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8/7/2019 Broadband in America Nov 12
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ColumbiaInstituteforTeleInformation
1AUrisHall,ColumbiaBusinessSchool
3022Broadway
NewYork,NY10027
BroadbandinAmericaWhereItIsandWhereItIsGoing
(AccordingtoBroadbandServiceProviders)
PreliminaryReportPreparedfortheStaffofthe
FCCsOmnibusBroadbandInitiative
By
RobertC.Atkinson
&
IvyE.Schultz
November11,2009
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AcknowledgementsThebulkoftheresearcheffortthatwentintothisreportwasundertakenbyteamsofCITIinternsand
researchassistantsunderourdirection.TheresearchwasstartedinAugust,2009withagroupCITIs
summerinterns:
RoyceGene(UniversityofSouthernCalifornia,BA,2011),CindyHuiXinKhor(CornellUniversity,BA,
2012),DanaLaventure(NewYorkUniversity,BA,2010),KaiLiu(BinghamtonUniversity,BA,2011),and
BettyWu(BrownUniversity,BA,2011).
Aftertheacademicyearstartedandtheinternsreturnedtotheirschools,theeffortwascontinuedby
visitinggraduatestudentsandCITIresearchassistants.
Primaryresearchwasconductedby:JohnLazcano(ArizonaStateUniversity,BA,1997),Maximilian
Mller,ChristopherScheubel,andHaraldSiebenweiber(allCenterforDigitalTechnologyand
Management,Munich,MS,2010)
Withassistancefrom:JavierAvila(UniversityofChile,MS,2004),ShiraLazarus(ColumbiaUniversity,
BA,2011)andChikaOkose(SmithCollege,BA,2009).
Inaddition,othermembersofCITIsstaffandanumberofCITIfriendsandaffiliatescontributedtheir
experienceandexpertisebyreviewingandcritiquingdrafts.Inparticular,wewishtothank:
EliNoam,RaulKatz,SusanKalla,TracyYoung,DaveBurstein
We
would
also
like
to
thank
the
many
organizations
who
responded
to
our
requests
for
broadband
data
andinformationandthoseindividualswhoverifiedtheirorganizationsdatapresentedintheAppendix
ofthisreport.
CITI,asaninstitution,doesnotauthororpublisharticlesorreports.Therefore,we,astheauthors,are
responsibleforthecontentofthisreport.Thepresentreportisthepreliminaryinstallmentofthe
informationcollected.Inasubsequentreportwemayanalyzethedatafurtherandprovideaggregate
trendsincollaborationwithsomeofourCITIcolleagues.
Robert C. Atkinson Ivy E. SchultzRobertC.Atkinson
DirectorofPolicyResearch
IvyE. Schultz
ManagerofResearchAssistants
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TableofContentsAcknowledgements....................................................................................................................................... 2
ExecutiveSummary....................................................................................................................................... 7
Section1:ListingofAllPubliclyAnnouncedBroadbandPlans................................................................... 12
1.1Technology........................................................................................................................................ 14
1.2TimelineforBroadbandPlans........................................................................................................... 25
1.3ExpectedDeployment/CoverageFootprint...................................................................................... 25
1.4ExpectedCapitalOutlays.................................................................................................................. 28
1.5ExpectedBroadbandPerformance/Quality...................................................................................... 32
1.6ARPU(AverageRevenueperUser)................................................................................................... 33
PricingAppendix..................................................................................................................................... 36
Section
2:
Review
of
Publicly
Announced
Broadband
Plans
.......................................................................
40
Section3:FutureProjections...................................................................................................................... 49
3.1UncompletedBroadbandPlans........................................................................................................ 51
3.2StatusofInternetBackbone............................................................................................................. 53
3.3StatusofBroadbandSatellitePlans.................................................................................................. 57
3.4SummaryofAnalystProjections....................................................................................................... 58
3.5Observations(orLessonsLearned)abouttheData...................................................................... 69
Appendix:ListingofAllPubliclyAnnounceBroadbandPlans............................................................. A1A43
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ListofFiguresFigure1:TypesofBroadbandServices....................................................................................................... 14Figure2:FTTHSubscriptionsinMillionsasofMarch30,2009.................................................................. 15Figure3:NorthAmericanNonRBOCFTTHSubscribers............................................................................. 16Figure4:RBOCDataSubscriptionsasof2Q09.......................................................................................... 18Figure5:RuralTelcos:DSLPenetrationofTotalAccessLines(1Q08 4Q09E).......................................... 18Figure6:HomesPassedbyCableCompanies............................................................................................ 20Figure7:MSOsBroadbandSubscriptionPenetrationofHomesPassed.................................................... 21Figure8:ExpectedDownstreamSpeedsof3Gand4GWirelessBroadband(mbps)................................. 23Figure9:InternetPenetrationofU.S.Households..................................................................................... 26Figure10:MajorBroadbandDeployments:PerformanceAgainstAnnouncedCompletionDates...........41Figure11:NorthAmericanConsumerInternetTraffic(Petabits/month).................................................. 49Figure12:EstimatedU.S.ConsumerInternetUse..................................................................................... 50Figure13:TypicalSpeeds(inmbps)thatInternetActivitiesandIPTVwillRequirein2013...................... 51Figure14:MajorInternetBackboneRoutesintheU.S.(>250gbps)......................................................... 54Figure15:20HighestCapacityU.S.DomesticInternetRoutes.20072009(gbps)................................... 55Figure16:WiredBroadbandSubscriberGrowth........................................................................................ 58Figure17:WirelineBroadbandAvailabilityandAdoption(inpercentageofU.S.households).................59Figure18:WirelessBroadbandPenetration............................................................................................... 60Figure19:AverageVoiceandDataARPUs................................................................................................. 63Figure20:IndustrySectors'BroadbandCapex........................................................................................... 67Figure21:TotalCapexandTotalBroadbandCapex................................................................................... 68
ListofTablesTable1:TelcoWirelineBroadbandAvailability.......................................................................................... 17Table2:CableBroadbandDeploymentandHomesPassed....................................................................... 20Table3:AggregateCapex2008 $62.8B................................................................................................... 29Table4:TOTALCapitalExpendituresofLargestCompanies($billions)..................................................... 29Table5:RBOCWiredBroadbandCapex($billion)..................................................................................... 30Table6:TypicalWirelessBroadbandRates................................................................................................ 34Table7:SatelliteInternetBroadbandRates............................................................................................... 35Table8:BundledPricingExamplesinUrbanandRuralMarkets................................................................ 36Table9:WiredBroadbandPricingplans..................................................................................................... 38Table10:UncompletedBroadbandPlans.................................................................................................. 51Table11:20HighestCapacityU.S.DomesticInternetRoutes.20072009(gbps).................................... 54Table12:CableCompanyBroadbandARPU............................................................................................... 62Table13:TelcoCompanyBroadbandARPU............................................................................................... 62Table14:TotalCapitalExpendituresforMajorServiceProviders($billion)............................................. 64Table15:TotalCapexandBroadbandCapexbySector............................................................................. 66
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ProjectBackgroundThestaffoftheFCCsOmnibusBroadbandInitiative(alsoknownastheNationalBroadbandPlanTask
Force)askedtheColumbiaInstituteforTeleInformation(CITI)toconductanindependentanalysisof
publiclyannouncedbroadbandnetworkdeployments(bothnewandupgradednetworks)ofcompanies
intheUnitedStates,forthepurposeofinformingtheFCCseffortsindevelopingitsNationalBroadband
Plan.OnAugust6,theFCCannouncedthatCITIhadagreedtoundertaketheanalysisproject.1
TwomembersofCITIsmanagementstaff,BobAtkinsonandIvySchultz,undertooktheproject.They
workedindependentlyoftheFCCandconductedtheprojectwithCITIsresearchresourcesandwithout
anyprojectfundingfromtheFCCoranyotherorganization.Asaresult,theprojectarrangements
ensuretheindependenceandintegrityfortheworkproduct.
AsrequestedbytheFCC,theprojectencompassedacomprehensiveexaminationandanalysisof
companiesannouncementsandsimilarpublicinformation,industryanalystsreports,andother
relevantdatatomeasureandassessbroadbandplans.Forpurposesoftheproject,theFCCspecified
thatbroadbandwouldbedefinedforwirelineasADSLequivalentsandadvanced,andforwireless
as2Gequivalentsandadvanced.Inaddition,theprojectwouldassessthecurrentstateofbackbone
facilities.
AlsoattheFCCsrequest,thereportincludedanassessmentofwherebroadbanddeploymentswillbe3
5yearsinthefutureandacomparisonofresultswithpreviouslyreleasedplansthatareinprogressor
complete.
TheresearchforthisprojectfocusedonthreespecificareasasrequestedbytheFCC,eachofwhichis
addressedasasectioninthisreport:
ListingofAllPubliclyAnnouncedBroadbandPlans,sortedboth(1)bycompanyand(2)by
technology(e.g.DSL,cable,fiber(FTTx),fixedwireless,wireless,satellite),withadescriptionof
relevantdetails,suchas(1)generaldetailsoftheplan,includingcompany,technology,andtimeline,
(2)expectedcapitaloutlaysandoperatingexpenditures,(3)expecteddeployment/coverage
footprint,(4)expectedbroadbandperformanceandquality,and(5)expectedARPUs(Average
RevenuePerUser).
ComparisonofAllPubliclyAnnouncedBroadbandPlans,basedupontheListingofAllPublicly
AvailableBroadbandPlans,acomparisonofwhatwasprojectedatthetimethatabroadbandplan
wasannouncedtowhathasresultedtodateforeachofthepubliclyannouncedbroadbandplans
acrosstheidentifiedvariables.Thislooksbackwardsatwhatwasannouncedatthetimetheplan
wasestablishedandthencomparestheannouncementwiththeoutcomesofcompletedplansand
thecurrentstatusforthoseplansstillinprogress.
1FCCPressRelease,http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC292598A1.pdf.
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FutureProjection:Ananalysisofwherethepubliclyannouncedbroadbandplanswhichareyettobe
commencedorstillinprogresswillbein35years,includingLTE,WiMAX,DOCSIS3.0,backbone,etc.
Thisshouldincludeasummaryofanalystprojectionsandalessonslearnedcomponent.
GeneralResearchMethodologySincetheFCCsrequestwasforareviewthestateofbroadbandinAmericabasedonwhatthe
broadbandserviceprovidershavepubliclyannounced,researchersassignedtothisprojectcollected
dataprimarilyfrom:serviceproviderspublicreportsandstatements;reportsbyinvestmentanalysts
andresearchfirms(whicharegenerallybasedoninformationobtainedfromtheserviceproviders
themselves);newsreportsquotingtheserviceproviders;and,informationcompiledbyindustrytrade
associationsfromtheirmembercompanies.Consequently,wedidnotdevelopindependentdataor
evaluatethevalidityofthedatareportedbytheserviceprovidersandwedidnotuseacademic,
governmentorotherstudiesregardingthestateofbroadbandthathavealreadybeenmadeavailableto
theFCCstaff.
Forcompetitivereasonsandtocomplywithsecuritieslawsregardingdisclosureofmaterialinformation,
publiclytradedbroadbandserviceprovidersareveryreluctanttoreleasedetailedinformationabout
theirfutureplansregardingbroadbanddeploymentsandtheirfinancialforecasts.Smallprivate
companiesaresimilarlyreticenttoprovideinformationabouttheirfutureplans,eventotheirtrade
associations.
Thepublicandanyonewithrelevantinformationwereandareinvitedtosubmitadditionalinformation
anddatatoadedicatedemailaddress:[email protected].
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capableofserving17millionlocationsby2010.8Anumberofothersmallercompanies,includingsmall
ruraltelephonecompanies,willbecoveringadditionalhomeswithFTTH.AT&Thasannounceditwill
offerDSLfromfiberfedcabinets(fibertotheneighborhood:FTTNDSL)to30millionhomesby2011.9
AT&Tcurrentlyoffersadvertisedspeedsofupto18megabitsperseconddownstream10(althoughthe
actualspeedcanbemuchlower),withincreasespossibleasbondingallowsdoublingtotalspeedson
DSL.Therefore,ifjustthesetwolargesttelephonecompaniesachievetheirgoals,atleast50million
homeswillbeabletoreceiveadvertisedspeedsof10megabitspersecondormoredownstreamwithin
thenexttwoyears.Othertelephonecompanieswillbeprovidingadditionalsimilarofferingsintheir
serviceareas.
Broadbandserviceiscurrentlyavailablefromcablecompaniesto92%ofhouseholdsaccordingtoa
researchfirmthattracksthecableindustry.11CablebroadbandisbeingupgradedtotheDOCSIS3.0
standard12andisbecomingwidelyavailableatadvertisedspeedsashighas50mbpsdownstream(with
onefirmadvertising101megabitspeeds).13Comcast,thelargestcablecompanyaddressingnearlyhalf
theUnitedStates,expectstocovernearlyallits50.6millionhomespassed14by2010.Oneanalyst
believesDOCSIS3.0willbeavailableby2013tonearlyall15
thehomescoveredtodaybycablemodem
services.16Thatwouldbeabout92%of112millionhouseholds,or103millionhomes.
WirelessCoverage:AnumberofwirelessbroadbandserviceprovidersexpecttodeployLongTerm
Evolution(LTE)andWiMAXtechnologies(socalled4Gwirelessservices)between2010and2013and,
ifsuccessful,bringmultimegabitsspeedstoamajorityofU.S.homesandpopulation.17Thewireless
servicesoffersharedbandwidth,sothespeedsobtainedbyuserswillbedependentonactualtraffic
loadsateachcellsite,andinparticularonhowmanyusersaresimultaneouslyusingbandwidth
intensiveapplications,suchaswatchingvideoonwirelessInternetconnections.Asoneexample,by
2013VerizonexpectsthatLTEwillprovidesubscriberswith4to12mbpsdownloadsinadeployment
planned
to
reach
all
of
its
covered
population
(at
the
end
of
2008,
Verizons
network
covered
288
million
people18or94%oftheU.S.population).19Otherwirelesscompaniescoverasmallershareofthe
population.EntrepreneurialandindependentWirelessInternetServiceProviders(WISPs)provide
WiMAXtypeservicestoatleast2millioncustomers20inruralareas,includingmanyareasnotcovered
bythenationalwirelesscompanies.
8SeeSection3:UncompletedBroadbandPlans,p.53.
9SeeSection3:UncompletedBroadbandPlans,p.51.
10SeeSection1:1.1Technology,p.17.
11SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.28.
12DOCSISisastandarddevelopedbyCableLabsandstandsforDataOverCableServiceInterfaceSpecification
13SeeSection1:1.1Technology,p.21.
14SeeAppendixA.
15SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.25
16SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.25
17SeeSection3,p.52.
18VerizonCommunications,2008AnnualReport,VerizonCommunicationsInc.,2009,at9.
19SeeSection1:1.1Technology,p.24.
20SeeSection1:1.1Technology,p.24.
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SatelliteCoverage:Satellitebroadbandisavailableatalmostanylocationinthecountrythathasan
unimpededlineofsighttothesouthernskyandthereforecanprovidebroadbandservicetothemost
remoteanddifficulttoservelocations.However,thecurrentsatelliteserviceshaverelativelylow
speedsandlatencyproblems,andcostmorethanterrestrialbroadbandservices.Twonewsatellites
withgreatercapacityareexpectedtobecomeoperationalbeginningin2011,withtheoperators
announcingthateachsatellitewillbecapableofproviding210mbps21service.Transmissionratesmay
average5megabitsperseconddownstreamby2011,22butthebandwidthavailabletoeachuserwill
varyinverselywiththeactualtrafficloadasoverallbandwidthissharedamongallusers.
BroadbandTransmissionRatesFasterWirelineTransmissionRates:MostU.S.homeswillbeservedbyadvertised50megabitper
secondspeedoptionswithinthenextfewyearsfromatleastonesupplier,ascableisexpectedto
covernearlyitsentirefootprint(92%ofhouseholds)withDOCSIS3.023andtelcosexpandFTTHservices.
DSL/fiberhybrids,calledfibertothenode,currentlyareadvertisedasprovidingupto18mbps24
downstreambyAT&T.DSLbonding,nowincommercialdeployment,willallowdoublingspeeds.
IncludinghybridfiberDSL(FTTNDSL)andbondedDSL,60to70millionhomeswillhaveachoiceof
providersforadvertisedspeedsof10megabitsdownstreamorhigher.
FasterWirelessSpeeds:VerizonindicatesthatitsLTEdeploymentwillbecapableofdeliveringpractical
speedsof4to12mbps.However,wirelessbandwidthisshared,anduntilthenetworksaretestedunder
substantialloaditisnotclearwhetherspeedsabove5mbpscanbeobtainedbymorethanafew
subscribersatthesametime.25Thedemandforwirelessbroadbandbandwidthhasbeengrowing
rapidly26
andgrowthisexpectedtocontinue,especiallyifwirelessbroadbandisusedforvideooverthe
Internet.Futurepricingarrangementsforwirelessbroadbandarelikelytogreatlyaffecthowmuchvideo
trafficandotherbandwidthintensiveapplicationsarecarriedonthewirelessbroadbandnetworks.
Improvedsatellitebroadbanddatarates:Satellites,liketerrestrialwirelesssystemssharetheavailable
bandwidthcoveredbyeachspotbeamsothespeedobtainedbyauserwilldependonthesimultaneous
usageofotherusers.ViaSatexpectstooffersharedspeedsof2to10megabitsstartingin2011.27
Upstreamspeeds:Mostconsumerbroadbandservicesareasymmetrical,withdownstreamspeeds
significantlyfasterthanupstreamspeed.28
FTTHofferingscurrentlyprovideadvertisedupstreamspeeds
21SeeSection3:3.3StatusofBroadbandSatellitePlans,p.57.
22SeeSection3:3.3StatusofBroadbandSatellitePlans,p.57.
23SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.28.
24SeeSection1:1.1Technology,p.17.
25SeeSection1:1.1Technology,p.23
26AT&Tsmobiledatatraffichasincreasednearly50timesinthepastthreeyears,presumablylargelyduetothe
iPhone.M.Meekeretal.,Economy+InternetTrends,MorganStanley,2009,at57,
http://www.morganstanley.com/institutional/techresearch/pdfs/MS_Economy_Internet_Trends_102009_FINAL.p
df.27
SeeSection2:ComparisonofAllPubliclyAnnouncedBroadbandPlans,p.48.
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ofaround20mbps,29
althoughfiberhasthecapacityformuchhigherspeeds.DOCSIS3.0upstreamis
onlyincommercialintrialsintheUnitedStates.UntilupstreamDOCSIS3.0isfullydeployed,upstream
cablespeedswillbeintherangeof768Kbpsto5mbps.30
Broadbandadoption
Approximately63%ofU.S.homescurrentlyutilizeawirelinebroadbandservice,afigurethatis
expectedtoincreasequiteslowlytoabout69%in2014duetomarketsaturationatcurrentpricing
levels.31
Investmentanalystsestimatethat31%ofAmericansovertheageof14currentlyusewireless
broadband(broadbanddoesnotincludeShortMessageServicetexting).Thisfigureisincreasing
rapidlyandanalystsexpectwirelessbroadbandadoptionwillprobablypass50%by2013.
Manyhouseholdsandindividualswillsubscribetobothwirelineandwirelessbroadbandservices,justas
theysubscribetofixedandmobilevoicetelephoneservices.Andjustassomeindividualshavecutthe
cordandrelyexclusivelyonamobiletelephoneforvoiceservices,somefamiliesandindividualsmay
choosetogowirelessonlyforbroadband.32
Thevariousbroadbandstimulusplansmayinfluencetheseadoptionforecaststhroughincreased
deploymentofbroadbandtounservedareasandencouragingincreasedadoptionofbroadband
services.
BackbonesBackbonebandwidthtrafficvolumeandcapacitywillgrowroughlyatthesamepace,withaleading
networkequipmentfirmforecastinggrowthinNorthAmericanIPtrafficof39%(CAGR)from2009to
2013.33Forthesameperiod,capacityisforecasttoincreasebyapproximately44%onmajorroutesso
thatmajorroutebackbonecapacityshouldkeepupwithdemandandsignificantproblemsofbackbone
congestiononmajorroutesarenotexpected.However,localizedcongestionmayoccuronlower
capacityroutesincludingconnectionstocelltowersthatexperiencerapidwirelessbroadbandgrowth.
28SeeAppendixA.
29SeeAppendixA:Verizon.
30Seefootnote38.
31Sinceacomputerisaprerequisitetoutilizingawiredbroadbandservice,itmightbemoreaccuratetomeasure
adoptionasapercentageofcomputerequippedhouseholdsratherthanallhouseholds.Asoneinvestment
analystsnoted,Weestimatethereare67MbroadbandsubscribersintheU.S.,representing60%ofoccupied
householdsand~70%ofPChomes.Givenbroadbandavailabilityinroughly90%ofhomes,normallydistributingPC
homesacrossbroadbandavailablehomesputsrealpenetrationatalmost80%.UBSInvestmentResearch,
SortingThroughtheDigitalTransition,UBSAG,2009,at5.32
SeeSection3:CuttingtheCord,p.60.33
SeeSection3:StatusofInternetBackbone,p.53.
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CapitalspendingServiceprovidersrarelybreakbroadbandoutoftheircapitalspendingfiguresamongtheirservice
offeringssoitisdifficulttoisolatebroadbandspecificcapitalexpenditures.34Muchoftheservice
providerscapitalisinvestedinmultipurpose(orconverged)digitalnetworksthatcarryvoice,data
(includingbroadband)andtelevisionservicessimultaneously.
Marketresearchersandinvestmentanalystsrecentlyestimatedthatasmuchastwothirdsofcurrent
investmentsarebeingmadetoprovideandexpandwiredandwirelessbroadband,35andthetrendover
thepastfewyearshasbeengrowing.
Overall,totalindustrycapitalexpendituresareforecastbyanalyststobeabout$60billionfor2009.
Capitalexpendituresareexpectedtodecreaseinthenextfewyearsintothemid$50billionrange
annuallyasthemajornewinfrastructuredeploymentscometoanendandcapitalisdevotedto
expandingthecapacityofthedeployedsystemsratherthanentirelynewdeployments.36
Withrespecttobroadband,capexfortotalbroadbandis$30billionin2009,lowerthanithadbeena
yearearlier.Lookingforward,thecapitalinvestmentsinbroadbandinfrastructureareexpectedto
remainflatatapproximately$30billionperyear.Atthesametime,totalcapexinallthesectors(Telco,
Cable,Wireless,Satellite,andWISP)isexpectedtodeclinefrom$60to$54billion.
34Suchabreakoutwouldalsobesubjecttoallocationofcapitalamongtypesofservicesforjointlyusedfacilities,
suchasbackofficesystemsandbackbonetransportfacilitiesthatcarryconventionaltelephone,wireless,
broadbandandvideotraffic.35
SeeSection1:1.4ExpectedCapitalOutlays/OperatingExpenditures,p.2836
SeeSection3:TotalCapitalExpenditures
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Section1:ListingofAllPubliclyAnnouncedBroadbandPlansAsafirststep,theFCCaskedforalistofallpubliclyannouncedbroadbandplans,
sortedboth(1)bycompanyandby(2)technology(e.g.DSL,cable,fiber(FTTx),fixedwireless,
wireless,satellite),withadescriptionofrelevantdetails,suchas(1)generaldetailsoftheplan,
includingcompany,technology,andtimeline,(2)expectedcapitaloutlaysandoperating
expenditures,(3)expecteddeployment/coveragefootprint,(4)expectedbroadbandperformance
andquality,and(5)expectedARPUs.
Tofindthedetailsofbroadbandplansforpubliclytradedcompanies,ourresearchersexamined
companiesinvestorrelationswebsites,includingtheirAnnualReportsfrom20042008,lookedat
earningscalltranscriptsforthethreequartersof2009,searchedforinvestmentanalystsreportsusing
theThomsonOnedatabase,andfinally,usedgeneralwebsearchestoobtainadditionalinformation.
Obtaininginformationaboutprivatelyheldcompanieswasmoredifficult.Sincemanyofthenonpublic
companiesaresmallcable,telephone,andwirelessinternetserviceprovider(WISP)companiesthat
tendtoservethemoreruralpartsofthecountry,informationwasscarcestfortheunservedand
underservedpopulations.Toobtaininformationaboutprivatecompaniesordivisionsofpublic
companies,theresearchersreviewedcompanywebsites,contactedrelevanttradeassociations,and
performedgeneralwebsearches.Aggregatedinformationaboutsmallercompanieswasobtainedfrom
reportsandsurveysbycable,wireless,andtelephonecompanytradeassociations.
Oncethepreliminaryinformationwascompiled,companyspecificinformationwassenttothesubject
companyaskingforverificationoftheinformationgatheredtothatpoint.Responseswerereceivedfromsomecompaniesandadjustmentsweremadebasedonacompanyssuggestionafterconfirming
theaccuracyoftheadditionalinformation.
Thecompletedatabasewillbeavailableonlineatwww.citi.columbia.edu.TheAppendixtothisreport
containscompanybycompanyinformationextractedfromtheonlinedatabasefor29companieswith
publiclyannouncedbroadbandplans.Theinformationwassortedbycompanyandbytechnology,
wherepossible.Wewelcomefurtherupdatesandadditionalinformationfromanycompanyinvolvedin
theprovisionofbroadbandservicesandwillupdatethedatabaseaccordingly.37
37Updatedandadditionalinformationshouldbesentto:[email protected].
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ThedetailsofthedatabasecanbeseenintheAppendix,whichlistsinformation,includingdetailsof
currentbroadbanddeployments,forthefollowing:
Company Page Company Page
AT&T A2 MediaCom A23
CableOne A6 MetroPCS A24
Cablevision A7 OpenRange A25
CenturyLink A8 Qwest A26
Charter A9 RCN A27
CincinnatiBell A10 SprintNextel A28
Clearwire A11 TMobile A31
Comcast A13 TimeWarnerCable A32
Cox A14 Verizon A33
EchoStarCorp A15 ViaSat A37
Fairpoint A16 WildBlue A38
Frontier A17 Windstream A39
Gilat A18 WISPIndustry A40
Hughes A19 OPATSCO A41
Insight A20 AmericanCableAssoc. A42
Knology A21 NTCA A43
LeapWireless A22
Thefollowingnarrativebroadlysummarizestheinformationinthedatabasewithrespecttosix
categoriesspecifiedbytheFCC:
1)Technology,
2)TimelineforDeployment,
3)ExpectedDeployment/CoverageFootprint,
4)ExpectedCapitalOutlays/Operatingexpenditures,
5)ExpectedBroadbandPerformanceandQuality,
6)ExpectedARPUs.
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1.1TechnologyTheAppendixcanbesortedtoshowthewireline,cable,wireless,andsatellitebroadbandprovidersand
theirplans.ThefollowingsectionbrieflysummarizestheinformationcontainedintheAppendixandthe
onlinedatabaseintermsofthesesubcategories.
WiredBroadband
Asthisdiagramshows,thereareanumberofdifferentwaystoprovidebroadbandservicesoverwired
facilities:
FIGURE1:TYPESOFBROADBANDSERVICES
Source:ForresterResearch,TheShiftfromBroadbandtoWideband,updatedJune12,200938
Wireline Fiber:Mosttelephonecompaniesutilizefiberopticsforasignificantportionoftheir
distributionnetworks.Mostusefibertothenode(FTTN)39andafewutilizefibertothehome(FTTH).40
38D.Williams,TheShiftFromBroadbandToWideband,ForresterResearchInc,2009,
http://www.forrester.com/Research/Document/0,7211,53419,00.html. 39
AlsoreferredtoasFibertotheNeighborhood.40
AlsoreferredtoasFibertothePremises(FTTP).
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However,onlyAT&TandVerizonhaveannounceddetailedplansforfiberdeployment.Verizonintends
topass17millionhomeswithitsFiOSFTTHbytheendof201041andAT&Tplanstopass30millionliving
unitswithitsUVerseservice(ahybridFTTNDSL)by2011.42
Therewereapproximately14.9millionU.S.homespassedbyfiberinMarch2009.43Whilesome
companiesaredeployingbothFTTHandFTTNbroadband,VerizonhasthelargestsharebyfarofFTTH
subscriptions,with3.1millionsubscribers.AT&TandQwesttogetherhave200,000FTTHsubscribers,
primarilyingreenfielddeploymentstonewhousingdevelopments44andanother681companieshavea
totalof1.1millionFTTHsubscribers.45Includedinthese681companiesaresmallruralTier3telephone
companiesthatserve7%oftheircollective8millionsubscribers(560,000locations)withFTTH,46Tier2
telephonecompanies,competitivelocalexchangecarriers(CLECs),realestatedevelopers,andpublic
entitiessuchasmunicipalities.
FIGURE2:FTTHSUBSCRIPTIONSINMILLIONSASOFMARCH30,2009
3.3
1.1
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Verizon,AT&T,Qwest
68 1OtherProviders
Source:RVALLC:FibertotheHome:NorthAmericanMarketUpdate,April200947
41VerizonInvestorRelations,VerizontoDiscussPlanstoDivestWirelineBusinessesin14States,Verizon
CommunicationsInc.,2009,http://investor.verizon.com/news/20090513/20090513_transcript.pdfat4.42
AT&TPublicRelations,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc.,
2009,http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597.43
RVA,FibertotheHome:NorthAmericanMarketUpdate,RVALLC,2009,at6
http://www.ftthcouncil.org/sites/default/files/RVA.FTTH_.Apr09.060109.pdf.44
S.Buckley,FibertotheX:Onesizedoesnotfitall,FierceTelecom,2009,
http://www.fiercetelecom.com/special reports/fiberxonesizedoesnotfitall.45
RVAmaintainsadatabaseofhundreds(over600)ofFTTHprovidersthroughoutNorthAmerica.RVAreportsthat
theycontactalargeportionoftheseproviderseachyeartogetdetailedinformationabouttheirdeployments.
Theirsamplerepresentsover33%ofallsmallerproviderseachyear.46
M.C.Render,WhoWillBuildTheRestofAmerica,RVALLC,at13,
http://www.ftthcouncil.org/sites/default/files/Mike%20RenderWho_Will_Build_the_Rest_of_America.pdf.47
RVA,FibertotheHome:NorthAmericanMarketUpdate,RVALLC,2009,at14
http://www.ftthcouncil.org/sites/default/files/RVA.FTTH_.Apr09.060109.pdf.
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ThenextchartdescribesthenonRBOCprovidersofFTTHserviceinmoredetail.Whilethemajorityof
nonRBOCFTTHserviceisprovidedbyothertelephonecompanies(ILECs),FTTHisalsoprovidedby
facilitiesbasedCLECs,developers,andmunicipalities.Perhapsmostsurprisingisthecommitmentofthe
smallest,usuallyrural,telephonecompaniestofiberdeployment.Astheresearchfirmnoted,
BothVerizonandthesmallerTier3ILECSsaytheyintendtocontinuetobuild[fiber]atafairly
strongpace,evenduring2009.48
Theresearchfirmexplainedthatdriversfortheruralindependenttelcos[todeployFTTH]includeaging
copperlinesinneedofreplacement,theopportunitytodelivervideogivenamorerobustplatform,a
pioneeringtradition,andinsomecases,subsidiessuchasruralbroadbandloanprogramsanduniversal
servicefunds.49
InadditiontotheTier3telephonecompanies,municipalities(particularlythoseinruralareas)have
deployedFTTHsystems,whichareusuallyundertakenafterprivateserviceprovidershavedeclinedto
upgradetheirnetworksorbuildsuchsystems.50Therearecurrently57publicFTTHsystemsintheU.S.,
mostlyinsmallruraltowns.51Thesesystemshaveproventobepopularwithconsumers:Nationwide,
thetakeratesforretailmunicipalsystemsafteronetofouryearsofoperationaverages54percent.52
FIGURE3:NORTHAMERICANNONRBOCFTTHSUBSCRIBERS
54.8%
15.8%
13.8%
13.4%
2.2%
0% 10% 20% 30% 40% 50% 60%
ILEC
CLEC
Developer/Integrator
Municipal/Public
MSO/Cable
Source:RVALLC:MunicipalFibertotheHomeDeploymentsNextGenerationBroadbandasaMunicipalUtility,
October,200953
48Ibid.at14,emphasisadded.
49Ibid.
50D.St.John,MunicipalFibertotheHomeDeployments:NextGenerationBroadbandasaMunicipalUtility,
FTTHCouncil,2009,at1,http://www.baller.com/pdfs/MuniFiberNetsOct09.pdf.51
Forthelistofthe57municipalities,seeibidat5.52
Ibid.at3.53
Ibid.at2.
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ThefollowingtableshowsthatVerizonsFTTHFiOS,(andsimilarFTTHservicesofferedbyothers)
offersthehighestspeedscomparedtotheDSLservicesgenerallyofferedbyothermajorwireline
telephonecompanies:
TABLE1:TELCOWIRELINEBROADBANDAVAILABILITY
Source:GoldmanSachsGlobalInvestmentResearch,Americas:CommunicationServices,September8,2009
FTTHcurrentlyprovidesupstreamspeedsofupto20mbps54,althoughfibercanprovidemuchhigher
speeds.
Wireline DSL:DSLutilizesthetraditionalcoppertelephonewirestodeliverabroadbandsignalto
customershomes.BecauseDSLbroadbandtransmissionratesareinverselyrelatedtothelengthofthe
copperwires,formanyyearstelephonecompanieshavebeendeployingfiberopticstoanelectronic
nodeinaneighborhoodandconnectingtorelativelyshortdistancecopperwiresatthatpoint.So,in
manycases,DSLserviceisprovidedbyahybridfibercopperarchitecture(FTTNDSL).
ThespeedofDSLhasalsoincreased,particularlyoverrelativelyshortdistances,suchasfroma
neighborhoodfibernode.Forexample,VDSL2usedwithFTTNcansupportspeedsinthe2050mbps
range.55Whilemostlocalexchangetelephonecompanies,includingthesmallestandmostrural,offer
DSLserviceintheirserviceareas,onlythelargerpubliclytradedcompanieshavemadewhatcanbe
characterizedasannouncementsabouttheirDSLplans.Thefollowingtelephonecompanieshave
madesuchannouncements:AT&T,CenturyLink(CenturyTel/Embarq),CincinnatiBell,Qwest,Verizon,
andWindstreamCommunications.
Thefollowingchartshowsthenumberofdatasubscriptionsforthelargeregionaltelephonecompanies
(oftenreferredtoastheRBOCs).Foritswirelinesubscriptions,Verizonhasamuchlargerproportion
(almostonethird)ofFTTHsubscriptionscomparedtoDSLsubscriptions.Bycontrast,AT&Thasa
majorityofDSLsubscriptions,withamuchsmallerpercentageofFTTHsubscriptions.ThethirdRBOC,
Qwest,has2.9millionDSLsubscriptions.
54SeeAppendixA:Verizon.
55LightReading,Report:VeryHighSpeedDSL(VDSL2)coulddrivecopperhigherlongterm,ResourceInvestor,
2009,http://www.resourceinvestor.com/News/2009/7/Pages/ReportVeryHighSpeedDSLVDSL2coulddrive
copperhigherlongterm.aspx.
Carriers MillionsofHomes
Passed2009YE
Highestdownstream
Speed
OfferedCurrently
AT&T 22 18mbps
Verizon 15 50mbps
Qwest 3 40mbps
Others 6 1020mbps
Note:Speedsvarybymarket
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FIGURE4:RBOCDATASUBSCRIPTIONSASOF2Q09
6.0
13.9
2.9
3.1
1.6
0
2
4
6
8
10
12
14
16
18
Verizon AT&T Qwest
DSL FTTH/FTTN
Source:CompanyAnnualReports,QuarterlyEarningsReports
ThegraphbelowshowsDSLpenetrationforthelargerTier2,mostlyrural,telcos.Penetration
hassteadilyincreasedintheareasservedbythesecompanies,withDSLbroadbandexpectedto
reach30%oftheiraccesslinesbythefourthquarterof2009.
FIGURE5:RURALTELCOS:DSLPENETRATIONOFTOTALACCESSLINES(1Q08 4Q09E)
Source:BankofAmericaMerrillLynch,3Q09Telecomresultspreviewandmodelbook Duck&cover,Oct.14,
2009at22.
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Interestingly,oneinvestmentanalystfoundthatbroadbandpenetrationasapercentageoftotal
subscribersis30.5%forruraltelephonecompaniescomparedto27.7%withVerizon,AT&TandQwest.56
Thisanalystattributedthedifferencetoruralcarriersgenerallyfacinglowercablepenetrationandaless
competitiveenvironmentthanthemajortelephonecompanies.Theanalystalsopointedoutthatthe
ruralcarriersmayhavelessgrowthpotentialthantheurbancarriersbecauseoflowerpersonal
computerpenetrationinruralhomes.
ThesmallesttelephonecompaniesrepresentedbytheNationalTelephoneCooperativeAssociation
(NTCA)alsohaveahighpenetrationofbroadbandlinesintheirruralareas.NCTAreportedthat:
....oursurveyresultsshowedthatrespondentswereofferingbroadbandserviceinexcessof768
kbpsto83%oftheircustomers.Applyingthatnumbertoourestimateof3.5millionaccesslinesgive
2.9millionbroadbandlinesservedbyNTCAmembercompanies.57
Cable:Cabletelevisioncompanieshavebeensignificantprovidersofbroadbandinternetaccessservices
formanyyearsandcurrentlyprovideinternetaccessto37%ofhouseholds(versus29%fortelco
broadband).58Theygenerallyusehybridfibercoaxarchitecture:fiberopticsbringscableservicestoa
neighborhoodnodeatwhichpointconnectionsaremadetocoaxialcablesthatservethecustomers
premises.IncontrasttotelecommunicationcompaniesFTTHandFTTN,clustersofhybridfibercoax
userssharethecapacityofeachnodesospeedsvarydependingonthesimultaneoususebyothers
servedbythesamenode.59Theoretically,mostcablebroadbandsystemsarecurrentlycapableof
providingdownloadspeedsofatleast10mbps.60
56MorganStanleyResearch,TelecomServices,MorganStanley,2009,at42.
57DataprovidedfromNTCAtoCITI,2009.NTCAalsonotedthatthemarginoferrorcouldpotentiallybefairly
large.58
J.Armstrongetal.,Americas:CommunicationsServices,TheGoldmanSachsGroupInc,2009at15.59
D.Williams,TheShiftfromBroadbandtoWideband,ForresterResearchInc,2009,
http://www.forrester.com/Research/Document/0,7211,53419,00.html. 60
Ibid.
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Asthefollowingchartillustrates,thetopfivecableMultipleSystemOperators(MSOs)clearlydominate
innumberofpassedhomes.
FIGURE6:HOMESPASSEDBYCABLECOMPANIES
50.6
26.8
11.39.4
4.8 3.92.8 1.9 1.7 1.4 1.3 0.9
0
10
20
30
40
50
60
C om cast TW C C har te r C ox C ab le vi si on Br igh th ou se M ed iac om Su dd en li nk R CN C ab leOn e I nsi gh t Kn ol ogy
Source:CompanyAnnualReports,QuarterlyEarningsReports,AnalystReport
ThemajorMSOscancurrentlysupplybroadbandservicestoallortonearlyallofthehomesthatthey
pass,asillustratedbythistable:
TABLE2:CABLEBROADBANDDEPLOYMENTANDHOMESPASSED
Source:StifelNicolausInvestmentBankingpresentationtoPennsylvaniaTelephoneAssociation,July20,2009,61
companyfilings,companypressreleases
61F.Gallagher,withouttitle,StifelNicolausCorp,2009,at4,
http://www.patel.org/Convention/2009/Stifel%20Nicolaus%20Presentation%20(PTA%202009).pdf
Company CableBroadband
Deployment(asofMarch31,2009)
HomesPassed
(millions)
Cablevision 100% 4.8
Mediacom 100% 2.8
TimeWarnerCable 99.5% 26.8
Comcast 99.4% 50.6
Charter 94.9% 11.3
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Thefollowingchartdescribesthepercentageofthehomespassedwhichcurrentlytakebroadband
servicesfromthetenlargestcablecompanies:
FIGURE7:MSOSBROADBANDSUBSCRIPTIONPENETRATIONOFHOMESPASSED(MOSTCURRENT
NUMBERS,2008OR2Q2009)
30%33%
26%
43%
52%
27%
18%
28%
35%
21%
0%
10%
20%
30%
40%
50%
60%
Comcast TWC Chart er Cox Cable vision Me diacom RCN CableOn e In sight Knology
Sources:Companies2008annualreports,companiessecondquarter2009reports,analystreports
Cablecompaniesthathaveannouncedfuturebroadbandplansinclude:Cablevision,Charter
Communication,Comcast,CoxCommunications,Knology,RCN,andTimeWarnerCable.Manycable
companiesarecurrentlyintheprocessofupgradingfromDOCSIS2.0or1.1toDOCSIS3.0protocols.
CablebroadbandupgradedtoDOCSIS3.0isbecomingwidelyavailabletodayatadvertisedspeedsas
highas50megabitsdownstream(withonefirmadvertising101megabitspeeds62).
Havingdonethefiberbuildoutstocustomersneighborhoodsoverthepast1015years,upgradingto
theDOCSIS3.0broadbandstandardisarelativelyquickandinexpensivetaskforcablecompanies
comparedtothetelcos'currentinfrastructuredeploymentsofFTTHorFTTN.ForexampleCharterhas
indicatedthatthecostofupgradingitsnetworktoDOCSIS3.0(includingthecablemodemtermination
systemandroutinggearinitsnetworkbutnotnewcablemodemsatcustomerpremises)willbeabout
$8to$10percustomer.63AninvestmentanalystrecentlyestimatedthatthecostofDOCSIS3.0
62T.Spangler,CablevisionToBlastOut101mbpsInternetService,MultichannelNews,2009,
http://www.multichannel.com/article/210164 Cablevision_To_Blast_Out_101_mbps_
Internet_Service.php?rssid=20059&q=Cablevision+To+Blast+Out+101mbps+Internet+Service.63
D.Williams,TheShiftFromBroadbandToWideband,ForresterResearchInc,2009,
http://www.forrester.com/Research/Document/0,7211,53419,00.html.
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homespassedorcustomerssubscribingtobroadband.AnACAsurveyfoundthatfouradditional
companieshaveplanstodeployhighspeedinternetservicewithinayearand36companieshaveno
planstodeployhighspeedinternetservice.Duringatelephoneinterview,anexpertonthecable
industrysbroadbandcoverageestimatedthatthesmallruraltelephonecompaniesarecapableof
providingbroadbandserviceto75%ofthehomestheycollectivelypass.75
Wireless:Arangeofwirelessbroadbandtechnologiesarecurrentlyinusebythevariouscellular
telephonecompanies.Secondgeneration(2Gand2.5G)digitaltechnologywasthefirsttosupport
internetaccessandthatsecondgenerationisbeingrapidlysupplantedbythirdgeneration(3G)wireless
evenaspreparationsarebeingmadeforthedeploymentof4G.
Thenextchartindicatestheexpectedaveragedownstreamspeedsforthevarious3Gand4G
technologies.
FIGURE8:EXPECTEDDOWNSTREAMSPEEDSOF3GAND4GWIRELESSBROADBAND(MBPS)
Source:BofAMerrillLynchGlobalResearchestimates,companyfilingsandpresentations.Speedsarebasedon
companycommentaryandmarketingmaterialandmaydifferfromuserexperiences,whichareimpactedby
numberofusers,distancefromcellsite,andtopographyamongotherfactors.Theoreticalspeedsarehigher.
AdaptedFrom:BankofAmericaMerrillLynch,4GFootraceCarriersrefinedeploymentplans,Sept.30,2009at6.
However,asexplainedinthesourcenoteabove,wirelessbandwidthisshared,anduntilthenetworks
aretestedundersubstantialloaditisnotclearwhetherspeedsabove5megabitscanbeobtainedby
morethanafewsubscribersatthesametime.76
75InterviewwithSNLKagan,Oct,7,2009.
76S.FlanneryandB.Swinburne,U.S.Cable,Satellite,Telecom3Q09/09/10Outlook,MorganStanley
Research,2009at17:4Gwirelessnetworksofferamajorstepfunctioninwirelessbroadbandcapabilities3G
todaytypically0.51.5mbpsWiMAXtoinitiallydeliver24mbpsLTElikelytodeliver36mbps.
0 2 4 6 8 10 12
EVDORev.A
HSPA3.6
HSPA7.2
WiMAX
LTE
3G
4G
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Anumberofnewwirelessbroadbandtechnologiesareinvariousstagesofdeployment,planningand
testing.MajorcompaniesthathavemadebroadbandwirelessannouncementsincludeAT&TWireless,
Cablevision,CenturyLink(themergedCenturyTel/Embarq),CincinnatiBell,Clearwire,Comcast,Cox
Communications,FrontierCommunications,MetroPCS,Sprint,TMobileandVerizon.Significant
initiativesincludethedeploymentof4Gwirelesssystemsthatareexpectedtoproviderelativelyhigh
speedbroadbandserviceswithdownloadspeedsinthe412mbpsrange,aslongassystemsarent
overloadedwithtoomanysubscribersusingbandwidthintensiveapplications.77
4GincludesLongTermEvolution(LTE)forcellulartelephonesystems.Itiscurrentlybeingtestedandis
projectedtoreach25to30marketsby2010.By2013Verizon,currentlythelargestwirelessservice
provider,expectstocoverallofitsPOPsover90%ofthepopulationwithLTE.78Another4G
technologyisknownbroadlyasWiMAX.OneearlynationalcompanyusingWiMAX(Clearwire)plans
tolaunch4Gservicein25marketsandbecapableofserving30millionpeoplebytheendof2009.79
HundredsofsmallerWirelessInternetServiceProviders(WISPs)havedeployedwireless(mostly
WiMAX)internetserviceinruralareasanditisexpectedthattheywillcontinuethedeployments.
However,manyoftheseWISPcompaniesaresmallprivateventuresandtendtobesecretiveabout
theirdeploymentplans.80The350membersoftheWISPAssociationfarfromthetotalnumberof
WISPsprovidefixedbroadbandwirelessservicestoover2millionlocations.81
NotallWISPsaresmall,independent,localbusinesses.OpenRangeiseffectivelyanationalWISPfunded
inpartbya$267millionBroadbandAccessLoanfromtheDepartmentofAgricultureand$100millionof
privateinvestment.ItplanstouseWiMAXtoinitiallyserve6millionpeoplein546communitiesin17
states82andrecentlybeganofferingitsfirstserviceswitha$38.95permonthbroadbandservice.83
77Verizonreportsarangeofdownloadspeedsfrom812mbps,andClearwiresWiMaxwillofferupto6mbps.See:
K.Brown,Verizon:LTEspeedwillbe812mbps,OneTouchIntelligenceLLC,2009,
http://www.onetrak.com/Uploads/scott/WIRELESSTRAK%20 %20July%202009.pdf. 78
S.Ragan,Verizon:LTEconfirmedonconferencecallbillionsspentonnetwork,TheTechHerald,2009,
http://www.thetechherald.com/article.php/200934/4266/VerizonLTEconfirmedonconferencecall
%E2%80%93billionsspentonnetwork.
And:P.Goldstein,Verizon'sMelonedetails4Gplansforbackhaul,antennasandbackuppower,FierceWireless,
2009,http://www.fiercewireless.com/story/verizonsmelonestressescollaboration4g/20090922.79
ClearwireCorporationInvestorRelations,ClearwireReportsSecondQuarter2009Results,Clearwire
Corporation,2009,http://investors.clearwire.com/phoenix.zhtml?c=198722&p=irol
newsArticle&ID=1319734&highlight=.80
AnassociationofWISPshaspublishedamapanddirectorywhichindicateswheresomeWISPsarecurrently
offeringservices.See:WISP,WelcometoWISPDirectory,wispdirectory.com,
http://www.wispdirectory.com/index.php?option=com_mtree&task=viewlink&link_id=300&Itemid=53.81
FilingofWISPAinFCCGNDocket0951,2009,at12.82
OpenRangeCommunications, OpenRangeCommunications Secures$374MilliontoDeployWireless
BroadbandServicesto546RuralCommunities,OpenRangeCommunications,2009,
http://www.openrangecomm.com/pr/pr_022009.html. 83
OpenRangeCommunications, PerfectPackageHighSpeedInternet,DigitalPhone,andEMail,OpenRange
Communications,2009,http://www.openrangecomm.com/packages.html.
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Satellite:Broadbandservicestoresidencesandsmallbusinessesviacommunicationssatellitesare
offeredbyEchoStar,Gilat,Hughes,ViaSat,andWildBlue.84Themostattractiveattributeofsatellite
broadbandisthatitisavailableinalmostanylocationintheUnitedStatesthathaselectricalpowerand
alineofsighttothesouthernskywheresatellitesareparkedingeostationaryorbitsovertheequator.
However,thelatencycausedbythetimerequiredsendingasignaltothesatellitesandbackmeansthat
satellitesarelesssatisfactorythanterrestrialbroadbandservicesforlatencysensitiveapplicationssuch
asvoicetelephonyandinteractivegaming.
Satellitebroadbandisalsomoreexpensivethanterrestrialbroadbandservices:inadditiontopayinga
monthlysubscriptionchargethatcanbetwicethecostoftypicalterrestrialservices,theusermustalso
purchaseasatellitedishatpricesthatrangefrom$149.95to$299.99.
AnewgenerationoftwowayHighThroughput(HT)satellitesisbeingbuiltforlaunchbeginninginearly
2011.Thesenewspotbeamsatelliteswillhave100gbpsofcapacity,whichis1825timesthecapacity
ofsatellitesthatwerelaunchedjustafewyearsago.85
1.2TimelineforBroadbandPlansForcompetitivereasonsandtocomplywithsecuritieslawsdealingwithdisclosuresofmaterial
information,mostcompaniesarereticentaboutreleasingdetailsofthetimingoftheirfuturebroadband
deploymentplans.Whereinvestmentanalystshavemadeforecastsforthemajorcompanies
deploymentplans(amatterofgreatinteresttoinvestors),thecompaniesthemselveshavenotverified
theanalystsforecasts.Totheextentcompaniesdomakeannouncements,theplanstypicallydonot
extendpast2011,andmostlyonlycoverthenextyear.
KnowndetailsofpublicplansandtimelinesaresummarizedinthefollowingdiscussiononExpected
Deployment.TheAppendixandthediscussionofanalystprojectionsinSection3ofthisreportalso
provideinsightsintodeploymenttimelines.
1.3ExpectedDeployment/CoverageFootprintInvestmentanalystsandotherresearchfirmsestimatecurrent(mid2009)wirelinebroadband
penetrationat66%ofallU.S.households,with29%bytelecommunicationscompaniesand37%by
cablecompanies:86Asthischartillustrates,bysuchestimatesapproximately20%ofU.S.householdsdo
nothaveanyinternetaccessand14%accesstheinternetwithdialuptelephoneservice:
84WildBluehasbeenacquiredbyViaSat.
85F.Valle,SatelliteBroadbandRevolution:HowTheLatestKaBandSystemsWillChangeTheRulesOfThe
Industry.AnInterpretationoftheTechnologicalTrajectory,SpringerScience+BusinessMedia,2009,
http://www.springerlink.com/content/x0x51281h3520202/fulltext.pdf.86
LeichtmanResearchGroup,Under650,000addbroadbandinthesecondquarterof2009,LeichtmanResearch
GroupInc,2009,at2,http://www.leichtmanresearch.com/press/081709release.pdf.Leichtmanestimates
69,902,289totalbroadbandsubscribersatendof2Q2009,whichisroughly60%ofU.S.households.
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FIGURE9:INTERNETPENETRATIONOFU.S.HOUSEHOLDS
1520 24
28 3235 37 39 40
418
12
17
22
2628
2931 32
33
39
31
23
20
1816
1412 10 9
38 37 3630
24 2120 19 19 18
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E
Cable Telcobroadband Dialup+Others NonInternethouseholds
Adaptedfrom:GoldmanSachsGlobalInvestmentResearch,Americas:Communications,Sept.8,2009at15.
Companiesdonotprovidedetailedinformationabouttheirdeploymentplansandcoveragefootprints.
Rather,pressreleasesandothersortsofannouncementsgenerallylistpercentagesoffootprintcovered,
additionalcustomers,andadditionalgeographicareastobeserved.Investmentanalystshavenoted
that,
Withinthetelcos,Verizonhasthemostaggressiveplantoupgrade50%oftheirfootprinttoFTTH
(fibertothehome)by2010,whichenablesbroadbandspeedsupto50mbps,alongwitharobust
videoproduct.AT&TalsohasaFTTN(fibertothenode)video/broadbandplantoreach60%ofits
footprintby2011andthecompanyhastalkedaboutpushingcoverageto80%longerterm.Forthe
RLECs(e.g.,Qwest,Embarq,Frontier),thefocushasbeenmoreonbroadbandupgradessofar
althoughthiscouldpotentiallychangewithIPTVcoststrendingdownovertime.87
Thefollowingareexamplesofthecoveragedetailsprovidedinthebroadbanddeployment
announcementsnotedintheAppendix:
AT&T
Uverse:
Plans
to
pass
30
million
living
units
in
2011.88
87M.Wienkes,FearsOverthetop?EarlystagebroadbandvideoinvestingacrossTech,Media&Telecom,The
GoldmanSachsGroupInc,2009,at17.88
AT&T,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc,2009,
http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597.
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AT&TWireless:AT&Ts3Gmobilebroadbandnetworkisnowavailableinnearly350U.S.
majormetropolitanareas,withabout20additionalmetroareasplannedfordeploymentin
2009."Deploymentofabout2,100newcellsitesacrossthecountry.Tosupportits
HSPA+deployment,AT&Tisgoinghardandheavybringingfibertocellsites.Thecompany
hasapproximately40%ofitscellsitesnationallywiredwithfiberbuttheseareconcentrated
inmetroareasthatgeneratecloserto60%+ofthecompanystraffic.Thecompanyis
targeting100%ofcellsiteswithHSPA+by2H2011.89
CenturyLink:ThemergedcompanywillofferretailbroadbandInternetaccessserviceto100
percentofitsbroadbandeligibleaccesslineswithinthreeyearsoftheTransactionClosing
Date.90
Clearwire:30millioncoveredpopulationwith4Gservicebytheendof200991upto120
millionsubscribersbytheendof2010.92Chicago,DallasandPhiladelphiaareexpectedto
launch
4Q.
Charlotte,
Seattle
and
Honolulu
are
expected
to
be
converted
to
WiMAX
in
4Q.
ComcastDOCSIS3.0:Hopingtoreach80%ofhomespassedbytheendof2009(equivalentto
40millionhomesandbusinessespassed),100%by2010.93Comcastwireless(service
providedbyClearwire)waslaunchedinPortlandinJuneandthecompanyisplanningto
extendservicetoChicago,Philadelphia,Washingtonstatearea,andothersbeforetheend
of2009.94
OpenRange:Planstoextendserviceto546ruralcommunitiesinseveralstates.Attheendof
thefiveyearproject,thecompanyplanstocoversixmillionpeople.95
Verizon:PlanstohaveFiOScoverageinabout70%ofitstelecomfootprintsubsequenttothe
Frontiertransaction.96
89D.W.Bardenetal.,Bandwidthanywherecomingtogetherwith4G,UverseBankofAmericaMerrillLynch,
2009,at6.90
Itisnotclearif100%coverageincludesresaleofsatellite.91
ClearwireCorporationInvestorRelations,ClearwireReportsSecondQuarter2009Results,Clearwire
Corporation,2009,http://investors.clearwire.com/phoenix.zhtml?c=198722&p=irol
newsArticle&ID=1319734&highlight=.92
Ibid.93
SeekingAlphaTranscripts,ComcastCorporationQ22009EarningsCallTranscript,SeekingAlpha,2009,
http://seekingalpha.com/article/154406comcastcorporationq22009earningscalltranscript.94
LosAngelesTimes,Comcasttolaunchwirelessbroadbandtoday,LosAngelesTimes,2009,
http://articles.latimes.com/2009/jun/30/business/ficomcastwimax30.95
OpenRangeCommunications, OpenRangeCommunications Secures$374MilliontoDeployWireless
BroadbandServicesto546RuralCommunities,OpenRangeCommunications,2009,
http://www.openrangecomm.com/pr/pr_022009.html. 96
ThomsonStreetEvents,VZ VerizonatOppenheimer&Co.Communications,Technology&
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SmallTelcos:BothVerizonandsmallerTier3ILECssaytheyintendtocontinuetobuild[FTTH]
atafairlystrongpace,evenduring2009.97
Satellite:Mostsatellitebroadbandcommunicationscompaniescoverthecontiguous48states
andsomeoffercoverageofAlaska,Hawaii,andPuertoRicoaswell.ViaSatclaimsthatthe
ViaSat1,oneofthenewgenerationofHighThroughputsatellitesscheduledtobe
operationalin2011willhavethecapacitytoservearound2millionsubscribersacrossthe
country.98
Cable:OneanalystexpectsDOCSIS3.0willbeavailableby2013tonearlyall99the92%100of
U.S.homesservabletodaybycablemodems.
1.4ExpectedCapitalOutlaysOverallCapex
In2008,thetelecommunicationsserviceproviders,includingtelephone,wirelessandcablecompanies
investedabout$62.8billion.101 Table3illustratesthebreakdownofthistotalamongsixindustry
sectors:
InternetConference,ThomsonReutersStreetEvents,2009,at3,
http://investor.verizon.com/news/20090811/20090811_transcript.pdf.97
RVA,FibertotheHome:NorthAmericanMarketUpdate,RVALLC,2009,at14
http://www.ftthcouncil.org/sites/default/files/RVA.FTTH_.Apr09.060109.pdf.98
ViaSat,ViaSatConferenceCalltoDiscussViaSat1Contract,ViaSatInc,2008,
http://investors.viasat.com/eventdetail.cfm?eventid=48902.99
T.McElgunn,DOCSIS3.0DeploymentForecast,Pike&Fischer,2009,
http://www.broadbandadvisoryservices.com/researchReportsBriefsInd.asp?repId=662.100
Nationally,92%ofU.S.homestodaycouldobtainbroadbandservicefromcableTVcompanies,accordingtothe
cableindustrystradeassociation.See:NCTA,IndustryData,NationalCable&TelecommunicationsAssociation,
2009,http://www.ncta.com/Statistics.aspx.
TheresearchfirmSNLKaganthatdevelopedthisnumberexplainedinatelephoneinterviewwithCITIresearchers
onOctober6,2009thatithasveryaccuratedatawithrespecttoallthelargemultiplesystemoperatorsthat
typicallyservethenonruralareas.Mostoftheselargefirms,whichpassedatotalof110millionhomesatyear
end2008,canprovidebroadbandserviceto100%ornearly100%ofthehomestheypassandaccountfor89%in
the92%figure.However,informationaboutthebroadbandcapabilitiesofthesmallindependentcablecompanies
thattypicallyserveruralareasisbothlessavailableandlessreliableso,basedsomesurveysandtheirknowledge
ofthecableindustry,theresearchfirmassumesthatthesesmallcompanies,whichaccountfortheremaining3%
inthe92%,canprovidebroadbandservicetoonly75%ofthehomestheypassintheircombinedservicesareas.101
Skylinebelievesthatitsresearchaccountsforabout98%ofthetotalU.S.telecommunicationspublicnetwork
infrastructurecapitalexpenditures.SkylineMarketingGroup,CapexReport2008AnnualReportat16.
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TABLE3:AGGREGATECAPEX2008 $62.8B
$Billion Percent
RBOCWireline 25.12 40%
OtherTelcoWireline 2.51 4%
CableMSOs 11.30 18%
CLECs 1.25 2%
IXC102 1.25 2%
Wireless 21.35 34%
Total 62.78 100%
Adaptedfrom:SkylineMarketingGroup,CapexReport:2008AnnualReport,Exhibit4
Note:Doesnotincludespectrumlicenseauctionpayments.
In2009,totalcompanycapitalexpendituresforthemajortelcos,majorcablecompanies,andmajor
wirelesscompanies,ofwhichbroadbandcapitalisonlyapart,isexpectedbyinvestmentanalyststobe
as
follows:
TABLE4:TOTALCAPITALEXPENDITURESOFLARGESTCOMPANIES($BILLIONS)
Source:AverageofanalystdataprovidedtoCITI,Telco:AT&T(excludingwireless),Verizon(excludingwireless),
Qwest;Cable:Comcast,TimeWarner,Cox,Cablevision,Charter,Mediacom,andInsight.Wireless:AT&T,Verizon,
Sprint,TMobile.
Note:Doesnotincludespectrumlicenseauctionpayments.
Thesetotalswillbeincreasedby618%,dependingonthesector,inSection3ofthisreporttoaccount
forthesmallercompaniesnotincludedinthefinancialanalystscoverageofpubliclyheldcompanies.
Telco:In2008telcocompaniescoveredbyanalystshadatotalcapitalexpenditureof$26billion.This
totalincludesthewirelinebroadbandexpendituresforAT&T,VerizonandQwest. In2009,thewireline
capitalexpendituresareestimatedat$21billion.
Cable:Totalcableindustrycapexfor2008wasestimatedat$14.6billionbytheNationalCableand
TelecommunicationsAssociation(NCTA),103about$1.5billionmorethanthecapitalexpendituresofthe
largestMSOsnotedinTable4above.TheNCTAnumbersarehigherthanthoseofthefinancialanalysts,
partlybecausetheyalsoincludesmallercableoperatorsinvestments.
102Companiesincludedinthiscategory(providersofwholesaleandretailinterexchangeservices)were:Level3,
GlobalCrossing,QwestLongDistance,SprintLongDistance103
NCTA,CableIndustryCapitalExpenditures19962008,NationalCable&TelecommunicationsAssociation,
2009,http://www.ncta.com/Stats/InfrastructureExpense.aspx,citingSNLKagan.
2008 2009
Telco 26,283 21,060
Cable 13,148 11,817
Wireless 19,520 18,597
Total 58,951 51,474
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Wireless:Wirelesscompaniesspent$19.5billionin2008and$18.5billionin2009.Thesecapextotals
donotincludespectrumlicensefees. Therehasbeenasignificantdropoffincapexduringtheyear,
partlyduetotheeconomicdownturn. Thesefigurescoverthelargestfourcompaniesinthesector:
AT&T,Verizon,Sprint,andTMobile. AT&TandVerizonalonespent$13.5billion. Clearwirestatedthat
itwouldspendbetween$1.5and$1.9billiontodeployits4Gnetworkin2009.104
BroadbandCapex
Howmuchofthisinvestmentgoestowardsbroadband?AT&Trecentlyestimatedthat:
ApproximatelytwothirdsofAT&T's2009investmentwillextendandenhancethecompany's
wirelessandwiredbroadbandnetworkstoprovidemorecoverage,speedandcapacity.105
Thefollowingtableillustrateshowthemajortelephonecompanieshaveshiftedwirelinecapitalfrom
theirlegacytelephonenetworkstowiredbroadband,withbroadbandcapexexpectedtoreachnearly
60%oftotalwirelinecapexin2011.
TABLE5:RBOCWIREDBROADBANDCAPEX($BILLION)
Network 2006 2007 2008 2009E 2010E 2011E
Legacy 16.3 15.2 13.0 10.5 10.5 10.0
Broadband 7.2 10.7 11.9 11.5 12.5 14.0
Total 23.5 25.9 24.9 22.0 23.0 24.0
%broadband 30.6% 41.3% 47.8% 52.3% 54.3% 58.3%
Adaptedfrom:SkylineMarketingGroup,CapexReport:2008AnnualReport,atExhibit14andtextat18,20,23.
104WirelessWeek,ClearwireDefiesSkeptics,PlansHeftyCapexin2009
http://www.wirelessweek.com/News/2009/03/Clearwire DefiesSkeptics,PlansHeftyCapExin2009/105
AT&T,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc.,2009,
http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597. AT&Tsestimateoftwothirds
isconsistentwiththeobservationofamarketresearchfirmthatbroadbandremainstheprimarycapexdriverfor
200809because,
Wirelineandwirelesscarriersalikearesteppinguptheirnetworkinvestmentstomakehighspeed
Internetconnections,andassociatedtripleplaybundles,availabletoagreaterportionoftheir
customers.
Thefirmaddedthat,therehasbeenapronouncedshiftincapextowardsnew,broadbandplatforms,andaway
fromnarrowbandsystems.SkylineMarketingGroup,CapExReport2008AnnualReportat1.
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TheAppendixincludesinformationonbroadbandrelatedcapitalexpenditures. Thefollowingare
examplesbycompany:
AT&Tplanstospend$17billionto$18billioncapitalexpendituresin2009.106 Capitalexpendituresin
thewirelinesegment,whichrepresented69.4%ofourcapitalexpenditures,increased2.5%in2008,
primarilyduetothecontinueddeploymentofourUverseservices.107
InJanuary2009AT&TsCEO
announcedthatthecompanywouldreduceitsUVersedeploymentin2009byonethirdbyshifting
itsgoalofpassing30millionhomesbytheendof2010totheendof2011.Thecompanysoverall
capitalexpenditureswereonlybeingreducedby15%.108
Sprintsaidthat:Wirelesscapitalexpenditureswere$227millioninthesecondquarterof2009,
comparedtoalmost$200millioninthefirstquarterof2009andalmost$400millionspentinthe
secondquarterof2008.Theyearoveryeardecreaseinwirelesscapitalspendingreflectsreduced
capacityneedsduetofewersubscribers.Thecompanycontinuestoinvestcapitalinthequalityand
performanceofitsnetworks.109
Comcast:ComparedtoQ2/08,directcostsforhighspeedInternetdeclined14%inQ2/09,totalcapital
expendituresdecreased14%to1.1billion.Thecompanyexpectscapextomodestlyincrease
duringsecondhalfofyearastheyexpanddeploymentofWiBand.110InQ4/08projections,itwas
forecastthatthecompanywouldinvestapproximately$400to$500millionofcapitalinDOCSIS3.0
andAllDigital111projects.112
Verizonstotalcapitalexpenditurestotaledroughly$17billionUSDin2008.Thecompanysexecutive
vicepresidentandchieftechnologyofficerRichardLynchnotedthatLTEnetworkcostswouldbe
withinthecompanysoverallprogramasspendingshiftsfromoldertechnologiestonewstrategic
106AT&T,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc.,2009,
http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597.107
AT&T,StrongWirelessGrowth,ContinuedCostDiscipline,SolidFreeCashFlowHighlightAT&T'sSecond
QuarterResults,AT&TInc.,2009,http://www.att.com/gen/press
room?pid=4800&cdvn=news&newsarticleid=26961.108
T.Spangler,AT&TToCutCapitalSpendingIn2009,MultichannelNews,2009,
http://www.multichannel.com/article/189778 AT_T_To_Cut_Capital_Spending_In_2009.php.109
SprintNextel,SprintNextelReportsSecondQuarter2009Results,SprintNextelCorp.,2009,
http://newsreleases.sprint.com/phoenix.zhtml?c=127149&p=irol
newsArticle_newsroom&ID=1313470&highlight=.110
SeekingAlphaTranscripts,ComcastCorporationQ22009EarningsCallTranscript,SeekingAlpha,2009,
http://seekingalpha.com/article/154406comcastcorporationq22009earningscalltranscript.111
T.Spangler,Comcast'sProjectCavalry:TheMarchof28MillionDTAs,MultichannalNews,2009,
http://www.multichannel.com/blog/BIT_RATE/13129
Comcast_s_Project_Cavalry_The_March_of_28_Million_DTAs.php.112
SeekingAlphaTranscripts,ComcastCorporationQ42008EarningsCallTranscript,SeekingAlpha,2009,
http://seekingalpha.com/article/121299comcastcorporationq42008earningscalltranscript.
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initiatives,suchasLTE.113InSeptember2009,VerizonsChairmanandCEOsaidOurcapitalintensity
on[FiOS]willstarttodropsignificantlyoverthenexttwoorthreeyears.114
Satellite:SatellitecommunicationcompaniessuchasViaSatInc.(ViaSat1)andHughes
Communications,Inc.(Jupiter)areplanningtolaunchnewsatellitesin2011(ViaSat1)and2012
(Jupiter),respectively.Satelliteconstruction,launchandinsurancecancostupwardsof$400million
persatellite.115
RBOCs:Accordingtoaninvestmentanalyst,WeestimateBellwirelinecapitalspendingwilltotalabout
$23.1billioninFY09,downabout14%Y/Yfrom$26.8inFY08.ThelargestculpritsbeingAT&Ts1
yeardelayofUversedeployment,thelackofY/Ylonghaulnetworkupgradespendingandeconomic
conditions.116
RuralTelcos:Thesameinvestmentanalystssaid,Weproject3Q09capitalexpenditureat14%of
revenues,forourcoveredruralwirelinecarriers,about9bpsabove3Q08resultsduetoeconomic
conditionsandgrowthcapex.Generally,weexpectthebulkofcapextobedirectedtowardexisting
networkmaintenance,withcarriersfocusedonexpandingtheavailabilityofDSLservicesand
meetingsuccessbasedinvestmentrequirements.117
1.5ExpectedBroadbandPerformance/QualityMostbroadbandserviceprovidersdescribetheirbroadbandperformanceintermsofupstreamand
downstreamspeed.Speedclaims,however,aredifficulttoverifyandcompanieshavedifferentnumbers
intermsofadvertised,actual,throughput,andaveragespeeds.Theadvertisedandtheoreticalspeed
capabilitiesofthevarioustechnologieshavebeenbroadlydescribedinthepreviousdiscussionofeach
technology.
TheAppendixincludesinformationsuchasthefollowing,whichprovidessomeindicationabout
performanceexpectations.Someexamplesinclude:
AT&Twireless:...theoreticalpeakspeedsof7.2mbps.Typicalrealworlddownlinkanduplinkspeeds
experiencedbycustomerswithupgraded3Gwillbelessthanthetheoreticalpeakandwillvary
113VerizonPublicRelations,VerizonWirelessFostersGlobalLTEEcosystemasVerizonCTODickLynchAnnounces
DeploymentPlans,VerizonCommunicationsInc.,2009,
http://investor.verizon.com/news/view.aspx?NewsID=969.114
VerizonPublicRelations,VerizonatGoldmanSachsCommunacopiaConferenceNewYork,Verizon
CommunicationsInc.,2009,http://investor.verizon.com/news/20090917/20090917_transcript.pdfat4.115
P.B.Selding,ViaSattoBuyWildBluefor$568Million,SpaceNews,2009,
http://www.spacenews.com/archive/archive08/kabandside_0114.html. 116
BankofAmericaMerrillLynch,3Q09TelecomresultspreviewandmodelbookDuck&cover,Bankof
AmericaMerrillLynch,2009,p.19.117
Ibid,p.23.
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basedonanumberoffactors,includinglocation,device,andoveralltrafficonthelocalnetworkata
giventime.118
VerizonFiOS:Speedsof50mbpsdownstreamand20mbpsupstream.119
ComcastDOCSIS:Comcastoffersspeedsupto50mbpsdownstreamandupto10mbpsupstream.
Satellite:Downloadspeedsaretypicallyfivetosixtimesfasterthansatelliteuploadspeedsandrange
from512kbpsto1.5mbpsdownstreamand100kbps300kbpsupstream.120
Overcominglatencyandsignallossduetoprecipitationhavebeenmajorperformanceandquality
obstaclesforsatelliteproviders.Geostationarysatellitecommunicationsexperiencelatencyduetothe
longdistancesthesignalmusttraveltogeostationaryorbitandbacktoearth.Thetotalsignaldelay,
includinglatencyintheconnectingterrestrialnetworks,canbeasmuchas500900millisecondsor
more,makingsomeapplicationsunusable(interactivegaming)ordifficult(twowayvoiceorvideo
conferenceconversation).However,latencyistypicallynotnoticedbytheuserduringbasicinternetuse
(webbrowsing,Email).Satellitecommunicationsarealsoaffectedbymoistureandvariousformsof
precipitation(rainorsnow),aconditioncalledrainfadeorsnowfade.
1.6ARPU(AverageRevenueperUser)TheARPUsforvariousprovidersarenotedintheAppendixandaresummarizedbelowwithrespectto
thevarioustechnologiesemployed.AlthoughtheARPUshavebeenlistedacrosstechnologies,ina
mannerconsistentwiththerestofthisreport,itshouldbenotedthatthepriceforbroadbandservice
variesbymarketandbyspeedoftheservicesoARPUdoesnotnecessarilyreflectpricespaidany
individualconsumer.
TelcoDSL:Overalltelcobroadband(DSLandfiber)ARPUwasestimatedtobe$36.121Therangeof
ARPUs,inthecasesforwhichdatawasavailable,spansalowof$32.42forFairpoint,through$39.61
forAT&T.
TelcoFiber:Presently,fibertothehomeismainlyprovidedbyVerizonwithitsFiOSservice.
Unfortunately,VerizonhasnotdisclosedFiOSbroadbandARPU.(VerizonreporteditsoverallFiOS
ARPU,whichincludesthetelevisionservice,at$135for2Q09.)
118AT&TPublicRelations,AT&TSeesSignificantRiseinWiFiHotspotConnectionsduringSecondQuarter, AT&T
Inc.,2009,http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26975.119
VerizonInvestorRelations,2008AnnualReport,VerizonCommunicationsInc.,2009,
http://investor.verizon.com/financial/annual/2008/downloads/08_vz_ar.pdfat9.120
WildBlue,Packages&Pricing,WildBlueCommunications,Inc.,2009,http://www.wildbluesales.com/wbsor.php?REQix=ID10.121
UBSInvestmentResearch,TelecommunicationsandPayTV,UBSAG,2009,at7.
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CableModem:ForbroadbandserviceovercablenetworkstheaverageARPUisapproximately$41.122
However,ARPUsrangefrom$36.72forMediacomto$42.05forComcast.Othercablecompanies
ARPUsinclude$41.41forCharter,41.60forTimeWarner,and$38.49forCablevision.123
Wireless:TheaveragemobilewirelessdataARPUinthesecondquarterof2009was29%oftotalARPU
or$13.73(amongthelargestfourcarriers).124
Datarevenueperuserwas$14.57and$14.96for
AT&TandVerizon,respectively,and$9.90forTMobileUSAinthatperiod.125
ARPUforfixedwirelessbroadbandisbroadlycomparabletoDSLARPU.Clearwire,theleading
WiMAXserviceprovider,hadARPUof$39.26inthesecondquarterof2008,risingto$39.47inthe
secondquarterof2009.126AnationalWISP,OpenRange,hasinaugurated4Gservicewitha$38.95
offering.
WeestimatethatthesmallerruralindependentWISPsgenerateanARPUofapproximately$30per
month.ThisestimatewasderivedthroughacombinationoftelephoneinterviewswithtwoWISPs,
pricingavailableonthewebsitesofafewotherWISPs,andacalculationbaseduponthereported
marginofonesuchprovider,whichtendedtosupportourotherassumptions.
Inadditiontoamonthlysubscriptionprice,somewirelessbroadbandpricingplanssometimesincludea
usagelimitorcapwhich,ifexceeded,leadstoadditionalusagecharges.
TABLE6:TYPICALWIRELESSBROADBANDPRICINGPLANS
Clearwire Comcast
(CLWR
network)
Verizon AT&T Sprint TMobile
Advertised
Service
4GWiMAX
36mbps
4GWiMAX
4mbps(local)3G1.4mbps
(national)
3G
National(CDMA)
0.6
1.4mbps
3GNational
(GSM)0.7
1.7mbps
3G
National(CDMA)
0.6
1.4mbps
3GNational
(GSM)0.71.7mbps
BasicPlan $35/month
4mbps&
2GB/month
cap
~$30/month
(bundledprice)
4GLocal,no
cap
$39.99/
mo
Includes
250MB
$40/mo
Includes
200MB
122Ibid,at9.
123GoldmanSachsInvestmentResearch,Americas:CommunicationServices,TheGoldmanSachsGroup,2009,at
31,35and46.124
MorganStanleyResearch,TelecomServices,MorganStanley,2009,at53.125
Ibid.126
MorganStanleyResearch,ClearwireCorp.,MorganStanley,2009,at3.
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Advanced
Plan
$45/month
Unlimited
Use
~$50/mo
(bundledprice)
4G/3GNat,no
cap
$59.99/
mo
Includes
5GB
$60/mo
Includes
5GB
$59.99
Includes
5GB
$59.99
Includes
5GB
Source:Companydata,MorganStanleyResearchestimates,CableandSatelliteU.S.Cable,Satellite,Telecom3Q09
/09/10Outlook,Oct.21,2009
Satellite:HughesCommunicationsARPUwas$70inthesecondquarterof2009upfrom$68inthe
sameperiodin2008,withfullyear2008ARPUat$65.127Thefollowingtablesummarizessatellite
broadbandrates:
TABLE7:SATELLITEINTERNETBROADBANDRATES
Company HardwareW/O
Installation
DownloadSpeeds*
(SubjectToVolumeCaps)
Lowest Medium Highest
HughesNet $249.99
AfterRebate
1.0mbps 1.2mbps 1.6mbps
$ 59.99 $ 69.99 $ 79.99
StarBand $299.9
AfterRebate
500kbps 1.0mbps 1.5mbps
$ 49.99 $ 69.99 $ 99.99
WildBlue $149.95 512kbps 1.0mbps 1.5mbps
$ 49.95 $ 69.95 $ 79.95
*Typicaluploadspeedsareroughly15%20%ofdownloadspeeds
Source:Companywebsites
Bundles:Itisworthnotingthatmanybroadbandservicesaresoldinbundlesalongwithvoiceand
television(thesocalledTriplePlay).ExamplesofbundlesareillustratedinthefollowingPricing
Appendix.
127SeekingAlphaTranscripts,HughesCommunicationsInc.Q22009EarningsCallTranscript,SeekingAlpha,
2009,http://seekingalpha.com/article/154496hughescommunicationsincq22009earningscalltranscript.
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PricingAppendixTABLE8:BUNDLEDPRICINGEXAMPLESINURBANANDRURALMARKETS
UrbanMarkets
NewYork InternetSpeed
(down/up)
Video
Channels
TotalPrice
RCN 3Mb/768Mb 180+HD $106.39
VerizonFiOS 25Mb/15Mb 320+HD $110.43
TWC 10Mb/512Kb 350+HD $120.80
Cablevision 15Mb/2Mb 230+HD $111.05
Average$112.17
Philadelphia InternetSpeed
(down/up)
Video
Channels
TotalPrice
Comcast 12Mb/2Mb 80+HD $132.44
VerizonFiOS 15Mb/5Mb 250+HD $115.43
RCN 3Mb/384Kb 192+HD $101.39
Average$116.42
Chicago InternetSpeed
(down/up)
Video
Channels
TotalPrice
Comcast 12Mb/2Mb 80+HD $132.44
AT&T 6Mb/1Mb upto230 $128.45
RCN 3Mb/384Kb 192+HD $111.39
Average
$124.09
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Dallas InternetSpeed
(down/up)
Video
Channels
TotalPrice
Comcast 12Mb/2Mb 80+HD $132.44
Charter 5Mb/512Kb 100+ $124.42
TWC 7Mb/512Kb 215+HD $120.47
Average$124.45
Ruralmarkets
RuralAlabama InternetSpeed
(down/up)
Video
Channels
TotalPrice
BrightHouse 7Mb/1Mb 150+ $124.40
CenturyTel* 1.5Mb/512kb 200+ $125.83
Mediacom 8Mb/1Mb 135 $104.30
RuralArizona InternetSpeed Video
Channels
TotalPrice
Frontier* 3Mb/384Kb 200+ $127.94
Cox 12Mb/1Mb 250 $128.44
Average$128.19
Notes:*videoproductisDISHresale;TotalpriceforbothTelco/Cableincludesmonthlyregulatoryfeesof$14.45.
Source:GoldmanSachs,Americas:CommunicationServices,September2009,at18.
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TABLE9:WIREDBROADBANDPRICINGPLANS
Verizon AT&T Comcast Cablevision TimeWarner
Cable
Qwest
Data
Plans
StarterDSL
(1mbps/384
Kbps):$17.99/mo(2
yragreement)
$19.99/mo(1yr
agreement,nohome
phonerequired)
DSL:
FastAccessDSLLite
(AT&THSIBasic):
$19.95(768Kpbs
down)
Economy(Upto
1mbpsdown):
$24.95/mo
OptimumOnline:
$49.95/mo
(w/BroadcastBasicor
fornoncable
customers)or
$44.95/mo(with
FamilyCableand
above);upto15mbps
down
RoadRunnerTurbo
(10mbpsdown):
$59.90/mo
QwestConnectSi
(1.5mbps):$30.00
internetonly,afte
months:$49.99/m
2 yr
commitment/Pric
Life:$39.99/m
PowerDSL(3
mbps/768Kbps):
$29.99/mo/
$29.99/mo
FastAccessDSLUltra
(AT&THSIExpress):
$25 32.95/mo(1.5
mbpsdown/256
Kpbsup)
Performance(Upto
12mbpsdown):
$42.95/mo
OptimumOnline
Boost:Optimum
Onlinefeeplus
$14.95/mo(without
OptimumVoice)or
$9.95/mo(with
OptimumVoice);upto
30mbpsdown
RoadRunnerHigh
SpeedOnline(7mbps
down):$49.95/mo
($47.95/mowith
anotherservice)
QwestConnec
Platinum(7mbp
$35.00/mo,after
months:$59.99/m2 yr
commitment/Pric
Life:$46.99/m
TurboDSL(7.1
mbps/768Kbps):
$39.99/mo/
$39.99/mo
FastAccessDSL
Extreme(AT&THSI
InternetPro):$30
37.95/mo(3.0mbps
down/384Kbpsup)
Blast!(Upto16
mbpsdown):
$52.95/mo
OptimumOnlineUltra:
OptimumOnlinefee
plus$55/moor
$104.95/moasanew
customerwithout
otherservices;upto
101mbpsdown
RoadRunnerBasic
(1.5mbpsdown):
$34.95/mo
($32.95/mowith
anotherservice)
QwestConnec
Titanium(12mbp
$45.00/mo,after
months:$69.99/m
2 yr
commitment/Pric
Life:$56.99/m
FiOS
Fast
(15
mbps/5
mbps):$44.99/mo
($54.99/mow/o
contract)FiOSFaster
(25mbps/15mbps):
$64.99/mo/$72.99
FiOSFastest(50
mbps/20mbps):
$139.95/mo/
$159.95
FastAccessDSL
Extreme6.0(AT&T
HSIInternetElite):
$3542.95/mo(6.0
mbpsdown/512
Kbpsup)
RoadRunnerLite(768
Kbpsdown):
$19.95/mofor12
months
QwestConnec
Quantum(20mb
$55.00/mo,after
months:$79.99/m
2 yr
commitment/Pric
Life:$69.99/m
Uverse:
Max18(18mbps/1.5
mbps):$65/mo
Max(10mbps/1.5
mbps):$55/mo
Elite(6mbps/1
mbps):$43/mo
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Pro(3mbps/1
mbps):$38/mo
Express(1.5mbps/1
mbps):$33/mo
Data
Promos
2yrcontractincludes
priceguaranteefor
life;1yrincludes3
monthsfree.Power
andTurboinclude
freenationalWi Fi
fromVZhotspotsin
hotels,publicareas,
etc.Freemodem.
$150cashbackafter
rebatewhen
switchingfromcable
tooneof3fastest
DSLspeeds.Some
marketsandplans
haveanadditional
$50cashback
incentiveaswell.
Firstsixmonthsof
Performanceat
$19.99/mo
OptimumOnline
$29.95/moforfirst6
monthswithself
installBoostisfreefor
firstmonthwhen
orderedonline
W/basicphone
service:save
$5.00/moonInte
W/qualifyinghom
phonepkg:sav
$10/moonInter
DellMiniNetbo
$199w/Platinum
higher(2yr
agreement)
Source:UBSInvestmentResearch,TelecommunicationsandPayTV September3,2009
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FIGURE10:MAJORBROADBANDDEPLOYMENTS:PERFORMANCEAGAINSTANNOUNCED
COMPLETIONDATES
Source:Section2text.
ThefocusofthisSectionistounderstandwhethertelecommunicationcompaniesaregenerallyabletomeetthegoalsoutlinedintheirownstatements,ornot.Thereviewfocusedonthetimeframe
beginningin200405basedonthejudgmentthatthoseyearsmarkedabeginningofamoderneraof
broadbandintermsofindustrystructure:theinternetbubbleandbusthadpassedandtheAT&TSBC
andMCIVerizonmergersandconsolidationinthecableindustryhadlargelybeencompleted.Those
yearsalsomarkthebeginningofwirelesscompaniesassignificantprovidersofbroadbanddata
service.
2004Verizonannouncedattheendof2003thatitplannedtobeginimplementationofitsnewFiOSfiberto
thehomenetworkin2004andpassonemillionhomesbyyearend.Thecompanypredictedthatby
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2005itcouldincreasethatnumbertothreemillion.128In2005Verizonreportedthatitreachedthat
number.129
Atthebeginningof2004Verizonalsoannouncedthatitwouldimplementwirelessbroadbandaccessin
twothirdsofitsnetwork,coveringabout75millionpeoplebytheendoftheyear.130ByDecember2004,
Verizons3Gservicewasavailableto75millionpeopleincluding20majorcitiesintheU.S.131132
CenturyLink(CenturyTel,priortotherecentmergerwithEmbarqinJuly2009)133attheendof2004
saiditwouldinvestheavilyinitsIPcapabilities,announcinga$350minvestmentforthefollowing
year.134Itsurpassedthatamount,investing$415min2005and$314min2006.135
Sprintinits2004annualreportannouncedthatitwouldrolloutEVDOwireless3Gtechnologyinthe
subsequenttwoyears,136withcoverageofmajormetropolitanareasintheU.S.bytheendof2005.137In
its2005annualreportSprintconfirmedcapitalexpendituresofnearly$1billionforEVDO
deployment.138ThecoverageinSeptember2006was69citiesintheU.S.includingmajormetropolitan
areas,mostofwhichwerenotpubliclyannouncedbySprintbefore.139
128VerizonInvestorRelations,VerizonSelectsVendorsforFibertothePremisesProject;DeploymentandNew
ProductRolloutBeginin2004,VerizonCommunicationsInc.,2003,
http://investor.verizon.com/news/view.aspx?NewsID=469.129
VerizonInvestorRelations,VerizonCommunications ReportsStrong4Q2005Results,DrivenbyContinued
GrowthinWirelessandBroadband,VerizonCommunicationsInc.,2006,
http://investor.verizon.com/news/view.aspx?NewsID=718.
130VerizonInvestorRelations,VerizonWirelessMakesStridesWithPlannedBroadbandAccess3GNetwork
Expansion,VerizonCommunicationsInc.,2004,http://investor.verizon.com/news/view.aspx?NewsID=498.131
B.Charny,Sprintbegins$3billionmarchto3G,CBSInteractiveInc.,2004,http://news.cnet.com/Sprint
begins3billionmarchto3G/21001039_35480249.html?tag=lia;rcol132
D.Dixon,TVonYourMobilePhone:VerizonWirelessVCAST(SamsungSCHa890,5/2005),Manifest
Technology,n/a,http://www.manifest tech.com/ce_wireless/wireless_vcast.htm.133
S.Higginbotham,EmbarqandCenturyTelMerge,BecomeCenturyLink,TheGigaOMNetwork,2009,
http://gigaom.com/2009/07/01/embarq andcenturytelmergebecomecenturylink/.134
CenturyTel,2004ANNUALREPORT,CenturyTelInc.,2005,at4,http://media.corporate
ir.net/media_files/irol/11/112635/annreports/04_annual_report.pdf.135
Verizon,AnnualReview2006,VerizonCommunicationsInc.,2007,at4,http://library.corporate
ir.net/library/11/112/112635/items/239821/CTLAnnualReview2006.pdf136
SprintNextel,Form10K,SprintNextelCorp,2005,at3,
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=3328930&format=PDF.137
A.SchiskaLombard,SprintBeginsOfferingEVDOReadySprintPCSConnectionCard(TM)bySierraWirelessto
BusinessCustomers,SprintNextelCorp,2005,http://newsreleases.sprint.com/phoenix.zhtml?c=127149&p=irol
newsArticle_newsroom&ID=681282&highlight=.138
SprintNextel,Form10K,SprintNextelCorp,2005,at1,
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=3548364&format=PDF.139
EVDOForums,SprintEVDORevACoverageSightings,EVDOForums.com,2006,
http://www.evdoforums.com/thread3234.html.
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monthsbehindthescheduledyearend2007.151AccordingtoTMobileslatestannouncement,theplan
tohavefull3Gdeploymentbytheendof2009iscurrentlyontrack.152
LeapWirelessannouncedinSeptember2005thatitplannedtoimplementEVDO3Gtechnologyin
2006investingabout$475m.153Inthe2006annualreportitconfirmedtherolloutofthistechnology
withacompletiongoalof2007.154
Inthecompanysannualreportfor2008,itindicatedthattherollout
wasnotentirelycompleted.155InJune2009thecompanysuccessfullycompletedthe3Grollout
throughouttheirentireservicearea.156
2006AT&TannouncedinJune2006thatitplannedtoreach19millionhouseholdswithitsUVerseFTTNDSL
systembytheyear2008.157Attheendof2007thecompanyreduceditsgoalto18millionhomespassed
bytheendof2008.158InJanuary2009thecompanysaidthat17millionhouseholdswerepassed,159
indicatingthatAT&Twasbehindtherevisedtargetbyatleastonemillionhouseholds.
CincinnatiBellannouncedinits2006annualreportthatitwouldinvestabout$30millionin2007to
buildupits3Gwirelessnetworkandtohave3Gserviceoperationalin2008.160Thecompanyspent$11
millionin2007,maintainingthedateforoperationallaunchas2008.CincinnatiBellplannedtospendan
additional$19millionin2008tocompletetheproject.161Theactualspendingonthe3Gnetworkin
151O.Malik,Finally,TMobileLaunchesaU.S.3GNetwork,TheGigaOMNetwork,2008,
http://gigaom.com/2008/05/05/t
mobile
launches
us
3g
network/.
152R.Halevy,TMobileForgesAheadWith3GRolloutStillNo3GBlackBerry,ContentNextMediaInc.,2009,
http://moconews.net/article/419tmobileusarollsoutsuperfast3ginpartsofphiladelphia/.153
K.Atkins(LeadMediaRelations),LeapUnveilsMobileDataStrategyforCricketandJumpMobileatCTIA
WirelessI.T.&Entertainment,LeapWirelessInternationalInc,2005,http://phx.corporate
ir.net/phoenix.zhtml?c=191722&p=irolnewsArticle&ID=760669&highlight=.154
LeapWireless,AnnualReport2006,LeapWirelessInternationalInc,2007,at29,
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=4714898&format=PDF.155
LeapWireless,AnnualReport2008,LeapWirelessInternationalInc,2009,at4,
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=6295822&format=PDF.156
G.Lund(MediaRelations),SecondQuarterResults,LeapWirelessInternationalInc,2009,
http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MTI1MjV8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1.157
AT&TInvestorRelations,Company'sExtensiveDSLNetworkExpandedtoReach95PercentofState,AT&T
Inc.,2006,http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=22361.158
P.D.Shapiro,AT&TUversebytheNumbers,CableFAXMagazine,2007,
http://www.cable360.net/cablefaxmag/business/competition/telcos/26065.html159
DSLReports,AT&TSlowsUVerseBuildOut,dslreports.com,2009,
http://www.dslreports.com/shownews/ATTSlowsUVerseBuildOut100539.160
CincinnatiBell,AnnualReport2006,CincinnatiBellTelephoneCompany,LLC,2007,at115,
http://library.corporateir.net/library/11/111/111332/items/246974/2006AnnualReport.pdf.161
CincinnatiBell,AnnualReport2007,CincinnatiBellTelephoneCompany,LLC,2008,at86,
http://library.corporateir.net/library/11/111/111332/items/294111/CincinnatiBellNPS10KWrap1.pdf.
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budgetfortheDOCSIS3.0andaWiFirolloutforthethreeyearperiodat$315m.180(WiFiwouldbea
freeadditionalservicetoCablevisionscablecustomers.)Thebuildoutwasplannedbecompletedby
2010.181Attheendof2008Cablevisionclai