Perspectives on Differences in the Transatlantic Approaches to Broadband Policy

1
Perspectives on Differences in the Transatlantic
Approaches to Broadband Policy

• Aryeh Friedman
• Senior Competition and Regulatory Counsel
• BT Global Services
• Washington DC

2
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

3
BTs DSL deployment

• 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

4
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

5
Availability of DSL Speeds in the UKAlmost 90
of UK DSL subscribers receive service at speeds
of 3 Mbps or more.
6
UK Broadband Connection Speed
40
30
2Mbps services are falling gt2Mbps services are
growing
20
10
0
Aug-06
Oct-06
Dec-06
Feb-07
Apr-06
Jun-06
128Kbps
512Kbps
1.5Mb
4Mb
Don't know
150Kbps
576Kbps
2Mb
8Mb
256Kbps
1Mb
3Mb
More than 8Mb
7
UK Retail Broadband Market Has Vibrant Competition

New survey

• 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

8
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

9
Vibrant Retail Market in the UK
10
UK Broadband Prices

• UK 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
ISPs Based on 228 consumer ADSL packages
Source http//www.adslguide.org.uk/isps/packageli
st.asp
11
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.
12
US Non-Incumbent DSL Market Share Compared
(Source 2006 Broadband Reality Check Report by
Free Press et al)
13
BT, Verizon, ATT Residential Broadband Compared

Using OECDs Purchasing Power Parities Rate
used in its Rate Comparisons
14
US. v. EU Regulatory Environments
15
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 operators resulting market power.
  And this, its 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

16
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

17
A history of investment
Source Infonetics Research, London economics

• Higher investment in better regulated countries
  (OECD, ECTA, LE). Source ECTA

18
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.

Source ECTA (European Competitive
Telecommunications Association)
19
(No Transcript)