeking peer content

user seeking peer content

user seeking peer content

?

User/peer w/ content

User/peerw/ content

Total US Mobile Telephone Wireless Subscribers

255.4

233

207.9

182.1158.7

140.8128.4

109.586

69.255.3

33.824.144

0

50

100

150

200

250

300

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Mil

lion

s of

Su

bsc

rib

ers

Source: Cellular Telecommunications & Internet Association, Semi-Annual Survey, 2007.

Growth in the Mobile Telephone Industry(June 2002 – June 2007)

DOWN43% From

$0.12 per minute in June 2002

Subscribers ServiceRevenues

Price per minute

243 MillionSubscribers in

June 2007

$133 Billion inAnnualized Revenues June 2007

Price per minute $0.07 in June 2007

Source: Cellular Telecommunications & Internet Association; FCC.

UP 88%

From $71Billion in

Annualized Revenues June 2002

Minutes of Use

734 Avg Monthly MOUs in

June 2007

UP81% From

135 Million Subscribers In June 2002

UP84% From 398 Average Monthly MOUs in

June 2002

Comparison of 700 MHz and AWS-1 Auction Revenues vs. All Others

700 MHz Auction$19.1B

All other auctions$19.1B

AWS-1 Auction$13.7B

Note: 700 MHz Auction revenues do not account for bidding credits. (FCC, April 2008)

700 MHz Auction: Openness Conditions

Consumers will be able to use the wireless device of their choice;

Consumers will be able to download the legal software they want;

Consumers will be able to download the applications they want.