Mercados DigiWorld | 1

El inicio de la crisis

Mercados DigiWorld | 4

El inicio de la crisis

Mercados DigiWorld | 2

España a la ‘vanguardia’

Mercados DigiWorld | 3

España a la ‘vanguardia’

Telecomunicaciones

Se salva Internet

Las TI

Los ordenadores de sobremesa se rinden

Electrónica de Consumo | 1

Brusca inversión de la tendencia

Electrónica de Consumo | 2

Entre las pantallas, sólo resisten las de LCD

El sector audiovisual | 1

Fin de la época dorada

El sector audiovisual | 2

La IPTV se hace un hueco

Los actores de Internet

Los buscadores atraen y las redes sociales retienen

Banda ancha fija

… y más rápida

Telefonía móvil | 1

¡El móvil nº 50 millones!

Telefonía móvil | 2

Intensificación de la competencia

Broadcasting

La TDT es diagonal

Equipamiento profesional

En el ‘pelotón’

Outsourcing

Potencial de crecimiento

B2B

Entre el Este y el Oeste

e-Administración

Mucha información, pero menos acción

Publicidad

Más dura será la caída

Ocio audiovisual

Las consolas nos consuelan

Las CCAA | 1

Hogares

Las CCAA | 2

Ranking / Hogares

Las CCAA | 3

Empresas

Las CCAA | 4

Ranking / Empresas

w w w . i d a t e . o r g

The Atlas of the

Digital World9th edition

23rd June 2009 – Madrid

2

Agenda

� Presentation of the 2009 DigiWorld YearbookWhat is at stake in the Telecoms-Internet-Media mar ket in 2009?- Pierre CARBONNE, IDATE, Head of Mobile Broadband P ractice

� An IDATE perspective on Mobile Broadband- Pierre CARBONNE, IDATE

3

IDATE’s mission

An Observatory of the Digital Worldmarket analysis, corporate strategies, trends & forecasting, …

A team of Consultants specialising in the Telecommunications, Internet and Media industries

A European Forum for exchange amongst Company heads, Public

Policy Makers & the AcademicWorld

4

DigiWorld ® Yearbook – a unique initiative

� The DigiWorld Yearbook 2009 objective is to provide a one-volume publication, gathering key indicators for the telec om, Internet and media industries, along with a chronicle of the trends an d events of the past 12 months.

� The DigiWorld Yearbook is a reference document and gives food for thought to all those interested in deepening their understa nding of the way ICT is evolving, and of its economic and social imp act.

� The DigiWorld Yearbook aims at aggregating the best of IDATE research, surveys and forecasts.

� The 2009 edition is available in English, French and Spanishwith launch in London, Paris, Madrid and Brussels.

5

DigiWorld ® Yearbook – a unique initiative

Published with the support of the DigiWorld Program me Members

6

Key trends of the DigiWorld per region

A slowdown in all regions with modest growth rates…

� 03.4 % in Europe

� 02.9 % in North America

� 06.2 % in APAC

� 10% in South America and 13.5% in Africa and the Middle East

A market of EUR 2,739 billions in 2008, with a grow thbelow 5 % compared to 2007

7

Key trends of the DigiWorld by segment

… and similar by segment

� Telecoms : 4.2 % in services, 4.7 % in equipment

� IT: 5.1 % in software & services, 3.5 % in hardware

� Medias : 5.4 % in TV services, 7.4 % in Consumer Electronics

8

From key events in 2008 to main questions for 2009…

1. Unstoppable rise of Facebook, eruption of Twitter , failure

of Yahoo! buyout. Web businesses may not save the

written press, first steps of the eBook... Confirmation of

Social Networks but uncertainty of web 2.0 economic s

2. Mobile Internet; the winner of digital dividend, rise of

Netbooks, AppStore confirms the Iphone success… and

the war of the platforms

3. TV ad revenue decrease, TV shows freed from ’’wa lled

gardens’’ (hulu, YouTube...), the TV set gets connec ted ...

TV managed vs. TV over the top

4. Open source progresses and starts to be part of the

leaders’ strategies, virtualisation and cloud comput ing

back up outsourcing trend...

"the big switch"?

5. The telecom service market resists, Opex and Cape x here to

serve EBIT, NGN financing challenged, impact of

’’stimulus packages’’ on broadband

Is it possible to generate margins with no growth?

9

USA Guest country

•Open Web•Open Cloud•Open Mobile•Open IPTV•Open Net/Open Access•Open visions for telcos•Openness and regulation, …

Disruptions that will mark the end of the crisis

No digital industry leader can afford to ignore the potential for innovation and value creation that t he other players in the digital ecosystem represent (developers, users, etc .). However there are many debates surrounding the notions of open innovation, open platforms…

What do they tell us about :- the changing shape of digital industries? - new business models?- the top players’ assets and agility? - the new forms of competition?

Mobile Broadband outlookKey topics on the 2009 agenda

Pierre CarbonneHead of Mobile Broadband Practice--------------Tél/Phone : +33 4 67 14 44 65e-mail : p.carbonne@idate.orgweb : www.idate.org

IDATEBP 416734092 MONTPELLIER CEDEX 5

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2

Mobile Broadband Enablers

• Operators across Europe are deploying mobile broadband infrastructures.

• We observe a large diffusion of latest generation terminals with new friendly users interfaces, and ultra light laptops.

• Mobile operators are adopting flat rate pricing and open portals policies.

• There is a large penetration of fixed broadband and internet applications and mobile usages are quickly evolving.

• Operators are relying on mobile broadband services to offset the fall in SMS and voice revenues.

• Overall ecosystem shall be ready to guarantee mobile broadband take off.

• Operators will progressively extend the 3G networks coverage and upgrade to latest HSPA versions.

Background Why it matters

IDATE views

Main questions

• What are the strategies adopted by operators regarding infrastructure deployments, devices diffusion and pricing policies?

• Where are the bottlenecks?

HSPA population coverage in Western Europe selected countries _ As of end 2008

• By 2009-2010, in Western Europe, the number of active subscribers with a 3G terminal will exceed the number of subscribers with a 2G/2.5G terminal.

• Operators are adopting flat rate data plans.

Flat rate mobile data pricing in the UKPrice per GB as of 1 November 2008

Source: IDATESource: IDATE

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3

Mobile Broadband Enablers_ Focus on Radio Spectrum

• Traffic increase is weighing on spectrum demand

• 2.5 – 2.6 GHz radio spectrum is not allocated yet in most of European countries. Allocations procedures and licences provisions need to be finalized

• Refarming of GSM bands frequency bands has been launched

• Digital Dividend spectrum is not allocated yet throughout most of Europe. Allocations procedures are not defined yet in many countries.

• Telecom radio spectrum is a transversal issue in the mobile ecosystem.

• For years, radio spectrum has been at the center of lobbying strategies of equipment vendors, telecom carriers and Internet service providers.

Background Why it matters

IDATE views

• How demand for spectrum assets is increasing?• How the regulation framework is evolving driven by new requirements?• What are players pragmatic approaches to seize suitable spectrum? • Where are the main battlefields? UHF band and bands allocated to

mobile services.

Main questions

New licences to be awarded

No, generally fully awarded

Limited by size of bands and

availability

New licences to be awarded

Capacity available

From 2010 / 2011YES2008From 2010 / 20113G devices available

end 2009YES2008LTE from 20103G infrastructure available

14 UMTS Carriers12 UMTS carriers7 UMTS Carriers6 UMTS carriersTotal capacity

UMTS extension band

UMTS Core bandGSM 900800 MHzDig. Div

2.5 GHz licences award in selected Western European countries

Radio spectrum resources in the 2012 timeframe in W estern Europe

• Radio spectrum limitation from 2012 with current assets.• Auction procedures are likely to be favored for allocation of

digital dividend and 2.5 – 2.69 GHz licences.• FDD is likely to remain the preferred mode, with TDD

spectrum gaining ground in selected markets.

Source: IDATE

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4

Mobile Broadband roadmap _ Focus on LTE

• Network equipment vendors and devices manufacturers are investing in LTE development.

• RAN and network architecture standardization are being finalized.

• LTE is the favored technological path towards NGMN for most tier 1 operators.

• Mobile operators are defining their LTE strategies through trials and bids for radio spectrum frequencies.

• Mobile Broadband and data traffic increases require improved technical and economic performance both at the radio access and core network levels.

• Transitions from one generation to another call for long term strategies.

• Drivers for LTE adoption•Large ecosystem gathering infrastructure and devices manufacturers, service providers.•Technical performance: peak rates, latency, spectrum efficiency, packet-switched only•Frequency flexibility with scalable bandwidths and FDD and TDD modes.•Lower cost per Mbit

Background Why it matters

IDATE views

Main questions• What are the main drivers for LTE adoption and

deployment?• What is the LTE roadmap?

• LTE Roadmaps• 2009: first LTE trials• Beyond 2010/ 2011deployment of LTE if

objectives in terms of performance, features and economic environment are met.

• Japan and USA a bit ahead of Europe with NTT DoCoMo and Verizon pioneering LTE.

LTE devices roadmap

Source: IDATE

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5

Mobile Broadband Economics _ Focus on LTE

• LTE is the next decisive investment for mobile operators.

• LTE is favored by Tier 1 operators in mature markets

• Operators are launching trials

• LTE roadmap is accelerating in the US and Japan (Radio spectrum allocated, Tier mobile operators committed to early deployments)

Background Why it matters

IDATE views

Main questions

• What are the main LTE items impacting CapEx and OpEx?

• What are the main gains achieved through LTE systems adoption?

Transport cost estimate per Mo for HSPA and LTE technologies

• Better spectral efficiency, reduced OpExand optimized network operations allow for a reduction of traffic transport costs when switching to LTE.

• Mobile operators want to avoid 3G failures: •Inappropriate roadmaps (radio spectrum, infrastructure, devices), •Lack of coordination between equipment manufacturers and operators.

Source: IDATE

-

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

end 2012 end 2015

US

Japan + South Korea

Europe 5 + Scandinavia

China

Global LTE adoption forecast _ end 2012 – end 2015 (million subscribers)

Source: IDATE

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6

Mobile Broadband Economics

• Revenues of traditional voice and SMS services are falling in many western European markets.

• Data traffic increases negatively impact operators’costs. They are driven by “flat rate” pricing policies, widespread mobile Internet access services for PCs, PC cards and dongles.

• Additional investments are required: radio spectrum licences, network upgrades, high end terminals subsidies.

• Fears related to the economic crisis are impacting operators forecasts and investment decisions.

• Any negative outlook on operators’ cash flow generation is likely to mean difficult times ahead for the overall mobile ecosystem.

• Investment decisions could be postponed.

• Operators arbitrate between different technical – economic solutions to cope with traffic increase:

•Improvements in technological performance•More spectrum for greater capacity•Network densification•Convergence between fixed and mobile networks and femtocells.

Background Why it matters

IDATE views

Main questions

• How operators are going to cope with traffic increases? • What are operators’ strategies to maintain margins when

deploying mobile broadband offers?

• Operators increasingly differentiate mobile connectivity offers: QoS, devices, fair use…

Comparison of mobile data plans per access device i n EuropeAs of end 2008

Source: IDATE

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7

Mobile Broadband Services

• Mobile operators, application providers and handsets manufacturers are struggling to transfer the web from the fixed to the mobile environment.

• Tier 1 operators concentrate R&D investments and standardization efforts on service innovation.

• Tier 1 operators are developing and standardizing innovative services specific to the mobile environment: LBS, m-payment, m-advertising, machine-to-machine and sensor communications, enhanced mobile communications services…

• New mobile usages are quickly taking off.

• Operators don’t want to give up service innovation. • Service innovation and standardization require long term

partnership strategies.

Background Why it matters

IDATE views

Main questions

• How usages are evolving? • Where are the services opportunities for operators? Is it

only about connectivity?• Which pricing and use policies for innovative services?

• Ideal equipment configuration is “Mobile phone + laptop” indicating appeal for both connectivity and traditional communication services

• Mobile internet usage remains largely driven by the use of practical services and downloads

• Mobile data revenue opportunity is growing but primarily driven by mobile PC access service.

• For mobile operators, the money is both in connectivity services and in dedicated services with high QoS.

Compared fixed and mobile internet usage among youn g usersSource: IDATE online survey of 1500 18-25 years old internet users in France, Italy, Sweden and UK

Source: IDATE

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8

Mobile Broadband Services: focus on interpersonal c ommunication services

• Revenues generated by voice and SMS account for 80% to 90% of Western European mobile operators revenues and are decreasing.

• Operator’s traditional communication services are challenged by the innovation coming from fixed Internet.

• Mobile operators are partnering with Internet giants: MSN messenger, Facebook, Yahoo, MySpace.

• Voice is being commoditized with unlimited plans becoming increasingly common.

• Operators fear that service innovation could lead to cannibalization of voice and SMS revenues.

• Operators want to retain customers.• VoIP is seen as the main short term threat.

Background Why it matters

IDATE views

Main questions

• How traditional voice and SMS services are evolving?• Which pricing strategy for communication services?• Which strategy regarding the Mobile VoIP threat?

The operators ’ positioning regarding mobile social networking and GSMA Rich Communication suite initiative

Source: IDATE

• End users expectations: From the fixed Internet side, messaging services (SMS, Email, and instant messaging), unlimited usage and presence features are wanted. From the telephony side, full mobility, total interoperability and handy user interfaces (contact book) are wanted.

• Internet applications and communication services offered by mobile operators will coexist in the future.

• Flat rate and bundle offers are most likely

• Several defensive strategies are deployed to mitigate VoIP threat

1

FTTx Global Panorama & Business CasesDigiWorld Yearbook 2009

Madrid, 23 June 2009

Roland MONTAGNEHead of Broadband Practicer.montagne@idate.orgMob: + 33 6 80 85 04 80

2

Agenda

► FTTH worldwide Status & Strategy► Global Figures► Leaders: Japan & US

► European Situation

► FTTH Business Models► Cost model

► Key variables► Sydney simulation

► Conclusion – Dynamics for FTTH

3

FTTH: Worldwide Status & Strategies

4

FTTH/B Global Picture: APAC Strong leadership

� Global FTTH/B market continues to make strides. Gro wth in 2008 was steady, with close to 8 million new subscribers (+37% over the past 12 months)

� Nearly 80% of Worldwide FTTH/B subscribers at Decem ber 2008 are in Asia

� Europe (including Russia) counting only for 8% of W orldwide FTTH/B Total

� In Asia at December 2008, estimated figures for FTT H/B Homes Passed: 70 million…. to be compared to the 17.5 million in Eur ope (including Russia)

FTTx subscribers at December 2008

Source: IDATE and FTTH Council Europe

(1) Western, Eastern & Central Europe counts EU27+Norway+Switzerland+Iceland+Andorra+Luxembourg+Croatia+Russia

(3) USA, Canada & Mexico

Decembre 2008 VDSL subscribers FTTH/B subscribers FTTL A subscribers Total

Western Europe (1) 776 550 1 512 960 15 000 2 304 510

Eastern & Central Europe (1) 32 000 778 940 212 393 1 023 333

North America (3) 1 045 000 3 995 000 na 5 040 000

Asie Pacifique 1 500 22 717 500 na 22 719 000

Middle East & Africa 0 15 000 0 15 000

Total 1 855 050 29 019 400 227 393 31 101 843

5

FTTH/B Global Picture: APAC Strong leadership

� In terms of operators, the gap between Asia and the rest of the world is still important

� Among the globe’s ten largest FTTx operators, six ar e Asian, two are North American and two are European

� Only six operators in the world have a base of more than a million subscribers:

four of which are Asian operators and the other two are based in North America

� NTT is the largest FTTx operator with a base of 10.6 million subscribers or a 73% share of the Japanese market and a close to 37% sha re of the global market.

World’s top 10 FTTx operators in terms of subscriber s at the end of 2008

Source: IDATE

Rank Operator Country Main Technology & architecture

FTTx subscribers

1 NTT Japan FTTH/B GEPON 10 636 000

2 SK Broadband South Korea GEPON FTTB GEPON 2 950 000

3 Verizon USA FTTH BPON/GPON 2 481 000

3 KT South Korea FTTB EPON/GEPON 2 481 000

5 AT&T USA VDSL2 FTTN 1 045 000

6 KDDI Japan FTTH/B EPON/GEPON 1 025 000

7 Beeline Russia Ethernet P2P FTTB 630 000

8 Chunghwa Telecom Taiwan FTTB GEPON 577 000

9 HKBN / CTI Hong Kong FTTH/B Ethernet P2P/GPON 330 000

10 FastWeb Italy Ethernet P2P FTTH/B 285 000

6

FTTH/B worldwide Status & Strategy: leaders

7

FTTH: Worldwide Status & Strategies: leaders

� Japan: the FTTH leader

� More new FTTH/B subscribers than new DSL subscribers since April 2005

� 14.5 Million FTTH/B subscribers at end 2008 and 46 Million Homes Passed...and still around 700 000 new FTTH subscribers each quarter …. Nearly 40% are FTTB subs

� At end 2008, FTTH/B subscribers represent 48% of total Broadband subscribers, with DSL counting now only 40%

� Attractive prices, closing the gap with ADSL tariffs… aerial deployments

� Government’s proactive approach to FTTH deployments: 30 Million FTTH subscribers in 2010 as a ambitious initial objective…objective revised in November 2007 at 20 Million FTTH subscribers in 2010

� But not specific services…. ….with a few IPTV subscribers in Japan (less than 250 000)

8

FTTH/B in Japan : Coverage

FTTH/B coverage is already nearly 90% of the populatio n!

Source: MIC – March 2009

9

NTT

NTT: strong domination on FTTH/B � Indeed, retail price for SDU was 5 460 Yens, was only around 10% more expensive than

wholesale offer.� But MIC has forced NTT to open up it’s FTTH network at advantage prices for competitors:

since June 2008, NTT East for example decreased his wholesale price of 14%.

NTT market shares on FTTH is nearly 73% compared to 37% on DSL (end 2008)

Source :NTT

NTT

Others

SDU

NTT

Others

MDU

NTT72.9%

PowerCompanies

10.2%

KDDI5.6%

USEN4.3% Others

7.0%NTT market shareOn FTTH/B

10

Hong Kong Broadband: reversal Asymmetry!

� Maintain “CAPEX level below EBTDA policy

� Hong Kong demography allows EUR 88 per home passed! !� Uplink traffic is 3 times of downlink traffic

Source: Weekly statistics from HKBN

Source: HKBN

11

FTTH: Worldwide Status & Strategies: leaders

� USA: FTTH is the unique solution for RBOC’s

� Power of Cable operators: Time Warner, Comcast, launching 30 or 50 Mbps offers

� CableVision just announced a 101 Mbps offer … more than twice what Verizon's much-touted FiOS offers (50/20 Mbps)

� At end 2008 Verizon has signed 2.5 Million FiOS FTTH subscriber (24.8% penetration) and has nearly 1.9 Million FiOS TV sub scribers (20.7% penetration)

� At end 2008 it reached 12.7 M homes passed by FTTH� At end 2008, Verizon has passed 9.2 M homes for FiO S Video� By 2010 , the FiOS network will have passed 18 million homes , or about half the

households Verizon serves

� AT&T (more FTTN oriented) and Verizon launched Fibre access for delivering HDTV & Triple Play

� Churn is very low for FiOS TV Subscribers: around 1%

12

FTTx: European situation

13

FTTH in EuropeOverview

14

FTTH in Europe - Overview: Projects

► IDATE has identified 224 FTTx projects in Europe of which 111 are new initiatives since mid 2005

► Some significant FTTH/B European deployments at Dec ember 2008

Source: IDATE for FTTH Council Europe

CountriesHome/Building

passed(December 2008)

DONG Energy Power utility 150 000Energie Midt Power utility 75 000TRE FOR Power utility 60 000

Finland TeliaSonera Incumbent 400 000France Telecom Incumbent 500 000Illiad/free Alternative 300 000SFR Alternative 250 000Numericable Cable operator 3 400 000

Germany Wilhelm Tel Public 100 000M-Net Public 80 000

Italy Fastweb Alternative 2 000 000Netherlands

ReggefiberInfrastructure operator

350 000

Norway Lyse Power utility 170 000Slovakia T-COM Incumbent 200 000

Orange Slovensko Alternative215 000

Slovenia T2 Alternative 200 000Spain Telefonica Incumbent 250 000Sweden B2 Alternative 390 000

Players

Denmark

France

15

FTTH in Europe - Overview: Global Figures

� December 2008, nearly 1.7 million FTTH/B subscribers i n the EU 31 and around 11.2 million Homes Passed…penetration is l ow!

� A growth of 25% in terms of subscribers and 27% in term s of Homes Passed compared to June 2008

Source: IDATE for FTTH Council Europe

December 2008 June 2008 June 2007 GrowthDec 2008/June

Total without VDSL, FTTN/C/LA 1 661 895 1 332 331 989 049 25%Total FTTx + VDSL + FTTLA 2 694 038 1 877 074 1 079 099 44%

EuropeSubscribers

December 2008 June 2008 June 2007Growth

Dec 2008/June Total without VDSL, FTTN/C/LA 11 248 595 8 840 890 3 953 619 27%Total FTTx +VDSL + FTTLA 26 829 195 23 564 155 14 643 669 14%

EuropeHomes/Buildings passed

Dec 2008 June 2008 June 2007

Global FTTH/B without VDSL, FTTN/C/LA 14,77% 15,07% 25,02%

EuropePenetration subs/Homes passed

16

FTTH in Europe - Overview: Players

►Municipalities and Power utilities continued to ini tiate FTTH/B projects in 2008

►Open Network Models are often chosen by Municipalit ies

►Alternative operators are still dynamic and represe nt at end 2008, nearly 40% of total European FTTH/B subscribers base (addi ng Fastweb –Italy, B2 –Sweden, Numericable –France, T2 –Slovenia)

Source: IDATE for FTTH Council Europe

Incumbents 22 9,8% 12 8,6%Municipalities / Power Utilities 131 58,5% 92 66,2%Alternative operators / ISPs 61 27,2% 20 14,4%Housing companies & Other 10 4,5% 15 10,8%

Players involved in FTTH/B

December 2008 June 2006

17

Familje Bostader: Housing Company in Stockholm

Exemple of Open Network Business Model: Familje Bos tader

COCom.operator

COCom.operator

SERVICEPROV.

SERVICEPROV.

HOUSEOWNER

�TENANT

STOKABSTOKAB

OPTICALFIBER

NETWORK

6 $ /month

~7 $ /paying customer/month

~36 $ /month (SP)For Internet access

~21 $ /month (ISP)

PRICES INCL. VAT

~ 3 $ /tenant/month

Source: IDATE - FB

18

Europe’s FTTH leaders

19

FTTH/B subscribers in Europe by country

Source: IDATE for FTTH Council Europe

(1) Here FTTx means Fiber-to-the-Home or Fiber-to-the-Building or Fiber-to-the-Office or Fiber-to-the-Dormitory

* Excluding VDSL / VDSL2, FTTC, FTTN deployments by incumbents

** Including FTTB deployments from Numericable

Evolution of FTTH/B subscribers in Europe (1)

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

Sweden Ita

lyFra

nce*

*Nor

wayNet

herla

nd*

Denm

ark

Germ

any*

Sloven

ia

Finlan

d

Spain

Other

s

June 2005

June 2006

June 2007

June 2008

Dec 2008

20

FTTH/B Home Passed in Europe by country

(1) Here FTTx means Fiber-to-the-Home or Fiber-to-the-Building or Fiber-to-the-Office or Fiber-to-the-Dormitory

* Excluding VDSL / VDSL2, FTTC, FTTN deployments by incumbents

** Including FTTB deployments form NumericableSource: IDATE for FTTH Council Europe

Evolution FTTH/B Homes Passed in Europe (1)

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

4 500 000

5 000 000

Franc

e**

Italy

Sweden

Denm

ark

Nethe

rland

s*Slov

akia

Finlan

d

Spain

Sloven

iaGer

many*

Other

sJune 2005

June 2006

June 2007

June 2008

Dec 2008

21

FTTH leadership in Europe: Technologies

Architectures FTTH & FTTB and choice of technology PON & Ethernet (in % of subscribers as of December 2008)

Source: IDATE for FTTH Council Europe

Total Europe at end 2008

- 52.8% of subscribers on FTTH(from 50.2% in June 2008)

- 47.2% of subscribers on FTTB(from 49.8% in June 2008)

- 80.8% of subscribers on Ethernet(from 83.8% in June 2008)

- 19.2% of subscribers on PON(from 16.2% in June 2008)

FTTH FTTB PON EthernetAndorra 100 0 100 0Austria 80 20 0 100Belgium na na na naCroatia 90 10 10 90Cyprus 100 0 100 0Czech Republic 80 20 20 80Denmark 80 20 15 85Estonia 50 50 100 0Finland 50 50 0 100France (*) 35 65 55 45Germany 10 90 0 100Greece 0 100 0 100Iceland 100 0 5 95Ireland 80 20 5 95Italy 5 95 5 95Latvia 100 0 na naLithuania 0 100 0 100Netherlands 90 10 5 95Norway 100 0 0 100Poland 100 0 0 100Portugal 100 0 100 0Romania na na na naSlovakia 100 0 95 5Slovenia 100 0 0 100Spain 100 0 100 0Sweden 50 50 10 90Switzerland 100 0 10 90United Kingdom 100 0 na na

Architecture and technology deployed (in %)

(*) excluding Numericable

► In the last 6 months, the momentum is more on the side of FTTH and PON

► But at end 2008, FTTH architecture and Ethernet technology are clearly leading NGA deployments in Europe

22

Europe : key facts & figures

► The panorama of FTTx deployments in Europe as of De cember 2008 shows that the FTTH market in Europe continues to grow► Especially in terms of Homes Passed (+27%) reaching around 11.2 million► Subscribers shows a +25% growth but are concentrated in 6 countries► Dynamism of countries like Netherlands (with Reggefiber’s leadership) and France

(FTTB/DOCSIS 3 deployed by Numericable to nearly 3.5 million homes)…but also Norway, Sweden, Denmark and Spain where Telefonica started a significant roll out

► Dynamic Eastern Europe countries like Slovenia (2 players involved), Slovakia► Major FTTH/B plans announced and on tracks in Greece, Portugal► New ambitious objective for France: up to 8 million FTTH subscribers in 2012 !!► Main European incumbents are deploying or will soon deploy FTTH/B: France Telecom,

Telefonica, Telecom Italia, Belgacom, KPN, Swisscom… others are still mainly positioned on VDSL: BT, Turk Telecom, Deutsche Telekom…

► Nevertheless► With nearly 1.7 million FTTH/B subscribers as of December 2008, Europe is still lagging behind

the US and Japan (14.5 million FTTH/B subscribers at end 2008)► Players have now to increase their subscribers bas es in order to recoup their investments

… Numericable in France stopped FTTB deployments to concentrate on marketing/advertising► Strong Barriers remains in Europe

► Facilitate access to MDU for operators (47% of subscribers on FTTB architecture),► Mutualise Civil Engineering costs, in particular outside dense urban areas: sharing

infrastructures, operators co-investments ► Key role of the regulators and governments

23

FTTx Business Models

24

General structure of the model

OPEXMarketing costs

Network operationsExternal purchases

RevenueRetail (number of subscriber x

ARPU)

Wholesale

CAPEXCivil engineering, cable

installationFinal connections

Electronic equipment

Interconnection,Backhaul,

Unbundling

Content purchases

Amortisation

Operating profit

25

FTTH Business Mode: Key variables

26

Dwelling-unit type

Density

Vertical structures

0

200

400

600

800

1000

1200

4 00

0

6 00

0

8 00

0

10 0

00

12 0

00

14 0

00

16 0

00

18 0

00

20 0

00

22 0

00

24 0

00

Civil engineering and cable costsbased on population density

for GPON technology(€ per outlet )

Source : IDATE

-30%

0

200

400

600

800

1000

1200

1400

4 6 8 10 12 14 16 18 20 22 24

-30%

Civil engineering and cable costsbased on average number of apartments per building

for GPON technology(€ per outlet )

Source: IDATE

27

International benchmark – Dwelling Type in Europe

In Europe, countries like Spain, Italy, Germany are well positioned for FTTH

It will be more expansive to deploy FTTH in the UK for example

28

ARPU potential: Australia vs France

� France has probably the most competitive Broadband offer worldwide!� Standard offer (Free): ADSL2+ (max 20 Mbps), >200 IP TV channels incl. HD TV, unlimited IP

telephony to fixed & overseas for 30 EUR / months (51 AU$)� No limitation on download traffic� And Free launched his FTTH 100 / 50 Mbps offer at… 30 EUR / month .� France Telecom FTTH 100 /20 Mbps is at 47 EUR / month (80 AU$)� Furthermore, a challenger Bouygues Telecom announced the first 4 play package: from 45 EUR

(77 AU$) to 76 EUR (129 AU$)� So … finding a higher ARPU for FTTH will be difficult in France:

� VOD� More HD TV and multi screen TV� TV Time control� Exclusive content (France Telecom: sports & cinema)� 100 Mbps symmetric

� Australia : a very different picture� Broadband only access & double play ranging from 30 AU$ (18 EUR) to 150 AU$ (88 EUR) with

Telstra or Optus.

� And limitation of download traffic.

� Starting point for FTTH in terms of ARPU seems more comfortable.

29

ARPU potential: Benchmark FTTH vs ADSL tariffs

40

30

44

30

38

45

30

86

65

41

0

10

20

30

40

50

60

70

80

90

100

Orange Free Telefonica Sonaecom NTT

Comparison of a selection of ADSL2+ and FTTH bundle s tariffs , with access at 100 Mbps or less(EUR/month – April 2009)

Source: IDATE – FTTx Watch Service 2009

30

FTTH Cost model: Sydney Simulation

31

Sydney demographics context

Demographics� 3 645153 residents in Sydney� Density 2 058 people / km²

� 1.4 million Households

� Predominance of horizontal habitat and very little vertical habitat in urban areas

Habitat, 3 main types:� Flats / purposed built: 28%� Semi-detached

/ terrace house: 12.3% � Separate house: 58.7%

� Very low proportion of high rise building

32

Caution statement

Hypothesis for the model� Hardware equipment cost is based on Western Europe cost (converted to AU$)

� ARPU assumed in line with current broadband packages + TV offer (AU$ 160)

� Deployment over 4 years with 25% / year

� Penetration on coverage 15% year 1 with +8% per year thereafter

� Amortisation of Civil Engineering: 40 years

� Re-used of existing ducts: 80% (rent: AU$ 2/ meter for existing ducts)

33

Sydney: Cumulated free cash flow to year N

Cumulated Free cash flow scenario brown field (excl . Tax; $ million)

-5000

0

5000

10000

15000

20000

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Y19

FCF Scenario brown field to Year N

34

Conclusion - Dynamics for FTTx

35

Conclusion – Dynamics for FTTH

� ARPU & Triple play Potential� Today FTTH ARPU is already high in some cases compared to DSL: Verizon,

Telefonica, Sonaecom,…� IPTV over Fiber will offer possibility for new services

� Government & Regulator roles will be essential

� Maturity of technologies � GPON & GEPON technologies are deployed: Asia, US, Europe� NGPON are coming: 10EPON, 10GPON….Hybrid TDM/WDM PON, WDM PON

� FTTH to be deployed for final access… but also for LTE backhauling

� FTTH : ARPU potential & New players� New players will come: Housing companies, developers, Civil Engineering

companies,…� VOD, SVOD, HDTV, Super HD, 3DTV . First services to leverage the ARPU…

others to be invented … for Residentials as well as for SMEs (Saas)

36

Thank You

Roland MONTAGNEHead of Broadband Practicer.montagne@idate.org+33 6 80 85 04 80

www.idate.org