Ultra Fast Broadband update

Graham Mitchell, Chief Executive Officer

TEL.CON12

17 April 2012

17 April 2012 2

Topics for today:

• Progress with deployment

• Likely sources of demand

• UFB opportunities for RSPs

• International developments

• Summary

17 April 2012 3

Deployment progress:

• 14 urban centres underway • All urban centres underway during 2012-13 • Target 70K premises by 30/6

10%

19%

10%

61%

Year 1 premises passed:

Images: Northpower Fibre, Whangarei; Chorus, Kelson

17 April 2012 4

Long term deployment view:

Premises Passed by Segment (Cumulative)

Premises Passed by Partner (Incremental per annum)

Priority Premises Passed

Non Priority Premises Passed

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2011 2012 2013 2014 2015 2016 2017 2018 2019

Notes: graphs show years to end June.

0

50,000

100,000

150,000

200,000

250,000

2011 2012 2013 2014 2015 2016 2017 2018 2019

17 April 2012 5

UFB progress:

~60,000 end users, mostly businesses, can access UFB P2P & Dark Fibre on demand today

Penrose / East Tamaki / Manukau:

Illustrative

Christchurch:

UFB Year 1 & 2 Business Fibre

17 April 2012 6

Deployment consultation:

• Local Councils: Successful consultation on Year 2 plans

• Schools: All candidate areas commencing Year 2

• Health: DHBs consulted by Health IT Board, CFH and MED

• Business: Focus on specific sectors & industry verticals

Stakeholder consultation is ongoing & suggests growing momentum in UFB build will drive reasonable uptake

17 April 2012 7

UFB schools deployment:

16.5%

18.2%

34.4%

30.9%

241

265

502

451 1459

Pre-UFB fibred

schools

FY12 UFB plan (to 30

June)

FY13 Chorus commitment

Balance to finish

Total urban

schools

100%

Number of schools

0

300

600

900

1200

1500

17 April 2012 8

School usage of UFB:

17 April 2012 9

Digital Leadership Forums:

Local communities are taking the lead in building programs to maximise UFB & RBI opportunities

Whangarei

Auckland Hamilton

Tauranga

New Plymouth Napier-Hastings

Wanganui

Wellington Nelson

Christchurch

Dunedin

Invercargill

Digital Leadership Forum in action

Digital Leadership Forum being explored/ instigated

Other digital strategy initiative(s)

NOT EXHAUSTIVE

Purpose: Brings together local stakeholders on demand & supply side to realise UFB benefits

Objectives: To develop & execute a strategy to realise local economic development goals using UFB

17 April 2012 10

Likely sources of demand: Priority segments

• GCIO priorities

• WAN

• WAN on fibre • Strong CIO demand • VM-ware • Centralising IT • Video conferencing • Collaboration • Cloud • Remote working

• Pent-up demand

• National data • e-learning • Network For

Learning

Enterprise:

Health:

SME:

Carrier:

Government:

• Imaging • VC

consultation • Aligned

Health IT plan

• Cost reduction • WAN • VoIP • Cloud apps &

back-up • Remote working

• 3G & LTE • Non-Building

Address Points

• Community Wi-Fi

• SCADA

Schools:

17 April 2012 11

Likely sources of demand: Residential

Higher speed Internet access

Back-up & cloud based storage

Working at & from home

Extended school learning

Advanced gaming

Real-time entertainment

Home security

Examples:

Home VC, uploading media

Home Monitoring & Control

17 April 2012 12

In the Home: Video is changing

• Netflix Movies: 33% of US peak download

• HBO Go app hits 1 million downloads in first week

• OIPF TV Browser, supported by all major TV OEMs

• AT&T/Cisco release of wireless set-top box – no more cables !

13

Real-Time Entertainment dominating:

• Asia-Pac: PPStream and PPLive together account > 37% of the upstream.

• P2P file sharing and web browsing diminishing

• Internet is being increasingly used as a broadcast entertainment medium

17 April 2012

14

US: Internet Peak now looks like TV peak

• US daily maximum ~ 8:45 p.m. to 10:45 p.m.

• Within 6 months peak period reduced from 2.5 to 2 hours

• AsiaPac peak at 9pm to 11.30pm

• Entertainment Video concurrency ratios much higher than internet

17 April 2012

UFB not contended, allowing high concurrency & quantity for video

15

Data usage growing:

• Netflix user averages 40-80 GB/month (5-10 movies)

• Growth entertainment driven – local

• Locally hosted to minimise latency/cost

17 April 2012

Source: Sandvine Network Demographics, Nov 2011.

Day Week Month Upstream 384.9MB 2.3GB 6.6GB Downstream 1.3GB 8.9GB 24.2GB Aggregate 1.7GB 11.2GB 30.8GB

Mean consumption Asia-Pacific Fixed Access

17 April 2012 16

Performance beyond the UFB PoI:

Corporate Office

Household

Household

100/50 Mbps

10/2.5 CIR <1ms

UFB PoI

ISP: • CIR ? • Mbps ? • ms ?

UFB Network RSP backhaul & cloud

UFB Network delivers high quality; RSPs control experience beyond PoI

17 April 2012 17

Home wiring: Double play

Home wiring should not be an issue for most UFB users

Copper Ethernet

Coaxial cable Fibre

18

Verizon FiOS continues to grow ARPU and share in highly competitive US market

Case study: FiOS (USA)

17 April 2012

• FTTH 61% of consumer revenue: o 20% YoY growth in triple play o ARPU US$148+

• FiOS video: o 4.2m subscribers, 194 net adds o 32% penetration

• FiOS Internet: o 4.8m subscribers, 201 net adds o 36% penetration

19

Case study: HKBN (Hong Kong)

In a highly competitive telco market, HKBN has 30% FTTP uptake & increasing profits.

17 April 2012

Example plans: • 100Mbps plan: NZ$31/ month • 1Gbps plan: $42/ month • International speeds: 20Mbps • Wi-Fi hotspots free • Free mobile handset or retail

voucher.

Net additions (‘000)

Total market adds (31 Dec Y/E)*

HKBN adds (31 Aug Y/E)

Source: OTFA, Hong Kong regulator.

17 April 2012 20

Case study: NBN Co retail plans

Willunga, South Australia: 29% uptake

Kiama, NSW: 26% uptake

Speed: (Mbps)

Cap: (GB)

Price: (A$)

Features:

25 / 5

200

$74.90

25 / 5

120 50 peak, 70 off peak

$64.94

• All local & national calls

• No set-up fee

• 24 month contract

• ABC iView, Fetch TV etc. zero-rated

• $30 of voice calls

• $79 setup fee

• 24 month contract

17 April 2012 21

Summary:

• Deployment advancing:

– Substantial coverage by 30 June 2012 + 2013

– UFB P2P available now in most CBDs

• All UFB networks activated mid-2012

• Opportunity for RSP differentiation:

– Upstream from UFB

– Packages

– Applications / content

• FTTH gaining momentum internationally

17 April 2012 22

Thank you!

CFH contact: Rohan MacMahon, Strategy Director E: rohan.macmahon <at> crownfibre.govt.nz Ph: 09 912 1970