MIT Cambridge 12 06

8/14/2019 MIT Cambridge 12 06

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Net Neutrality just a symptom?

James Enck

December 2006


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+

=

- $

Nov. 7, 2005: The shot heard round the

world
http://images.google.co.uk/imgres?imgurl=http://www.searchengine-weblog.com/50226711/skype.jpg&imgrefurl=http://www.searchengine-weblog.com/&h=170&w=300&sz=11&tbnid=rqwtqN_gPldhsM:&tbnh=62&tbnw=111&hl=en&start=7&prev=/images%3Fq%3Dskype%26svnum%3D10%26hl%3Den%26lr%3D


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Were not in Kansasanymore


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Rather, I am concerned that they will be nave and inept

Infrastructure

Most of all, Im concerned that we may be distracting

ourselves from the central issue:

Im not so concerned that telcos will be evil

And that the market overestimates the potential for this modelto succeed

The world has changed a lot in a year


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How realistic is a my pipes strategy?


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Consider the complications


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Yes, BitTorrent has evil uses

0

10,000,000

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Weekly total

Monthly run rate

Weekly and normalized monthly download figures, top ten global video titles

Source: Daiwa, from p2pnet.net and BigChampagne data


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And heres the telco impact

Source: PlusNet


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But its also a company with content partners


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Its also an enabler for others with similar aims


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Its also used for game updates


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And even Auntie likes it


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How do you solve a problem like a mash-up?


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How do you solve a problem like a mash-up?


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How do you Redline a virtual world?


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Are you willing to infuriate your

corporate customers?


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Not your fathers internet anymore


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Net Neutrality debate is a symptom


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Infrastructure is the problem

What we have

What we want/need


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Recent study from Arthur D. Little came to the followingconclusions about European broadband in 2011:

? Not more than 10% of broadband households areexpected to exceed 30Mbps (downstream);

? Upload speed of 8Mbps will be sufficient;

? FTTH will mostly be relevant at a local/regional

level, assuming it is able to offer more than superiorbandwidth.

Buying the scarcity story?


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The broadband vision is too narrow

The industry views the issue through the

lens of voice, web, entertainment. What

opportunities are we not capturing?Education

Social service delivery

The power of grid computingThings we havent even thought of yet


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Failure to communicate

Telcos Governments"...future proof data infrastructure is

for Rotterdam just as important as a

good connection by means of water,

road and railtrack. A fiber network

has proven to be an important

settlement criterion for youngprofessionals, knowledge-intensive

companies, port-related companies

and companies in the medical-

technological sector.

Autumn 2005, Cisco executive:

Broadband is not a universal humanright.


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Will the current model deliver?


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Look at the Dutch market

Seemingly a perfect example of the EU

vision of facilities-based competition:

DSL vs. cable 60/40 split

ULL takes c.30% of the DSL market

Among the highest broadband penetration rates

in the OECDBut


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times do change KPN has acquired a number of other smaller players, now c.75% of

the retail DSL market

Two of the three largest MSOs now under control of private equity expecting to merge

KPN moving from 1,350 C.O.s to 28,000 local access nodes for FTTC

project to be funded by sales of the old C.O.s (OPTA has placedsome safeguards as of October)

Dutch press reported last week that KPN may seek to saddle remainingULL players with opex of legacy exchanges after FTTC migration.

Ministry of Economic Affairs study reportedly assumes 300% rise incable prices over five years, coupled with capex reductions, to producesuitable returns for private equity investors. Less intensive cableinvestment may ease the pressure on KPN to upgrade?

Possible legacies: market concentration, duplication of investment,stranded ULL assets, greater uncertainty for challengers, lower long-term investment, economic benefits diluted?


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Points of disconnect

Traditional players:

Vertically integrated business models

Addicted to scarcity

Risk averse

Primary focus on capital markets/investors

Poor track record in innovationMaximum investment horizon 3 5 years


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and for incumbent telco transformation

Nevertheless, there is an opportunity here for localcommunities, entrepreneurs, adjacent industries, the capital

markets

With true, symmetrical broadband, the preservationof scarcity argument underpinning the Net Neutrality

debate recedes

However, the status quo access model in place looks ill-suitedto delivering this

Conclusions


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Thanks for listening!

MIT Cambridge 12 06

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