Residential Broadband

1
Residential Broadband

• Group A
• John Chuang
• Tushar Dani
• Ilin Tsai
• Ilya Bagrak
• Alexandra Fedyukova

2
Residential Broadband

• Introduction
• Market and competition
• Technology
• Economics
• Policy and regulation
• Conclusion

3
What is Residential Broadband

• Technologies that provide a high-bandwidth
  connection to the Internet for residential
  consumers
• Replacement for the now fading residential
  dial-up technology
• Entirely new online experience
• Watching a video stream,
• Downloading music in seconds,
• Video and voice chats
• Real-time gaming
• This presentation is limited to US residential
  Broadband market

4
Growth and Penetration

• Fast growth, 11 increase per year
• Reached more than 50 penetration already across
  internet households
• Several competing broadband service providers
• Telephone companies, wireless carriers, cable TV
  service providers and satellite providers

5
Players

• DSL
• SBC
• Verizon
• Bellsouth
• Quest

• Cable
• Comcast
• Time Warner Brothers
• Cox
• Charter
• Cablevision

• New technologies
• Wi-Fi (Google cloud in San Francisco, hot spots)
• Satellite Signals
• Wi-Max
• BPL (broadband over power lines)

6
Market segments Prices 1

• Competition for Broadband subscribers is
  bifurcating
• Low end emphasizing price
• High end emphasizing speed
• DSL companies primarily target low price segment
• Started penetrating into high end market,
  Verizons FiOS (15 mbps)
• Cable companies have elected to stay exclusively
  at the high end
• Bundling as a way to reduce churn rate attract
  new customers
• Triple and even quadruple play

7
Market segments Prices 2
8
DSL Technology

• Limited distance to central office (CO)
• Dedicated line from CO to home
• Asymmetric flow
• Typical speeds up to 1.5Mbits/s downstream

9
Cable Technology

• Shared lines to the nearest splitter
• Generally higher speeds
• Reaches more households since distance limitation
  is removed
• Typical offering 4Mbits/s
• Last Mile advantage

10
Future Technology

• WiMax
• Metropolitan Area Networks (MANs)
• 3-5 miles range, no direct line of sight required
• 2Mbits/s practical limit
• Can use existing cell towers
• Broadband over Power Lines (BPL)
• More pervasive infrastructure, but requires extra
  equipment
• Up to 2.7Mbits/s
• Superimposing analog signal over AC
• Small deployments in operation (e.g. Manassas,
  Virginia 10MBits/s for 30.00 a month)

11
Porter's Five Forces Model

• Broadband over power lines
• Wi-Fi free internet (Google)
• Municipal utility internet
• Wi-Max

New entrants

• Cable and DSL Co.
• cut-throat competition
• Trend to provide a bundle of services
• Cable companies converging from video to
  telephony
• - Cox, Comcast
• Telecom companies converging from telephony to
  video
• - SBC, Bellsouth, AOL

• Large number of
• equipment suppliers are available
• e.g. Nortel, Lucent, Cisco, Nokia etc.
• Limited companies actually own network lines,
  and heavily depend on network owners

• Broadband as a Commodity.
• Some people have 3 to 4 providers to buy from
• Tend to buy bundled services
• Switching costs are low, unless annual contracts

Suppliers
Buyers
Substitutes

• TV, Music
• Newspapers
• Telephone etc

Source Michael E. Porter Competitive Strategy
Techniques for Analyzing Industries and
Competitors, (The Free Press, 1980)
12
Policy and Regulation Existing situation

• US is 16th in the world in broadband penetration
  (ITU 2005 report)
• Why is US so far behind?
• monopolistic structure, entrenched management,
  and political power of incumbents
• failure of effective policy and regulation for
  broadband industry (e.g. ,FCC regulation on
  spectrum allocation policy)
• Legislative tug-of-war
• Preserving Innovation in Telecom Act of 2005
• Community Broadband Act of 2005

13
Policy and Regulation

• Need for national broadband strategy
• Continue to encourage highly successful open
  access model in Japan
• competitors may use existing residential
  telephone infrastructure for a modest fee
• competition and innovation ? cheap, high-speed
  broadband access
• Regulations for emerging technologies
• FCC better allocation of wireless spectrum
• Municipal WiFi usage
• Mixture of legislative, regulatory, and
  investment initiatives

14
Conclusion

• Market Players
• Broadband will replace dial-up
• The Battle is still pretty much between Cable and
  DSL companies
• Technology
• New technologies such as BPL, Wi-Max, Satellite
  are emerging, but are not great threat to
  existing Cable DSL
• Economics
• Bundling as a way to keep existing and attract
  new customers
• Segments based on Price and Speed
• Regulation
• Need for national broadband strategy, open
  access, economic incentives

15
Conclusion

• Cable companies have advantage due to their
  infrastructure and quadruple play
• They will be top player in coming years
• No winner take all conditions, Cable companies,
  DSL companies, and new technologies will
  co-exists

16
Thank you
Clap Questions