alfredo baptista
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FTTH – The Service and Application Enabler
February 24, 2010
Alfredo BaptistaCTO
PROPRIETARYAny use of this material without specific permission of Portugal Telecom is strictly prohibited
1
million customers*
billion euros in revenues**
of revenues from international operations
in the main markets where it is present
HungaryHungaro Digitel HDT
Cape VerdeCabo Verde TelecomDirectel Cabo Verde
BrazilVivo, Dedic, UOL, PT Inovação Angola
Unitel, Multitel, Elta
MozambiqueListas telefónicas de Moçambique, Teledata
KenyaKenya Postel Directories
MacauCompanhia Telecomunicações Macau
Guinea-BissauGuiné Telecom, Guinetel
São ToméCompanhia Santomense de Telecomunicações
TimorTimor Telecom
PortugalPortugal Telecom
NamibiaMobile Telecommunications Limited
BotswanaMascom Wireless
* Excludes Meditel (sold on September 1st 2009)** Sum of four quarters (4Q08, 1Q09, 2Q09 and 3Q09)
*** Index including world companies that respect certain sustainability criteria
PT an international operator with more than 70 million customers
Listed in Euronext, NYSE and in DJStoxx and FTSE4Good*** indexes
2
Strategy based on innovation and execution
Residential PersonalCorporate
Portugal
Leadership in all segments
SMBs
International
Growth and profitability
Brazil AfricaWholesale
Innovation Execution
Structured approach
Strategic partners
Human resources
Value creating projects
Operational optimization
Financial capacity
3
Agenda
A new paradigm for the sector
PT with a clear strategy for FTTH
Enabling the fibre potential
4
There are four key forces driving a new paradigm for the sector
Bandwidth demand Sector boundaries/Convergence
Competing infrastructures
Regulation requirements
New sector paradigm with customer-centric
competition for latent growth opportunities
• Improved products and services services requiring increased bandwidth and a future-proof network
• Players in the value chain competing in all services and convergence at the device and media layers
• Cable players capturing a significant portion of the growth in bandwidth needs
• Governments assuming increasingly active roles in promoting infra-structure development
5
New products and services have generated increasing bandwidth requirements
Bandwidth
• Advanced internet browsing
• P2P music sharing• Basic
internet browsing
• Internet video streaming (YouTube, MyVideo)
• Basic 3D worlds• Video-on- demand
• Comprehensive IPTV offering (multiple channels, high definition)
• Rendered 3D worlds and peer interaction
• Basic remote application hosting
• Full-scale entertainment solutions (3D perspective, high definition, full interaction)
128 Kbps
1-2 Mbps
6-16 Mbps
25-50 Mbps
100-120 Mbps
2009 2006 2003 2000 1996
6
ISPs and OEMs are leveraging the existing infrastructure to capture this growth
Global scale of ISPs and OEMs leads to a bigger capacity of appropriating the growth of new services
Market share of top 3 playersRevenues$Bn, 2009E
850 160 90 24 30
Search engines
82
Onlineads
75
Equip-ment
63
Handsets
66
MNOs
20
Data infrastructure to connect users and physical services
Application level: Applications and services that use operators’ infrastructures
Rising number of services and applications that use operators’ infrastructures
On the other side…On one side…
7
Convergence is making the access less valuable and increasing the importance of content and functionalities
Wired network
Wireless network
IP network
Functionalities
Media
Equip-ments
Access
• Ability to use the same media type across multiple devices– E.g. Meo IPTV, Satellite, Mobile, Fibre, PC
• Ability to use the same device across different media types – E.g. films, voice and internet with the PC
• Ability to seamless transition between access networks for the same device– E.g. Homezoning - moving from the mobile network to Wi-fi network
• Ability to use the same functionality across multiple media types– E.g. GPS-enabled mobiles with location
based services, chat on music service
Convergence level (layers)
Past(95-00)
Present(00-10)
Future(2010-?)
8
Traditional incumbent-led markets
0
5
10
15
20
25
30
35
40
45
50
55
24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60
Cable broadband market sharePercent. 08
Japan
Korea
Russia
US*
UK
Switzerland
Sweden
Spain
Portugal
Norway
Holland
IrelandGermany
Finland
France
Denmark
Belgium
Austria
* Players classified as incumbents in the US are AT&T, Verizon, Bellsouth, Broadwing, Qwest, Sprint, ALLTEL and WindstreamSource: Screen Digest
+
-
Thre
at fr
om c
able
op
erat
ors
Incumbent broadband market sharePercent. 08
+- Incumbent market leadership
There are highly competitive markets with a significant cable presence
Scattered DSL/FTTx competition
Challenged incumbent-led markets
Beyond cable
presence, mobile is also an
important competitor
in the platform
competition
Strong platform competition
9
There is a new paradigm for the sector
Client management• Focus on innovation and client
experience
• Redefine positioning along the value chain
• Guarantee operational excellence
Platform management (utility)• Manage operations with a lean
approach
• Promote regulatory management to preserve value of access
Focus of competition
GrowthStagnation
Access based
Strong
Customer based
Focus on innovation and execution excellence• Focus on execution• Leverage the role of innovation
Business model transformation• Partnerships along value chain• Technological investment
(fibre)
10
Agenda
A new paradigm for the sector
PT with a clear strategy for FTTH
Enabling the fibre potential
11
PT is committed to a full-scale fibre network deployment
Description
• Building a completely new network from scratch, with all the physical and financial challenges it implies
High quality network with nationwide coverage
• Developing knowledge to manage network efficiently and apply state-of-the-art solutions (e.g. through partnerships)
• Developing innovative solutions that can be offered to explore the full potential of FTTH
There are three main levers for PT to deploy a world leading “future proof”
network
1
Leading edge knowledge
2
Innovative and attractive product offering
3
13
EP2P* (optic fibre)
G-PON is an efficient FTTH architecture with potential for future development
* Ethernet point-to-point
xDSL (legacy) G-PON (optic fibre)
Central Cabinet
ONT
ONT
ONT
OLT
Central
ONT
ONT
OLT
ONT
Central Cabinet
OLT
ONT
ONT
ONTPD Splitter
• Lower CAPEX with reductions of 30 to 60%• Less OPEX with reduced energy consumption
(~2.5 times less)• Less space required, with equipment ~7 times
more concentrated• Potential to increase bandwidth with lower split
ratio (and, in the medium term, with WDM-PON)
• Lower OPEX with reduced energy consumption (4 to 5 times less)
• Less space required, with equipment 4 to 6 times more concentrated
• Better quality of service with less down time
+ speed + efficiency
ILLUSTRATIVE
14
Fibre with RF-overlay allows for a substantial leap vs. legacy copper offer: +TV sets, + speed, - equipment
• Unlimited number of TV sets
• Significant reduction of investment in customer acquisition
• Simplification of home installation, which should allow for lower investment
• Reduction of IP bandwidth dedicated to TV streams allowing for broadband offers with greater speed
… improving the positioning relative to cable competitionRF-overlay avoids the use of set-top boxes for each TV set…
Optical fibre (link to external network)
IP Signal RF Signal
STB
• Transmission of a number of channels (up to 70) in simultaneous broadcast model to all customers
• ONT transforms RF overlay into analogical signal, both for coaxial network and TV sets
ONT
WiFiHome
Gateway VOIP
STB … …
15
FTTH roll-out follows a standardized prioritization process divided into 4 steps
Market potential index
Geographic coherence
Field drivers
Service providers capacity Commercial survey
Description
End-product
• Prioritization of parishes according to market potential index based on 4 key drivers– # of households– Density of
households– Building
morphology– Purchasing power
index
• Ranking of parishes
• In order to maximize synergies in network construction, parishes are selected according to geographical proximity
• Map for potential roll-out
• Optimize overall capacity by promoting and demoting parishes to maximize utilization of SP capacity in each region
• Adjusted rollout plan
• Final “go” for FTTH is determined by commercial areas after a survey to define which buildings are to be covered
• Final rollout mapwith detail on a building-by-building basis
Conceptual drivers
RESIDENTIAL SEGMENT
16
To have the most advanced solutions available to the client, PT has been developing a cluster of knowledge around fibre
Objective PT initiatives
Construction providers Fast rollout,
building on strong external SPs and internal technical know-how
Technologysuppliers
Strong partnership with leading suppliers
Partners
• Launch of a tender bid to select PT’s partners to design and construct the fibre network (6 service providers were selected, including the 4 copper SPs)
• Creation of a G-PON project office to supervise the rollout
• Leverage of best fibre suppliers to define key network architecture criteria
• Suppliers selection take in consideration in-depth technical analysis and logistics capabilities
Build state-of--the-art knowledge and technologies for future needs
R&D specialists
• WDM-PON ONT project with the objective of massifying ultra-high speed access (>2 Gbps)
• Development of advanced technological platform (IMS) for the development of convergent multimedia services
17
Agenda
A new paradigm for the sector
PT with a clear strategy for FTTH
Enabling the fibre potential
18
Non-core CPE*-based home services
New web enabled social services
Core Telecom, TV and entertainment services
FTTH is the only solution capable of simultaneously enabling a broad set of innovative services
* Customer Premises Equipment
Core Telecom, TV and entertainment services
Examples
• 3D TV and gaming • Super HD; Internet TV• HD video conferencing• Cloud computing/storage
• Next generation surveillance systems
• Internet-enabled house appliances
• Other Wi-fi enabled devices
• E-health• E-security• E-education
Service
Detailed next
19
Core Telecom,TV and
entertainment services
“Over-the-Top”Content
Content for “traditional”TV broadcast
Cloud computing/storage
Home WAN
Examples
• LCDs with Wi-fi and full internet connection
• Next generation 3D TV and gaming
• Home WAN, allowing users to access their home/office networks from any remote location
• Multimedia services on demand over the Internet cloud, e.g. Internet TV (OTT) with improved resolution
• Centralized service provision (SaaS, PaaS, IaaS)
• Next generation video conferencing
Mostly downstream requirements
Mostly upstream requirements
Several new “core services” are expected to become widely available
ILLUSTRATIVE
20
A clear and focused marketing strategy is key to achieve success
Product (Residential, SMB, Corporate) Price
Promotion
• Leverage on Meo brand reputation and positioning
• Ability to serve customers that want more TVs without set-top boxes
• Easier home installation coupled with better Quality-of-Service
• Potential to charge premium for fibre connection and higher speeds
• Broad commercial offer (3P and 2P) with new advancedservices
• Below-the-line advertising, aimed at installed zones and following the rollout of FTTH network
• Focused door-to-door sales (internal and SPs)
21
Fibre benefits will extend beyond traditional telecom services for consumers
Education
Health
Security
• High speed network connecting all the schools of the country
• Schools of the Future, with the use of multimedia and IT tools to facilitate the learning process (e.g., interactive boards)
• TeleMedicine solution with audio and video communications allowing access to doctors and promoting collaboration
• Virtualization of clinical processes with gains of efficiency and productivity
• XXI century Police station with state of the art technology to allow more effective protection (e.g., videosurveillance and videoconference)
• Development of products for specific security issues (e.g. car jacking)
Only fibre will enable the
services of the future and
promote the development
of areas beyond Telecom
Examples
22
Ambitious targets for the 2009-2011 triennium
Leadership Leadership in all segments and geographies
Sustainability Reference in the sector at a social, economic and environmental level
Performance Top-quartile performance in shareholder return and operational and financial results
International Two thirds of revenues from international business
Clients 100 million customers
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