BT Partners
Perspectives on Differences in the Transatlantic Approaches to
Broadband Policy
Aryeh FriedmanSenior Competition and Regulatory Counsel
BT Global ServicesWashington DC
Broadband Defined
FCC Defines Broadband as anything over 200 kbps measure
That is over-inclusive.
More realistic -- Residential
Over 1 Mbps
Residential: Would include DSL, cable modem, Fiber to the Node and Fiber to the Home
Enterprise Market
Over 1-2 Mbps
BT’s DSL deployment
Historical view of BT Wholesale Broadband
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Oct
-99
Feb
-00
Jun-
00
Oct
-00
Feb
-01
Jun-
01
Oct
-01
Feb
-02
Jun-
02
Oct
-02
Feb
-03
Jun-
03
Oct
-03
Feb
-04
Jun-
04
Oct
-04
Feb
-05
Jun-
05
Oct
-05
Feb
-06
Jun-
06
Oct
-06
Co
vera
ge
% Exchanges
% Households
• Over 99% of UK households are in ADSL enabled exchanges
• The remaining exchange areas are extremely rural in nature with ~ 200 customers in each
• Solutions to provide broadband to these remote areas are being investigated
• Cable provided broadband is available to ~ 55% of the households in the UK
UK Broadband Penetration
•Total UK broadband penetration is currently ~55%
• Approaching 8.4 million households are served by BT Wholesale broadband
• BT Retail has an end customer relationship with ~ 3 million customer. Less than 25% market share.
•1.7 million customers have broadband provided by other communication providers through Local Loop Unbundling
• In addition, there are approximately 3 million cable broadband customers
Historical view of BT Wholesale Broadband
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
1999
10
2000
02
2000
06
2000
10
2001
02
2001
06
2001
10
2002
02
2002
06
2002
10
2003
02
2003
06
2003
10
2004
02
2004
06
2004
10
2005
02
2005
06
2005
10
2006
02
2006
06
2006
10
Co
nn
ecti
on
s
Availability of DSL Speeds in the UK
Almost 90% of UK DSL subscribers receive service at speeds of 3 Mbps or more.
Estimated DSL Max speed distribution
Based on line checker data and estimates only
Line rate Percentage of PSTN lines
0.5Mb 98%
1Mb 96%
2Mb 93%
3Mb 89%
4Mb 78%
5Mb 63%
6Mb 42%
>or =6.5Mb 25%
UK Broadband Connection Speed
0%
10%
20%
30%
40%
Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07
128Kbps
150Kbps
256Kbps
512Kbps
576Kbps
1Mb
1.5Mb
2Mb
3Mb
4Mb
8Mb
More than 8Mb
Don't know
≤2Mbps servicesare falling
>2Mbps servicesare growing
22
32
85
18
21
0
10
20
30
40
Any BT Virgin Media Tiscali Orange AOL
Other ISP CPW Sky NTL Telewest
UK Retail Broadband Market Has Vibrant Competition
%
• Recent wave of consolidation and new entrants:
• Virgin Media was formed by the merger of NTL, Telewest and Virgin
• CPW has bought AOL (but is retaining the brand)
• BSkyB (satellite pay TV operator) has bought EasyNet
New survey
Vibrant Retail Broadband Competition in the UK
LLU now being aggressively deployed by major broadband service providers.
Significant percentage of Broadband (~12%) and rapidly increasing (over 57,000 orders completed per week)
Bulk of retail broadband competition still from cable and CLECs selling BT DSL products.
Most offering up to 8Mb services with intention of using ADSL2+ (i.e., up to 24 Mbps)
Per Ofcom Report, from December 2002 to May 2006, BT speeds (max) have risen from 0.5 to 8Mbps while prices have dropped from 27.99 to 17.99 per month.
Over 60% of small and medium enterprises in the UK use business DSL
Vibrant Retail Market in the UK
UK Broadband PricesUK Market structure has produced a wide variety of pricing packages tailored to specific users
Most ISPs offer a number of options based on
Contention ratio
Data cap allowance
Static IP addresses
Included web space
Included e-mail
Value added services
Security services (firewalls & antivirus software)
Domain registration
Dial-up backup
Some additional Virtual / reseller ISPs target local areas
Distribution of pricing packages from 69 ISPsBased on 228 consumer ADSL packages
Distribution of Residential Broadband Prices
0
5
10
15
20
25
30
35
< 15
0
150
- 17
5
175
- 20
0
200
- 22
5
225
- 25
0
250
- 27
5
275
- 30
0
300
- 32
5
325
- 35
0
350
- 37
5
375
- 40
0
400
- 42
5
425
- 45
0
450
- 47
5
475
- 50
0
500
- 52
5
525
- 55
0
550
- 57
5
575
- 60
0
600
- 62
5
625
- 65
0
650
- 67
5
675
- 70
0
700
- 72
5Total Cost of Ownership (UK£/annum)
Nu
mb
er o
f P
acka
ges
Source: http://www.adslguide.org.uk/isps/packagelist.asp
US Broadband Market Share Compared (Source: 2006 Broadband Reality Check Report by Free Press et al)
Non-Incumbent Sources of Broadband
Competition in the USA
Is Decreasing.
US Non-Incumbent DSL Market Share Compared (Source: 2006 Broadband Reality Check Report by Free Press et al)
BT, Verizon, AT&T Residential Broadband Compared
Consumer Speed Price* Included
BT Total Broadband(Regulated Wholesale DSL)
Up to 8 Mbps
$21/mt first 3 mts $29/mt for mts 3-12
250 Free Wi-Fi Minutes at 10,000 BT HotSpots throughout the UK.
AT&T DSL (No regulation)
Up to 3 Mbps
$29.95/mt for 12 mts
Verizon DSL (No regulation)
FIOS(No regulaton)
Up to 3 Mbps
Up to 5 Mbps
$19.99/mt for first 6 mts. $29.99/mt for mts 7-12
$29.99/mt for first 6 mts. $39.99/mt for mts 7-12
* Using OECD’s Purchasing Power Parities Rate used in its Rate Comparisons
US. v. EU Regulatory Environments
Impact on, e.g. Net Neutrality: OfCom
“The lack of unbundling in the US is likely to mean rapid concentration in the retail ISP market. The result is generally that, at the retail level, consumers only have a choice of broadband operator to the extent that they are able to choose between operators with lines connected to their home – a choice between cable and telcos, rather than multiple ISPs offering bitstream or LLU access.
This lack of choice, it is argued, could lead to abuse of the operator’s resulting market power. And this, it’s then argued, needs to stopped by outlawing any “non-neutral” behavior using new legislation. This is an important point because it is the retail ISP, operating at the IP layer of the network, which can have most impact in prioritising traffic. . . .
As the UK has such strong retail ISP competition, these problems, and therefore a strong case for new ex-ante legislation, are much harder to imagine.”
Speech given by Tom Kiedrowski on behalf of Lord Currie, OFCOM, at CEPS/Progress and Freedom Foundation Conference in Brussels Feb. 22, 2007
USA: ICT and Productivity
USA had two productivity surges between 1995-2000 and 2000-2004 that caused USA to leap ahead of Europe in productivity. Only one was ICT-led.
1995-2000 – use of information communications technology (ICT) dominated this surge.
2000-2004 – non IT factors dominated this surge.
See Jorgenson, Ho and Stiroh, The Sources of the Second Surge of US Productivity and Implications for the Future (March 2006).
1995-2000 -- Correlates to period when market opening commitments of 1996 Telecoms Act were being implemented in USA
2000-2004 – Correlates to period when FCC began to deregulate uncritically
A history of investment…
Higher investment in better regulated countries (OECD, ECTA, LE). Source: ECTA
Source: Infonetics Research, London economics
Effective Regulation vs. Investment
The Report also measures the relationship between the effectiveness of the regulatory environment in each of the Member States surveyed and the level of telecommunications investment in that country, based on OECD data. The economic analysis conducted in this regard shows that effective regulation continues to have a strong and positive impact on the level of investment in telecommunications networks and services.
Relationship between Scorecard and Investment as percentage of GFCF
0
1
2
3
4
200 250 300 350 400 450
Scorecard
Inve
stm
en
t
DE BE NL
ES
IE
FR DK
ATSE
IT
UK
Source: ECTA (European Competitive Telecommunications Association)
Thank you