March 1, 2018
Patrick Brogan, VP Industry Analysis
202-326-7282
Contains revisions as of October 18, 2018
USTelecom Industry Metrics and Trends 2018
Contents
1. The Transition from Legacy Voice Networks to Mobile and Internet Communications
2. Broadband Investment, Deployment and Adoption
3. Internet Traffic Growth and Drivers
Note on data and projections: Unless otherwise noted, the data in this presentation are based on sources that are current through year-end 2016. Projections are denoted with a “P”. In the first two sections, projections for 2017 and 2018 are USTelecom straight-line estimates based on the most recent 6-month trends. Accuracy of projections is not guaranteed, and may depend on factors such as level of aggregation, technological maturity, and adoption curves. In the third section, projection are provided directly by our source.
Note on terminology: As used in this presentation, broadband includes fixed and mobile services. Mobile broadband is provided over cellular wireless networks. Wired broadband is a subset of fixed broadband and predominantly includes services using fiber, DSL, and cable technologies. Fixed broadband includes wired broadband plus fixed wireless and, sometimes, satellite. The broadband deployment data below exclude satellite from fixed broadband while the broadband connections data include satellite in fixed broadband.
2
The Transition from Legacy Voice Networks to Mobile and Internet Communications
3
Dramatic Decline in Traditional Wired Voice Connections Continues
4
186182
177170
163156
148
137
124
111
99
89
7970
6255
4942
35
~120 -125
94 89
82 73
64 56
48 42
35 30
26 23 19 16
0
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P2018P
Source: FCC and USTelecom analysis. Includes primary and non-primary lines. Excludes ILEC VoIP and UNE-L (unbundled loops). Projections based on most recent 6-month straight-line run rates. Pre-2005, carriers with <10,000 lines did not report and FCC did not report residential lines.
ILEC Switched Access Lines 2000 – 2018 Projected (millions)
Residential Retail87% Projected Loss
Total Retail and Wholesale81% Projected Loss
Wired Voice Alternatives Are Growing
5
14.9
19.7
24.9
29.832.9
44.345.9
52.253.9
56.558.2 57.5
60.063.0
0.51.2
2.94.7
6.99.0 11.3
12.613.1
0
10
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: FCC and USTelecom analysis. Includes primary and non-primary lines. Includes non-ILEC lines using ILEC wholelsale lines. Pre-2005, carriers with <10,000 lines did not report and FCC did not report residential lines. 2005-7 Non-ILEC data excluded due to data reliability issues. Projections based on most recent 6-month straight-line trend.
Non-ILEC Lines and ILEC VoIP 2000 – 2018 Projected (millions)
Non-ILEC Lines(VoIP + Switched)
ILEC VoIP Lines
Wireless Voice Connections Are Growing Rapidly
6
101
124139
157
181
204
230
249261
274285
297 305 311323
335 341 348 356
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P2018P
Source: FCC and USTelecom analysis. Projections based on most recent 6-month straight-line run rates.
Wireless Voice Connections 2000 – 2018 Projected (millions)
Non-ILECs Have a Greater Share of Wired Voice Lines Than ILECs
7
1520
2530 33
44 4652 54 56 58 57 60
6366 68
178172
164
153145 144
139130
118
10797
8982
7569 64
5852
46
0
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P2018P
Source: FCC and USTelecom analysis. Pre-2005, carriers with <10,000 lines did not report. Pre-2008 data exclude VoIP. ILEC lines exclude wholesale. 2005-7 Non-ILEC data excluded due to data reliability issues. Projections are straight-line based on most recent 6-mnth trend.
ILEC and Non-ILEC Retail Swiched and VoIP Lines 2000 – 2018 Projected (millions)
ILECSwitched and VoIP
Non-ILECSwitched and VoIP
Non-ILECs Have Also Surpassed ILECs in Wired Voice Even When Considering Wholesale Lines
8
186 182 177170
163153
144134
124
112102
9486
7973
6762
55 49
7 10 12 13 15
38 4147 49 52 54 54
56 59
62 65
0
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P2018P
Source: FCC and USTelecom analysis. Pre-2005, carriers with <10,000 lines did not report. Pre-2008 data exclude VoIP. ILEC lines exclude wholesale. 2005-7 Non-ILEC data excluded due to data reliability issues. Projections are straight-line based on most recent 6-month trend.
ILEC and Non-ILEC Switched and VoIP Lines 2000 – 2018 Projected (millions)
ILEC Switcvhed and VoIP, including switched wholesale
Non-ILEC Switcvhed and VoIP, excluding resold ILEC switched lines
There Are Three Times as Many Wireless as Wired Voice Connections in the U.S.
9
61%
7%3%
5%
15%
34%
76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2H00 2H18P
Wireless
Non-ILEC
ILEC VoIP 3%
ILEC Switched
Source: FCC, USTelecom Analysis. Incudes residential and business. Projections are straight-line based on most recent 6-month trend.
Change in Share of Total U.S. Voice Connections, 2000 to 2018 Projected
Households Have Shifted to Wireless and IP Voice
10
93% 89%84%
76%68%
60%54%
46%39%
33%27%
22% 19% 16% 14% 11%
3%4%
6%
10%
15%
18%
20%
23%
26%
28%
29%
30%31%
30%29%
29%
5% 7% 10%13%
17%22%
26%31%
36%40%
44%48% 50% 53%
57% 60%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P 2018P
Sources: FCC, CDC, Census, USTelecom Analysis (2008-15P); and FCC, CDC, NCTA, Financial Reports, USTelecom Analysis (2003-7); projections based on six-month run rates.
Wireless-Only
ILEC SwitchedLandline
Landline Other Than ILEC Switched
U.S. Household Voice Service Penetration and Projections(Percent of Telephone Households)
Broadband Investment, Deployment and Adoption
11
Competing Broadband Providers Have Invested More Than $1.6 Trillion in Capital since 1996
12
Data includes wireline, wireless, and cable providers.
Revised October 18, 2018
55.3
65.3
72.1
91.8
118.1
111.5
72.0
57.0 57.562.1
70.1 70.4 71.1
64.567.9 68.1 69.6
76.0 78.0 77.5 74.8 76.3
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
U.S. Broadband Provider Capital Expenditures,1996-2017 ($ billions)
Source: USTelecom (1996-present) and Yankee Group (1996-2010). Figures are rounded.
Network Capital Investment
More than
$1.6 Trillionfrom 1996-2017
Broadband Investment by Competitive Providers Has Brought Near-Nationwide Deployment
13
0.4% 1% 3%
9%
87%
0
1
2
3
4+
U.S. Wireless LTE Broadband Choices Available (% of Housing Units, Year-End 2016)
2%
8%
90%
0
1
2+
U.S. Fixed Broadband Choices Available at Any Speed (% of Housing Units, Year-End 2016)
Source: FCC, USTelecom, and Telcodata CensusNBM.com.
Investment Has Enabled Widespread and Ongoing Broadband Adoption
14
U.S. Fixed Broadband Connections(Millions of “High Speed” Connections)
27
12
19
28
37
48
60
70
7680
8588
9396 98
102106
109112
2 5 11
17
26
35
44
56
6569
7377
8184
88 8993
97100
103
0
20
40
60
80
100
120
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P 2018P
Source: FCC. Based on “high-speed services” > 200 kbps downstream. Projections are staright-line based on most recent 6-month trend.
Total
Residential
Fixed Broadband Penetration Is Nearing Four-Fifths of U.S. Households
15
Estimated U.S. Residential Fixed Broadband Penetration(Percentage of U.S. Households with “High Speed” Connections )
2%5%
10%
16%
23%
31%
39%
48%
56%59%
62%64%
67%69%
71% 72%74%
77%79%
81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P 2018P
Source: FCC, Census, and USTelecom Analysis. Based on “high-speed services” > 200 kbps downstream. Projections based on most recent 6-month trend.
Mobile Broadband is Growing Rapidly
16
U.S. Fixed and Mobile Broadband Connections(Millions of “High Speed” Connections)
27
56
98
142
170
197
223
253
270281
291
2 712
1928
3748
6070
76 80
85
88 93 96 98 102 106 109 112
0
50
100
150
200
250
300
350
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P 2018P
Source: FCC. Based on “high-speed services” > 200 kbps downstream.
Mobile
Fixed
U.S. smartphone adoption estimates range from 77% of adults (Pew Internet, January 2018) to 82% of households (Consumer Technology Association, January 2018)
Providers Are Deploying Networks Capable of Providing Higher Speeds
17
94% 92%
85%
49%45%
10%
0%
96% 96% 94%91% 90%
83%
11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
>768 kbps > 3 mbps > 10 mbps > 25 mbps > 50 mbps > 100 mbps > 1 gbps
1H2010
2H2016
Broadband Availability by Download Speed for Wired Technologies , 2010-2016(Percent of Housing Units)
Source: NTIA National Broadband Map, USTelecom, and Telcodata CensusNBM.com. Percentages in bar chart are cumuliatve.
Fourth generation mobile broadband was available to less than 1% of Americans in 2010 and 99.6% of Americans in 2016 Speeds are in excess of 10 mbps, in some cases approaching 20 mbps (opensignal.com)
Consumer Are Choosing Services withHigher Speeds
18
U.S. Residential Fixed Broadband Connections by Speed and Households(Millions of Connections)
25
11
17
26
35
44
56
6569
7377
8184
88 8993
97100
103
29
3742
47
60
7278
85
91
97102
64
72
78
85
92
41
52
59
67
75
104107 109 111 112 113 114 116 117 117 117 119 121 122 123 124 126 126 127 128
9
15
24
35
47
0
20
40
60
80
100
120
Source: FCC, Census, USTelecom. "At least" lower-speed categories are inclusive of higher-speed categories. Projections based on most recent 6-month trend.
At least 200 kpbs in one direction
At least 3 mpbs down / 1 mbps up
At least 10 mpbs down / 1 mbps up
At least 25 mpbs down / 3 mbps up
Estimated Households
At least 100 mbps down
Broadband Has Been a Competitive Industry from Its Inception
19
U.S. Fixed Broadband Connections by Technology(Millions of “High Speed” Connections)
27
12
19
28
37
48
60
7076
8085
8893
96 98102
106109
112
0.4 0.5 0.7 1 1 1 2 2 2 2 3 3 3 3 3 21115
20
2630 31 32 32 32 32 32
29 29 2725
230.1
0.2
0.3
1
2 34 5 6 7 8 9 10 12 14 16
16
21
27
32
37
4042
4548
5254 56
6063
6771
0
20
40
60
80
100
120
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P 2018P
Source: FCC. Based on “high-speed services” > 200 kbps downstream
Total
Wireline - Fiber
Wireline - DSL & Other
Satellite & Fixed Wireless
Cable Modem
Core Competitive Broadband Infrastructure Is Widely Available
20
3%
11%
86%
0
1
2+
U.S. Wired Broadband Choices Available at Any Speed (% of Housing Units, Year-End 2016)
Source: FCC, USTelecom, and Telcodata CensusNBM.com.
As shown above, mobile wireless broadband is also competitively deployed with 96 percent of Americans able to choose among three or more providers. The next several charts focus narrowly on wired broadband competition due to historical data limitations. Fixed broadband, which includes fixed wireless services, would show even greater competitive overlap.
Competitive Availability Varies with Speed
21
1%
5%
18%
9%
60%
7%
2%
8%
31%
10%
47%
3%Nonrural 0
Rural 0
Nonrural 1
Rural 1
Nonrural 2+
Rural 2+
1%2% 3%
7%
75%
12%
Source: FCC, USTelecom, and Telcodata CensusNBM.com.
U.S. Wired Broadband Choices Available at Different Speed Tiers(% of Housing Units, Year-End 2016)
Any Speed 10 mbps Down / 1 mbps Up 25 mbps Down / 3 mbps Up
In a continual process of competitive leap-frog, wired broadband providers are at different stages of ongoing network upgrades
As Providers Invest in Network Upgrades…Competition at Higher Speed Is Growing
22
59%63%
67%
25%
31%
50%
0%
10%
20%
30%
40%
50%
60%
70%
Year-End 2012 Year-End 2014 Year-End 2016
Two+ at 10 mbpsDL / 1 mbps UL*
Two+ at 25 mbpsDL / 3 mbps UL
U.S. Broadband Competition: Services Deployed Widely and Speeds Growing Rapidly(% of U.S. Housing Units with Two or More Wired Broadband Options Available at Selected Speed Tiers, 2012 to 2016)
Sources: FCC, NTIA, USTelecom, and Telcodata CensusNBM.com.
*10 megabit per second download / 1 megabit per second upload estimated for 2012 based on 10m download / 768 kilobit upload data available from NTIA. Data were adjusted proportionately according to FCC 2016 reported data for 10m DL / 1m UL and 10m DL / 768k UL.
Two or more wired broadband providers are available to 86 percent of Americans and at least one option is available to 97 percent. Competition occurs dynamically over time as providers upgrade network speed and quality. In addition to wired options from telecom, cable, and others, multiple satellite and wireless options are available to nearly all Americans.
U.S. Invests More in Broadband than Most Industrialized Nations
23
Average Annual Telecommunications Capital Investment Per Capita 1997-2013 (US Dollars)
Source: OECD and USTelecom Analysis.
296
269258
245
220
204198
191184 182
157 155 155 152 148 147 143137 131 129 128 127 125 123
115 110 109 10393
77 74 7158
38 35
0
50
100
150
200
250
300
350
U.S. Investment Has Yielded More Competitive Choice than Europe
24
86%
14%2+
1 or 0
U.S. Wired Broadband Choices Available at Any Speed (% of Housing Units, 2016)
Source: FCC, USTelecom, and Telcodata CensusNBM.com.
44%
56%
2+
1 or 0
EU28 Broadband Choices Available at Any Speed (% of Households, 2016)
Source: European Union, USTelecom, and IHS Markit.
Broadband Gaps Remain in High-Cost Rural Areas
25
97% 95%94%
90%
74%
11%
86%
82%
75%
62%
39%
8%
99% 99% 99% 98%
83%
11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Any Speed > 3 M DL /768 K UL
> 10 M DL /1 M UL
> 25 M DL /3 M UL
> 100 M DL /10 M UL
> 1 G DL /Any Speed UL
Total
Rural
Non-Rural
U.S. Wired Broadband Availability by Speed and Geographic Area, Year-End 2016(Percentage of Housing Units)
Source: FCC, USTelecom, and Telcodata CensusNBM.com
USTelecom supports direct, non-duplicative government support to broadband providers as the most economically and administratively efficient way to close broadband gaps
Fixed Wireless Eliminates Some Rural Coverage Gaps
26
These data include fixed terrestrial wirelessUSTelecom supports flexible, cost-effective policies that do not impose rigid technology and speed requirements
98% 98% 96%92%
74%
11%
94%90%
83%
68%
40%
8%
100% 99% 99%98%
83%
12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Any Speed > 3 M DL /768 K UL
> 10 M DL /1 M UL
> 25 M DL /3 M UL
> 100 M DL /10 M UL
> 1 G DL /Any Speed UL
Total
Rural
Non-Rural
U.S. Fixed Broadband Availability by Speed and Geographic Area, Year-End 2016(Percentage of Housing Units)
Source: FCC, USTelecom, and Telcodata CensusNBM.com
Broadband Capex Fell in 2015 and Resumed Growth in 2017 in Step with Title II Regulatory Expectations
27
Addressing rural broadband gaps and maintaining international leadership will require increased broadband investment under an even-handed, light-touch regulatory framework
Revised October 18, 2018
70.4 71.1
64.567.9 68.1 69.6
76.078.0 77.5
74.8 76.3
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
U.S. Broadband Provider Capital Expenditures, 2007-2017 ($ billions)
Source: USTelecom. Figures are rounded.
Recession
Internet Traffic Growth and Drivers
28
Internet Protocol Traffic Continues Rapid Growth
29
Estimated U.S. Internet Protocol Traffic, 1996-2021 (Petabytes per Month and Annualized DVD Equivalent)
2 4 8 17 36 74 150 234 348 612 1,035 1,7912,990
4,6096,314
9,35112,400
15,16218,127
23,443
31,352
39,344
48,272
58,279
69,084
79,640
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
218billion
DVDs per year
100 million DVDs per
year
2billion DVDs
per year
17billion
DVDs per year
86billion
DVDs per year
Source: Cisco Visual Networking Index and USTelecom Analysis. DVD equivalents are annualized, rounded, and assumed to store atwo-hour movie. The 2012 figure is revised from previously
reported volumes based on Cisco VNI statements and is a rounded estimate.
U.S. IP traffic is projected to grow 2.5x in the next five years
Video is the Biggest Driver of IP Traffic
30
Source: Cisco Visual Networking Index and USTelecom analysis. Mobile and business include video; consumer data includes all consumer non-video.
U.S. Internet Protocol Traffic, 2016-2021 (Petabytes per Month)
2016 2017 2018 2019 2020 2021
Mobile 1,322 1,819 2,475 3,306 4,346 5,644
Fixed Consumer Data and Business 6,315 7,809 9,260 10,870 12,582 14,362
Fixed Consumer Video 23,715 29,716 36,537 44,104 52,157 59,634
Total 31,352 39,344 48,272 58,279 69,084 79,640
31,352
39,344
48,272
58,279
69,084
79,640
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Mobile and Wi-Fi Are Growing but Fixed Networks Remain Essential for All Traffic
31
61%50%
35%
43%
4% 7%
2016 2021
Fixed-WiFi
Fixed-Wired
Mobile Cellular
Source: Cisco Visual Networking Index
Percent Share of U.S. IP Traffic, 2016 and 2021 Projected
The U.S. Is a Global Leader in IP Traffic
32
U.S. and Global Internet Protocol Traffic, 2016 - 2021 Projected (Petabytes per Month)
96,054
121,694
150,910
186,453
228,411
278,108
31,352 39,344
48,272 58,279
69,084 79,640
0
50,000
100,000
150,000
200,000
250,000
300,000
2016 2017P 2018P 2019P 2020P 2021P
Source: Cisco Visual Networking Index.
Global
U.S.
The U.S. is home to 4.4% of the world’s population, but it generates nearly one-third of global IP traffic
North America Leads in IP Traffic per Capita
33
93.4
33.6
12.7
9.4 8.31.8
0
10
20
30
40
50
60
70
80
90
100
North America Western Europe Central and EasternEurope
Latin America Asia Pacific Middle East andAfrica
IP Traffic per Capita (Gigabytes per Month, 2016)
Source: Cisco Visual Networking Index (VNI), USTelecom Analysis
World 2016Weighted Average
12.9
North America Leads in IP Traffic per User
34
106.0
41.2
21.4 20.2 17.9
8.4
0
20
40
60
80
100
120
North America Western Europe Central and EasternEurope
Asia Pacific Latin America Middle East andAfrica
IP Traffic per Internet User (Gigabytes per Month, 2016)
Source: Cisco Visual Networking Index (VNI), USTelecom Analysis
World 2016Weighted Average
29.5
The U.S. Leads Other Industrialized Nations in IP Traffic per Internet User
35
IP Traffic per Capita (Gigabytes per Month, 2009, 2016, and 2021 Projected)
Source: Cisco Visual Networking Index, USTelecom Analysis
15
33
15
n/a10
n/a8 11 10
4
97
7663 61 60
4235 33
26 24 17
237
172
143
114
158
126113
8574 67
50
0
50
100
150
200
250
UnitedStates
SouthKorea
Canada Sweden UnitedKingdom
Australia Japan France Germany Spain Italy
2009
2016
2021P
World 2021Weighted Average
36
n/a
The U.S. Has Surpassed Former Leader South Korea and Now Leads the World in Internet Traffic per User
36
19
26
38
51
59
66
82
109
41
4954
58 60
6871
83
0
20
40
60
80
100
120
2009 2010 2011E 2012 2013 2014 2015 2016
United States
South Korea
U.S. and South Korea IP Traffic per Internet User 2009-2016 (Gigabytes per Month)
Source: Cisco Visual Networking Index, USTelecom Analysis. USTelecom did not collect data for 2011. The 2011 estimatre is the 2010-2012 midpoint.
Where Are We Headed?
• Continued migration of analog world online, from video to the Internet of Things
• Rationalization of networks
o More fiber closer to network end-points for efficient multi-purpose use
o Dynamic, software-based network operation and management
• Convergence of wireline and wireless with fiber and 5G
o Cloud migrating closer to the user
o Network functions migrating back to the data center
o Lower latency as well as higher speeds
o New forms of competition
• New networked applications
o The usual suspects: autonomous vehicles, artificial intelligence, augmented reality/virtual, big data analytics, the Industrial Internet, the Internet of Things, smart cities, telemedicine
o The unknown …
37
Additional USTelecom Industry Analysis Resources
• USTelecom Research Brief: U.S. Broadband Availability Year-End 2016 (February 22, 2018)
• USTelecom Research Brief: U.S. Internet Usage and Global Leadership Are Expanding (November 27, 2017)
• USTelecom Research Brief: Broadband Investment Continued Trending Down in 2016 (October 31, 2017)
• USTelecom Blog: Achieving the Promise of Fiber-Enabled 5G Networks(October 27, 2017)
• USTelecom Research Brief: U.S. Broadband Availability Mid-2016 (August 25, 2017)
38