VDSL The way to Next Generation Access Networks
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1 WIK Conference VDSL The way to Next Generation Access Networks Patrick Dehmer, Swisscom Fixnet Ltd.
2 Swiss Regulatory framework Telecom Act 1997 aims at lean regulation of former monopoly SUSTAINABLE COMPETITION IN THE BROADBAND MARKET IS THE STRIKING THRUTH Telecom Act 97 Universal Service Obligations Voice Interconnection price regulated voice telephony access (CHF for POTS) by Federal Council uniform prices all over Switzerland politically motivated the core of sector specific competition regulation allows competition among service providers on Swisscom infrastructure has induced price decrease for telephony and dial-up Internet Competition Broadband market fast Internet access Recently emerged market Out of scope of regulation (until today no LLU-Regulation) Development is solely left to market forces the technology race continues 2
3 Technological development (convergence) sets the precondition for infrastructure based competition Technological convergence has broken up former monopolies and network boundaries enabled infrastructure based competition separated access and service Converging networks GPRS UMTS WLAN ADSL CATV Ethernet IP-Netz/Internet Telefonnetz (TDM) GPRS UMTS WLAN ADSL CATV Ethernet Consumers willingness decides. 3
4 Competition has emerged in the broadband market, where cable operators have broadband access to 80% of the Swiss households Competition has brought dynamic growth of Cable- and DSL-broadband connections Broadband penetration in Switzerland ADSL growth in recent years due to: # of Broadband connections 2'500'000 2'000'000 1'500'000 1'000' ' ADSL CATV Total Attractive wholesale services (BBCS broadband connectivity services) ADSL light offer (CHF 9 per month) (Source: Sw isscable, Sw isscom) 4
5 Competition has also brought impressive broadband penetration OECD Broadband subscribers per 100 inhabitants, by technology, June DSL Cable Other Greece Poland Turkey Slovak Republic Mexico Ireland Hungary Denmark Netherlands Iceland Korea Switzerland Finland Norway Sweden Canada United Kingdom Belgium United States Japan Luxembourg Austria France Australia Germany Spain Italy Portugal New Zealand Czech Republic Source: OECD at internationally comparable prices OECD average Source: Tarifica Prices for Broadband Connections NL I S D FIN F P UK B DK CH A USA IRE L EL US$ E
6 The price spiral is still moving AND CABLECOM IS IN A POSITION TO DELIVER HIGH SPEED INTERNET AT CHEAPER PRICES THAN SWISSCOM Players Cablecom Cablecom is in a position, due to it s coaxial network, to deliver internet content at high speed download rates Cablecom launched it s triple play product in 2004 It s current offer, bit/s download, is not replicable by ordinary ADSL technology Swisscom Swisscom launched it s broadband service later than Cablecom (October 00) High prices at the beginning decreased after February 03 as a reaction to Cablecom s new offering 6
7 Swisscom is heavily challenged and must keep moving CABLECOM HAS FIRST MOVER ADVANTAGE IN TRIPLE PLAY SERVICES OVER SWISSCOM Challenges technological development Infrastructure based competition In an IP-environment the business model of time and distance depending pricing of telephony calls is being questioned Services like skype offer worldwide free calls on the basis of a broadband-connection The core business wireline telephony is about to erode Cable network provider have nearly full coverage in Switzerland Most of them offer television services, fast internet access as well as telephony services Swisscom s customer basis is at risk to erode main strategic move network upgrade Next Generation Networks Basis to secure the business in the long run Basis to introduce TV-services for households Basis for other broadband services Swisscom s VDSL approach is a reaction to long run capabilities of cable operators 7
8 VDSL The next broadband step SWISSCOM s MAIN FOCUS IS TO OFFER HIGH BROADBAND SERVICES SUCH AS HDTV Main office Fibre Copper VDSL node Step over ADSL2+ technology Commit to long term quality for majority of customer 750 m Mbps VDSL, in opposite to ADSL2+, needs high (sunk) investments Swisscom will have invested nearly 800 Mio. CHF in VDSL technology by the end of 2008 (~130 EURO / copper line) Fibre rollout needed HDTV + 1. HDTV HSI +2TV + VoIP VDSL2 ADSL m The swiss broadband market is driven by high quality requirements of consumers 8
9 VDSL The next broadband step SWISSCOM HAS A LONG TERM COMMITMENT TO IT S CUSTOMERS, BUT SUCCESS IS NOT GUARANTEED Penetration VDSL (% of households) 75% 50% 25% -VDSL 1500m 20% -VDSL 750m As it occurs in every market, success can not be predicted Consumers may change their preferences or not change their habits (TV over DSL?) what about the return on investment? what happens with regulation, if TV over DSL is successful? On the other hand threats are arising from (publicly financed) fiber to the home plans What decisions should be taken? 9
10 Summary THE SWISS APPROACH HAS BROUGHT MARKET PROCESS TO SUCCESS Intense competition between network operators since 2000 Why regulation? -> Market forces drive innovation Diversity in broadband services and prices Consumer perceive high quality networks as essential VDSL as a response to main cable network operator 10
11 Thanks for your attention 11
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