KNOWLEDGE FOR ACTION

THE PRESENT AND FUTURE

OF FIXED BROADBANDProf. Kevin Werbach

werbach@wharton.upenn.edu / Twitter: @kwerb

Tel Aviv, June 2014

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Just released: http://t.co/bUCnJDqtkf

KNOWLEDGE FOR ACTION

SETTINGTHE CONTEXT

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

“The Internet”

(The “Peacock Map” of Internet

autonomous systems, circa

1999)

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Personal Computers Phone Networks Information Goods

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

≈1.5 billion PCs ≈1.3 billion landlines

1.65 billion CDs

The World, Circa 2012

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

The World, Circa Now

> 1.6 billion

smartphones+tablets

7 billion mobile lines

Streaming > 50% of

Net traffic

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Post-PC Devices

Converged Broadband Networks

The Cloud

The Next Internet

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

The PC is Dead

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

So is the PSTN!

• U.S. Residential switched access lines– 194 million in 2000 – 101 million 2012

• % of U.S. Households with POTS– 93% in 2003, 25% in 2013,

and…

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Not Just a U.S. Phenomenon

• >50% of OECD countries experienced a drop in PSTN access lines from 2009-11.

• In 8 OECD countries, already <20 PSTN access lines per 100 inhabitants.

– OECD Communications Outlook 2013

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

1943 20001980 2020

0.004

0.000000002

0.1

6.5

Expect

ed D

evic

es

per

Pers

on

Year

Coming Next: Internet of Things

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Cloud Platformsare the New Utilities

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Infrastructure of the 21st Century

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KNOWLEDGE FOR ACTION

IMPLICATIONS FORFIXED BROADBAND

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

3(Share of fixed connections still on dial-up in the OECD as of 2011)

%Broadband is Here

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Why Go Beyond Broadband?

• Convergence– Voice/video/data to IP– Fixed/mobile/nomadic

• Applications– Streaming media– Real-time communications– Telework/telepresence– Cloud computing and storage– Financial services– Internet of Things– Smart homes

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

OK, But Why FIXED Broadband?• Mobile still only 7% of traffic in 2017

(Cisco)

• Fixed is complementary to mobile– Most “wireless” traffic quickly goes to fixed– WiFi offload estimated at 70% of

smartphone data

• Most recent data suggestsper-device mobile data usagemay be peaking– At least, until the wearable/IoT

explosion!18

Has to plug in somewhere!

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

From Here to Fibre

• Only truly future-proof technology

• The Good– GDP benefits of ultrafast networks– Knock-on effects of “economics of

abundance”

• The Bad– Up-front capex costs very high– Heavily take-rate dependent – Municipal obstacles like ROW– Transit costs an issue in some areas– Business case uncertainties

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

…And The Confusing

• All modern fixed broadband access systems incorporate some fiber– Key is how far fiber is extended toward the end-user

• Claimed speeds aren’t necessarily representative

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Netflix USA Speed Index, January-May 2014

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Big Variation in Fibre Adoption

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IsraelBelgiumGreeceIreland

GermanyNew Zealand

AustriaFrance

ChileAustraliaCanada

ItalyFinlandPolandSpain

Mexico LuxembourgSwitzerlandNetherlands

United KingdomUnited States

TurkeyHungaryPortugal

Czech RepublicDenmarkSlovenia

IcelandNorway

Slovak RepublicEstonia

SwedenKoreaJapan

0 10 20 30 40 50 60 70 80 90 100

Fiber as % of Total Broadband

Percentage of fibre connections in total broadband subscriptions, June 2013

OECD ranks by FTTP as % of Broadband Subscriptions

OECD Average: 15.75% (June 2013)

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Big Variation in Fibre Adoption

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IsraelBelgiumGreeceIreland

GermanyNew Zealand

AustriaFrance

ChileAustraliaCanada

ItalyFinlandPolandSpain

Mexico LuxembourgSwitzerlandNetherlands

United KingdomUnited States

TurkeyHungaryPortugal

Czech RepublicDenmarkSlovenia

IcelandNorway

Slovak RepublicEstonia

SwedenKoreaJapan

0 10 20 30 40 50 60 70 80 90 100

Fiber as % of Total Broadband

Percentage of fibre connections in total broadband subscriptions, June 2013

OECD ranks by FTTP as % of Broadband Subscriptions

OECD Average: 15.75% (June 2013)

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Cable Changes the Data Somewhat

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GreeceItaly

New ZealandFrance

LuxembourgTurkey

GermanyAustralia

FinlandIcelandSpain

Mexico United Kingdom

IrelandAustria

SwitzerlandPoland

IsraelCzech Republic

DenmarkSlovak Republic

SloveniaBelgium

NetherlandsChile

SwedenEstoniaNorway

PortugalCanadaHungary

United StatesJapanKorea

0 10 20 30 40 50 60 70 80 90 100

Fiber as % of Total Broadband

Percentage of fibre connections in total broadband subscriptions, June 2013

OECD ranks by FTTP+Cable as % of Broadband Subscriptions

KNOWLEDGE FOR ACTION

APPROACHES TO NEXT-GENERATIONFIXED BROADBAND

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Architectural Choices

• Fiber to the home vs. the node– Cost vs. capacity tradeoff– The Australia example

• May be multiple technologies deployed within countries – Esp. with municipal networks – Hierarchy by density

(FTTH/VDSL2/VDSL/Wireless)

• Path dependencies important– High DSL/cable adoption may actually slow fiber

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Business/Regulatory Models

• Role of incumbents vs. new entrants– Non-traditional entrants (Reggefiber, Google)

important in some countries

• Scope of public funding or provision– Different models being used at the national,

regional, and local level– Success stories (Stokab), failures (Provo, UT), and

incompletes (Australia)

• Requirements for open access or wholesale– Prevalent in most of the world except the U.S.– Wholesale model often chosen voluntarily

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Vectoring and G.Fast

• Potential game changers?– “Fiber-like” speeds at “DSL-like” costs

• Challenges– May make unbundling technical infeasible– Heavily dependent on loop lengths– Real-world performance and deployment pace

lags– Still tops out well below fibre speeds

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Israel Fibre Network

• An important global test case

• Israel Electric Corporation (IEC) deploying a 1 Gbps wholesale network nationwide– First announced in 2011– Partnership with a group led by Sweden’s

Viaeuropa– Service scheduled to begin this month, offered

by retail providers (10 so far)– Plans to cover two thirds of the country by 2020,

and the remainder by 2033

• Bezeq/Hot investing in FTTH in response

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KNOWLEDGE FOR ACTION

KEY POLICY ISSUES

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

What’s the Goal?

• End-user maximum download speed isn’t necessarily representative– Interconnection, transit, caching, equipment

matter – Full capacity not always available at consumer

prices– Caps, tiers, usage-based prices also significant

• Importance and meaning of ubiquity?

• Technological neutrality may be impossible– Investment decisions today lock in particular

configurations for many years.

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

What About Competition?

• Virtually no business case to overbuild fiber, except urban MDUs – Natural monopoly?– Will the cost dynamics change any time soon?

• Unbundling may be restricted – E.g. with vectoring– Potentially removes a major regulatory tool in

much of the world– Choose between next-gen broadband and

competition?

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Operators vs. Edge Providers

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Already an Issue in the U.S.

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Watch This Space Going Forward• ETNO Proposal for “sender pays”

rule

• Complicated arrangements– CDNs, multiple end user fees, etc. – Data caps, freezones, usage charges also

significant.

• At high level, interests are aligned– Preconceived idea of cost “causation” not

realistic.

• Voluntary deals raise neutrality concerns

• Compulsion skews competition/investment w/no guarantee of more infrastructure

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

Surveillance and Governance

• Governments go where the information is

• Information goes where the users are

• An ongoing governance challenge

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KNOWLEDGE FOR ACTION

CONCLUDINGTHOUGHTS

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KNOWLEDGE FOR ACTION Prof. Kevin Werbach

• Ubiquity

• Capacity & Robustness

• Interconnection

• Innovation

• Data Integrity & Privacy

The Network Utility Agenda

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

These Questions

Aren’t as New

KNOWLEDGE FOR ACTION Prof. Kevin Werbach

“A new pronouncement by the regulatory agencies of a doctrine of free interchange

of signals across the boundaries of individual

systems would be of tremendous

technological benefit.”

-- Paul Baran, “Communication Policy Issues for

the Coming Computer Utility”, May 1968

KNOWLEDGE FOR ACTION

רבה !תודהwerbach@wharton.upenn.edu

Twitter: @kwerb