Fiber Networks in EuropeBuilding network and services along customer demand and competition

KATP – CITI International Joint Symposium

Seoul, 24th June 2011

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Western andCentral EuropePortugal 40%France 21%Italy 10%Netherlands 10%Switzerland 7%Austria 4%Spain 3%Germany 2%UK 1%Belgium 0%

Northern andEastern EuropeLithuania 76%Latvia 43%Sweden 36%Slovakia 35%Estonia 21%Norway 18%

Asian Pacificand AustraliaSouth Korea 96%Japan 94%Hong Kong 93%Taiwan 77%Australia 3%

NorthernAmericaUSA 19%Canada 2%

Snapshot FTTH/FTTB deployments EOY 2010Fiber deployments vary significantly world wide – Asia and NorthernEuropean countries are ahead, while Western Europe is “lagging” behind

Is demand for FTTH / high bandwidth (services) so different from countryto country or are other factors driving NGA roll-out strategies?

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Source coverage: based on IDATE FTTx Watch Service 2011, Mai 2011 and public available household figures

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No differences in customer demand todayAverage download speeds do not differ substantially world wide andshow little correlation with FTTH/B coverage – reflecting similar demand

It makes perfect sense – HDTV and OTT (video) service such as Youtube,iTunes etc. are used world wide and do not necessarily need fiber yet

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Avg. download speed in Mbps

FTTH/B coverage100%90%

SE

SP

KR

SK

PTNO

NL

LT

LV

JP

IT

DEFR

EE

DK

CA

BE

AT

AU

80%70%60%50%40%30%20%10%0%

USAUK

CH

TW

R2=0.34

55% of broadbandcustomers on FTTH/B

62% of broadbandcustomers on FTTH/B

20% of broadbandcustomers on FTTH/B

8% of broadbandcustomers on FTTH/B

Source FTTH/B penetration: IDATE FTTx Watch Service 2011, Mai 2011Source download speeds: Net Index by Ookla, www.netindex.com, June 2011

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No doubt on future demand for FTTHBut there is no doubt – fiber will be needed in the long run and operatorsare pressured to invest early since roll-out may take substantial time

This would imply that all roll-outs should be similarly advanced or arethere other factors than demand driving NGA roll-out strategies?

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100 Mbps

10 Mbps

1’000 Mbps(1 Gbps)

InternetVoice 1.x TV sets

From… today limitedconcurrent broadband usage …

… to heavy concurrent usageof new high bandwidth services

Multi-room3D/HD TV

Videoconferencing

Low latency foronline gaming

Home office

Multi-room4k/8k TV

Point-to-MPtelepresence

All data/contenton online storage

Remotecomputing

Surveillance

“Killerapplication”

~2010 ~2015 ~2020

Nielsen’s law+650%

in 5 years

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Competitive/political landscape driving decision on FTTxLocal FTTH competition and public initiatives/incentives have induced earlyinvestments in FTTH and lead to high penetrations in Asia / North. Europe

Incumbents facing strong cable competition had to move quickly tohigher bandwidths – choosing FTTC/VDSL over FTTH/B in the midterm

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Cablecompetition

DOCSIS 3.0competition

USO

Altnetslocal initiatives

Broadband programs(incentives / subsidies)

Local FTTHcompetitionand publicinitiatives

Strong cablecompetition

ADSL FTTC/VDSL FTTH/B DOCSIS 1.x/2.x DOCSIS 3.0

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2015e2014e2013e2012e2011e20102009

Example: NGA roll-out in SwitzerlandSwisscom started FTTV/VDSL roll-out in 2006 to cope with strong cablecompetition, that exists in 80% of Switzerland – even low dense areas

Fast progressing FTTH roll-out initiated in 2009 to cope with DOCSIS 3.0and meet long term demand for ultra high bandwidth services

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VDSL>8 Mbps

ADSLup to 5 Mbps

FTTHToday: 100 Mbps

Future: 1 Gbps and more

FTTC/VDSLToday: 20-30 Mbps

Vectoring tests promisespeeds beyond 50 Mbps

ADSL2+up to 8 Mbps

& wireless(e.g. HSPA+/LTE)

Top cities andagglomerations

~35% of HH

Cable/DOCSIScompetition

~80% of HH

Rural areasw/o DOCSIS

Medium termdemand (3D/HDTV)

Competitive on BB

Long term demandand replacement ofcopper network

Beyond universalservice obligation

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Intermediate step FTTC benefitting all customersMoving directly to FTTH unleashes speeds beyond 100 Mbps, but only for afraction of customers – bandwidths in areas without FTTH often insufficient

Intermediate FTTC allows to cover larger areas with necessary bandwidth,benefitting all customers and leaving enough time to roll-out FTTH

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2010 2015e

100% 100% 100% 100%

2015e2010

ADSL2+< 20 Mbps< 2 HDTV streams

From ADSL2+ to FTTH Switzerland

FTTH> 100 Mbps> 10 HDTV streams

FTTH> 100 Mbps> 10 HDTV streams

FTTC/VDSL20-30 Mbps2-3 HDTV streams+ vectoring40-100 Mbps4-10 HDTV streams

ADSL2+/VDSL<20 Mbps<2 HDTV streams

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Example: NGA Go-to-MarketNation wide availability of high bandwidths (FTTH, FTTC/VDSL)allows an almost technology agnostic go-to-market

Swisscom is offering a single bundle portfolio on FTTH/VDSL, puttingservices rather than download speeds in focus, ultimately meetingcustomer’s demand – also in terms of simplicity

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10/1 Mbps and HDTVboth on FTTH and VDSL

20/2 Mbps and HDTVboth on FTTH and VDSL

HDTV and multi-roomboth on FTTH and VDSL

30/3 Mbps on VDSL50/5 Mbps on FTTH

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Summary and conclusionWestern Europe is building networks and services along customer demandand competition – there is no need for acceleration or even intervention

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1. Europe is not lagging behind in terms of bandwidth availabilityMixed FTTH/FTTC is as well suited to meet current and growingbandwidth demand as FTTH/B, which often comes

i. with heavy overbooking

ii. and/or limited reach, increasing digital divide

2. FTTH roll-outs are well under way – no need for accelerationFTTH roll-outs are progressing and well under way to catch up with theleading countries and will sure meet long term customer demand

3. FTTH roll-outs are financed by private sector – no need for interventionCountries with strong infrastructure competition have seen substantialinvestments from the private sector in FTTC and now FTTH, whereas inother countries public money was needed from the beginning