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Perspectives on Differences in
the Transatlantic Approaches to
Broadband Policy
Aryeh Friedman
Senior Competition and Regulatory Counsel
BT Global Services
Washington DC
BT Partners
Broadband Defined
FCC Defines Broadband as anything over 200 kbps
measure
That is over-inclusive.
More realistic -- Residential
Over 1 Mbps
Residential: Would include DSL, cable modem, Fiber to the
Node and Fiber to the Home
Enterprise Market
Over 1-2 Mbps
BT’s DSL deployment
Historical view of BT Wholesale Broadband
• Over 99% of UK households
are in ADSL enabled
exchanges
• The remaining
exchange areas are
extremely rural in nature
with ~ 200 customers in
each
• Solutions to provide
broadband to these
remote areas are being
investigated
100.00%
90.00%
% Exchanges
80.00%
% Households
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
Oct-06
Jun-06
Feb-06
Oct-05
Jun-05
Feb-05
Oct-04
Jun-04
Feb-04
Oct-03
Jun-03
Feb-03
Oct-02
Jun-02
Feb-02
Oct-01
Jun-01
Feb-01
Oct-00
Jun-00
Feb-00
0.00%
Oct-99
Coverage
70.00%
• Cable provided broadband
is available to ~ 55% of the
households in the UK
UK Broadband Penetration
Historical view of BT Wholesale Broadband
9,000,000
8,000,000
7,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
200610
200606
200602
200510
200506
200502
200410
200406
200402
200310
200306
200302
200210
200206
200202
200110
200106
200102
200010
200006
200002
0
199910
Connections
6,000,000
• Total UK broadband
penetration is currently
~55%
• Approaching 8.4 million
households are served
by BT Wholesale
broadband
• BT Retail has an end
customer relationship
with ~ 3 million
customer. Less than
25% market share.
• 1.7 million customers have
broadband provided by
other communication
providers through Local
Loop Unbundling
• In addition, there are
approximately 3 million
cable broadband customers
Availability of DSL Speeds in the UK
Almost 90% of UK DSL subscribers receive service at speeds of 3
Mbps or more.
Estimated DSL Max speed distribution
Based on line checker data and estimates only
Line rate
Percentage of PSTN lines
0.5Mb
98%
1Mb
96%
2Mb
93%
3Mb
89%
4Mb
78%
5Mb
63%
6Mb
42%
>or =6.5Mb
25%
UK Broadband Connection Speed
40%
30%
20%
≤2Mbps services
are falling
10%
>2Mbps services
are growing
0%
Apr-06
Aug-06
Jun-06
Oct-06
Dec-06
128Kbps
512Kbps
1.5Mb
4Mb
150Kbps
576Kbps
2Mb
8Mb
256Kbps
1Mb
3Mb
More than 8Mb
Feb-07
Don't know
UK Retail Broadband Market Has Vibrant
Competition
40
%
32
30
New survey
22
20
18
10
8
5
2
1
0
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Any BT
Virgin Media
Tiscali
Orange
AOL
Other ISP
CPW
Sky
NTL
Telewest
• Recent wave of consolidation and new entrants:
• Virgin Media was formed by the merger of NTL, Telewest and Virgin
• CPW has bought AOL (but is retaining the brand)
• BSkyB (satellite pay TV operator) has bought EasyNet
Vibrant Retail Broadband Competition in
the UK
LLU now being aggressively deployed by major broadband service
providers.
Significant percentage of Broadband (~12%) and rapidly increasing
(over 57,000 orders completed per week)
Bulk of retail broadband competition still from cable and CLECs
selling BT DSL products.
Most offering up to 8Mb services with intention of using ADSL2+
(i.e., up to 24 Mbps)
Per Ofcom Report, from December 2002 to May 2006, BT speeds
(max) have risen from 0.5 to 8Mbps while prices have dropped
from 27.99 to 17.99 per month.
Over 60% of small and medium enterprises in the UK use business
DSL
Vibrant Retail Market in the UK
UK Broadband Prices
UK Market structure has produced a wide variety of
pricing packages tailored to specific users
Distribution of Residential Broadband Prices
35
Most ISPs offer a number of options based on
Contention ratio
30
Number of Packages
Data cap allowance
25
Static IP addresses
Included web space
20
Included e-mail
15
Value added services
10
Security services (firewalls & antivirus software)
Domain registration
5
Dial-up backup
Total Cost of Ow nership (UK£/annum )
Distribution of pricing packages from 69 ISPs
Based on 228 consumer ADSL packages
Source: http://www.adslguide.org.uk/isps/packagelist.asp
700 - 725
675 - 700
650 - 675
625 - 650
600 - 625
575 - 600
550 - 575
525 - 550
500 - 525
475 - 500
450 - 475
425 - 450
400 - 425
375 - 400
350 - 375
325 - 350
300 - 325
275 - 300
250 - 275
225 - 250
200 - 225
175 - 200
150 - 175
< 150
0
Some additional Virtual / reseller ISPs target local
areas
US Broadband Market Share Compared
(Source: 2006 Broadband Reality Check Report by Free Press et al)
Non-Incumbent
Sources of
Broadband
Competition
in the USA
Is Decreasing.
US Non-Incumbent DSL Market Share
Compared
(Source: 2006 Broadband Reality Check Report by Free Press et al)
BT, Verizon, AT&T Residential Broadband
Compared
Consumer
Speed
Price*
BT Total
Broadband
Up to 8
Mbps
$21/mt first 3 mts
250 Free Wi-Fi Minutes at
$29/mt for mts 3-12 10,000 BT HotSpots throughout
the UK.
Up to 3
Mbps
$29.95/mt for 12
mts
Up to 3
Mbps
$19.99/mt for first 6
mts. $29.99/mt for
mts 7-12
(Regulated
Wholesale DSL)
AT&T DSL (No
regulation)
Verizon DSL
(No regulation)
Included
FIOS
(No regulaton)
Up to 5
Mbps
$29.99/mt for first 6
mts. $39.99/mt for
mts 7-12
* Using OECD’s Purchasing Power Parities Rate used in its Rate Comparisons
US. v. EU Regulatory Environments
Impact on, e.g. Net Neutrality: OfCom
“The lack of unbundling in the US is likely to mean rapid concentration in
the retail ISP market. The result is generally that, at the retail level,
consumers only have a choice of broadband operator to the extent that
they are able to choose between operators with lines connected to their
home – a choice between cable and telcos, rather than multiple ISPs
offering bitstream or LLU access.
This lack of choice, it is argued, could lead to abuse of the operator’s
resulting market power. And this, it’s then argued, needs to stopped by
outlawing any “non-neutral” behavior using new legislation. This is an
important point because it is the retail ISP, operating at the IP layer of the
network, which can have most impact in prioritising traffic. . . .
As the UK has such strong retail ISP competition, these problems, and
therefore a strong case for new ex-ante legislation, are much harder to
imagine.”
Speech given by Tom Kiedrowski on behalf of Lord Currie, OFCOM, at
CEPS/Progress and Freedom Foundation Conference in Brussels Feb. 22,
2007
USA: ICT and Productivity
USA had two productivity surges between 1995-2000 and 20002004 that caused USA to leap ahead of Europe in productivity. Only
one was ICT-led.
1995-2000 – use of information communications technology (ICT)
dominated this surge.
2000-2004 – non IT factors dominated this surge.
See Jorgenson, Ho and Stiroh, The Sources of the Second Surge of
US Productivity and Implications for the Future (March 2006).
1995-2000 -- Correlates to period when market opening
commitments of 1996 Telecoms Act were being implemented in
USA
2000-2004 – Correlates to period when FCC began to deregulate
uncritically
A history of investment…
Source: Infonetics Research, London economics
Higher investment in better regulated countries (OECD, ECTA, LE).
Source: ECTA
Effective Regulation vs. Investment
Relationship between Scorecard and Investment
as percentage of GFCF
Investment
4
SE
3
ES
0
200
BE NL
DE
250
AT
IT
2
1
UK
FR
DK
350
400
IE
300
450
Scorecard
The Report also measures the relationship between the effectiveness of the regulatory environment in each of
the Member States surveyed and the level of telecommunications investment in that country, based on OECD
data. The economic analysis conducted in this regard shows that effective regulation continues to have a
strong and positive impact on the level of investment in telecommunications networks and services.
Source: ECTA (European Competitive Telecommunications Association)
Thank you