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Connecting All Americans Link Hoewing VP, Internet and Technology Policy July 15, 2007. Broadband Penetration Rankings – By Household. Key Takeaways: US Internet & Broadband Adoption Significantly Higher than EU Overall Internet US 70\% vs. EU 39\% Broadband US 42\% vs. EU 23\%

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Connecting All Americans

Link Hoewing

VP, Internet and Technology Policy

July 15, 2007

broadband penetration rankings by household
Broadband Penetration Rankings – By Household

Key Takeaways:

  • US Internet & Broadband Adoption Significantly Higher than EU Overall
    • Internet US 70% vs. EU 39%
    • Broadband US 42% vs. EU 23%
  • On a state-by-state basis:
    • The most penetrated US states compare favorably with the most penetrated EU countries (US States would be 8 of the top 10)
    • The least penetrated US states are above the EU average (23%).

US50: 70% Internet, 42% Broadband

Source: Pew Internet & American Life Project, “Home Broadband Adoption 2006”, May 28, 2006

EU25: 39% Internet, 23% Broadband

Source: European Commission, “E-Communications Household Survey”, July 2006

Top 3 US States

State Data Source: Render Vanderslice & Associates, September 2006

Bottom 3 US States

Page 2

platform competition lacking in europe
Platform Competition – Lacking in Europe

European Competitive Telecom Association (ECTA), ‘Scorecard’ 1st quarter 2006.

The majority of European markets have a small non-DSL infrastructure, and cable penetration – particularly – for most of Europe is at less than 21%.

Unbundling of DSL throughout the EU is, in large part, to compensate for a lack of platform competition.

record year for bb growth
Record Year for BB Growth
  • 20 largest cable and telco providers in the U.S. combined added over 10.2 million new BB subscribers in 2006
  • For 2006, Verizon added 1.8 million new BB subscribers
  • These providers now serve over 53.3 million BB subscribers, with cable controlling ~55%

Source: Leichtman Research Group

today s u s broadband market is highly competitive
Today’s U.S. Broadband Market is Highly Competitive

Most households can get broadband:

82% DSL

94% Cable

50,000 WiFi Hotspots exist nationwide

Broadband over powerline now competing in dozens of locations

The percent of households subscribing to broadband has exploded:

More than 50% of all homes have broadband

Carriers are offering lower entry prices for their broadband services:

Verizon offers $14.95 DSL

Mobile carriers have introduced new services and networks:

EVDO (700 kbps average speed) available to 255 million Americans

Carriers are improving the high-speed options available to customers:

Verizon FiOS 50 Mbps

Cablevision 16 Mbps

customer time spent in selected forms of electronic communication
Customer Time Spent in Selected Forms of Electronic Communication

Consumers daily total use is 5.25 hours! Multitasking plays a role. No one form dominates.

Sources: (1) “Multitasking Drives Consumer Consumption of Media”, Yankee Group, Jan 26, 2007, Exhibit 1 "Average Media Consumption (Hours per workday) in the United States… " (excerpts) (2) Households in US, 2005 - (shows 113M HH in 2006) (3) “The VoIP Evolution Continues: Forecasting Broadband VoIP and Cable Telephony”, Yankee Group, Aug 2006, Exhibit 3 shows 8.5M VoIP HHs (4) “Worldwide Email Usage 2005-2009 Forecast”, IDC, Dec 2005, Table 15 North American and Worldwide Average Daily Person to Person Email Messages Sent – shows 11.97 person to person emails sent. (5) “Daily Internet Activities”, shows 93M Adults use the Internet on any given day.

verizon s broadband strategy includes
Verizon’s Broadband Strategy Includes . . .
  • Fiber-to-the-premises (FTTP)
    • Next generation network technology
    • 9 million homes passed by end of 2007
    • 5/2 Mbps; 15/2 Mbps; 30/5 Mbps; 50/5 Mbps (in some markets) – Advancing now to GPON and potentially 100s of megabytes to homes
  • DSL
    • Continue to deploy as ubiquitous data network
    • Speeds of 768 kbps and 3 megabytes available
    • Deployed to over 80 percent of all our customers
  • Wireless
    • 3G deployed today
    • 255 million Americans (5/6s) can access today
    • Up to 700 kbps on average available
    • EVDO Rev A now being deployed in dozens of cities with upload speeds in particular several times higher than current EVDO
    • Moving toward 4G - other wireless technologies (WiMax) in trials
verizon fios strategy
Verizon FiOS Strategy

Verizon CapEx spending on FiOS will total of $23 billion by 2010

  • FiOS – began in 2005 – an all-digital fibre-optic network that extends to the customers’ premises (FTTH / FTTP)
    • FiOS TV – now offered in 400 cities to over 3.5 million customers
    • “Triple play” – also supports voice and high-speed Internet at up to 100/10 Mbps in more than 1,600 cities in 16 states
    • More capacity for digital & HDTV, and unparalleled IP bandwidth for on-demand & niche programming
    • Unprecedented interactivity to support new business opportunities in voice, data, video, conferencing, etc.

2Q’07 Deployment Status:

  • Over 7 M premises passed
  • 1 M FiOS high speed customers
  • 350,000 plus FiOS TV customers
  • Nearly 1 million TV customers in total (satellite/FiOS)

2007 Deployment Objectives:

  • Pass 9M premises passed

2010 Deployment Objectives

  • Pass 18M premises by 2010

What is Verizon Doing?

Page 9

FTTH/FTTP Update – April 1, 2007

percent of residents with no choice in internet service
Percent of Residents with No Choice inInternet Service

Source: Pew Internet and Society Project

connect kentucky the model
Connect Kentucky – the Model
  • Private-public partnership managed by a non-profit organization
    • Trust, reliance on private sector wherever possible
  • Focus on BOTH supply and demand – build it and they will come not enough
  • Must find out where the “holes” are where broadband is not – mapping
    • Work with companies to get data – strong non-disclosure agreement and non-profit not subject to FOIA
    • Develop effective GIS mapping system
  • Continuously report progress to political leaders
  • Create eCommunity leadership teams
    • Teams consist of local members from nine different groups (listed in next slide)
    • Conduct economic and business analysis
  • Promote deployment – focused on private players first
    • Aggregated demand and market analysis developed through eCommunity work
    • Private players may decline and if so, other options – including RUS loans working with local governments – are used
the connect kentucky model works
The Connect Kentucky Model Works

Kentucky has reached 42% penetration of broadband

Kentucky went from among the bottom states on deployment to one of the top five

Kentucky will be at 100% deployment by year’s end

connect kentucky model produces results
Connect Kentucky Model Produces Results
  • U. S. model – platform competition, remove constraints on investment – has worked and is working
  • Mapping is important but it alone does not produce results
    • In fact it can be harmful if not linked to effective programs focused on encouraging deployment and use
  • Non-profit led, private-public partnership is results focused
    • Community based with objective to “fill the holes”
  • Data comes in many formats – gathering it and effectively teasing out key conclusions is not easy
    • GIS systems are almost rocket science
  • Focusing on the demand/uptake side of the equation is critical too
  • Connect Kentucky results speak for themselves