| Slide 1 |
FACILITIES-BASED COMPETITION IN MASS MARKET TELECOM:
A PERIOD OF RAPID CHANGE
2007 Telecommunications Symposium
Sean C. Lindsay
Associate General Counsel
November 29, 2007
Competition in the mass market telecom segment has evolved beyond competition represented by CLECs utilizing RBOC wholesale service elements and now includes facilities-based competition by wireless carriers, cable television providers and telecom providers utilizing broadband internet (landline-based and wireless) connections.
The Decade of 2000: A Period of Rapid Change
- MCI launched “The Neighborhood” (2002).
- XO acquired Allegiance (2004).
- Verizon acquired MCI; SBC acquired AT&T (2005).
- Sprint acquired Nextel (2005).
- eBay acquired Skype (2005).
- AT&T acquired BellSouth (2006).
- Microsoft announced availability of Office Communications Server business VoIP product (2006).
- Cingular became AT&T Wireless (2007).
- Integra acquired Eschelon (2007).
- PAETEC acquired McLeodUSA (2007).
- Best Buy (a leading provider of consumer retail goods) acquired Speakeasy (a provider of internet access and VoIP) (2007).
- Comcast/Cox/Time Warner Cable/Advance Newhouse announced “Pivot” joint venture with Sprint/Nextelproviding integrated fixed/mobile entertainment, internet accessand telephony (2007).
- AOL/Clearwire high speed wireless broadband internet distribution partnership announced (2007).
- Cable-based telephony continues double-digit growth rates (e.g.: Comcast 3Q07 earnings report showed in excess of 3.8 million telephone subscribers, with an 86% increase in Comcast telephone service revenue over 3Q06, and Comcast added 662,000 telephone service customers in 3Q07 alone.
- Municipality-supported broadband and WiFi deployments continue to proliferate.
What does this all mean to Qwest?
- Competitive forces are multifacetedno longer limited to CLECs.
- Cable MSOs (e.g.: Cox, Comcast, Charter, Bresnan, Time Warner, Mediacom, etc.) are aggressively marketing service bundles, including telephone service, in Qwest’s region and are increasing their access line bases at an extraordinary pace.
- Wireless carriers (e.g.: Verizon, AT&T, Sprint/Nextel, Cricket, etc.) are increasingly contributing to the erosion of Qwest’s customer base.
- Competition in business markets significant from landline and VoIP-based competitors; competition in residential and small business markets significant from VoIP-based (cable MSOsand stand-alone) providerswith prices as low as $17/moand wireless competitors.
Note: Verizon (VoiceWing) and AT&T (CallVantage) VoIP services are now available to any broadband subscriber in Qwest’s region.
- New generations of competitors (e.g.: eBay/Skype, Best Buy/Speakeasy, Microsoft) are now direct competitive threats.
THE DECADE OF 2000: THE NUMBERS
(Data for Qwest’s 14 State Region, unless noted)
|Qwest access lines||17.6m (all time high)||12.1m|
|CLEC access lines||1.4m||4.1m|
(FCC does not require VoIP-based providers to report in-service quantities)
|No. of approved Qwest/CLEC Interconnection Agreements||163||1,250|
|No. of wireless subscribers||12.1m||27.1m|
(exceeds ILEC and CLEC lines combined)
|Average number of wireless carriers/state||6||11|
|Wireless ARPM (national)||$0.18||$0.07|
|VoIP Providers (national)||n/a (primarily computer-to-computer||100+|
(each a potential VoIP customer)
(Sources: Qwest access lines – ARMIS 43-08;CLEC access lines – FCC Local Competition Report; No. of approved ICAs – Qwest; All wireless data – FCC Commercial Mobile Radio Services report; VoIP providers –www.voipreview.org; Broadband subscribers – FCC High Speed Internet Access Report)
The Decade of 2000 (cont’d)
EFFECTS OF COMPETITION ON THE RBOC RETAIL SWITCHED
ACCESS LINE BASE: 2000 VS. 2006
(source: ARMIS Report 43-08, Table III)
| ||Res. Line|
Each RBOC is experiencing robust competitive pressure in the residential and business markets from a wide range of intermodaland intramodal competitors.
BROADBAND GROWTH REPRESENTS INCREASING FACILITIES-BASED TELECOM COMPETITION IN THE MASS MARKET
- Residential high speed lines in the U.S. have increased from 3.2m in 2000 to 58.2m in 2006, an increase of over 1,700%.
Source: FCC High-Speed Services for Internet Access Report, January 2007
- Roughly half of U.S. households now subscribe to broadband internet service, and that trend continues its upward trajectory.
Source: Pew Internet and American Life Project: July 2007
- In 2007, 63% of adults ages 18-29 use broadband internet at home, and 59% of adults ages 30-49 do so. These demographics will continue to drive broadband internet adoption.
(Source: Pew Internet and American Life Project: July 2007)
- Availability of a broadband internet connection enables the customer to purchase VoIP-based service from a myriad of providers; from cable telephony providers to stand-alone VoIP companies (e.g.: Vonage, Packet8, AT&T CallVantage, VerizonVoiceWing, Net2Phone, etc.) in lieu of landline voice telephone service from an ILEC.
WIRELESS SERVICE IS INCREASINGLY A FULL SUBSTITUTE FOR TRADITIONAL LANDLINE SERVICE
AVAILABLE DEVICES FACILITATE “CORD CUTTING”
|T-Mobile Hotspot @ Home |
- Introduced nationwide in 2007
- Integrates in-home cell calls with VoIP
- Base station purchase $49.99, service $9.99/mo.
- At home calls not counted against monthly cell plan minutes
- Significantly improved in-home cell call quality
|Sprint AIRAVE |
- Introduced 9/07 in Denver, Indianapolis
- Phased nationwide deployment in 2007and 2008
- Integrates in-home cells calls with VoIP
- Base station purchase $49.00, service $15.00/mo.
- At home calls not counted against monthly minutes
- Significantly improved in-home cell call quality
|Dock ‘n Talk |
- Available nationwide
- Allows cell phone to be connected to existing in-home inside wiring to activate all existing standard telephones
- Allows any in-home standard telephone to make/receive calls via the subscribers preexisting cellular service
- Purchase price $125.00
WiFi: IT’S HERE AND IT’S GROWING
- Enables wireless broadband internet access at up to 54 Mbps.
- Factors: limited range, but simple and low cost to deploy.
- Numerous WiFi providers are now serving each state in Qwest’s region, i.e.: Spokane Hot Zone, Roadrunner Wireless (Rio Rancho, NM), TCT West (WY), Wireless Minneapolis.
- Over 150 municipal WiFinetworks have been deployed in the U.S., with over 200 more in planning stages (source: MuniWireless.com)
- Wireless VoIP handsets are now readily available for use in WiFiapplications in lieu of traditional landline voice telephony.
- Skype announced on 1/4/06 the availability of its “WiFi phone” enabling use of Skype VoIP service without a PC (contains on-board modem enabling VoIP calling). Price: $99.99.
- WiFi phone will enable Skype to “multiply by 10 the number of Skype users across the world.” (source: Skype press release) Skype had 220 millionusers as of Oct. 2007.
- Skype purchased by eBay 10/05 for $2.5 billion a very formidable union and one well attuned to the mass markets.
- Vonage now offers a similar VoIP WiFi phone at $80.00 after rebate.
WiMAX is “WiFi on Steroids”
- Enables wireless broadband internet access at up to 72 Mbps.
- Fixed or mobile applications.
- Greater range than WiFi: up to 6 miles from base station.
- Lower cost to deploy (fewer base stations required).
- International Telecommunications Union (ITU) certified WiMAX standards in 10/07allows industry to proceed to deployment under unified standards.
- In 10/07 (one week after ITU announcement), Cisco purchased Navini Networks (a major manufacturer of WiMAX networking equipment) for $330m.
- Remaining issues: spectrum, CPE compatibility, etc.
- Yet another means of complete bypass of “last mile” wirelineloop.
- Sprint has committed $5b to WiMAX (“XOHM”) deployment through 2010, with initial market launch in 2007 in Chicago and Baltimore/Washington D.C., followed with broad commercial launch in 2008.
- Numerous deployments, system trials now underway.
WiMAX AS CURRENT VOICE/INTERNET ACCESS ALTERNATIVE
- Founded in 2003 by Craig McCaw, headquartered in Kirkland, WA.
- Pre-WiMAX service, utilizing 2.5 GHz licensed spectrum.
- Clearwirewireless broadband service now available in 16 states.
- Wireless broadband internet plans: from $14.99/mo for 768k to $44.99/mo for 2.0 Mb.
- Wireless VoIP available at $29.99/mo. (unlimited local/LD plusover 15 features).
- Direct substitute for landline-based voice and internet access services.
Broadband Over Power Lines (“BPL”)
- Uses the AC power distribution network to support the simultaneous transmission of power and broadband data, using the unused bandwidth of existing power lines into homes and businesses. Requires use of a special “modem” that plugs into a standard AC power outlet to access the broadband internet capability. Can provide broadband internet capacity of up to 200mbps. (source: Wikipedia).
- Many BPL trials underway, e.g.: Meridian, Idaho; Boise, Idaho; Wenatchee, Washington; etc.(source: www.bpldatabase.org)
- Clear potential for loop bypass and another enabling technology for expansion of VoIP service.
Ultrawide Wireless Broadband
Rapid change in the telecommunications industry is a given and will continue to drive heightened facilities-based competition and innovation in the mass markets. As these competitive pressures continue to escalate, incumbents and new entrants alike will be driven to deliver the best telecom service value, and the customer will be the ultimate winner.