Broadband Stimulus: Paying for Net Neutrality?

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The focus points of this Frost and Sullivan Presentation include: Consumer Communication Services, The Growth of Broadband Access, Broadband Stimulus, Net Neutrality, Combining the Influences, Implications for Carriers and Operators, Conclusion.

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Broadband Stimulus: Paying for Net Neutrality?

  1. 1. Broadband Stimulus: Paying for Net Neutrality? Mike Jude, Program Manager Consumer Communication Services October 13, 2009
  2. 2. Focus Points • Consumer Communication Services • The Growth of Broadband Access • Broadband Stimulus • Net Neutrality • Combining the Influences • Implications for Carriers and Operators • Conclusions 2
  3. 3. Consumer Communication Services 3
  4. 4. Consumer Communication Services •The Consumer Communication Services (CCS) practice is focused on understanding the dynamics of communication service consumption by the residential consumer. •CCS looks at three essential layers in the service delivery continuum: •Services •Consumer preferences and the consumer decision to buy •Distribution infrastructure 4
  5. 5. The Growth of Broadband Access 5
  6. 6. Broadband 6
  7. 7. Broadband: Where We Are Residential Broadband Market: Competitive Landscape Quarter 1- 4 Subscribers (U.S.), 2007 - 2009 80,000 Number of Total 70,000 Subscribers 60,000 Total Satellite 50,000 Total FTTx 40,000 30,000 Total DSL 20,000 Total Cable 10,000 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2007 2007 2007 2008 2008 2008 2008 2009 Quarter and Year Source: Frost & Sullivan 7
  8. 8. Broadband: Where We’re Going Broadband Growth Absent non-Market Influences 120000 Subscribers (000s) 100000 80000 60000 40000 20000 0 2007 2008 2009 2010 2011 2012 2013 Year Source: Stratecast 8
  9. 9. Broadband Stimulus 9
  10. 10. Broadband Stimulus • Encourage the deployment of broadband infrastructure to ensure the ubiquity of broadband access. • $7.3 Billion to encourage deployment of broadband to un NTIA served and under served areas - primarily rural areas beyond the reach of cable and DSL facilities Department FCC Of • Wireless access also encouraged Agriculture • August 14 (20th) deadline for funding proposals • No Tier 1 carriers applied 10
  11. 11. Broadband Stimulus: $7.3 Billion Breakdown of Broadband Stimulus Funding ($ millions) Rural Loans and Grants $300.00 $200.00 $2,500.00 Broadband Grants $400.00 (NTIA) Broadband Mapping Internet Usage $3,900.00 Upgrade PC Centers Source: Stratecast 11
  12. 12. Stimulus Impact Range of impacts defined by NTIA comments and the stimulus objectives 95% of Subscribers Stimulus Impact on Broadband Access 140000 Subscribers (000s) 120000 100000 80000 60000 40000 20000 0 2007 2008 2009 2010 2011 2012 2013 Year Source: Stratecast 60% of Subscribers 12
  13. 13. Stimulus: Does it Matter? Market Growth Compared to Stimulus Influenced Growth 140000 Subscribers (000s) 120000 100000 Market Min 80000 Market Nominal 60000 Market Max 40000 Stimulus Min 20000 Stimulus Nominal 0 2007 2008 2009 2010 2011 2012 2013 Stimulus Max Year Market Max = 91% Source: Stratecast Stimulus Max = 95% 13
  14. 14. Net Neutrality 14
  15. 15. Net Neutrality • Net neutrality is an emotionally charged issue • Proponents want unrestrained access to the Internet • Opponents want network operator opportunity to capitalize on infrastructure http://www.netcompetition.org/ http://news.cnet.com/8301-13578_3-10122935-38.html?tag=mncol investment • Truth is that net neutrality has been business as usual so far, but new applications tend to stress the network and compete with operators’ service offerings • Video • VoIP http://news.squeak.org/category/editorials http://isen.com/blog/2006/06/another-toon-for-net-neutrality.html 15
  16. 16. Impact of Net Neutrality Net Neutrality either has no impact on normal growth or it has a somewhat negative impact (both positions come with high uncertainty, though) Net Neutrality Impact on Broadband Access 120000 Subscribers (000s) 100000 80000 60000 40000 20000 0 2007 2008 2009 2010 2011 2012 2013 Year Source: Stratecast 16
  17. 17. Putting it Together 17
  18. 18. Net Neutrality and Stimulus Net Neutrality and Stimulus Impact on Broadband Access 120000 Subscribers (000s) 100000 80000 60000 40000 20000 0 2007 2008 2009 2010 2011 2012 2013 Year Source: Stratecast All Impacts combined deliver access levels roughly equal to normal growth 18
  19. 19. Implications for Carriers and Operators 19
  20. 20. Implications • Net neutrality is almost certainly going to be part of the broadband landscape • Stimulus funding, at the extremes, seems to be off setting the impact of net neutrality • It appears that the market, minus any externalities, would do almost as well providing ubiquitous broadband access as the broadband stimulus funding combined with net neutrality • If Tier 1 carriers are not accessing the stimulus funding, the implication is that those network operators that do, may not be deploying infrastructure in the most business optimal way: what happens when the government subsidy is consumed? 20
  21. 21. Conclusions 21
  22. 22. Conclusions • It is clear that both net neutrality and stimulus will continue to influence the broadband market for some time. • Focusing on the service experience rather than the placement of infrastructure seems to be the best bet for network providers • This allows networks to pay their own way • Value perception generates margin • To the extent that inefficient business models are encouraged by stimulus funding, there may be an opportunity for carriers and operators to acquire new subscribers through mergers and acquisitions in a few years 22
  23. 23. Next Steps Request a proposal for a Growth Partnership Service or Growth Consulting Services to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2010: A Frost & Sullivan Global Congress on Corporate Growth, September 12-15 2010, San Jose, CA (www.gil-global.com) Register for the next Chairman’s Series on Growth: The CEO's Perspective on Competitive Intelligence (November 3rd) (http://www.frost.com/growth) Subscribe for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 23
  24. 24. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 24
  25. 25. For Additional Information Mike Jude, Ph.D. Jake Wengroff Program Manager: Consumer Director of Corporate Communications Communications Services Information & Communication Stratecast | Frost & Sullivan Technologies (303) 466-2377 (210) 247-3806 mjude@stratecast.com Jake.wengroff@frost.com Craig Hays Angie Montoya Sales Manager Global Analyst Briefing Coordinator Information & Communication Marketing Technologies (210) 247-2435 (210) 247-2460 amontoya@frost.com chays@frost.com 25

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