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The Present and Future of Fixed Broadband

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Presentation to event organized by University of Haifa Law School, June 2014

Published in: Internet, Technology, Business
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The Present and Future of Fixed Broadband

  1. KNOWLEDGE FOR ACTION THE PRESENT AND FUTURE OF FIXED BROADBAND Prof. Kevin Werbach werbach@wharton.upenn.edu / Twitter: @kwerb Tel Aviv, June 2014
  2. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Just released: http://t.co/bUCnJDqtkf
  3. KNOWLEDGE FOR ACTION SETTING THE CONTEXT 3
  4. KNOWLEDGE FOR ACTION Prof. Kevin Werbach “The Internet” (The “Peacock Map” of Internet autonomous systems, circa 1999)
  5. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Personal Computers Phone Networks Information Goods
  6. KNOWLEDGE FOR ACTION Prof. Kevin Werbach ≈1.5 billion PCs ≈1.3 billion landlines 1.65 billion CDs The World, Circa 2012
  7. KNOWLEDGE FOR ACTION Prof. Kevin Werbach The World, Circa Now > 1.6 billion smartphones+tablets 7 billion mobile lines Streaming > 50% of Net traffic
  8. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Post-PC Devices Converged Broadband Networks The Cloud The Next Internet
  9. KNOWLEDGE FOR ACTION Prof. Kevin Werbach The PC is Dead
  10. KNOWLEDGE FOR ACTION Prof. Kevin Werbach So is the PSTN! • U.S. Residential switched access lines – 194 million in 2000 – 101 million 2012 • % of U.S. Households with POTS – 93% in 2003, 25% in 2013, and…
  11. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Not Just a U.S. Phenomenon • >50% of OECD countries experienced a drop in PSTN access lines from 2009-11. • In 8 OECD countries, already <20 PSTN access lines per 100 inhabitants. – OECD Communications Outlook 2013
  12. KNOWLEDGE FOR ACTION Prof. Kevin Werbach 1943 20001980 2020 0.004 0.000000002 0.1 6.5 Year Coming Next: Internet of Things
  13. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Cloud Platforms are the New Utilities 13
  14. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Infrastructure of the 21st Century 14
  15. KNOWLEDGE FOR ACTION IMPLICATIONS FOR FIXED BROADBAND 15
  16. KNOWLEDGE FOR ACTION Prof. Kevin Werbach (Share of fixed connections still on dial-up in the OECD as of 2011) % Broadband is Here
  17. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Why Go Beyond Broadband? • Convergence – Voice/video/data to IP – Fixed/mobile/nomadic • Applications – Streaming media – Real-time communications – Telework/telepresence – Cloud computing and storage – Financial services – Internet of Things – Smart homes 17
  18. KNOWLEDGE FOR ACTION Prof. Kevin Werbach OK, But Why FIXED Broadband? • Mobile still only 7% of traffic in 2017 (Cisco) • Fixed is complementary to mobile – Most “wireless” traffic quickly goes to fixed – WiFi offload estimated at 70% of smartphone data • Most recent data suggests per-device mobile data usage may be peaking – At least, until the wearable/IoT explosion! 18 Has to plug in somewhere!
  19. KNOWLEDGE FOR ACTION Prof. Kevin Werbach From Here to Fibre • Only truly future-proof technology • The Good – GDP benefits of ultrafast networks – Knock-on effects of “economics of abundance” • The Bad – Up-front capex costs very high – Heavily take-rate dependent – Municipal obstacles like ROW – Transit costs an issue in some areas – Business case uncertainties 19
  20. KNOWLEDGE FOR ACTION Prof. Kevin Werbach …And The Confusing • All modern fixed broadband access systems incorporate some fiber – Key is how far fiber is extended toward the end-user • Claimed speeds aren’t necessarily representative 20 Netflix USA Speed Index, January-May 2014
  21. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Big Variation in Fibre Adoption 21 0 10 20 30 40 50 60 70 80 90 100 Israel Greece Germany Austria Chile Canada Finland Spain Luxembourg Netherlands United States Hungary Czech Republic Slovenia Norway Estonia Korea Fiber as % of Total Broadband Percentage of fibre connections in total broadband subscriptions, June 2013 OECD ranks by FTTP as % of Broadband Subscriptions OECD Average: 15.75% (June 2013)
  22. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Big Variation in Fibre Adoption 22 0 10 20 30 40 50 60 70 80 90 100 Israel Greece Germany Austria Chile Canada Finland Spain Luxembourg Netherlands United States Hungary Czech Republic Slovenia Norway Estonia Korea Fiber as % of Total Broadband Percentage of fibre connections in total broadband subscriptions, June 2013 OECD ranks by FTTP as % of Broadband Subscriptions OECD Average: 15.75% (June 2013)
  23. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Cable Changes the Data Somewhat 23 0 10 20 30 40 50 60 70 80 90 100 Greece New Zealand Luxembourg Germany Finland Spain United Kingdom Austria Poland Czech Republic Slovak Republic Belgium Chile Estonia Portugal Hungary Japan Fiber as % of Total Broadband Percentage of fibre connections in total broadband subscriptions, June 2013 OECD ranks by FTTP+Cable as % of Broadband Subscriptions
  24. KNOWLEDGE FOR ACTION APPROACHES TO NEXT-GENERATION FIXED BROADBAND 24
  25. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Architectural Choices • Fiber to the home vs. the node – Cost vs. capacity tradeoff – The Australia example • May be multiple technologies deployed within countries – Esp. with municipal networks – Hierarchy by density (FTTH/VDSL2/VDSL/Wireless) • Path dependencies important – High DSL/cable adoption may actually slow fiber 25
  26. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Business/Regulatory Models • Role of incumbents vs. new entrants – Non-traditional entrants (Reggefiber, Google) important in some countries • Scope of public funding or provision – Different models being used at the national, regional, and local level – Success stories (Stokab), failures (Provo, UT), and incompletes (Australia) • Requirements for open access or wholesale – Prevalent in most of the world except the U.S. – Wholesale model often chosen voluntarily 26
  27. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Vectoring and G.Fast • Potential game changers? – “Fiber-like” speeds at “DSL-like” costs • Challenges – May make unbundling technical infeasible – Heavily dependent on loop lengths – Real-world performance and deployment pace lags – Still tops out well below fibre speeds 27
  28. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Israel Fibre Network • An important global test case • Israel Electric Corporation (IEC) deploying a 1 Gbps wholesale network nationwide – First announced in 2011 – Partnership with a group led by Sweden’s Viaeuropa – Service scheduled to begin this month, offered by retail providers (10 so far) – Plans to cover two thirds of the country by 2020, and the remainder by 2033 • Bezeq/Hot investing in FTTH in response 28
  29. KNOWLEDGE FOR ACTION KEY POLICY ISSUES 29
  30. KNOWLEDGE FOR ACTION Prof. Kevin Werbach What’s the Goal? • End-user maximum download speed isn’t necessarily representative – Interconnection, transit, caching, equipment matter – Full capacity not always available at consumer prices – Caps, tiers, usage-based prices also significant • Importance and meaning of ubiquity? • Technological neutrality may be impossible – Investment decisions today lock in particular configurations for many years. 30
  31. KNOWLEDGE FOR ACTION Prof. Kevin Werbach What About Competition? • Virtually no business case to overbuild fiber, except urban MDUs – Natural monopoly? – Will the cost dynamics change any time soon? • Unbundling may be restricted – E.g. with vectoring – Potentially removes a major regulatory tool in much of the world – Choose between next-gen broadband and competition? 31
  32. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Operators vs. Edge Providers 32
  33. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Already an Issue in the U.S. 33
  34. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Watch This Space Going Forward • ETNO Proposal for “sender pays” rule • Complicated arrangements – CDNs, multiple end user fees, etc. – Data caps, freezones, usage charges also significant. • At high level, interests are aligned – Preconceived idea of cost “causation” not realistic. • Voluntary deals raise neutrality concerns • Compulsion skews competition/investment w/no guarantee of more infrastructure 34
  35. KNOWLEDGE FOR ACTION Prof. Kevin Werbach Surveillance and Governance • Governments go where the information is • Information goes where the users are • An ongoing governance challenge 35
  36. KNOWLEDGE FOR ACTION CONCLUDING THOUGHTS 36
  37. KNOWLEDGE FOR ACTION Prof. Kevin Werbach • Ubiquity • Capacity & Robustness • Interconnection • Innovation • Data Integrity & Privacy The Network Utility Agenda
  38. KNOWLEDGE FOR ACTION Prof. Kevin Werbach These Questions Aren’t as New
  39. KNOWLEDGE FOR ACTION Prof. Kevin Werbach “A new pronouncement by the regulatory agencies of a doctrine of free interchange of signals across the boundaries of individual systems would be of tremendous technological benefit.” -- Paul Baran, “Communication Policy Issues for the Coming Computer Utility”, May 1968
  40. KNOWLEDGE FOR ACTION ‫רבה‬ ‫!תודה‬ werbach@wharton.upenn.edu Twitter: @kwerb

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