Regulatory Challenges of Fttx Regulation

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Regulatory Challenges of FttxRegulation Public
Policy 3rd Transatlantic Telecom Forum

• Dr. Frank Schmidt, Deutsche Telekom

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T-Home Entertain We make the Triple Play future
happen in Germany

• IP TV for the mass market in 2007
• Launch of IP TV via ADSL2 in up to 750 cities
• Increase T-Home IP TV coverage to 44 / 17 Mio.
  Homes (end of 2007)
• Premium VDSL quality 8 Mio. homes
• Mid term VDSL in up to 50 cities

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Increasing demand for bandwidth leads to the
need for fibre roll-out
Hunger for bandwidth
Challenges for telcos and NRAs

• Traditional copper business model of (all) telcos
  under pressure
• More fibre deployment without alternative
• Fibre rollout does not lead to new or more
  enduring bottlenecks
• Fttx opens new and enhanced opportunities for
  infrastructure based competition

Increasing deployment of bandwidth
continuous development
Increasing demand of bandwidth by new
applications
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New competition in the local loop
The new level playing field does not rely on the
incumbents infrastructure
Investments into fibre networks
NetCologne FTTB in cologne area, target 100 of
city covered by 2011 Mnet FTTB in Munich area,
target 60 of homes covered by 2011 HanseNet
FttH in Hamburg area, target 100k
households CableCos Plans to massively invest in
broadband Wilhelm.tel FTTH and Cable TV in
Schleswig-Holstein Internet market share of 71
in Norderstedt area

• Sharing of passive infrastructure (ducts) might
  be reasonable if applied by all players
• Facilities of utilities or municipalities should
  also be taken into account!
• Careful market analysis is necessary and still
  missing in the German case
• Street cabinets do not meet the definition of a
  bottleneck

Source Wilhelm.tel presentation, November 2006 ,
bubbles by DT
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Comprehensive Services in DTs Access Network
today
Full Unbundling since 1998 Current price
10,50/month
Line Sharing since 2001 Current price
1,91/month
Sub-loop Unbundling since 2002 Current price
7,55/month
Access to inhouse cabling since 1999 0/month
Local Loop Unbundling since almost 10 years
Local Exchange Building (MDF)
Street Cabinet
Copper cable
Old
New
MDF
Main copper cable
Copper cable
Bitstream Access Offered since 2002 in different
product combinations

• Downstream access regulation (e.g. bitstream)
  might not be necessary at all
• If bitstream is regulated it should not deter
  incentives for more infrastructure competition

Bitstream Access
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Old thinking traps investments. It is time to
rethink!

• Old thinking traps investments
• Fttx does not aggravate an access problem but
  rather helps solving it
• Traditional access regulation aggravates a
  bottleneck situation as it artificially sets
  incentives to use the infrastructure of the
  incumbent
• Europe risks falling behind other markets such as
  Japan and the US in the move to fibre

• How to create the right framework for
  investments?
• No further or even enhanced regulation in the
  downstream markets (bitstream access)
• Facility sharing to be applied by all
  infrastructure providers, not only imposed on the
  incumbent
• Price floor for remaining regulated access prices
  has been reached
• Bottom Line Deregulation!

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Thank you for your attention.

• Dr. Frank Schmidt
• Deutsche Telekom AG, D-53105 Bonn
• Frank.Schmidt08_at_telekom.de

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Backup
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Demand for bandwidth in GermanyMore than 70
of broadband access lines in Germany have already
a downstream speed of 2Mbit/s or more.
gt 6000 Mbit/s 2000-6000 Mbit/s 1000-2000 Mbit/s lt
1000 Mbit/s
Estimate
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Fttx by DT Fibre to the street cabinet
Local Exchange Building
Street Cabinet
Copper cable (old)
ODF
Old
New
MDF
Main copper cable (old)
Copper cable (old)
Main fiber-optic cable (new)/FTTC
Optical fiber runs parallel to the existing
retained copper network.
Street cabinets to host additional technology
(DSLAM, Energy Supply, AC).
Last mile is retained, but supplied via outdoor
technology with considerably higher transmission
rates.
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Germany is the leader in ULL based competition
Number of fully unbundled local loops 03/2007

Belgium
Denmark
Sweden
Portugal
Austria
Finland
Netherlands
Spain
UK
Italy
France

Germany
Already 5.9 million ULLs in Germany by end of
September 2007.
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
Source ECTA 03/2007
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US Telecommunications Industry Lessons
learntWith increasing regulation, investment
of both incumbents and new competitors decreased
sharply. The US regulation policy based on the
ladder theory clearly failed and made
deregulation possible.
RBOCs Regional Bell Operating Companies
Source FCC data, Hazlett/Bazelon 2005.
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Europes Telecommunications Industry Indicators
USA and Asia increase their investment
leadership
Telecommunications Investment per capita (OECD
2007)
200
USA
Asia
US Dollar
150
Europe
100
2003
2004
2005
EU-15 Japan, Korea Source OECD (2007)