Telecommunications Industry Market and Technology Trends

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Telecommunications Industry Market and
Technology Trends

• February 27, 2003Link Hoewing
• VP, Internet Technology Policy Development

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The World Has Changed in Telecommunications

• People have numerous communications options today
  and are using them
• These options are constraining prices and
  stimulating innovation
• Many of these options are based on networks and
  services built free of regulation
• Bundling did not originate with MCI but rather
  with wireless providers
• Key question In a world of strong competition
  and rapid entry, why is economic/rate regulation
  still in place?
• Regulation is constraining a key sector
  incumbent providers undermining investment and
  reducing choice vis-à-vis cable.

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More Than Two-Thirds of Americans Own Cell Phones
Source Gallup Poll, Cellphone Users Have Little
Interest in Number Portability, Gallup Poll
Analysis, December 8, 2003
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Cellular Surpasses Residential Landline
Wireless Surpasses Landline!
U. S. Wireless Subscribers (Millions)
U. S. Total Access Lines (Millions)
Source Kaufman Brothers, A General Flavor of
Mild Decay, July 14, 2003
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Trends in Total Communications Access
Source Global Insight, Technology and
Substitution The End of Boundaries in
Telecommunications, 10/30/03
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Average Percent of LD Calls replaced by Wireless
Source Forrester, Market Overview Consumer
Choice Fuels Displacement, November, 2003
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E-mail and Instant Messaging Are Substitutes for
Voice Calls
Percent of Daily Communications
Source J.D. Power Associates, 2003 Residential
Internet Service Provider Study, August, 2003
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Total Non-printed Directory Assistance Market
Volume Competitive Too
In Millions of Calls
Source Frost Sullivan, Various Sources
9
Changes in the Industry Declines in Market Value
Source Month-end stock price for the major firms
in each category Jan 2001-Jan 2004
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RBOCs Total Access lines YoY Growth
Source Kaufman Brothers, A General Flavor of
Mild Decay, July 14, 2003
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Wireless Data Now 60 of Industry Revenues
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IP TelephonyDisruptive Technology?
(The Innovators Dilemma, Clayton Christensen
1997)
Sustaining Technology
Disruptive Technology
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U. S. Cable Telephony Market
CAGR 2003-2007 Revenues 51 Cable VOIP
Customers 68
Billions of Dollars
Millions of Customers
Source Kaufman Brothers, A General Flavor of
Mild Decay, July 14, 2003
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Cable dominates the North American marketplace
48 Million
Overall Broadband Subscribers (In Millions)
Source Yankee Group
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Verizon Fiber Deployment Plans
Verizon plans to roll out fiber-optic
connections to every home and business in its
29-state territory over the next 10 to 15 years
It will cost 20 billion to 40 billion,
depending on how fast equipment prices fall, and
allow the lightning-fast transmission of
everything from regular old phone service to
high-definition TV Verizon's Gutsy Bet
Business Week Online, 8/4/03
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Typical Broadband Services
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Typical Speeds for Wireless
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Capital Investments in Telecom Infrastructure Are
Punished by Wall Street
Source Fulcrum Global Partners, Wireline
Communications, February 14, 2003
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US Is Behind in Todays Broadband and Lagging in
Tomorrows Broadband
Broadband penetration, total households
Source RHK Research Brief 8/03
World-wide FTTH leaders
Q302 FTTH Council estimates
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The Impacts of Good Policies

• INVESTMENT
• 63 billion in new capital investment. Adding in
  next generation broadband will bring the total to
  nearly 150 billion in technology investment.
• GROWTH and INNOVATION
• 180 and 465 billion to US economic growth and
  investments in new applications and innovative
  services
• JOBS
• 1.2 million jobs, including 250,000 jobs in the
  telecom services and manufacturing industries.

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What Can Be Done Deploy a New Network IP,3G,
Fiber

• Network deployments always happen in stages
• DSL is not the end game higher capacity/more
  flexible networks are on the horizon
• Give freed markets a chance it has never really
  been tried
• Worked for wireless and cable - 160 billion was
  invested between them
• Governments can conduct more of their business
  online stimulating demand
• Eliminate government programs that hinder
  deployment
• Right of Way costs/lack of uniformity
• High telecom taxes/inequitable taxes on same
  services
• Adopt a pro-investment national broadband policy
• Four of six fiber plants in U. S. are shuttered
• Expertise going overseas because no one is
  investing domestically

"While the wireline sector faces challenges
globally, the US has the worst combination of
structural, regulatory and other adverse factors
of any major market."   The Telecommunicator,
Telecom Civil War Post 2Q Update, Merrill Lynch,
Aug 5, 2003, pg 1