1

Multimedia over DSL: the way to new growth?Multimedia over DSL:

the way to new growth?

2

An early state of development of Broadband Services

on Telecom Networks

An early state of development of Broadband Services

on Telecom Networks

Penetration to be only about 8%of households in Europe by

end 2002

Only PC users can have access

Speed is generally limited to a few hundred Kbs/s

Service is only rapid accessto existing Internet

services

Penetration to be only about 8%of households in Europe by

end 2002

Only PC users can have access

Speed is generally limited to a few hundred Kbs/s

Service is only rapid accessto existing Internet

services

3

Actual 2002• North America: 18 M broadband

customers• Europe: 13 M broadband

customers

Expectations

• North America (Probe Research, Forrester Research)+ 7 - 10 M new broadband users / year 4 - 6 % of homes switched to broadband per year

• Europe: 4% per year or more?

Actual 2002• North America: 18 M broadband

customers• Europe: 13 M broadband

customers

Expectations

• North America (Probe Research, Forrester Research)+ 7 - 10 M new broadband users / year 4 - 6 % of homes switched to broadband per year

• Europe: 4% per year or more?

Fixed broadbandsubscription rate evolution

Fixed broadbandsubscription rate evolution

4

Technically a lot more is possible

Technically a lot more is possible

Speed can be 5Mbs/s for 70% of Europeans, directly from the telephone exchange

Video compression at 2Mbs/s and lower, allows multi-channel video services

Access to both PC and TV set allowed by reduced costs of set top boxes

Service offering can be much richer

Speed can be 5Mbs/s for 70% of Europeans, directly from the telephone exchange

Video compression at 2Mbs/s and lower, allows multi-channel video services

Access to both PC and TV set allowed by reduced costs of set top boxes

Service offering can be much richer

5

ADSL & ADSL+ from COBitrate vs. reach

ADSL & ADSL+ from COBitrate vs. reach

0.51.02.03.04.05.0

0.51.02.03.04.05.0

VDSL VDSL remoteremoteADSL+ ADSL+ ADSLADSLDistance kmDistance km

Downstream bitrate [Mbit/s]Downstream bitrate [Mbit/s]

87.46.25.53.01.0

87.46.25.53.01.0

14.513105.93.01.0

14.513105.93.01.0

12.010.07.23.51.00

12.010.07.23.51.00

22153.5000

22153.5000

6

total annual broadband

revenues [€]

“More of the same”

FTTExelectronics at

CO

FTTExelectronics at

CO

FTTAreaelectronics at centralized

remote location

FTTAreaelectronics at centralized

remote location“Evolution …Pay & be paidas you Play”

“Pay today”

FTTCabelectronics at copper

cross connect (JWI : Junction Wire

Interface)

FTTCabelectronics at copper

cross connect (JWI : Junction Wire

Interface)

FTTUFTTU“Revolution…for existing,End game…

for greenfield”

A healthy investment cycle goes hand in hand with

expected revenue stream evolution…

A healthy investment cycle goes hand in hand with

expected revenue stream evolution…

CO

ADSLADSL(+)

CO

ADSLADSL(+)

COVDSL

COPON

Year

7

Small & medium size businessesSmall & medium size businesses

8

Small Businesses:DSL is becoming the

standard

Small Businesses:DSL is becoming the

standard18.0%69%62%56%48%40%29%ALL SBs

CAGR2000-05200520042003200220012000DSL Penetration

Source: AMI Partners 2000 U.S. Small Business Strategy & Forecast 2000 - 2005Source: AMI Partners 2000 U.S. Small Business Strategy & Forecast 2000 - 2005

9

DSL Services for Business Access

DSL Services for Business Access

LAN to LAN networking • Intranet and extranet solutions for SMEs

Private line services • Complement to Leased line solutions

Multipair IMA/G.shdsl

Multiservice/multivoice lines (VoDSL)

IP services and solutions• IP connectivity• IP peering• intranet/Extranet• IP-VPN (GRE, IPsec, virtual routers, MPLS-VPN

(RFC2547bis)• IP services: IP QoS, intranet access, firewalling ,

portals, virus scanning

LAN to LAN networking • Intranet and extranet solutions for SMEs

Private line services • Complement to Leased line solutions

Multipair IMA/G.shdsl

Multiservice/multivoice lines (VoDSL)

IP services and solutions• IP connectivity• IP peering• intranet/Extranet• IP-VPN (GRE, IPsec, virtual routers, MPLS-VPN

(RFC2547bis)• IP services: IP QoS, intranet access, firewalling ,

portals, virus scanning

10

Residential customersResidential customers

11

existing businessexisting businessHigh SpeedInternet Access

High SpeedInternet Access

Premium InternetPremium Internet

Basic VideoServices

Basic VideoServices

Premium VideoServices

Premium VideoServices

P2P applications(intensive downloads)

P2P applications(intensive downloads)

- Set-Top-Box rental- 30 broadcast channels- Set-Top-Box rental- 30 broadcast channels

- Premium broadcast channels- Video-on-Demand- Pay-per-View / Time shifted TV- Entertainment / Gaming

- Premium broadcast channels- Video-on-Demand- Pay-per-View / Time shifted TV- Entertainment / Gaming

- E-Mail- Infotainment- Enhanced Teletex - Internet (customized for TV)- Portal / Kiosk services

- E-Mail- Infotainment- Enhanced Teletex - Internet (customized for TV)- Portal / Kiosk services

- T-commerce- Games (on-line gambling)- T-commerce- Games (on-line gambling)

PC usersPC users TV usersTV users

New services through ADSL video

New services through ADSL video

12

Revenue per user evolutionRevenue per user evolution

PC ownersPC owners TV ownersTV owners

Voice

45 €

Low speedInternet

15 €

Hi-speedInternet

35 €

Moving toMoving to

Voice

35 €

TVBasic

35 €

Hi-speedInternet

15 €

TVPremium

25 €

New !New !

Voice

45 €

Voice

35 €

TVBasic

35 €

Interneton TV

10 €

TVPremium

25 €

New !New !

20012001

20092009Moving toMoving to

13

A three step approach?

A three step approach?

New services to the PC: broadband specific web sites, videoconferencing, teleworking, gaming, video on demand …

Interactive video to the TV set: internet access, video on demand, pay TV, time shifted TV, gaming, e-commerce: one channel

Full multimedia including broadcast channels: two to three simultaneous channels

New services to the PC: broadband specific web sites, videoconferencing, teleworking, gaming, video on demand …

Interactive video to the TV set: internet access, video on demand, pay TV, time shifted TV, gaming, e-commerce: one channel

Full multimedia including broadcast channels: two to three simultaneous channels

14

A combination of technologiesa way to speed up broadband

penetration?

A combination of technologiesa way to speed up broadband

penetration?

VoD SERVER

Vidéo distribution

Production, Edition and Contribution

Customer and Service Management

Internet

PACKETNETWORK

Packaged Content(This Operator

is a Broker) Satelliteor DTT

• No limitation of the number of channels

• Interactivity

• Open system: access to all content providers

• No limitation of the number of channels

• Interactivity

• Open system: access to all content providers

15

Is the customer willing to pay?

Is the customer willing to pay?

US Video Services Revenues in 2001 (per subscriber / month):

• Cable Network: $53penetration rate = 70%

• DBS: $63penetration rate = 15%

• Video purchase + rental: $16 (household/month)

penetration rate = 100%

US Video Services Revenues in 2001 (per subscriber / month):

• Cable Network: $53penetration rate = 70%

• DBS: $63penetration rate = 15%

• Video purchase + rental: $16 (household/month)

penetration rate = 100%

16

V-o-D penetration on US Cable(source: Forrester Research)

V-o-D penetration on US Cable(source: Forrester Research)

Now: 8 Million(revenues ~ $ 20/ months per user)

2004: 24 Million expected

2007: 40 Million expected

Now: 8 Million(revenues ~ $ 20/ months per user)

2004: 24 Million expected

2007: 40 Million expected

In 2007, half of US homes are expectedto have V-o-D because of additional offering

over DSL

In 2007, half of US homes are expectedto have V-o-D because of additional offering

over DSL

17

What are the bottlenecks?What are the bottlenecks?

Telecom Operators have high debt and declining wireline revenues

only invest if short term financial return is assured

The regulatory environment is confused because of debates and court cases

operators slow down investment in an

uncertain environment

Telecom Operators have high debt and declining wireline revenues

only invest if short term financial return is assured

The regulatory environment is confused because of debates and court cases

operators slow down investment in an

uncertain environment

18

What are the bottlenecks?What are the bottlenecks?

No level playing field between Telecom Operators and Cable Operators

Other actors (content providers, aggregators, software houses, set top box manufacturers, etc.) are slowing down investment, uncertain about the time scale and content protection issues

the potential of technology is not realised

Early entrants experience heavy losses because of low revenue (single service) and high costs (no volume)

negative image is projected

No level playing field between Telecom Operators and Cable Operators

Other actors (content providers, aggregators, software houses, set top box manufacturers, etc.) are slowing down investment, uncertain about the time scale and content protection issues

the potential of technology is not realised

Early entrants experience heavy losses because of low revenue (single service) and high costs (no volume)

negative image is projected

19

What competitive environment?

What competitive environment?

What is the objective of regulation: lowest price?

Maximum competition? Broad service offering?

Strong service penetration?

Where should competition exist: at all levels?

Where there is most added value?

When should regulation happen: at the start of the service or when there is a market?

Is there a need to go beyond competition law?

What is the objective of regulation: lowest price?

Maximum competition? Broad service offering?

Strong service penetration?

Where should competition exist: at all levels?

Where there is most added value?

When should regulation happen: at the start of the service or when there is a market?

Is there a need to go beyond competition law?

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Content Providers

Aggregators

Service Providers

ATM/IP Network

Providers

Access Providers

Telecom Operators

Customer

Set Top Box

Providers

Content Providers

Aggregators

Service Providers

ATM/IP Network

Providers

Access Providers

Telecom Operators

Customer

Set Top Box

ProvidersThe customer should ideally be able to choose any combination of actors to get access to a

certain content

The customer should ideally be able to choose any combination of actors to get access to a

certain content

The ActorsThe Actors

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MARGINMARGIN

ACCESSACCESS

TRANSMISSIONTRANSMISSION

SERVICESSERVICES

A model based on new added-value

A model based on new added-value

1010

2020

3030

4040

5050

6060

COSTSCOSTS

€€

ADSL OFFERADSL OFFERHIGH SPEED

ACCESSHIGH SPEED

ACCESS BUSINESS ACCESSBUSINESS ACCESS

ACCESSACCESS

TRANSMISSIONTRANSMISSION

ACCESSACCESS

TRANSMISSIONTRANSMISSION

SERVICESSERVICES

RESIDENTIAL MULTIMEDIARESIDENTIAL MULTIMEDIA

SERVICESSERVICES

22

An ideal revenue sharing model?An ideal revenue sharing model?

Operators:- provide access- billing- keep part of billed revenue

Service or Content providers:- advertise services- provide services- collect part of billed revenue

Operators:- provide access- billing- keep part of billed revenue

Service or Content providers:- advertise services- provide services- collect part of billed revenue

i-Mode or Minitel model

23

Looking back from the futureLooking back from the future

All homes will have wired broadband connectivity (copper lines, cable)

Additional broadband connectivity will be provided by mobile networks, wireless LANs,

DTT, satellite

Service will be truly multimedia: voice, data, video, gaming, e-commerce…) value of service will be at least as high as the

valueof connectivity

This multimedia broadband environment will be a major driver for related industries: consumer electronics, content, software, IT services ...

All homes will have wired broadband connectivity (copper lines, cable)

Additional broadband connectivity will be provided by mobile networks, wireless LANs,

DTT, satellite

Service will be truly multimedia: voice, data, video, gaming, e-commerce…) value of service will be at least as high as the

valueof connectivity

This multimedia broadband environment will be a major driver for related industries: consumer electronics, content, software, IT services ...

Present policy should be determinedby this view of the future

Present policy should be determinedby this view of the future

24

Regulation in a multimedia environment: new objectives

Regulation in a multimedia environment: new objectives

Increase dramatically the level of service available to enterprise and residential users: higher speed, more content, greater interactivity.

Create an open service environment with appropriate revenue sharing models.

Encourage investment in broadband infrastructure.

Create a level playing field for competition at the transport layer using competing platforms (copper, cable,…) and loop unbundling.

Increase dramatically the level of service available to enterprise and residential users: higher speed, more content, greater interactivity.

Create an open service environment with appropriate revenue sharing models.

Encourage investment in broadband infrastructure.

Create a level playing field for competition at the transport layer using competing platforms (copper, cable,…) and loop unbundling.

25

ARCHITECTS OF AN INTERNET WORLD