Dennis Weller

1

Next Generation Networks Challenges and
Opportunities of Convergence

• Dennis Weller
• Chief Economist Verizon
• Telecommunications Policy Review Panel
• Ottawa
• 24 October 2005

2
About Verizon

• Largest wireline operator in the US
• More than 50 million lines
• Second largest wireless operator in the US
• 43.8 million wireless subscribers (end of 2004)
• 6.3 million new customers in 2004
• Largest directory publisher in the world
• Revenue 71.3 billion in 2004
• There are about 110 million households in the US
  on any given day about 100 million people are
  connected to a Verizon network

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About Verizon

• Largest wireline operator in the US
• More than 50 million lines
• Second largest wireless operator in the US
• 43.8 million wireless subscribers (end of 2004)
• 6.3 million new customers in 2004
• Largest directory publisher in the world
• Revenue 71.3 billion in 2004
• There are about 110 million households in the US
  on any given day about 100 million people are
  connected to a Verizon network

4
Verizon Overview - Nationwide Presence in a
Fragmented US Market

• Local telephone services in 29 states and the
  District of Columbia
• Wireless service nationwide
• Long Distance
• Broadband
• Data services
• Directories

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Transforming Verizon Through Investment in
Next-Generation Networks and Services

• Wireline Fiber to the premise
• 3 million homes passed by end of 2005
• Now in 15 states
• Wireless 3G broadband
• Services and Integration
• To deliver the greatest possible value to
  consumers
• In rural areas
• WiMax In Grundy, Virginia and other communities
• Partnership between Verizon Avenue, local
  government, and Alvarion

6
FTTP Full Build Overlay Architectures
Office Parks
Small Businesses
ONT
ONT
Residential
Copper Distribution
SAI
Copper Feeder
Circuit Switch
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FTTP The Perfect Broadband Platform
Bandwidths Services
Downstream
Upstream
1310 nm
1490 nm
1550 nm
Voice and Data _at_ 622 Mbps
Voice and Data _at_ 155 to 622 Mbps
Video
550 MHz
860 MHz
42 MHz
Digital TV
HD/VOD
Analog TV
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Verizon Fios Wireline Broadband Access
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Fios TV

• First offering in Keller, TX in October 2005
• One million homes passed by year end 2005
• Will begin with
• 293 channels of video
• 1800 choices for video on demand
• Easy interface
• Parental control
• Will add
• Full interactivity
• Two-way video
• Integrated shopping (T-commerce)

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Verizon WirelessHigh-Speed Internet Access
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Verizon 3G Wireless Broadband

• Verizon is US market leader in 3G rollout
• Available to 150 million people by end of 2005
• CDMA technology EV-DO
• Card for laptop provides BB Internet access
• Unlimited nationwide usage 69.95 per month

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Pricing of VCAST Service
V CAST VPak 15 per Month
Mobile Web 2.0 VZW Today Unlimited Browsing
Unlimited Data Transport Get It Now services Get
Games Get Tones Get Wallpaper Get Going
Unlimited Basic Video Clips News Sports
Entertainment Weather Access to Premium Content

• Partners include Comedy Central, MTV, News Corp,
• 20th Century Fox
• NBC News tailored for mobile
• Exclusive mini-episodes (mobisodes) of popular
  TV shows
• More than 300 clips updated daily

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VoiceWing Personal Account Manager
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Verizon iobi HomeIP Enabled Telephone Service
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Access Point - Client
CALL LOGS
CALL FORWARDING VOICE MAIL
CONTACTS

• iobi desktop client allows users to manage their
  communications from their PC
• Most convenient access point from your office or
  home PC
• Send SMS or e-mails with a mouse click
• View your weather information

SEND MESSGAGES
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Service Control
Outlook
iobi End User Portal
IM SMS Messaging VM Alert VM Retrieval
Broadsoft Application Server
Conferencing And Collaboration Web Sharing
Addr book Calendar Content Directories
PSTN/VoIP Call Control
ISCP
MGC
SIP Proxy
VM
TG
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T-Commerce
Food Network - Groceries Overview
Opportunities for Integration
TV and Broadband
Commercial agreements with partners
Convenience, security, ease of payment
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Policies ForNext-Generation Infrastructure

• United States policy is to promote platform
  competition
• Competition among wireline, cable, 3G wireless,
  others
• Product differentiation
• Old wires old rules. New wires, new rules.
• Elimination of unbundling for new networks
• Elimination of line sharing
• Tradeoffs in policy one wire or many?

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Policies ForNext-Generation Infrastructure

• How do policy objectives from the old world
  translate into the new world?
• Two examples
• What does universal connectivity mean in the new
  world, and how will it be achieved?
• What does openness mean in the new world, and how
  will it be achieved?

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Policies ForNext-Generation Infrastructure

• What does universal connectivity mean in the new
  world, and how will it be achieved?
• Universal connectivity in the old world
• Theodore Vail and the Kingsbury commitment, 1913
• Obligation to interconnect
• Regulation as an necessary result
• Universal connectivity in the new world
• Worldwide connectivity on the Internet
• Achieved without any obligation to interconnect,
  or any regulation
• How has this been possible?
• Efficient markets, valuation, and incentives to
  invest
• Policy challenge Keep Theodore Vails hand off
  the Internet
• As next-generation networks grow, new world will
  displace the old

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Policies ForNext-Generation Infrastructure

• What does openness mean in the new world, and how
  will it be achieved?
• Openness to third party service provision in the
  old world
• Services tied to the network platform
• Third party provider rents part of network
• Policy instruments have included open network
  architecture (ONA), equal access, unbundling
• Openness to third party service provision in the
  new world
• Services can be independent of the network
  platform
• Openness means customers ability to reach third
  party sites

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Policies ForNext-Generation Infrastructure

• Connectivity principles
• Proposed by High-Tech Broadband Coalition two
  years ago
• Broadband consumers should be able to
• Reach content of their choice on the net
• Run any software
• Attach any device
• Obtain information about these abilities
• As the High-Tech Coalition predicted, the market
  has observed these principles
• Adopted by the FCC in August 2005
• Without any ex-ante rules to enforce them

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Connectivity Principles

• Developed by a coalition of high-tech companies
• Proposed to FCC in 2003
• Adopted by FCC as principles
• No ex ante regulation to enforce principles
• Ensure that bits are not blocked
• Broadband customer can access any site, run any
  application
• In world where applications are not tied to
  networks, principles ensure open market for
  service applications
• Market for Integration
• Customer chooses how much integration to buy, and
  from whom