June 2, 2008June 2, 2008

byby

Link HoewingLink Hoewing

Vice President, Internet & Technology PolicyVice President, Internet & Technology Policy

June 2, 2008June 2, 2008

byby

Link HoewingLink Hoewing

Vice President, Internet & Technology PolicyVice President, Internet & Technology Policy

The Evolution of The Evolution of Communications Communications

NetworksNetworks

2AT&T print ad circa 1977

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The World Has ChangedThe World Has Changed

To…From…

Mobile and Converged

Broadband

Multi-media

Packetized

Optical Infrastructure

Open architecture

Market-based regulation

Wireline

Narrowband

Voice-centric

Circuit-switched

Copper infrastructure

Proprietary architecture

Traditional Regulation

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CDC Report and Pew Center Demonstrates the Impact of Change CDC Report and Pew Center Demonstrates the Impact of Change

Preliminary results from the July-December 2007 National Health Interview Survey (NHIS) indicate that nearly one out of every six American homes (15.8%) had only wireless telephones during the second half of 2007. In addition, more than one out of every eight American homes (13.1%) received all or almost all calls on wireless telephones despite having a landline telephone in the home.   

This does not mean that all Americans who use wireless increasingly for voice calls have cut all landline connections. Recent data from the Pew Trust suggests that broadband penetration continues to grow. In fact in some segments of the population – African Americans – broadband connectivity has expanded dramatically. Landline broadband networks offer real value to consumers.

The CDC numbers show cord cutting is not limited to “young singles,” or even “yuppies” as many often assume. One table in the CDC report shows that 15.5 percent of 30-44 year olds, 13 percent of families with children, and a whopping 27 percent of poor people have cut the cord.  Even 7.3 percent of homeowners have done so, and that figure has doubled in the last two years.

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Telecom Sector ChangesTelecom Sector Changes

POTS – plain old telephone service

“Old World”— Common carrier regulation— Line loss by LECs

Wireless cannibalization VoIP offered by cable operators 8-10% annual line loss across sector In 2007 VZ had 4% lines loss to cable VoIP plus another

4% lost to wireless– 33M H/H in VZ footprint– 2M lines per year lost

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Verizon’s StrategyVerizon’s Strategy

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Verizon’s Broadband DeploymentVerizon’s Broadband Deployment

No company has committed more resources to network upgrades – more than $63B in since 2004

FTTP – Undertaking a very ambitious roll-out of passive fiber optic cable to customer’s homes and businesses

DSL – Continuing to extend the reach of DSL— Nearly 80% of our lines are DSL-capable; 90% plus in urban

areas

EV-DO (wireless broadband) – Reaches 228 million people today

Other technologies – exploring innovative and cost-effective ways to bring broadband to more customers

— Partnerships with non-profits such as One Economy to bring broadband to low income customers living in subsidized housing

— New highly-flexible fiber from Corning allows tighter bends for MDU installations

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Upstream DownstreamMbps

FiOS – Redefining InteractionFiOS – Redefining Interaction

Applications and Media BandwidthApplications and Media Bandwidth

5 10 15 20 250 100510152025100

File Sharing, Home Video Sharing/Streaming

Multi-Player Gaming, Interactive Distance Learning

Large File Sharing

HDTV Video-on-Demand

Network Hosted Applications and Storage

Video Conferencing, Premises Surveillance, Two-way Signing

Telemedicine

SDTV Video-on-Demand, Telecommuting

Premises Web Hosting

Next Generation 3D TV

Web Surfing

Real-Time SDTV, Network PVR

FTTPCable Modem

ADSL

Dial-Up

Platform for current and future content and applicationsPlatform for current and future content and applications

Upstream Speed Increasing in Importance!

Megs of Bandwidth

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FTTP/FiOS Bandwidth – A Quantum LeapFTTP/FiOS Bandwidth – A Quantum Leap

Niagara Falls

•100 Meg Service Being Trialed•20/20 Meg Service available•15/15 Meg Service for $65

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Power &

Battery

ONTONT

Data

POTS

OLT

FTTP ArchitectureFTTP Architecture

Internet

Video

Super Head End

BroadcastServices

SER

VideoHub

Office

VerizonBroadband Network

InteractiveServices

TDMSwitch

NetworkTransportSwitching/Routing

Local CO(Video Serving Office)

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Fiber DeploymentFiber Deployment

4Q’07 Deployment Status:Over 10M premises passed in

16 states5.9M premises open for TV

sales

2008 Deployment Objectives:Pass 12M premises9M premises open for sale

2010 Deployment ObjectivesPass 18M premises by 201050% of households in footprint

FTTP Deployed

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FiOS High Speed Internet ResultsFiOS High Speed Internet Results

Expect to achieve 35% - 40% Expect to achieve 35% - 40% penetration by 2010penetration by 2010

FiOS Internet Net Adds (000)

1.8M subscribers

7.9M homes open for sale

2000 communities

More customers on higher speeds

22% migration from DSL

262245229203

177

22%21%20%19%16%

1Q'07 2Q'07 3Q'07 4Q'07 1Q'08

Penetration

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Key Metrics Will ChangeKey Metrics Will Change

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ODI Initiative a Key DriverODI Initiative a Key Driver

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How is the U. S. Doing?How is the U. S. Doing?

The World Economic Forum ranks the U.S. 4th in “networked readiness,” which measures ICT development, taking into account the environment and individual and corporate usage and readiness. Denmark is 1st, Japan is 19th.

The Fiber to the Home Council estimates that North America has 2.91M fiber connections and has been growing annually at a rate of 97 percent. The number of FTTH connections continues to almost double annually in the U. S.  This compares to just 1M subscribers in all of Europe. Japan has far more subscribers but has been deploying fiber for far longer than any other country.

More than 12 million homes in the U. S. and Canada are passed by fiber networks compared to only five million in Europe. Nevertheless, as IDATE, a major European analyst firm put it “fiber to the home is still concentrated in only a few countries as Europe remains far behind leaders such as Japan and the US (emphasis added)”.

Verizon has more than 70% of the North American fiber connections and accounts for almost 10 million homes passed in the U. S.

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Verizon Supports PrinciplesVerizon Supports Principles

Verizon endorsed the High Tech Broadband Coalition’s “Connectivity Principles” more than two years ago: All participants in the broadband value chain should

embrace a set of connectivity principles which ensure that consumers can

access any content on the internet run any application they choose attach any devices to their broadband connection that do not

harm the network get information regarding their service capabilities

In February 2004 former FCC Chair Michael Powell spoke about what he termed “Four Freedoms,” which mirror the HTBBC principles.

In September 2005 the FCC adopted FCC Chair Kevin Martin’s restatement of the HTBBC principles.

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But there Have Been Problems – What Should be Done?But there Have Been Problems – What Should be Done?

Information can act as “sunlight” on industry actions so transparency principles around network management are worth considering What consumers can expect with regard to how their

connection will work and what services it normally should be able to run

What information should be provided about traffic management practices by the broadband providers/ISPs

What information should applications providers make available to the public and network providers

Industry should work together to help make applications work better – the “P4P Task Force” model

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The Internet, Markets, CooperationThe Internet, Markets, Cooperation

If an internet company acts inappropriately today:— The FTC has asserted jurisdiction over anticompetitive behavior

and consumer protection— The FCC has claimed authority to oversee and enforce its

principals

Competition and choice is driving market – remember line loss

The Internet is not a closed system – many experts and geeks watching

Problems won’t be kept “hiding” long

The Internet has long been – and remains – a network of networks with a competitive/cooperative/adaptive model

Industry and consumers have adapted continuously— FTP Download crisis – 1980s; “World Wide Wait” – 1990s

Transparency principles should be considered

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Wrap-up/ Q&AWrap-up/ Q&A