FTTx Summit Europe

London, 24th – 25th April 2012

The roll out of

NGAs in Greece

George Georgiadis

OTE S.A.

Regulatory Affairs Department

Contents

The roll out of

NGAs in Greece

• Current situation

– The role of OTE

– The role of the regulator

– The role of the market

• CONCLUSIONS

• NGA’s are dependent upon

• Demand.

• Regulatory environment.

• Governmental initiatives.

• Current economic crisis.

Status of NGA deployment

in Greece today (1)

• Very limited fibre access network so far (mainly for leased line

services – business users) by OTE and OLOs.

• FTTC is under construction in a few regional cities and in a few

selected areas in Athens by OTE.

• No governmental network is being deployed – only plans.

• Exceptionally difficult economic circumstances do not encourage

private investment.

• Governmental initiatives on FTTH

project.

• Governmental initiatives on MAN’s

utilization project.

• Governmental initiatives on rural areas

broadband project.

A little of history

History 1- OTE’s plans (1)

OTE in order to:

• Detect market demand.

• Detect price sensitivity.

• Check the implementation of the specific design and actual

operating costs and functionalities.

Started a pilot project

• Originally FTTC/VDSL2, with sufficient infrastructure for

GPON-FTTH transformation.

• Targeted mainly on Athens and Thessaloniki.

• Other big cities to be covered, subject to criteria.

History 1- OTE’s plans (2)

• Publicly announced plans. (Sept. 2010)

• Implementation started in a small area in

Athens and in 4 regional cities in Northern

Greece.

• Proposal to alternative operators.

• Announced wholesale and retail prices.

• Commercial launch in one town on

February 28, 2011.

History 1- OTE’s plans (3)

In order to understand the dynamics of NGA business case OTE started providing VDSL retail services on February 28th only in a small city in the north of Greece (Komotini – 0.4%) while has been rolling out a small-scale VDSL network (defined as a commercial pilot case 4.8%), in three small cities in the same region and one municipality in Athens.

OTE launched retail and wholesale (bitstream L3) services. Wholesale tariffs were based on retail-minus approach. As the new services are not well established, pricing according to retail-minus principle would be more appropriate. It will allow more price flexibility, which is beneficial to all players of the market during this very first phase of the products’ lifecycle.

Speed (download/upload) Tariff

Retail (with 18-month subscription) up to 30/2.5 Mbps 24.31€

Retail (with 18-month subscription) up to 50/5 Mbps 28.37 €

Retail (without minimum subscription) up to 30/2.5 Mbps 26.75 €

Retail (without minimum subscription) up to 50/5 Mbps 31.63 €

Wholesale (with 12-month subscription) up to 30/2.5 Mbps 14.86 €

Wholesale (with 12-month subscription) up to 50/5 Mbps 17.66 €

History 2- EETT’s reaction (1) • The Greek NRA EETT imposed on the 22nd of March 2011 interim

measures to OTE, requesting OTE to stop altogether the provision of NGA (FTTC/VDSL) retail services. More precisely EETT requested OTE to:

– provide bitstream VDSL services (similar to bitstream ADSL services and publish a relevant Reference Offer (terms of provision, technical specifications, pricelist),

– wholesale prices should be cost-oriented. OTE should submit a bottom-up cost model for wholesale bitstream VDSL services

– OTE could start providing retail services only six-months after providing wholesale services (including prices if and when approved by EETT). In the meantime OTE can continue providing wholesale services.

• EETT did not carry a market analysis but based on the NGA Commission Recommendation justified its Decision in order to avoid any timing advantage for the retail arm of OTE, to safeguard effective access for alternative operators in cost oriented prices, previously approved by the EETT.

History 2- EETT’s reaction (2) EETT’s rational behind the temporary measures.

Shortly after the temporary measures the president of the EETT, at the 6th international forum organised by EETT, stressed that:

Would these measures not have been taken by the EETT, OTE would have regained all the subscriber base from alternative operators, basing his reasoning on the assumption that for VDSL OTE would provide services “in a price arbitrary set today X Euro and tomorrow changed and as a result all the investments carried out by alternative providers in the ADSL would have been destroyed”.

“OTE’s investments in the last five years have exceeded 2.2 billions € whereas

corresponding investments by alternative providers have reached 2 billions €, while for the VDSL only 90 millions € have been foreseen in a three-year period.”

“Because we are recipients of distress of all CEOs of all companies that have behind them banks, shareholders, lending, we are absolutely convinced that the decision which we took is a decision of responsibility”

Status of NGA deployment

in Greece today (2)

• CYTA – the newest OLO in Greece started providing VDSL services from the

CO in December 2011.

• CYTA’s commercial offer changed the competition field.

• OTE took the decision to provide VDSL services from CO in approx 178

COs in Greece and submitted a new bottom-up model to EETT for VDSL

WBA from CO in December 2011.

• Costs from CO were approved.

• OTE submitted also retail prices (the same for SC and CO)

• Retail prices have to be approved according to EETT because they are

“technically” bundled with access and therefore have to go through a PSM

test. No feedback from EETT on retail prices yet.

• New RBO and RUO are not finalized – public consultation has been

concluded and discussions are on-going.

VDLS bottom up model & prices

Costs Submitted Costs Approved

Monthly rate V ARYS 30 Mbps 11,29 11,65

Monthly rate V ARYS 50 Mbps 13,13 13,23

Monthly rate V ARYS Γ 30 Mbps 10,58

Monthly rate V ARYS Γ 50 Mbps 10,88

11,44

bottom-up model

based on 1 Street Cab

and penetration using

a 5 year average

OTE’S current activities

• VDSL roll out at selected areas.

• NGA like roll out.

• VDSL from CO roll out.

VDSL cabinets

VDSL from

Central Office

The top 10 business risks in telecommunications 2012

(Ernst & Young)

• Failure to shift the business model from minutes to bytes As value shifts from minutes of usage to volumes of data, operators need to move away from their legacy strategies focused on customer retention, which have had the effect of commoditizing the value of minutes and bandwidth in customers' eyes.

• Disengagement from the changing customer mindset With global technology brands now top of mind for consumers, and technology cycles quickening, operators need to understand and respond to fast-changing customer expectations and behaviors if they are to fight off the competitive threat from over-the top providers.

• Lack of confidence in return on investment While operators have proved adept at managing capital investment and balancing it flexibly with free cash flow and dividends, it is increasingly clear that tight capex control can limit their ability to grow new services quickly. So they need to maintain their commitment to investing in growth opportunities, while tracking technology and consumer developments closely to ensure they target their money at the right areas at the right time.

• Insufficient information to turn demand into value To drive profitable customer propositions and improve their time-to-market for new services, operators need accurate, timely and comprehensive business intelligence and customer analytics, underpinned by aligned and integrated operational support and billing systems.

• Lack of regulatory certainty on new market structures It is increasingly crucial for governments and regulators to adopt pro-investment policies to sustain the sector's momentum and for operators to form workable stances on a range of issues, including the increasing relationship between fixed and mobile policies. At the same time, all these groups must work together to achieve greater clarity over regulatory approaches.

• Failure to capitalize on new types of connectivity New types of connectivity such as machine-to-machine (M2M) are redefining the concept of connectivity, requiring operators to adopt new strategies. Instead of continuing to think of connections in human terms, operators need to develop new understandings of connectivity and target new growth areas.

• Poorly formulated M&A and partnership strategy Though M&A activity has accelerated through 2010–11, its nature and risks have changed. Footprint control increasingly takes precedence over footprint growth, and political, macroeconomic and regulatory risks are increasing. But acquisitions and partnerships are essential for success in emerging market segments such as mobile advertising and cloud computing.

• Failure to define new business metrics The metrics and key performance indicators (KPIs) that operators use to manage their operations internally and communicate their performance and prospects externally have not kept pace with the shift in business models from minutes to bytes. Operators urgently need to define a new and different set of metrics that puts the customer first.

• Privacy, security and resilience Customers place more trust in operators than in social networks, regarding operators as security guarantors across a range of services. Yet they still hold operators responsible for threats from third parties even for mobile malware attacks and rogue apps. Operators should work closely with governments to clarify their responsibilities in areas such as anti-terrorism and content for children, and collaborate with suppliers and partners to tackle privacy and security issues in new service areas such as cloud security and mobile apps.

• Lack of organizational flexibility With their organizational structures subject to forces such as the shift to data services, the rise of partnering and the rising imperative for speed-to-market, operators have already made significant changes to their organizations. But more are needed. Operators now need to al ign their business units to maximize the economies of scale and scope in their geographic footprints while reconciling the competing forces of geographic sensitivity and global strength.

By Ernst & Young

The top 10 business risks in

telecommunications for 2012

6Ernst & Young/ITU Telecom World poll,

November 2011 (85 online respondents)

Survey: challenges facing ISPs6

3. WHAT NEXT

The stakeholders

•The state

•The operators

•The regulator

The state’ s plans

FTTH project: pending since 2008

MAN’s project: MAN’s pending since 2005

The rural areas broadband: Probably will also start pending

The operators facing many challenges

OLO’s OTE

THE REGULATOR:

Inventing the modern ladder of regulation

Forward looking.

What is forward looking What is not forward looking

Concluding remarks (1)

What is the outcome of all this? No NGAs in Greece:

- Government – nothing

- OLOs – almost nothing

- The NRA approved cost oriented wholesale tariffs on the 2nd of

December but:

- There is no approved Reference Offer (Document under

consultation)

- Retail prices have to be submitted to be tested by the retail

price squeeze test.

- OTE will have to wait until approximately July 2012 to start

providing retail VDSL services in Greece –

16 months after initial launch!

Concluding remarks (2)

1. A country facing a financial crisis.

2. Investments are necessary.

3. One company (OTE) willing to invest.

4. Investment framework, is it friendly?

5. A tricky issue, what is wrong?

Thank you.

Any ?

George Georgiadis

OTE S.A.

ggeorgiadis@ote.gr