Liberalization and Market Structure
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Transcript Liberalization and Market Structure
Mobile Markets:
The US Experience
Dennis Weller
Chief Economist
Verizon
Mobile Economics
ARCEP
26 March 2007
Verizon: Profile
Verizon Wireless
59 million subscribers
Verizon Telecom
45 million lines
7 million broadband customers:
700,000 FiOS Internet
189,000 FiOS TV
Verizon Business
Operations in 150 countries
Serves 97% of Fortune 500
World’s most connected IP network
2
Verizon Wireline Footprint in US
3
$7.6
$8.1
$10.5
Avg. of Fortune 10 Companies*
$6.1
$7.4
$12.9
Chevron
$6.9
$8.0
$8.5
GM
$6.0
$8.3
$7.6
AIG
Capital Expenditures (in billions)
$0
$5
$10
$15
$20 $7.3 $25
$30
$35
$40
$45
$6.8
$7.3
Ford
$4.2
$5.4
$8.0
AT&T
$12.8
$15.5
$16.3
Verizon
$5.5
$6.0
Intel $3.5
$12.5
$13.5
$15.8
Wal-Mart
$4.2
$4.6
$4.2
IBM
$12.2
$14.0
$15.6
GE
$4.0
$4.4
Avg. of 28 Dow Companies* $3.5
$12.1
$13.3
$15.2
Exxon Mobil
$3.5
$3.5
Home Depot $3.8
$6.4
$13.4
$14.6
ConocoPhillips
$3.7
Citigroup $2.7 $3.5
$7.6
$8.1
$10.5
Avg. of Fortune 10 Companies
Pfizer $3.3 $2.7 $2.2
$6.1
$7.4
$12.9
Chevron
Johnson & Johnson $1.9 $2.5 $2.7
$6.9
$8.0
$8.5
GM
Procter & Gamble $2.1 $2.2 $2.8
$6.0
$8.3
$7.6
AIG
Caterpillar $2.0 $2.4 $2.4
$6.8
$7.3
$7.3
Ford
Hewlett-Packard $2.1 $2.0 $2.5
$4.2
$5.4
$8.0
AT&T
Altria $1.8 $2.2 $2.2
$5.5
$6.0
Intel $3.5
$2.8
Alcoa
$4.2
$4.6
$4.2
IBM
Walt Disney
$4.0 McDonald's
$4.4
Avg. of 28 Dow Companies* $3.5
$3.5
$3.5
Home Depot $3.8
Merck
$3.7Boeing
Citigroup $2.7 $3.5
Pfizer $3.3 $2.7 $2.2 DuPont
Year Ending Sept./Oct.
Johnson & Johnson $1.9 $2.5 $2.7 Microsoft
2004
2005
2006
Procter & Gamble $2.1 $2.2 $2.8
3M
Caterpillar $2.0 $2.4 $2.4 Coca-Cola
Hewlett-Packard $2.1 $2.0 $2.5
$1.8
Google
$2.2Technologies
Altria $1.8 $2.2
United
$2.8
Alcoa
Honeywell
Walt Disney
American Express
McDonald's
*Excludes Verizon. Data for JPMorgan & Chase are not available.
Merck
Companies in the Dow Jones Industrial Average: 3M, AIG, Alcoa, Altria, American Express, AT&T, Boeing, Caterpillar, Citigroup, Coca-Cola,
Boeing
DuPont, Exxon Mobil, GE, GM, Hewlett-Packard,
Home Depot,
Honeywell,
IBM, Intel,&Johnson
Johnson,
JPMorgan & Chase, McDonald's,
*Excludes Verizon.
Data
for JPMorgan
Chase&Sept./Oct.
are
not available.
DuPont
Year Ending
Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon, Wal-Mart, and Walt Disney.
Microsoft
2004 Average:
2005 3M, 2006
Companies in the Dow Jones Industrial
AIG, Alcoa, Altria, American Express,
3M
Companies in the Fortune 10: Exxon Mobil, Wal-Mart, GM, Chevron, Ford, ConocoPhillips, GE, Citigroup, AIG, and IBM.
AT&T, Boeing, Caterpillar, Citigroup, Coca-Cola, DuPont, Exxon Mobil, GE, GM, Hewlett-Packard,
Coca-Cola
Home Depot, Honeywell, IBM, Intel, Johnson & Johnson, JPMorgan & Chase, McDonald's, Merck,
Sources:$1.8
Reuters data; company reports.
Google
Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon, Wal-Mart, and Walt Disney.
United Technologies
Honeywell
Companies in the Fortune 10: Exxon Mobil, Wal-Mart, GM, Chevron, Ford, ConocoPhillips, GE,
American Express
Citigroup, AIG, and IBM.
Capital Expenditures of US Companies
*Excludes Verizon. Data for JPMorgan & Chase are not available.
Sources: Reuters data; company reports.
*Excludes Verizon. Data for JPMorgan & Chase are not
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Market Structure of US Wireless
Verizon
AT&T
Sprint/Nextel
T-Mobile
Alltel
Other players
Cable consortium
Regional carriers
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1990s Reform of US Wireless Policies
Increased spectrum, capacity, competition
“Light touch” regulation
Preemption of states
Flexibility in technology
Verizon, Sprint, Alltel are CDMA
AT&T, T-Mobile are GSM
Flexibility in use of spectrum
Development of secondary market
3G service without 3G license
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Compensation for Wireless
Termination in the US Market
A “calling party pays” system
Local traffic from a wireline carrier pays
$0.0007 per minute for wireless termination.
Wireless carriers have commercial
agreements to exchange traffic on a “bill and
keep” basis
Long distance carriers do not pay to
terminate traffic on wireless carriers
7
Wireless Termination in Europe and the US
Termination rate in US cents per minute
0
5
10
15
17.09
Luxembourg
13.3
EU average
9.29
Sweden
US
20
0.07
8
Performance of US Wireless Market
Rapid growth in subscription
19% annual growth over last decade
233 million subscribers
More wireless than wireline
Lower prices
Flat-rated packages include nationwide calling
Increased usage
Average usage per wireless handset:
832 minutes/month in US
149 minutes/month in Europe
More total wireless minutes in US than wireline
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US Retail Market for Wireless
Most offers count minutes in and out
But some offers count only minutes out
Flat rate offers for “buckets” of minutes
Unlimited off-peak minutes
Unlimited on-net minutes
Nationwide coverage
Most roaming is free
“Family share” plans
Handsets are subsidized
Numbers are portable
Geographic numbers from same pool as wireline
MVNOs are common
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Future Development and New Services
Broadband
Video
Shopping
Gaming
Payment
Integration between wireline and wireless
New solutions for business
IP
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Growth of Wireless Broadband
High Speed Net Adds by
Type, Dec. 2005 – June 2006
In 1H06, total high-speed
lines grew 26%, from 51.2
million to 64.6 million lines
7.9
8
7
59% of all adds were
From June 2005 to June
2006:
Mobile wireless’ share
of total broadband lines
rose from 1% to 17% of
total broadband lines.
6
Millions
mobile wireless
subscriptions.
5
4
3.1
3
2.0
2
1
0.5
0
ADSL
Cable
Other Wireless
Modem Broadband
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13
Pricing of VCAST Service
V CAST VPak $15 per Month
Unlimited Basic Video Clips
Unlimited Data Transport
News
Sports
Entertainment
Weather
Get It Now services
Access to Premium Content
Get Games**
Get Tones**
Get Wallpaper**
Get Going**
Mobile Web 2.0
VZW Today
Unlimited Browsing
• Partners include Comedy Central, MTV, News Corp,
20th Century Fox
• NBC News tailored for mobile
• Exclusive mini-episodes of popular TV shows
• More than 300 clips updated daily
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Verizon iobi Home
IP Enabled Telephone Service
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VerizonOne Concept
2-way Multimedia Communication
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Access Point - Client
• iobi desktop client allows
CALL
FORWARDING
VOICE MAIL
users to manage their
communications from their PC
CALL LOGS
• Most convenient access point
from your office or home PC
CONTACTS
• Send SMS or e-mails with a
mouse click
SEND MESSGAGES
• View your weather information
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Service Control
IM
SMS
Messaging
VM Alert
VM Retrieval
iobi
End User
Portal
Outlook
Broadsoft
Application
Server
Conferencing
And
Collaboration
Web Sharing
L1 Gateway
EPG
Addr book
Calendar
Content
Directories
PSTN/VoIP
Call Control
Internet
ISCP™
MSC
MGC
SSP
MSC
VM
SSP
TG
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Traffic Flows Among 20,000 Autonomous
Networks on the Internet
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Lost?
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STM-1 IP Transit Prices in London
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VOIP Peering
VOIP traffic exchange:
Some services (e.g. SKYPE) don’t use telephone numbers –
route IP to IP
Today, services that use phone numbers (e.g. Vonage)
usually route through PSTN, even if both customers are
VOIP
“VOIP peering” will allow VOIP to be exchanged on
an IP basis, even if phone number is used
Data base lookup provides concordance between telephone
number and IP address of recipient
Several systems now under development
Depends on what service customer buys, or on agreements
among providers
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Challenges for Future of IP Market
Threat of regulation
As next-generation platforms converge with Internet,
collision between Internet traffic model and traditional
regulation of voice traffic exchange
Adding new dimensions to Internet market model
Quality
SMS
VOIP
Content
Security and privacy
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