broadband in america nov 12

8/7/2019 Broadband in America Nov 12

1/70

ColumbiaInstituteforTeleInformation

1AUrisHall,ColumbiaBusinessSchool

3022Broadway

NewYork,NY10027

BroadbandinAmericaWhereItIsandWhereItIsGoing

(AccordingtoBroadbandServiceProviders)

PreliminaryReportPreparedfortheStaffofthe

FCCsOmnibusBroadbandInitiative

By

RobertC.Atkinson

&

IvyE.Schultz

November11,2009


2/70

2

AcknowledgementsThebulkoftheresearcheffortthatwentintothisreportwasundertakenbyteamsofCITIinternsand

researchassistantsunderourdirection.TheresearchwasstartedinAugust,2009withagroupCITIs

summerinterns:

RoyceGene(UniversityofSouthernCalifornia,BA,2011),CindyHuiXinKhor(CornellUniversity,BA,

2012),DanaLaventure(NewYorkUniversity,BA,2010),KaiLiu(BinghamtonUniversity,BA,2011),and

BettyWu(BrownUniversity,BA,2011).

Aftertheacademicyearstartedandtheinternsreturnedtotheirschools,theeffortwascontinuedby

visitinggraduatestudentsandCITIresearchassistants.

Primaryresearchwasconductedby:JohnLazcano(ArizonaStateUniversity,BA,1997),Maximilian

Mller,ChristopherScheubel,andHaraldSiebenweiber(allCenterforDigitalTechnologyand

Management,Munich,MS,2010)

Withassistancefrom:JavierAvila(UniversityofChile,MS,2004),ShiraLazarus(ColumbiaUniversity,

BA,2011)andChikaOkose(SmithCollege,BA,2009).

Inaddition,othermembersofCITIsstaffandanumberofCITIfriendsandaffiliatescontributedtheir

experienceandexpertisebyreviewingandcritiquingdrafts.Inparticular,wewishtothank:

EliNoam,RaulKatz,SusanKalla,TracyYoung,DaveBurstein

We

would

also

like

to

thank

the

many

organizations

who

responded

to

our

requests

for

broadband

data

andinformationandthoseindividualswhoverifiedtheirorganizationsdatapresentedintheAppendix

ofthisreport.

CITI,asaninstitution,doesnotauthororpublisharticlesorreports.Therefore,we,astheauthors,are

responsibleforthecontentofthisreport.Thepresentreportisthepreliminaryinstallmentofthe

informationcollected.Inasubsequentreportwemayanalyzethedatafurtherandprovideaggregate

trendsincollaborationwithsomeofourCITIcolleagues.

Robert C. Atkinson Ivy E. SchultzRobertC.Atkinson

DirectorofPolicyResearch

IvyE. Schultz

ManagerofResearchAssistants


3/70

3

TableofContentsAcknowledgements....................................................................................................................................... 2

ExecutiveSummary....................................................................................................................................... 7

Section1:ListingofAllPubliclyAnnouncedBroadbandPlans................................................................... 12

1.1Technology........................................................................................................................................ 14

1.2TimelineforBroadbandPlans........................................................................................................... 25

1.3ExpectedDeployment/CoverageFootprint...................................................................................... 25

1.4ExpectedCapitalOutlays.................................................................................................................. 28

1.5ExpectedBroadbandPerformance/Quality...................................................................................... 32

1.6ARPU(AverageRevenueperUser)................................................................................................... 33

PricingAppendix..................................................................................................................................... 36

Section

2:

Review

of

Publicly

Announced

Broadband

Plans

.......................................................................

40

Section3:FutureProjections...................................................................................................................... 49

3.1UncompletedBroadbandPlans........................................................................................................ 51

3.2StatusofInternetBackbone............................................................................................................. 53

3.3StatusofBroadbandSatellitePlans.................................................................................................. 57

3.4SummaryofAnalystProjections....................................................................................................... 58

3.5Observations(orLessonsLearned)abouttheData...................................................................... 69

Appendix:ListingofAllPubliclyAnnounceBroadbandPlans............................................................. A1A43


4/70

4

ListofFiguresFigure1:TypesofBroadbandServices....................................................................................................... 14Figure2:FTTHSubscriptionsinMillionsasofMarch30,2009.................................................................. 15Figure3:NorthAmericanNonRBOCFTTHSubscribers............................................................................. 16Figure4:RBOCDataSubscriptionsasof2Q09.......................................................................................... 18Figure5:RuralTelcos:DSLPenetrationofTotalAccessLines(1Q08 4Q09E).......................................... 18Figure6:HomesPassedbyCableCompanies............................................................................................ 20Figure7:MSOsBroadbandSubscriptionPenetrationofHomesPassed.................................................... 21Figure8:ExpectedDownstreamSpeedsof3Gand4GWirelessBroadband(mbps)................................. 23Figure9:InternetPenetrationofU.S.Households..................................................................................... 26Figure10:MajorBroadbandDeployments:PerformanceAgainstAnnouncedCompletionDates...........41Figure11:NorthAmericanConsumerInternetTraffic(Petabits/month).................................................. 49Figure12:EstimatedU.S.ConsumerInternetUse..................................................................................... 50Figure13:TypicalSpeeds(inmbps)thatInternetActivitiesandIPTVwillRequirein2013...................... 51Figure14:MajorInternetBackboneRoutesintheU.S.(>250gbps)......................................................... 54Figure15:20HighestCapacityU.S.DomesticInternetRoutes.20072009(gbps)................................... 55Figure16:WiredBroadbandSubscriberGrowth........................................................................................ 58Figure17:WirelineBroadbandAvailabilityandAdoption(inpercentageofU.S.households).................59Figure18:WirelessBroadbandPenetration............................................................................................... 60Figure19:AverageVoiceandDataARPUs................................................................................................. 63Figure20:IndustrySectors'BroadbandCapex........................................................................................... 67Figure21:TotalCapexandTotalBroadbandCapex................................................................................... 68

ListofTablesTable1:TelcoWirelineBroadbandAvailability.......................................................................................... 17Table2:CableBroadbandDeploymentandHomesPassed....................................................................... 20Table3:AggregateCapex2008 $62.8B................................................................................................... 29Table4:TOTALCapitalExpendituresofLargestCompanies($billions)..................................................... 29Table5:RBOCWiredBroadbandCapex($billion)..................................................................................... 30Table6:TypicalWirelessBroadbandRates................................................................................................ 34Table7:SatelliteInternetBroadbandRates............................................................................................... 35Table8:BundledPricingExamplesinUrbanandRuralMarkets................................................................ 36Table9:WiredBroadbandPricingplans..................................................................................................... 38Table10:UncompletedBroadbandPlans.................................................................................................. 51Table11:20HighestCapacityU.S.DomesticInternetRoutes.20072009(gbps).................................... 54Table12:CableCompanyBroadbandARPU............................................................................................... 62Table13:TelcoCompanyBroadbandARPU............................................................................................... 62Table14:TotalCapitalExpendituresforMajorServiceProviders($billion)............................................. 64Table15:TotalCapexandBroadbandCapexbySector............................................................................. 66


5/70

5

ProjectBackgroundThestaffoftheFCCsOmnibusBroadbandInitiative(alsoknownastheNationalBroadbandPlanTask

Force)askedtheColumbiaInstituteforTeleInformation(CITI)toconductanindependentanalysisof

publiclyannouncedbroadbandnetworkdeployments(bothnewandupgradednetworks)ofcompanies

intheUnitedStates,forthepurposeofinformingtheFCCseffortsindevelopingitsNationalBroadband

Plan.OnAugust6,theFCCannouncedthatCITIhadagreedtoundertaketheanalysisproject.1

TwomembersofCITIsmanagementstaff,BobAtkinsonandIvySchultz,undertooktheproject.They

workedindependentlyoftheFCCandconductedtheprojectwithCITIsresearchresourcesandwithout

anyprojectfundingfromtheFCCoranyotherorganization.Asaresult,theprojectarrangements

ensuretheindependenceandintegrityfortheworkproduct.

AsrequestedbytheFCC,theprojectencompassedacomprehensiveexaminationandanalysisof

companiesannouncementsandsimilarpublicinformation,industryanalystsreports,andother

relevantdatatomeasureandassessbroadbandplans.Forpurposesoftheproject,theFCCspecified

thatbroadbandwouldbedefinedforwirelineasADSLequivalentsandadvanced,andforwireless

as2Gequivalentsandadvanced.Inaddition,theprojectwouldassessthecurrentstateofbackbone

facilities.

AlsoattheFCCsrequest,thereportincludedanassessmentofwherebroadbanddeploymentswillbe3

5yearsinthefutureandacomparisonofresultswithpreviouslyreleasedplansthatareinprogressor

complete.

TheresearchforthisprojectfocusedonthreespecificareasasrequestedbytheFCC,eachofwhichis

addressedasasectioninthisreport:

ListingofAllPubliclyAnnouncedBroadbandPlans,sortedboth(1)bycompanyand(2)by

technology(e.g.DSL,cable,fiber(FTTx),fixedwireless,wireless,satellite),withadescriptionof

relevantdetails,suchas(1)generaldetailsoftheplan,includingcompany,technology,andtimeline,

(2)expectedcapitaloutlaysandoperatingexpenditures,(3)expecteddeployment/coverage

footprint,(4)expectedbroadbandperformanceandquality,and(5)expectedARPUs(Average

RevenuePerUser).

ComparisonofAllPubliclyAnnouncedBroadbandPlans,basedupontheListingofAllPublicly

AvailableBroadbandPlans,acomparisonofwhatwasprojectedatthetimethatabroadbandplan

wasannouncedtowhathasresultedtodateforeachofthepubliclyannouncedbroadbandplans

acrosstheidentifiedvariables.Thislooksbackwardsatwhatwasannouncedatthetimetheplan

wasestablishedandthencomparestheannouncementwiththeoutcomesofcompletedplansand

thecurrentstatusforthoseplansstillinprogress.

1FCCPressRelease,http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC292598A1.pdf.


6/70

6

FutureProjection:Ananalysisofwherethepubliclyannouncedbroadbandplanswhichareyettobe

commencedorstillinprogresswillbein35years,includingLTE,WiMAX,DOCSIS3.0,backbone,etc.

Thisshouldincludeasummaryofanalystprojectionsandalessonslearnedcomponent.

GeneralResearchMethodologySincetheFCCsrequestwasforareviewthestateofbroadbandinAmericabasedonwhatthe

broadbandserviceprovidershavepubliclyannounced,researchersassignedtothisprojectcollected

dataprimarilyfrom:serviceproviderspublicreportsandstatements;reportsbyinvestmentanalysts

andresearchfirms(whicharegenerallybasedoninformationobtainedfromtheserviceproviders

themselves);newsreportsquotingtheserviceproviders;and,informationcompiledbyindustrytrade

associationsfromtheirmembercompanies.Consequently,wedidnotdevelopindependentdataor

evaluatethevalidityofthedatareportedbytheserviceprovidersandwedidnotuseacademic,

governmentorotherstudiesregardingthestateofbroadbandthathavealreadybeenmadeavailableto

theFCCstaff.

Forcompetitivereasonsandtocomplywithsecuritieslawsregardingdisclosureofmaterialinformation,

publiclytradedbroadbandserviceprovidersareveryreluctanttoreleasedetailedinformationabout

theirfutureplansregardingbroadbanddeploymentsandtheirfinancialforecasts.Smallprivate

companiesaresimilarlyreticenttoprovideinformationabouttheirfutureplans,eventotheirtrade

associations.

Thepublicandanyonewithrelevantinformationwereandareinvitedtosubmitadditionalinformation

anddatatoadedicatedemailaddress:[email protected].


7/70


8/70

8

capableofserving17millionlocationsby2010.8Anumberofothersmallercompanies,includingsmall

ruraltelephonecompanies,willbecoveringadditionalhomeswithFTTH.AT&Thasannounceditwill

offerDSLfromfiberfedcabinets(fibertotheneighborhood:FTTNDSL)to30millionhomesby2011.9

AT&Tcurrentlyoffersadvertisedspeedsofupto18megabitsperseconddownstream10(althoughthe

actualspeedcanbemuchlower),withincreasespossibleasbondingallowsdoublingtotalspeedson

DSL.Therefore,ifjustthesetwolargesttelephonecompaniesachievetheirgoals,atleast50million

homeswillbeabletoreceiveadvertisedspeedsof10megabitspersecondormoredownstreamwithin

thenexttwoyears.Othertelephonecompanieswillbeprovidingadditionalsimilarofferingsintheir

serviceareas.

Broadbandserviceiscurrentlyavailablefromcablecompaniesto92%ofhouseholdsaccordingtoa

researchfirmthattracksthecableindustry.11CablebroadbandisbeingupgradedtotheDOCSIS3.0

standard12andisbecomingwidelyavailableatadvertisedspeedsashighas50mbpsdownstream(with

onefirmadvertising101megabitspeeds).13Comcast,thelargestcablecompanyaddressingnearlyhalf

theUnitedStates,expectstocovernearlyallits50.6millionhomespassed14by2010.Oneanalyst

believesDOCSIS3.0willbeavailableby2013tonearlyall15

thehomescoveredtodaybycablemodem

services.16Thatwouldbeabout92%of112millionhouseholds,or103millionhomes.

WirelessCoverage:AnumberofwirelessbroadbandserviceprovidersexpecttodeployLongTerm

Evolution(LTE)andWiMAXtechnologies(socalled4Gwirelessservices)between2010and2013and,

ifsuccessful,bringmultimegabitsspeedstoamajorityofU.S.homesandpopulation.17Thewireless

servicesoffersharedbandwidth,sothespeedsobtainedbyuserswillbedependentonactualtraffic

loadsateachcellsite,andinparticularonhowmanyusersaresimultaneouslyusingbandwidth

intensiveapplications,suchaswatchingvideoonwirelessInternetconnections.Asoneexample,by

2013VerizonexpectsthatLTEwillprovidesubscriberswith4to12mbpsdownloadsinadeployment

planned

to

reach

all

of

its

covered

population

(at

the

end

of

2008,

Verizons

network

covered

288

million

people18or94%oftheU.S.population).19Otherwirelesscompaniescoverasmallershareofthe

population.EntrepreneurialandindependentWirelessInternetServiceProviders(WISPs)provide

WiMAXtypeservicestoatleast2millioncustomers20inruralareas,includingmanyareasnotcovered

bythenationalwirelesscompanies.

8SeeSection3:UncompletedBroadbandPlans,p.53.

9SeeSection3:UncompletedBroadbandPlans,p.51.

10SeeSection1:1.1Technology,p.17.

11SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.28.

12DOCSISisastandarddevelopedbyCableLabsandstandsforDataOverCableServiceInterfaceSpecification


14SeeAppendixA.

15SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.25

16SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.25

17SeeSection3,p.52.

18VerizonCommunications,2008AnnualReport,VerizonCommunicationsInc.,2009,at9.




9/70

9

SatelliteCoverage:Satellitebroadbandisavailableatalmostanylocationinthecountrythathasan

unimpededlineofsighttothesouthernskyandthereforecanprovidebroadbandservicetothemost

remoteanddifficulttoservelocations.However,thecurrentsatelliteserviceshaverelativelylow

speedsandlatencyproblems,andcostmorethanterrestrialbroadbandservices.Twonewsatellites

withgreatercapacityareexpectedtobecomeoperationalbeginningin2011,withtheoperators

announcingthateachsatellitewillbecapableofproviding210mbps21service.Transmissionratesmay

average5megabitsperseconddownstreamby2011,22butthebandwidthavailabletoeachuserwill

varyinverselywiththeactualtrafficloadasoverallbandwidthissharedamongallusers.

BroadbandTransmissionRatesFasterWirelineTransmissionRates:MostU.S.homeswillbeservedbyadvertised50megabitper

secondspeedoptionswithinthenextfewyearsfromatleastonesupplier,ascableisexpectedto

covernearlyitsentirefootprint(92%ofhouseholds)withDOCSIS3.023andtelcosexpandFTTHservices.

DSL/fiberhybrids,calledfibertothenode,currentlyareadvertisedasprovidingupto18mbps24

downstreambyAT&T.DSLbonding,nowincommercialdeployment,willallowdoublingspeeds.

IncludinghybridfiberDSL(FTTNDSL)andbondedDSL,60to70millionhomeswillhaveachoiceof

providersforadvertisedspeedsof10megabitsdownstreamorhigher.

FasterWirelessSpeeds:VerizonindicatesthatitsLTEdeploymentwillbecapableofdeliveringpractical

speedsof4to12mbps.However,wirelessbandwidthisshared,anduntilthenetworksaretestedunder

substantialloaditisnotclearwhetherspeedsabove5mbpscanbeobtainedbymorethanafew

subscribersatthesametime.25Thedemandforwirelessbroadbandbandwidthhasbeengrowing

rapidly26

andgrowthisexpectedtocontinue,especiallyifwirelessbroadbandisusedforvideooverthe

Internet.Futurepricingarrangementsforwirelessbroadbandarelikelytogreatlyaffecthowmuchvideo

trafficandotherbandwidthintensiveapplicationsarecarriedonthewirelessbroadbandnetworks.

Improvedsatellitebroadbanddatarates:Satellites,liketerrestrialwirelesssystemssharetheavailable

bandwidthcoveredbyeachspotbeamsothespeedobtainedbyauserwilldependonthesimultaneous

usageofotherusers.ViaSatexpectstooffersharedspeedsof2to10megabitsstartingin2011.27

Upstreamspeeds:Mostconsumerbroadbandservicesareasymmetrical,withdownstreamspeeds

significantlyfasterthanupstreamspeed.28

FTTHofferingscurrentlyprovideadvertisedupstreamspeeds

21SeeSection3:3.3StatusofBroadbandSatellitePlans,p.57.

22SeeSection3:3.3StatusofBroadbandSatellitePlans,p.57.

23SeeSection1:1.3ExpectedDeployment/CoverageFootprint,p.28.


25SeeSection1:1.1Technology,p.23

26AT&Tsmobiledatatraffichasincreasednearly50timesinthepastthreeyears,presumablylargelyduetothe

iPhone.M.Meekeretal.,Economy+InternetTrends,MorganStanley,2009,at57,

http://www.morganstanley.com/institutional/techresearch/pdfs/MS_Economy_Internet_Trends_102009_FINAL.p

df.27

SeeSection2:ComparisonofAllPubliclyAnnouncedBroadbandPlans,p.48.


10/70

10

ofaround20mbps,29

althoughfiberhasthecapacityformuchhigherspeeds.DOCSIS3.0upstreamis

onlyincommercialintrialsintheUnitedStates.UntilupstreamDOCSIS3.0isfullydeployed,upstream

cablespeedswillbeintherangeof768Kbpsto5mbps.30

Broadbandadoption

Approximately63%ofU.S.homescurrentlyutilizeawirelinebroadbandservice,afigurethatis

expectedtoincreasequiteslowlytoabout69%in2014duetomarketsaturationatcurrentpricing

levels.31

Investmentanalystsestimatethat31%ofAmericansovertheageof14currentlyusewireless

broadband(broadbanddoesnotincludeShortMessageServicetexting).Thisfigureisincreasing

rapidlyandanalystsexpectwirelessbroadbandadoptionwillprobablypass50%by2013.

Manyhouseholdsandindividualswillsubscribetobothwirelineandwirelessbroadbandservices,justas

theysubscribetofixedandmobilevoicetelephoneservices.Andjustassomeindividualshavecutthe

cordandrelyexclusivelyonamobiletelephoneforvoiceservices,somefamiliesandindividualsmay

choosetogowirelessonlyforbroadband.32

Thevariousbroadbandstimulusplansmayinfluencetheseadoptionforecaststhroughincreased

deploymentofbroadbandtounservedareasandencouragingincreasedadoptionofbroadband

services.

BackbonesBackbonebandwidthtrafficvolumeandcapacitywillgrowroughlyatthesamepace,withaleading

networkequipmentfirmforecastinggrowthinNorthAmericanIPtrafficof39%(CAGR)from2009to

2013.33Forthesameperiod,capacityisforecasttoincreasebyapproximately44%onmajorroutesso

thatmajorroutebackbonecapacityshouldkeepupwithdemandandsignificantproblemsofbackbone

congestiononmajorroutesarenotexpected.However,localizedcongestionmayoccuronlower

capacityroutesincludingconnectionstocelltowersthatexperiencerapidwirelessbroadbandgrowth.

28SeeAppendixA.

29SeeAppendixA:Verizon.

30Seefootnote38.

31Sinceacomputerisaprerequisitetoutilizingawiredbroadbandservice,itmightbemoreaccuratetomeasure

adoptionasapercentageofcomputerequippedhouseholdsratherthanallhouseholds.Asoneinvestment

analystsnoted,Weestimatethereare67MbroadbandsubscribersintheU.S.,representing60%ofoccupied

householdsand~70%ofPChomes.Givenbroadbandavailabilityinroughly90%ofhomes,normallydistributingPC

homesacrossbroadbandavailablehomesputsrealpenetrationatalmost80%.UBSInvestmentResearch,

SortingThroughtheDigitalTransition,UBSAG,2009,at5.32

SeeSection3:CuttingtheCord,p.60.33

SeeSection3:StatusofInternetBackbone,p.53.


11/70

11

CapitalspendingServiceprovidersrarelybreakbroadbandoutoftheircapitalspendingfiguresamongtheirservice

offeringssoitisdifficulttoisolatebroadbandspecificcapitalexpenditures.34Muchoftheservice

providerscapitalisinvestedinmultipurpose(orconverged)digitalnetworksthatcarryvoice,data

(includingbroadband)andtelevisionservicessimultaneously.

Marketresearchersandinvestmentanalystsrecentlyestimatedthatasmuchastwothirdsofcurrent

investmentsarebeingmadetoprovideandexpandwiredandwirelessbroadband,35andthetrendover

thepastfewyearshasbeengrowing.

Overall,totalindustrycapitalexpendituresareforecastbyanalyststobeabout$60billionfor2009.

Capitalexpendituresareexpectedtodecreaseinthenextfewyearsintothemid$50billionrange

annuallyasthemajornewinfrastructuredeploymentscometoanendandcapitalisdevotedto

expandingthecapacityofthedeployedsystemsratherthanentirelynewdeployments.36

Withrespecttobroadband,capexfortotalbroadbandis$30billionin2009,lowerthanithadbeena

yearearlier.Lookingforward,thecapitalinvestmentsinbroadbandinfrastructureareexpectedto

remainflatatapproximately$30billionperyear.Atthesametime,totalcapexinallthesectors(Telco,

Cable,Wireless,Satellite,andWISP)isexpectedtodeclinefrom$60to$54billion.

34Suchabreakoutwouldalsobesubjecttoallocationofcapitalamongtypesofservicesforjointlyusedfacilities,

suchasbackofficesystemsandbackbonetransportfacilitiesthatcarryconventionaltelephone,wireless,

broadbandandvideotraffic.35

SeeSection1:1.4ExpectedCapitalOutlays/OperatingExpenditures,p.2836

SeeSection3:TotalCapitalExpenditures


12/70

12

Section1:ListingofAllPubliclyAnnouncedBroadbandPlansAsafirststep,theFCCaskedforalistofallpubliclyannouncedbroadbandplans,

sortedboth(1)bycompanyandby(2)technology(e.g.DSL,cable,fiber(FTTx),fixedwireless,

wireless,satellite),withadescriptionofrelevantdetails,suchas(1)generaldetailsoftheplan,

includingcompany,technology,andtimeline,(2)expectedcapitaloutlaysandoperating

expenditures,(3)expecteddeployment/coveragefootprint,(4)expectedbroadbandperformance

andquality,and(5)expectedARPUs.

Tofindthedetailsofbroadbandplansforpubliclytradedcompanies,ourresearchersexamined

companiesinvestorrelationswebsites,includingtheirAnnualReportsfrom20042008,lookedat

earningscalltranscriptsforthethreequartersof2009,searchedforinvestmentanalystsreportsusing

theThomsonOnedatabase,andfinally,usedgeneralwebsearchestoobtainadditionalinformation.

Obtaininginformationaboutprivatelyheldcompanieswasmoredifficult.Sincemanyofthenonpublic

companiesaresmallcable,telephone,andwirelessinternetserviceprovider(WISP)companiesthat

tendtoservethemoreruralpartsofthecountry,informationwasscarcestfortheunservedand

underservedpopulations.Toobtaininformationaboutprivatecompaniesordivisionsofpublic

companies,theresearchersreviewedcompanywebsites,contactedrelevanttradeassociations,and

performedgeneralwebsearches.Aggregatedinformationaboutsmallercompanieswasobtainedfrom

reportsandsurveysbycable,wireless,andtelephonecompanytradeassociations.

Oncethepreliminaryinformationwascompiled,companyspecificinformationwassenttothesubject

companyaskingforverificationoftheinformationgatheredtothatpoint.Responseswerereceivedfromsomecompaniesandadjustmentsweremadebasedonacompanyssuggestionafterconfirming

theaccuracyoftheadditionalinformation.

Thecompletedatabasewillbeavailableonlineatwww.citi.columbia.edu.TheAppendixtothisreport

containscompanybycompanyinformationextractedfromtheonlinedatabasefor29companieswith

publiclyannouncedbroadbandplans.Theinformationwassortedbycompanyandbytechnology,

wherepossible.Wewelcomefurtherupdatesandadditionalinformationfromanycompanyinvolvedin

theprovisionofbroadbandservicesandwillupdatethedatabaseaccordingly.37

37Updatedandadditionalinformationshouldbesentto:[email protected].


13/70

13

ThedetailsofthedatabasecanbeseenintheAppendix,whichlistsinformation,includingdetailsof

currentbroadbanddeployments,forthefollowing:

Company Page Company Page

AT&T A2 MediaCom A23

CableOne A6 MetroPCS A24

Cablevision A7 OpenRange A25

CenturyLink A8 Qwest A26

Charter A9 RCN A27

CincinnatiBell A10 SprintNextel A28

Clearwire A11 TMobile A31

Comcast A13 TimeWarnerCable A32

Cox A14 Verizon A33

EchoStarCorp A15 ViaSat A37

Fairpoint A16 WildBlue A38

Frontier A17 Windstream A39

Gilat A18 WISPIndustry A40

Hughes A19 OPATSCO A41

Insight A20 AmericanCableAssoc. A42

Knology A21 NTCA A43

LeapWireless A22

Thefollowingnarrativebroadlysummarizestheinformationinthedatabasewithrespecttosix

categoriesspecifiedbytheFCC:

1)Technology,

2)TimelineforDeployment,

3)ExpectedDeployment/CoverageFootprint,

4)ExpectedCapitalOutlays/Operatingexpenditures,

5)ExpectedBroadbandPerformanceandQuality,

6)ExpectedARPUs.


14/70

14

1.1TechnologyTheAppendixcanbesortedtoshowthewireline,cable,wireless,andsatellitebroadbandprovidersand

theirplans.ThefollowingsectionbrieflysummarizestheinformationcontainedintheAppendixandthe

onlinedatabaseintermsofthesesubcategories.

WiredBroadband

Asthisdiagramshows,thereareanumberofdifferentwaystoprovidebroadbandservicesoverwired

facilities:

FIGURE1:TYPESOFBROADBANDSERVICES

Source:ForresterResearch,TheShiftfromBroadbandtoWideband,updatedJune12,200938

Wireline Fiber:Mosttelephonecompaniesutilizefiberopticsforasignificantportionoftheir

distributionnetworks.Mostusefibertothenode(FTTN)39andafewutilizefibertothehome(FTTH).40

38D.Williams,TheShiftFromBroadbandToWideband,ForresterResearchInc,2009,

http://www.forrester.com/Research/Document/0,7211,53419,00.html. 39

AlsoreferredtoasFibertotheNeighborhood.40

AlsoreferredtoasFibertothePremises(FTTP).


15/70

15

However,onlyAT&TandVerizonhaveannounceddetailedplansforfiberdeployment.Verizonintends

topass17millionhomeswithitsFiOSFTTHbytheendof201041andAT&Tplanstopass30millionliving

unitswithitsUVerseservice(ahybridFTTNDSL)by2011.42

Therewereapproximately14.9millionU.S.homespassedbyfiberinMarch2009.43Whilesome

companiesaredeployingbothFTTHandFTTNbroadband,VerizonhasthelargestsharebyfarofFTTH

subscriptions,with3.1millionsubscribers.AT&TandQwesttogetherhave200,000FTTHsubscribers,

primarilyingreenfielddeploymentstonewhousingdevelopments44andanother681companieshavea

totalof1.1millionFTTHsubscribers.45Includedinthese681companiesaresmallruralTier3telephone

companiesthatserve7%oftheircollective8millionsubscribers(560,000locations)withFTTH,46Tier2

telephonecompanies,competitivelocalexchangecarriers(CLECs),realestatedevelopers,andpublic

entitiessuchasmunicipalities.

FIGURE2:FTTHSUBSCRIPTIONSINMILLIONSASOFMARCH30,2009

3.3

1.1

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Verizon,AT&T,Qwest

68 1OtherProviders

Source:RVALLC:FibertotheHome:NorthAmericanMarketUpdate,April200947

41VerizonInvestorRelations,VerizontoDiscussPlanstoDivestWirelineBusinessesin14States,Verizon

CommunicationsInc.,2009,http://investor.verizon.com/news/20090513/20090513_transcript.pdfat4.42

AT&TPublicRelations,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc.,

2009,http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597.43

RVA,FibertotheHome:NorthAmericanMarketUpdate,RVALLC,2009,at6

http://www.ftthcouncil.org/sites/default/files/RVA.FTTH_.Apr09.060109.pdf.44

S.Buckley,FibertotheX:Onesizedoesnotfitall,FierceTelecom,2009,

http://www.fiercetelecom.com/special reports/fiberxonesizedoesnotfitall.45

RVAmaintainsadatabaseofhundreds(over600)ofFTTHprovidersthroughoutNorthAmerica.RVAreportsthat

theycontactalargeportionoftheseproviderseachyeartogetdetailedinformationabouttheirdeployments.

Theirsamplerepresentsover33%ofallsmallerproviderseachyear.46

M.C.Render,WhoWillBuildTheRestofAmerica,RVALLC,at13,

http://www.ftthcouncil.org/sites/default/files/Mike%20RenderWho_Will_Build_the_Rest_of_America.pdf.47


http://www.ftthcouncil.org/sites/default/files/RVA.FTTH_.Apr09.060109.pdf.


16/70

16

ThenextchartdescribesthenonRBOCprovidersofFTTHserviceinmoredetail.Whilethemajorityof

nonRBOCFTTHserviceisprovidedbyothertelephonecompanies(ILECs),FTTHisalsoprovidedby

facilitiesbasedCLECs,developers,andmunicipalities.Perhapsmostsurprisingisthecommitmentofthe

smallest,usuallyrural,telephonecompaniestofiberdeployment.Astheresearchfirmnoted,

BothVerizonandthesmallerTier3ILECSsaytheyintendtocontinuetobuild[fiber]atafairly

strongpace,evenduring2009.48

Theresearchfirmexplainedthatdriversfortheruralindependenttelcos[todeployFTTH]includeaging

copperlinesinneedofreplacement,theopportunitytodelivervideogivenamorerobustplatform,a

pioneeringtradition,andinsomecases,subsidiessuchasruralbroadbandloanprogramsanduniversal

servicefunds.49

InadditiontotheTier3telephonecompanies,municipalities(particularlythoseinruralareas)have

deployedFTTHsystems,whichareusuallyundertakenafterprivateserviceprovidershavedeclinedto

upgradetheirnetworksorbuildsuchsystems.50Therearecurrently57publicFTTHsystemsintheU.S.,

mostlyinsmallruraltowns.51Thesesystemshaveproventobepopularwithconsumers:Nationwide,

thetakeratesforretailmunicipalsystemsafteronetofouryearsofoperationaverages54percent.52

FIGURE3:NORTHAMERICANNONRBOCFTTHSUBSCRIBERS

54.8%

15.8%

13.8%

13.4%

2.2%

0% 10% 20% 30% 40% 50% 60%

ILEC

CLEC

Developer/Integrator

Municipal/Public

MSO/Cable

Source:RVALLC:MunicipalFibertotheHomeDeploymentsNextGenerationBroadbandasaMunicipalUtility,

October,200953

48Ibid.at14,emphasisadded.

49Ibid.

50D.St.John,MunicipalFibertotheHomeDeployments:NextGenerationBroadbandasaMunicipalUtility,

FTTHCouncil,2009,at1,http://www.baller.com/pdfs/MuniFiberNetsOct09.pdf.51

Forthelistofthe57municipalities,seeibidat5.52

Ibid.at3.53

Ibid.at2.


17/70

17

ThefollowingtableshowsthatVerizonsFTTHFiOS,(andsimilarFTTHservicesofferedbyothers)

offersthehighestspeedscomparedtotheDSLservicesgenerallyofferedbyothermajorwireline

telephonecompanies:

TABLE1:TELCOWIRELINEBROADBANDAVAILABILITY

Source:GoldmanSachsGlobalInvestmentResearch,Americas:CommunicationServices,September8,2009

FTTHcurrentlyprovidesupstreamspeedsofupto20mbps54,althoughfibercanprovidemuchhigher

speeds.

Wireline DSL:DSLutilizesthetraditionalcoppertelephonewirestodeliverabroadbandsignalto

customershomes.BecauseDSLbroadbandtransmissionratesareinverselyrelatedtothelengthofthe

copperwires,formanyyearstelephonecompanieshavebeendeployingfiberopticstoanelectronic

nodeinaneighborhoodandconnectingtorelativelyshortdistancecopperwiresatthatpoint.So,in

manycases,DSLserviceisprovidedbyahybridfibercopperarchitecture(FTTNDSL).

ThespeedofDSLhasalsoincreased,particularlyoverrelativelyshortdistances,suchasfroma

neighborhoodfibernode.Forexample,VDSL2usedwithFTTNcansupportspeedsinthe2050mbps

range.55Whilemostlocalexchangetelephonecompanies,includingthesmallestandmostrural,offer

DSLserviceintheirserviceareas,onlythelargerpubliclytradedcompanieshavemadewhatcanbe

characterizedasannouncementsabouttheirDSLplans.Thefollowingtelephonecompanieshave

madesuchannouncements:AT&T,CenturyLink(CenturyTel/Embarq),CincinnatiBell,Qwest,Verizon,

andWindstreamCommunications.

Thefollowingchartshowsthenumberofdatasubscriptionsforthelargeregionaltelephonecompanies

(oftenreferredtoastheRBOCs).Foritswirelinesubscriptions,Verizonhasamuchlargerproportion

(almostonethird)ofFTTHsubscriptionscomparedtoDSLsubscriptions.Bycontrast,AT&Thasa

majorityofDSLsubscriptions,withamuchsmallerpercentageofFTTHsubscriptions.ThethirdRBOC,

Qwest,has2.9millionDSLsubscriptions.

54SeeAppendixA:Verizon.

55LightReading,Report:VeryHighSpeedDSL(VDSL2)coulddrivecopperhigherlongterm,ResourceInvestor,

2009,http://www.resourceinvestor.com/News/2009/7/Pages/ReportVeryHighSpeedDSLVDSL2coulddrive

copperhigherlongterm.aspx.

Carriers MillionsofHomes

Passed2009YE

Highestdownstream

Speed

OfferedCurrently

AT&T 22 18mbps

Verizon 15 50mbps

Qwest 3 40mbps

Others 6 1020mbps

Note:Speedsvarybymarket


18/70

18

FIGURE4:RBOCDATASUBSCRIPTIONSASOF2Q09

6.0

13.9

2.9

3.1

1.6

0

2

4

6

8

10

12

14

16

18

Verizon AT&T Qwest

DSL FTTH/FTTN

Source:CompanyAnnualReports,QuarterlyEarningsReports

ThegraphbelowshowsDSLpenetrationforthelargerTier2,mostlyrural,telcos.Penetration

hassteadilyincreasedintheareasservedbythesecompanies,withDSLbroadbandexpectedto

reach30%oftheiraccesslinesbythefourthquarterof2009.

FIGURE5:RURALTELCOS:DSLPENETRATIONOFTOTALACCESSLINES(1Q08 4Q09E)

Source:BankofAmericaMerrillLynch,3Q09Telecomresultspreviewandmodelbook Duck&cover,Oct.14,

2009at22.


19/70

19

Interestingly,oneinvestmentanalystfoundthatbroadbandpenetrationasapercentageoftotal

subscribersis30.5%forruraltelephonecompaniescomparedto27.7%withVerizon,AT&TandQwest.56

Thisanalystattributedthedifferencetoruralcarriersgenerallyfacinglowercablepenetrationandaless

competitiveenvironmentthanthemajortelephonecompanies.Theanalystalsopointedoutthatthe

ruralcarriersmayhavelessgrowthpotentialthantheurbancarriersbecauseoflowerpersonal

computerpenetrationinruralhomes.

ThesmallesttelephonecompaniesrepresentedbytheNationalTelephoneCooperativeAssociation

(NTCA)alsohaveahighpenetrationofbroadbandlinesintheirruralareas.NCTAreportedthat:

....oursurveyresultsshowedthatrespondentswereofferingbroadbandserviceinexcessof768

kbpsto83%oftheircustomers.Applyingthatnumbertoourestimateof3.5millionaccesslinesgive

2.9millionbroadbandlinesservedbyNTCAmembercompanies.57

Cable:Cabletelevisioncompanieshavebeensignificantprovidersofbroadbandinternetaccessservices

formanyyearsandcurrentlyprovideinternetaccessto37%ofhouseholds(versus29%fortelco

broadband).58Theygenerallyusehybridfibercoaxarchitecture:fiberopticsbringscableservicestoa

neighborhoodnodeatwhichpointconnectionsaremadetocoaxialcablesthatservethecustomers

premises.IncontrasttotelecommunicationcompaniesFTTHandFTTN,clustersofhybridfibercoax

userssharethecapacityofeachnodesospeedsvarydependingonthesimultaneoususebyothers

servedbythesamenode.59Theoretically,mostcablebroadbandsystemsarecurrentlycapableof

providingdownloadspeedsofatleast10mbps.60

56MorganStanleyResearch,TelecomServices,MorganStanley,2009,at42.

57DataprovidedfromNTCAtoCITI,2009.NTCAalsonotedthatthemarginoferrorcouldpotentiallybefairly

large.58

J.Armstrongetal.,Americas:CommunicationsServices,TheGoldmanSachsGroupInc,2009at15.59

D.Williams,TheShiftfromBroadbandtoWideband,ForresterResearchInc,2009,

http://www.forrester.com/Research/Document/0,7211,53419,00.html. 60

Ibid.


20/70

20

Asthefollowingchartillustrates,thetopfivecableMultipleSystemOperators(MSOs)clearlydominate

innumberofpassedhomes.

FIGURE6:HOMESPASSEDBYCABLECOMPANIES

50.6

26.8

11.39.4

4.8 3.92.8 1.9 1.7 1.4 1.3 0.9

0

10

20

30

40

50

60

C om cast TW C C har te r C ox C ab le vi si on Br igh th ou se M ed iac om Su dd en li nk R CN C ab leOn e I nsi gh t Kn ol ogy

Source:CompanyAnnualReports,QuarterlyEarningsReports,AnalystReport

ThemajorMSOscancurrentlysupplybroadbandservicestoallortonearlyallofthehomesthatthey

pass,asillustratedbythistable:

TABLE2:CABLEBROADBANDDEPLOYMENTANDHOMESPASSED

Source:StifelNicolausInvestmentBankingpresentationtoPennsylvaniaTelephoneAssociation,July20,2009,61

companyfilings,companypressreleases

61F.Gallagher,withouttitle,StifelNicolausCorp,2009,at4,

http://www.patel.org/Convention/2009/Stifel%20Nicolaus%20Presentation%20(PTA%202009).pdf

Company CableBroadband

Deployment(asofMarch31,2009)

HomesPassed

(millions)

Cablevision 100% 4.8

Mediacom 100% 2.8

TimeWarnerCable 99.5% 26.8

Comcast 99.4% 50.6

Charter 94.9% 11.3


21/70

21

Thefollowingchartdescribesthepercentageofthehomespassedwhichcurrentlytakebroadband

servicesfromthetenlargestcablecompanies:

FIGURE7:MSOSBROADBANDSUBSCRIPTIONPENETRATIONOFHOMESPASSED(MOSTCURRENT

NUMBERS,2008OR2Q2009)

30%33%

26%

43%

52%

27%

18%

28%

35%

21%

0%

10%

20%

30%

40%

50%

60%

Comcast TWC Chart er Cox Cable vision Me diacom RCN CableOn e In sight Knology

Sources:Companies2008annualreports,companiessecondquarter2009reports,analystreports

Cablecompaniesthathaveannouncedfuturebroadbandplansinclude:Cablevision,Charter

Communication,Comcast,CoxCommunications,Knology,RCN,andTimeWarnerCable.Manycable

companiesarecurrentlyintheprocessofupgradingfromDOCSIS2.0or1.1toDOCSIS3.0protocols.

CablebroadbandupgradedtoDOCSIS3.0isbecomingwidelyavailabletodayatadvertisedspeedsas

highas50megabitsdownstream(withonefirmadvertising101megabitspeeds62).

Havingdonethefiberbuildoutstocustomersneighborhoodsoverthepast1015years,upgradingto

theDOCSIS3.0broadbandstandardisarelativelyquickandinexpensivetaskforcablecompanies

comparedtothetelcos'currentinfrastructuredeploymentsofFTTHorFTTN.ForexampleCharterhas

indicatedthatthecostofupgradingitsnetworktoDOCSIS3.0(includingthecablemodemtermination

systemandroutinggearinitsnetworkbutnotnewcablemodemsatcustomerpremises)willbeabout

$8to$10percustomer.63AninvestmentanalystrecentlyestimatedthatthecostofDOCSIS3.0

62T.Spangler,CablevisionToBlastOut101mbpsInternetService,MultichannelNews,2009,

http://www.multichannel.com/article/210164 Cablevision_To_Blast_Out_101_mbps_

Internet_Service.php?rssid=20059&q=Cablevision+To+Blast+Out+101mbps+Internet+Service.63

D.Williams,TheShiftFromBroadbandToWideband,ForresterResearchInc,2009,

http://www.forrester.com/Research/Document/0,7211,53419,00.html.


22/70


23/70

23

homespassedorcustomerssubscribingtobroadband.AnACAsurveyfoundthatfouradditional

companieshaveplanstodeployhighspeedinternetservicewithinayearand36companieshaveno

planstodeployhighspeedinternetservice.Duringatelephoneinterview,anexpertonthecable

industrysbroadbandcoverageestimatedthatthesmallruraltelephonecompaniesarecapableof

providingbroadbandserviceto75%ofthehomestheycollectivelypass.75

Wireless:Arangeofwirelessbroadbandtechnologiesarecurrentlyinusebythevariouscellular

telephonecompanies.Secondgeneration(2Gand2.5G)digitaltechnologywasthefirsttosupport

internetaccessandthatsecondgenerationisbeingrapidlysupplantedbythirdgeneration(3G)wireless

evenaspreparationsarebeingmadeforthedeploymentof4G.

Thenextchartindicatestheexpectedaveragedownstreamspeedsforthevarious3Gand4G

technologies.

FIGURE8:EXPECTEDDOWNSTREAMSPEEDSOF3GAND4GWIRELESSBROADBAND(MBPS)

Source:BofAMerrillLynchGlobalResearchestimates,companyfilingsandpresentations.Speedsarebasedon

companycommentaryandmarketingmaterialandmaydifferfromuserexperiences,whichareimpactedby

numberofusers,distancefromcellsite,andtopographyamongotherfactors.Theoreticalspeedsarehigher.

AdaptedFrom:BankofAmericaMerrillLynch,4GFootraceCarriersrefinedeploymentplans,Sept.30,2009at6.

However,asexplainedinthesourcenoteabove,wirelessbandwidthisshared,anduntilthenetworks

aretestedundersubstantialloaditisnotclearwhetherspeedsabove5megabitscanbeobtainedby

morethanafewsubscribersatthesametime.76

75InterviewwithSNLKagan,Oct,7,2009.

76S.FlanneryandB.Swinburne,U.S.Cable,Satellite,Telecom3Q09/09/10Outlook,MorganStanley

Research,2009at17:4Gwirelessnetworksofferamajorstepfunctioninwirelessbroadbandcapabilities3G

todaytypically0.51.5mbpsWiMAXtoinitiallydeliver24mbpsLTElikelytodeliver36mbps.

0 2 4 6 8 10 12

EVDORev.A

HSPA3.6

HSPA7.2

WiMAX

LTE

3G

4G


24/70

24

Anumberofnewwirelessbroadbandtechnologiesareinvariousstagesofdeployment,planningand

testing.MajorcompaniesthathavemadebroadbandwirelessannouncementsincludeAT&TWireless,

Cablevision,CenturyLink(themergedCenturyTel/Embarq),CincinnatiBell,Clearwire,Comcast,Cox

Communications,FrontierCommunications,MetroPCS,Sprint,TMobileandVerizon.Significant

initiativesincludethedeploymentof4Gwirelesssystemsthatareexpectedtoproviderelativelyhigh

speedbroadbandserviceswithdownloadspeedsinthe412mbpsrange,aslongassystemsarent

overloadedwithtoomanysubscribersusingbandwidthintensiveapplications.77

4GincludesLongTermEvolution(LTE)forcellulartelephonesystems.Itiscurrentlybeingtestedandis

projectedtoreach25to30marketsby2010.By2013Verizon,currentlythelargestwirelessservice

provider,expectstocoverallofitsPOPsover90%ofthepopulationwithLTE.78Another4G

technologyisknownbroadlyasWiMAX.OneearlynationalcompanyusingWiMAX(Clearwire)plans

tolaunch4Gservicein25marketsandbecapableofserving30millionpeoplebytheendof2009.79

HundredsofsmallerWirelessInternetServiceProviders(WISPs)havedeployedwireless(mostly

WiMAX)internetserviceinruralareasanditisexpectedthattheywillcontinuethedeployments.

However,manyoftheseWISPcompaniesaresmallprivateventuresandtendtobesecretiveabout

theirdeploymentplans.80The350membersoftheWISPAssociationfarfromthetotalnumberof

WISPsprovidefixedbroadbandwirelessservicestoover2millionlocations.81

NotallWISPsaresmall,independent,localbusinesses.OpenRangeiseffectivelyanationalWISPfunded

inpartbya$267millionBroadbandAccessLoanfromtheDepartmentofAgricultureand$100millionof

privateinvestment.ItplanstouseWiMAXtoinitiallyserve6millionpeoplein546communitiesin17

states82andrecentlybeganofferingitsfirstserviceswitha$38.95permonthbroadbandservice.83

77Verizonreportsarangeofdownloadspeedsfrom812mbps,andClearwiresWiMaxwillofferupto6mbps.See:

K.Brown,Verizon:LTEspeedwillbe812mbps,OneTouchIntelligenceLLC,2009,

http://www.onetrak.com/Uploads/scott/WIRELESSTRAK%20 %20July%202009.pdf. 78

S.Ragan,Verizon:LTEconfirmedonconferencecallbillionsspentonnetwork,TheTechHerald,2009,

http://www.thetechherald.com/article.php/200934/4266/VerizonLTEconfirmedonconferencecall

%E2%80%93billionsspentonnetwork.

And:P.Goldstein,Verizon'sMelonedetails4Gplansforbackhaul,antennasandbackuppower,FierceWireless,

2009,http://www.fiercewireless.com/story/verizonsmelonestressescollaboration4g/20090922.79

ClearwireCorporationInvestorRelations,ClearwireReportsSecondQuarter2009Results,Clearwire

Corporation,2009,http://investors.clearwire.com/phoenix.zhtml?c=198722&p=irol

newsArticle&ID=1319734&highlight=.80

AnassociationofWISPshaspublishedamapanddirectorywhichindicateswheresomeWISPsarecurrently

offeringservices.See:WISP,WelcometoWISPDirectory,wispdirectory.com,

http://www.wispdirectory.com/index.php?option=com_mtree&task=viewlink&link_id=300&Itemid=53.81

FilingofWISPAinFCCGNDocket0951,2009,at12.82

OpenRangeCommunications, OpenRangeCommunications Secures$374MilliontoDeployWireless

BroadbandServicesto546RuralCommunities,OpenRangeCommunications,2009,

http://www.openrangecomm.com/pr/pr_022009.html. 83

OpenRangeCommunications, PerfectPackageHighSpeedInternet,DigitalPhone,andEMail,OpenRange

Communications,2009,http://www.openrangecomm.com/packages.html.


25/70

25

Satellite:Broadbandservicestoresidencesandsmallbusinessesviacommunicationssatellitesare

offeredbyEchoStar,Gilat,Hughes,ViaSat,andWildBlue.84Themostattractiveattributeofsatellite

broadbandisthatitisavailableinalmostanylocationintheUnitedStatesthathaselectricalpowerand

alineofsighttothesouthernskywheresatellitesareparkedingeostationaryorbitsovertheequator.

However,thelatencycausedbythetimerequiredsendingasignaltothesatellitesandbackmeansthat

satellitesarelesssatisfactorythanterrestrialbroadbandservicesforlatencysensitiveapplicationssuch

asvoicetelephonyandinteractivegaming.

Satellitebroadbandisalsomoreexpensivethanterrestrialbroadbandservices:inadditiontopayinga

monthlysubscriptionchargethatcanbetwicethecostoftypicalterrestrialservices,theusermustalso

purchaseasatellitedishatpricesthatrangefrom$149.95to$299.99.

AnewgenerationoftwowayHighThroughput(HT)satellitesisbeingbuiltforlaunchbeginninginearly

2011.Thesenewspotbeamsatelliteswillhave100gbpsofcapacity,whichis1825timesthecapacity

ofsatellitesthatwerelaunchedjustafewyearsago.85

1.2TimelineforBroadbandPlansForcompetitivereasonsandtocomplywithsecuritieslawsdealingwithdisclosuresofmaterial

information,mostcompaniesarereticentaboutreleasingdetailsofthetimingoftheirfuturebroadband

deploymentplans.Whereinvestmentanalystshavemadeforecastsforthemajorcompanies

deploymentplans(amatterofgreatinteresttoinvestors),thecompaniesthemselveshavenotverified

theanalystsforecasts.Totheextentcompaniesdomakeannouncements,theplanstypicallydonot

extendpast2011,andmostlyonlycoverthenextyear.

KnowndetailsofpublicplansandtimelinesaresummarizedinthefollowingdiscussiononExpected

Deployment.TheAppendixandthediscussionofanalystprojectionsinSection3ofthisreportalso

provideinsightsintodeploymenttimelines.

1.3ExpectedDeployment/CoverageFootprintInvestmentanalystsandotherresearchfirmsestimatecurrent(mid2009)wirelinebroadband

penetrationat66%ofallU.S.households,with29%bytelecommunicationscompaniesand37%by

cablecompanies:86Asthischartillustrates,bysuchestimatesapproximately20%ofU.S.householdsdo

nothaveanyinternetaccessand14%accesstheinternetwithdialuptelephoneservice:

84WildBluehasbeenacquiredbyViaSat.

85F.Valle,SatelliteBroadbandRevolution:HowTheLatestKaBandSystemsWillChangeTheRulesOfThe

Industry.AnInterpretationoftheTechnologicalTrajectory,SpringerScience+BusinessMedia,2009,

http://www.springerlink.com/content/x0x51281h3520202/fulltext.pdf.86

LeichtmanResearchGroup,Under650,000addbroadbandinthesecondquarterof2009,LeichtmanResearch

GroupInc,2009,at2,http://www.leichtmanresearch.com/press/081709release.pdf.Leichtmanestimates

69,902,289totalbroadbandsubscribersatendof2Q2009,whichisroughly60%ofU.S.households.


26/70

26

FIGURE9:INTERNETPENETRATIONOFU.S.HOUSEHOLDS

1520 24

28 3235 37 39 40

418

12

17

22

2628

2931 32

33

39

31

23

20

1816

1412 10 9

38 37 3630

24 2120 19 19 18

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E

Cable Telcobroadband Dialup+Others NonInternethouseholds

Adaptedfrom:GoldmanSachsGlobalInvestmentResearch,Americas:Communications,Sept.8,2009at15.

Companiesdonotprovidedetailedinformationabouttheirdeploymentplansandcoveragefootprints.

Rather,pressreleasesandothersortsofannouncementsgenerallylistpercentagesoffootprintcovered,

additionalcustomers,andadditionalgeographicareastobeserved.Investmentanalystshavenoted

that,

Withinthetelcos,Verizonhasthemostaggressiveplantoupgrade50%oftheirfootprinttoFTTH

(fibertothehome)by2010,whichenablesbroadbandspeedsupto50mbps,alongwitharobust

videoproduct.AT&TalsohasaFTTN(fibertothenode)video/broadbandplantoreach60%ofits

footprintby2011andthecompanyhastalkedaboutpushingcoverageto80%longerterm.Forthe

RLECs(e.g.,Qwest,Embarq,Frontier),thefocushasbeenmoreonbroadbandupgradessofar

althoughthiscouldpotentiallychangewithIPTVcoststrendingdownovertime.87

Thefollowingareexamplesofthecoveragedetailsprovidedinthebroadbanddeployment

announcementsnotedintheAppendix:

AT&T

Uverse:

Plans

to

pass

30

million

living

units

in

2011.88

87M.Wienkes,FearsOverthetop?EarlystagebroadbandvideoinvestingacrossTech,Media&Telecom,The

GoldmanSachsGroupInc,2009,at17.88

AT&T,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc,2009,

http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597.


27/70

27

AT&TWireless:AT&Ts3Gmobilebroadbandnetworkisnowavailableinnearly350U.S.

majormetropolitanareas,withabout20additionalmetroareasplannedfordeploymentin

2009."Deploymentofabout2,100newcellsitesacrossthecountry.Tosupportits

HSPA+deployment,AT&Tisgoinghardandheavybringingfibertocellsites.Thecompany

hasapproximately40%ofitscellsitesnationallywiredwithfiberbuttheseareconcentrated

inmetroareasthatgeneratecloserto60%+ofthecompanystraffic.Thecompanyis

targeting100%ofcellsiteswithHSPA+by2H2011.89

CenturyLink:ThemergedcompanywillofferretailbroadbandInternetaccessserviceto100

percentofitsbroadbandeligibleaccesslineswithinthreeyearsoftheTransactionClosing

Date.90

Clearwire:30millioncoveredpopulationwith4Gservicebytheendof200991upto120

millionsubscribersbytheendof2010.92Chicago,DallasandPhiladelphiaareexpectedto

launch

4Q.

Charlotte,

Seattle

and

Honolulu

are

expected

to

be

converted

to

WiMAX

in

4Q.

ComcastDOCSIS3.0:Hopingtoreach80%ofhomespassedbytheendof2009(equivalentto

40millionhomesandbusinessespassed),100%by2010.93Comcastwireless(service

providedbyClearwire)waslaunchedinPortlandinJuneandthecompanyisplanningto

extendservicetoChicago,Philadelphia,Washingtonstatearea,andothersbeforetheend

of2009.94

OpenRange:Planstoextendserviceto546ruralcommunitiesinseveralstates.Attheendof

thefiveyearproject,thecompanyplanstocoversixmillionpeople.95

Verizon:PlanstohaveFiOScoverageinabout70%ofitstelecomfootprintsubsequenttothe

Frontiertransaction.96

89D.W.Bardenetal.,Bandwidthanywherecomingtogetherwith4G,UverseBankofAmericaMerrillLynch,

2009,at6.90

Itisnotclearif100%coverageincludesresaleofsatellite.91

ClearwireCorporationInvestorRelations,ClearwireReportsSecondQuarter2009Results,Clearwire

Corporation,2009,http://investors.clearwire.com/phoenix.zhtml?c=198722&p=irol

newsArticle&ID=1319734&highlight=.92

Ibid.93

SeekingAlphaTranscripts,ComcastCorporationQ22009EarningsCallTranscript,SeekingAlpha,2009,

http://seekingalpha.com/article/154406comcastcorporationq22009earningscalltranscript.94

LosAngelesTimes,Comcasttolaunchwirelessbroadbandtoday,LosAngelesTimes,2009,

http://articles.latimes.com/2009/jun/30/business/ficomcastwimax30.95

OpenRangeCommunications, OpenRangeCommunications Secures$374MilliontoDeployWireless

BroadbandServicesto546RuralCommunities,OpenRangeCommunications,2009,

http://www.openrangecomm.com/pr/pr_022009.html. 96

ThomsonStreetEvents,VZ VerizonatOppenheimer&Co.Communications,Technology&


28/70

28

SmallTelcos:BothVerizonandsmallerTier3ILECssaytheyintendtocontinuetobuild[FTTH]

atafairlystrongpace,evenduring2009.97

Satellite:Mostsatellitebroadbandcommunicationscompaniescoverthecontiguous48states

andsomeoffercoverageofAlaska,Hawaii,andPuertoRicoaswell.ViaSatclaimsthatthe

ViaSat1,oneofthenewgenerationofHighThroughputsatellitesscheduledtobe

operationalin2011willhavethecapacitytoservearound2millionsubscribersacrossthe

country.98

Cable:OneanalystexpectsDOCSIS3.0willbeavailableby2013tonearlyall99the92%100of

U.S.homesservabletodaybycablemodems.

1.4ExpectedCapitalOutlaysOverallCapex

In2008,thetelecommunicationsserviceproviders,includingtelephone,wirelessandcablecompanies

investedabout$62.8billion.101 Table3illustratesthebreakdownofthistotalamongsixindustry

sectors:

InternetConference,ThomsonReutersStreetEvents,2009,at3,

http://investor.verizon.com/news/20090811/20090811_transcript.pdf.97


http://www.ftthcouncil.org/sites/default/files/RVA.FTTH_.Apr09.060109.pdf.98

ViaSat,ViaSatConferenceCalltoDiscussViaSat1Contract,ViaSatInc,2008,

http://investors.viasat.com/eventdetail.cfm?eventid=48902.99

T.McElgunn,DOCSIS3.0DeploymentForecast,Pike&Fischer,2009,

http://www.broadbandadvisoryservices.com/researchReportsBriefsInd.asp?repId=662.100

Nationally,92%ofU.S.homestodaycouldobtainbroadbandservicefromcableTVcompanies,accordingtothe

cableindustrystradeassociation.See:NCTA,IndustryData,NationalCable&TelecommunicationsAssociation,

2009,http://www.ncta.com/Statistics.aspx.

TheresearchfirmSNLKaganthatdevelopedthisnumberexplainedinatelephoneinterviewwithCITIresearchers

onOctober6,2009thatithasveryaccuratedatawithrespecttoallthelargemultiplesystemoperatorsthat

typicallyservethenonruralareas.Mostoftheselargefirms,whichpassedatotalof110millionhomesatyear

end2008,canprovidebroadbandserviceto100%ornearly100%ofthehomestheypassandaccountfor89%in

the92%figure.However,informationaboutthebroadbandcapabilitiesofthesmallindependentcablecompanies

thattypicallyserveruralareasisbothlessavailableandlessreliableso,basedsomesurveysandtheirknowledge

ofthecableindustry,theresearchfirmassumesthatthesesmallcompanies,whichaccountfortheremaining3%

inthe92%,canprovidebroadbandservicetoonly75%ofthehomestheypassintheircombinedservicesareas.101

Skylinebelievesthatitsresearchaccountsforabout98%ofthetotalU.S.telecommunicationspublicnetwork

infrastructurecapitalexpenditures.SkylineMarketingGroup,CapexReport2008AnnualReportat16.


29/70

29

TABLE3:AGGREGATECAPEX2008 $62.8B

$Billion Percent

RBOCWireline 25.12 40%

OtherTelcoWireline 2.51 4%

CableMSOs 11.30 18%

CLECs 1.25 2%

IXC102 1.25 2%

Wireless 21.35 34%

Total 62.78 100%

Adaptedfrom:SkylineMarketingGroup,CapexReport:2008AnnualReport,Exhibit4

Note:Doesnotincludespectrumlicenseauctionpayments.

In2009,totalcompanycapitalexpendituresforthemajortelcos,majorcablecompanies,andmajor

wirelesscompanies,ofwhichbroadbandcapitalisonlyapart,isexpectedbyinvestmentanalyststobe

as

follows:

TABLE4:TOTALCAPITALEXPENDITURESOFLARGESTCOMPANIES($BILLIONS)

Source:AverageofanalystdataprovidedtoCITI,Telco:AT&T(excludingwireless),Verizon(excludingwireless),

Qwest;Cable:Comcast,TimeWarner,Cox,Cablevision,Charter,Mediacom,andInsight.Wireless:AT&T,Verizon,

Sprint,TMobile.

Note:Doesnotincludespectrumlicenseauctionpayments.

Thesetotalswillbeincreasedby618%,dependingonthesector,inSection3ofthisreporttoaccount

forthesmallercompaniesnotincludedinthefinancialanalystscoverageofpubliclyheldcompanies.

Telco:In2008telcocompaniescoveredbyanalystshadatotalcapitalexpenditureof$26billion.This

totalincludesthewirelinebroadbandexpendituresforAT&T,VerizonandQwest. In2009,thewireline

capitalexpendituresareestimatedat$21billion.

Cable:Totalcableindustrycapexfor2008wasestimatedat$14.6billionbytheNationalCableand

TelecommunicationsAssociation(NCTA),103about$1.5billionmorethanthecapitalexpendituresofthe

largestMSOsnotedinTable4above.TheNCTAnumbersarehigherthanthoseofthefinancialanalysts,

partlybecausetheyalsoincludesmallercableoperatorsinvestments.

102Companiesincludedinthiscategory(providersofwholesaleandretailinterexchangeservices)were:Level3,

GlobalCrossing,QwestLongDistance,SprintLongDistance103

NCTA,CableIndustryCapitalExpenditures19962008,NationalCable&TelecommunicationsAssociation,

2009,http://www.ncta.com/Stats/InfrastructureExpense.aspx,citingSNLKagan.

2008 2009

Telco 26,283 21,060

Cable 13,148 11,817

Wireless 19,520 18,597

Total 58,951 51,474


30/70

30

Wireless:Wirelesscompaniesspent$19.5billionin2008and$18.5billionin2009.Thesecapextotals

donotincludespectrumlicensefees. Therehasbeenasignificantdropoffincapexduringtheyear,

partlyduetotheeconomicdownturn. Thesefigurescoverthelargestfourcompaniesinthesector:

AT&T,Verizon,Sprint,andTMobile. AT&TandVerizonalonespent$13.5billion. Clearwirestatedthat

itwouldspendbetween$1.5and$1.9billiontodeployits4Gnetworkin2009.104

BroadbandCapex

Howmuchofthisinvestmentgoestowardsbroadband?AT&Trecentlyestimatedthat:

ApproximatelytwothirdsofAT&T's2009investmentwillextendandenhancethecompany's

wirelessandwiredbroadbandnetworkstoprovidemorecoverage,speedandcapacity.105

Thefollowingtableillustrateshowthemajortelephonecompanieshaveshiftedwirelinecapitalfrom

theirlegacytelephonenetworkstowiredbroadband,withbroadbandcapexexpectedtoreachnearly

60%oftotalwirelinecapexin2011.

TABLE5:RBOCWIREDBROADBANDCAPEX($BILLION)

Network 2006 2007 2008 2009E 2010E 2011E

Legacy 16.3 15.2 13.0 10.5 10.5 10.0

Broadband 7.2 10.7 11.9 11.5 12.5 14.0

Total 23.5 25.9 24.9 22.0 23.0 24.0

%broadband 30.6% 41.3% 47.8% 52.3% 54.3% 58.3%

Adaptedfrom:SkylineMarketingGroup,CapexReport:2008AnnualReport,atExhibit14andtextat18,20,23.

104WirelessWeek,ClearwireDefiesSkeptics,PlansHeftyCapexin2009

http://www.wirelessweek.com/News/2009/03/Clearwire DefiesSkeptics,PlansHeftyCapExin2009/105

AT&T,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc.,2009,

http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597. AT&Tsestimateoftwothirds

isconsistentwiththeobservationofamarketresearchfirmthatbroadbandremainstheprimarycapexdriverfor

200809because,

Wirelineandwirelesscarriersalikearesteppinguptheirnetworkinvestmentstomakehighspeed

Internetconnections,andassociatedtripleplaybundles,availabletoagreaterportionoftheir

customers.

Thefirmaddedthat,therehasbeenapronouncedshiftincapextowardsnew,broadbandplatforms,andaway

fromnarrowbandsystems.SkylineMarketingGroup,CapExReport2008AnnualReportat1.


31/70

31

TheAppendixincludesinformationonbroadbandrelatedcapitalexpenditures. Thefollowingare

examplesbycompany:

AT&Tplanstospend$17billionto$18billioncapitalexpendituresin2009.106 Capitalexpendituresin

thewirelinesegment,whichrepresented69.4%ofourcapitalexpenditures,increased2.5%in2008,

primarilyduetothecontinueddeploymentofourUverseservices.107

InJanuary2009AT&TsCEO

announcedthatthecompanywouldreduceitsUVersedeploymentin2009byonethirdbyshifting

itsgoalofpassing30millionhomesbytheendof2010totheendof2011.Thecompanysoverall

capitalexpenditureswereonlybeingreducedby15%.108

Sprintsaidthat:Wirelesscapitalexpenditureswere$227millioninthesecondquarterof2009,

comparedtoalmost$200millioninthefirstquarterof2009andalmost$400millionspentinthe

secondquarterof2008.Theyearoveryeardecreaseinwirelesscapitalspendingreflectsreduced

capacityneedsduetofewersubscribers.Thecompanycontinuestoinvestcapitalinthequalityand

performanceofitsnetworks.109

Comcast:ComparedtoQ2/08,directcostsforhighspeedInternetdeclined14%inQ2/09,totalcapital

expendituresdecreased14%to1.1billion.Thecompanyexpectscapextomodestlyincrease

duringsecondhalfofyearastheyexpanddeploymentofWiBand.110InQ4/08projections,itwas

forecastthatthecompanywouldinvestapproximately$400to$500millionofcapitalinDOCSIS3.0

andAllDigital111projects.112

Verizonstotalcapitalexpenditurestotaledroughly$17billionUSDin2008.Thecompanysexecutive

vicepresidentandchieftechnologyofficerRichardLynchnotedthatLTEnetworkcostswouldbe

withinthecompanysoverallprogramasspendingshiftsfromoldertechnologiestonewstrategic

106AT&T,AT&TtoInvestMoreThan$17Billionin2009toDriveEconomicGrowth,AT&TInc.,2009,

http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26597.107

AT&T,StrongWirelessGrowth,ContinuedCostDiscipline,SolidFreeCashFlowHighlightAT&T'sSecond

QuarterResults,AT&TInc.,2009,http://www.att.com/gen/press

room?pid=4800&cdvn=news&newsarticleid=26961.108

T.Spangler,AT&TToCutCapitalSpendingIn2009,MultichannelNews,2009,

http://www.multichannel.com/article/189778 AT_T_To_Cut_Capital_Spending_In_2009.php.109

SprintNextel,SprintNextelReportsSecondQuarter2009Results,SprintNextelCorp.,2009,

http://newsreleases.sprint.com/phoenix.zhtml?c=127149&p=irol

newsArticle_newsroom&ID=1313470&highlight=.110


http://seekingalpha.com/article/154406comcastcorporationq22009earningscalltranscript.111

T.Spangler,Comcast'sProjectCavalry:TheMarchof28MillionDTAs,MultichannalNews,2009,

http://www.multichannel.com/blog/BIT_RATE/13129

Comcast_s_Project_Cavalry_The_March_of_28_Million_DTAs.php.112


http://seekingalpha.com/article/121299comcastcorporationq42008earningscalltranscript.


32/70

32

initiatives,suchasLTE.113InSeptember2009,VerizonsChairmanandCEOsaidOurcapitalintensity

on[FiOS]willstarttodropsignificantlyoverthenexttwoorthreeyears.114

Satellite:SatellitecommunicationcompaniessuchasViaSatInc.(ViaSat1)andHughes

Communications,Inc.(Jupiter)areplanningtolaunchnewsatellitesin2011(ViaSat1)and2012

(Jupiter),respectively.Satelliteconstruction,launchandinsurancecancostupwardsof$400million

persatellite.115

RBOCs:Accordingtoaninvestmentanalyst,WeestimateBellwirelinecapitalspendingwilltotalabout

$23.1billioninFY09,downabout14%Y/Yfrom$26.8inFY08.ThelargestculpritsbeingAT&Ts1

yeardelayofUversedeployment,thelackofY/Ylonghaulnetworkupgradespendingandeconomic

conditions.116

RuralTelcos:Thesameinvestmentanalystssaid,Weproject3Q09capitalexpenditureat14%of

revenues,forourcoveredruralwirelinecarriers,about9bpsabove3Q08resultsduetoeconomic

conditionsandgrowthcapex.Generally,weexpectthebulkofcapextobedirectedtowardexisting

networkmaintenance,withcarriersfocusedonexpandingtheavailabilityofDSLservicesand

meetingsuccessbasedinvestmentrequirements.117

1.5ExpectedBroadbandPerformance/QualityMostbroadbandserviceprovidersdescribetheirbroadbandperformanceintermsofupstreamand

downstreamspeed.Speedclaims,however,aredifficulttoverifyandcompanieshavedifferentnumbers

intermsofadvertised,actual,throughput,andaveragespeeds.Theadvertisedandtheoreticalspeed

capabilitiesofthevarioustechnologieshavebeenbroadlydescribedinthepreviousdiscussionofeach

technology.

TheAppendixincludesinformationsuchasthefollowing,whichprovidessomeindicationabout

performanceexpectations.Someexamplesinclude:

AT&Twireless:...theoreticalpeakspeedsof7.2mbps.Typicalrealworlddownlinkanduplinkspeeds

experiencedbycustomerswithupgraded3Gwillbelessthanthetheoreticalpeakandwillvary

113VerizonPublicRelations,VerizonWirelessFostersGlobalLTEEcosystemasVerizonCTODickLynchAnnounces

DeploymentPlans,VerizonCommunicationsInc.,2009,

http://investor.verizon.com/news/view.aspx?NewsID=969.114

VerizonPublicRelations,VerizonatGoldmanSachsCommunacopiaConferenceNewYork,Verizon

CommunicationsInc.,2009,http://investor.verizon.com/news/20090917/20090917_transcript.pdfat4.115

P.B.Selding,ViaSattoBuyWildBluefor$568Million,SpaceNews,2009,

http://www.spacenews.com/archive/archive08/kabandside_0114.html. 116

BankofAmericaMerrillLynch,3Q09TelecomresultspreviewandmodelbookDuck&cover,Bankof

AmericaMerrillLynch,2009,p.19.117

Ibid,p.23.


33/70

33

basedonanumberoffactors,includinglocation,device,andoveralltrafficonthelocalnetworkata

giventime.118

VerizonFiOS:Speedsof50mbpsdownstreamand20mbpsupstream.119

ComcastDOCSIS:Comcastoffersspeedsupto50mbpsdownstreamandupto10mbpsupstream.

Satellite:Downloadspeedsaretypicallyfivetosixtimesfasterthansatelliteuploadspeedsandrange

from512kbpsto1.5mbpsdownstreamand100kbps300kbpsupstream.120

Overcominglatencyandsignallossduetoprecipitationhavebeenmajorperformanceandquality

obstaclesforsatelliteproviders.Geostationarysatellitecommunicationsexperiencelatencyduetothe

longdistancesthesignalmusttraveltogeostationaryorbitandbacktoearth.Thetotalsignaldelay,

includinglatencyintheconnectingterrestrialnetworks,canbeasmuchas500900millisecondsor

more,makingsomeapplicationsunusable(interactivegaming)ordifficult(twowayvoiceorvideo

conferenceconversation).However,latencyistypicallynotnoticedbytheuserduringbasicinternetuse

(webbrowsing,Email).Satellitecommunicationsarealsoaffectedbymoistureandvariousformsof

precipitation(rainorsnow),aconditioncalledrainfadeorsnowfade.

1.6ARPU(AverageRevenueperUser)TheARPUsforvariousprovidersarenotedintheAppendixandaresummarizedbelowwithrespectto

thevarioustechnologiesemployed.AlthoughtheARPUshavebeenlistedacrosstechnologies,ina

mannerconsistentwiththerestofthisreport,itshouldbenotedthatthepriceforbroadbandservice

variesbymarketandbyspeedoftheservicesoARPUdoesnotnecessarilyreflectpricespaidany

individualconsumer.

TelcoDSL:Overalltelcobroadband(DSLandfiber)ARPUwasestimatedtobe$36.121Therangeof

ARPUs,inthecasesforwhichdatawasavailable,spansalowof$32.42forFairpoint,through$39.61

forAT&T.

TelcoFiber:Presently,fibertothehomeismainlyprovidedbyVerizonwithitsFiOSservice.

Unfortunately,VerizonhasnotdisclosedFiOSbroadbandARPU.(VerizonreporteditsoverallFiOS

ARPU,whichincludesthetelevisionservice,at$135for2Q09.)

118AT&TPublicRelations,AT&TSeesSignificantRiseinWiFiHotspotConnectionsduringSecondQuarter, AT&T

Inc.,2009,http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=26975.119

VerizonInvestorRelations,2008AnnualReport,VerizonCommunicationsInc.,2009,

http://investor.verizon.com/financial/annual/2008/downloads/08_vz_ar.pdfat9.120

WildBlue,Packages&Pricing,WildBlueCommunications,Inc.,2009,http://www.wildbluesales.com/wbsor.php?REQix=ID10.121

UBSInvestmentResearch,TelecommunicationsandPayTV,UBSAG,2009,at7.


34/70

34

CableModem:ForbroadbandserviceovercablenetworkstheaverageARPUisapproximately$41.122

However,ARPUsrangefrom$36.72forMediacomto$42.05forComcast.Othercablecompanies

ARPUsinclude$41.41forCharter,41.60forTimeWarner,and$38.49forCablevision.123

Wireless:TheaveragemobilewirelessdataARPUinthesecondquarterof2009was29%oftotalARPU

or$13.73(amongthelargestfourcarriers).124

Datarevenueperuserwas$14.57and$14.96for

AT&TandVerizon,respectively,and$9.90forTMobileUSAinthatperiod.125

ARPUforfixedwirelessbroadbandisbroadlycomparabletoDSLARPU.Clearwire,theleading

WiMAXserviceprovider,hadARPUof$39.26inthesecondquarterof2008,risingto$39.47inthe

secondquarterof2009.126AnationalWISP,OpenRange,hasinaugurated4Gservicewitha$38.95

offering.

WeestimatethatthesmallerruralindependentWISPsgenerateanARPUofapproximately$30per

month.ThisestimatewasderivedthroughacombinationoftelephoneinterviewswithtwoWISPs,

pricingavailableonthewebsitesofafewotherWISPs,andacalculationbaseduponthereported

marginofonesuchprovider,whichtendedtosupportourotherassumptions.

Inadditiontoamonthlysubscriptionprice,somewirelessbroadbandpricingplanssometimesincludea

usagelimitorcapwhich,ifexceeded,leadstoadditionalusagecharges.

TABLE6:TYPICALWIRELESSBROADBANDPRICINGPLANS

Clearwire Comcast

(CLWR

network)

Verizon AT&T Sprint TMobile

Advertised

Service

4GWiMAX

36mbps

4GWiMAX

4mbps(local)3G1.4mbps

(national)

3G

National(CDMA)

0.6

1.4mbps

3GNational

(GSM)0.7

1.7mbps

3G

National(CDMA)

0.6

1.4mbps

3GNational

(GSM)0.71.7mbps

BasicPlan $35/month

4mbps&

2GB/month

cap

~$30/month

(bundledprice)

4GLocal,no

cap

$39.99/

mo

Includes

250MB

$40/mo

Includes

200MB

122Ibid,at9.

123GoldmanSachsInvestmentResearch,Americas:CommunicationServices,TheGoldmanSachsGroup,2009,at

31,35and46.124

MorganStanleyResearch,TelecomServices,MorganStanley,2009,at53.125

Ibid.126

MorganStanleyResearch,ClearwireCorp.,MorganStanley,2009,at3.


35/70

35

Advanced

Plan

$45/month

Unlimited

Use

~$50/mo

(bundledprice)

4G/3GNat,no

cap

$59.99/

mo

Includes

5GB

$60/mo

Includes

5GB

$59.99

Includes

5GB

$59.99

Includes

5GB

Source:Companydata,MorganStanleyResearchestimates,CableandSatelliteU.S.Cable,Satellite,Telecom3Q09

/09/10Outlook,Oct.21,2009

Satellite:HughesCommunicationsARPUwas$70inthesecondquarterof2009upfrom$68inthe

sameperiodin2008,withfullyear2008ARPUat$65.127Thefollowingtablesummarizessatellite

broadbandrates:

TABLE7:SATELLITEINTERNETBROADBANDRATES

Company HardwareW/O

Installation

DownloadSpeeds*

(SubjectToVolumeCaps)

Lowest Medium Highest

HughesNet $249.99

AfterRebate

1.0mbps 1.2mbps 1.6mbps

$ 59.99 $ 69.99 $ 79.99

StarBand $299.9

AfterRebate

500kbps 1.0mbps 1.5mbps

$ 49.99 $ 69.99 $ 99.99

WildBlue $149.95 512kbps 1.0mbps 1.5mbps

$ 49.95 $ 69.95 $ 79.95

*Typicaluploadspeedsareroughly15%20%ofdownloadspeeds

Source:Companywebsites

Bundles:Itisworthnotingthatmanybroadbandservicesaresoldinbundlesalongwithvoiceand

television(thesocalledTriplePlay).ExamplesofbundlesareillustratedinthefollowingPricing

Appendix.

127SeekingAlphaTranscripts,HughesCommunicationsInc.Q22009EarningsCallTranscript,SeekingAlpha,

2009,http://seekingalpha.com/article/154496hughescommunicationsincq22009earningscalltranscript.


36/70

36

PricingAppendixTABLE8:BUNDLEDPRICINGEXAMPLESINURBANANDRURALMARKETS

UrbanMarkets

NewYork InternetSpeed

(down/up)

Video

Channels

TotalPrice

RCN 3Mb/768Mb 180+HD $106.39

VerizonFiOS 25Mb/15Mb 320+HD $110.43

TWC 10Mb/512Kb 350+HD $120.80

Cablevision 15Mb/2Mb 230+HD $111.05

Average$112.17

Philadelphia InternetSpeed

(down/up)

Video

Channels

TotalPrice

Comcast 12Mb/2Mb 80+HD $132.44

VerizonFiOS 15Mb/5Mb 250+HD $115.43

RCN 3Mb/384Kb 192+HD $101.39

Average$116.42

Chicago InternetSpeed

(down/up)

Video

Channels

TotalPrice


AT&T 6Mb/1Mb upto230 $128.45

RCN 3Mb/384Kb 192+HD $111.39

Average

$124.09


37/70

37

Dallas InternetSpeed

(down/up)

Video

Channels

TotalPrice


Charter 5Mb/512Kb 100+ $124.42

TWC 7Mb/512Kb 215+HD $120.47

Average$124.45

Ruralmarkets

RuralAlabama InternetSpeed

(down/up)

Video

Channels

TotalPrice

BrightHouse 7Mb/1Mb 150+ $124.40

CenturyTel* 1.5Mb/512kb 200+ $125.83

Mediacom 8Mb/1Mb 135 $104.30

RuralArizona InternetSpeed Video

Channels

TotalPrice

Frontier* 3Mb/384Kb 200+ $127.94

Cox 12Mb/1Mb 250 $128.44

Average$128.19

Notes:*videoproductisDISHresale;TotalpriceforbothTelco/Cableincludesmonthlyregulatoryfeesof$14.45.

Source:GoldmanSachs,Americas:CommunicationServices,September2009,at18.


38/70

38

TABLE9:WIREDBROADBANDPRICINGPLANS

Verizon AT&T Comcast Cablevision TimeWarner

Cable

Qwest

Data

Plans

StarterDSL

(1mbps/384

Kbps):$17.99/mo(2

yragreement)

$19.99/mo(1yr

agreement,nohome

phonerequired)

DSL:

FastAccessDSLLite

(AT&THSIBasic):

$19.95(768Kpbs

down)

Economy(Upto

1mbpsdown):

$24.95/mo

OptimumOnline:

$49.95/mo

(w/BroadcastBasicor

fornoncable

customers)or

$44.95/mo(with

FamilyCableand

above);upto15mbps

down

RoadRunnerTurbo

(10mbpsdown):

$59.90/mo

QwestConnectSi

(1.5mbps):$30.00

internetonly,afte

months:$49.99/m

2 yr

commitment/Pric

Life:$39.99/m

PowerDSL(3

mbps/768Kbps):

$29.99/mo/

$29.99/mo

FastAccessDSLUltra

(AT&THSIExpress):

$25 32.95/mo(1.5

mbpsdown/256

Kpbsup)

Performance(Upto

12mbpsdown):

$42.95/mo

OptimumOnline

Boost:Optimum

Onlinefeeplus

$14.95/mo(without

OptimumVoice)or

$9.95/mo(with

OptimumVoice);upto

30mbpsdown

RoadRunnerHigh

SpeedOnline(7mbps

down):$49.95/mo

($47.95/mowith

anotherservice)

QwestConnec

Platinum(7mbp

$35.00/mo,after

months:$59.99/m2 yr

commitment/Pric

Life:$46.99/m

TurboDSL(7.1

mbps/768Kbps):

$39.99/mo/

$39.99/mo

FastAccessDSL

Extreme(AT&THSI

InternetPro):$30

37.95/mo(3.0mbps

down/384Kbpsup)

Blast!(Upto16

mbpsdown):

$52.95/mo

OptimumOnlineUltra:

OptimumOnlinefee

plus$55/moor

$104.95/moasanew

customerwithout

otherservices;upto

101mbpsdown

RoadRunnerBasic

(1.5mbpsdown):

$34.95/mo

($32.95/mowith

anotherservice)

QwestConnec

Titanium(12mbp

$45.00/mo,after

months:$69.99/m

2 yr

commitment/Pric

Life:$56.99/m

FiOS

Fast

(15

mbps/5

mbps):$44.99/mo

($54.99/mow/o

contract)FiOSFaster

(25mbps/15mbps):

$64.99/mo/$72.99

FiOSFastest(50

mbps/20mbps):

$139.95/mo/

$159.95

FastAccessDSL

Extreme6.0(AT&T

HSIInternetElite):

$3542.95/mo(6.0

mbpsdown/512

Kbpsup)

RoadRunnerLite(768

Kbpsdown):

$19.95/mofor12

months

QwestConnec

Quantum(20mb

$55.00/mo,after

months:$79.99/m

2 yr

commitment/Pric

Life:$69.99/m

Uverse:

Max18(18mbps/1.5

mbps):$65/mo

Max(10mbps/1.5

mbps):$55/mo

Elite(6mbps/1

mbps):$43/mo


39/70

39

Pro(3mbps/1

mbps):$38/mo

Express(1.5mbps/1

mbps):$33/mo

Data

Promos

2yrcontractincludes

priceguaranteefor

life;1yrincludes3

monthsfree.Power

andTurboinclude

freenationalWi Fi

fromVZhotspotsin

hotels,publicareas,

etc.Freemodem.

$150cashbackafter

rebatewhen

switchingfromcable

tooneof3fastest

DSLspeeds.Some

marketsandplans

haveanadditional

$50cashback

incentiveaswell.

Firstsixmonthsof

Performanceat

$19.99/mo

OptimumOnline

$29.95/moforfirst6

monthswithself

installBoostisfreefor

firstmonthwhen

orderedonline

W/basicphone

service:save

$5.00/moonInte

W/qualifyinghom

phonepkg:sav

$10/moonInter

DellMiniNetbo

$199w/Platinum

higher(2yr

agreement)

Source:UBSInvestmentResearch,TelecommunicationsandPayTV September3,2009


40/70


41/70

41

FIGURE10:MAJORBROADBANDDEPLOYMENTS:PERFORMANCEAGAINSTANNOUNCED

COMPLETIONDATES

Source:Section2text.

ThefocusofthisSectionistounderstandwhethertelecommunicationcompaniesaregenerallyabletomeetthegoalsoutlinedintheirownstatements,ornot.Thereviewfocusedonthetimeframe

beginningin200405basedonthejudgmentthatthoseyearsmarkedabeginningofamoderneraof

broadbandintermsofindustrystructure:theinternetbubbleandbusthadpassedandtheAT&TSBC

andMCIVerizonmergersandconsolidationinthecableindustryhadlargelybeencompleted.Those

yearsalsomarkthebeginningofwirelesscompaniesassignificantprovidersofbroadbanddata

service.

2004Verizonannouncedattheendof2003thatitplannedtobeginimplementationofitsnewFiOSfiberto

thehomenetworkin2004andpassonemillionhomesbyyearend.Thecompanypredictedthatby


42/70

42

2005itcouldincreasethatnumbertothreemillion.128In2005Verizonreportedthatitreachedthat

number.129

Atthebeginningof2004Verizonalsoannouncedthatitwouldimplementwirelessbroadbandaccessin

twothirdsofitsnetwork,coveringabout75millionpeoplebytheendoftheyear.130ByDecember2004,

Verizons3Gservicewasavailableto75millionpeopleincluding20majorcitiesintheU.S.131132

CenturyLink(CenturyTel,priortotherecentmergerwithEmbarqinJuly2009)133attheendof2004

saiditwouldinvestheavilyinitsIPcapabilities,announcinga$350minvestmentforthefollowing

year.134Itsurpassedthatamount,investing$415min2005and$314min2006.135

Sprintinits2004annualreportannouncedthatitwouldrolloutEVDOwireless3Gtechnologyinthe

subsequenttwoyears,136withcoverageofmajormetropolitanareasintheU.S.bytheendof2005.137In

its2005annualreportSprintconfirmedcapitalexpendituresofnearly$1billionforEVDO

deployment.138ThecoverageinSeptember2006was69citiesintheU.S.includingmajormetropolitan

areas,mostofwhichwerenotpubliclyannouncedbySprintbefore.139

128VerizonInvestorRelations,VerizonSelectsVendorsforFibertothePremisesProject;DeploymentandNew

ProductRolloutBeginin2004,VerizonCommunicationsInc.,2003,

http://investor.verizon.com/news/view.aspx?NewsID=469.129

VerizonInvestorRelations,VerizonCommunications ReportsStrong4Q2005Results,DrivenbyContinued

GrowthinWirelessandBroadband,VerizonCommunicationsInc.,2006,

http://investor.verizon.com/news/view.aspx?NewsID=718.

130VerizonInvestorRelations,VerizonWirelessMakesStridesWithPlannedBroadbandAccess3GNetwork

Expansion,VerizonCommunicationsInc.,2004,http://investor.verizon.com/news/view.aspx?NewsID=498.131

B.Charny,Sprintbegins$3billionmarchto3G,CBSInteractiveInc.,2004,http://news.cnet.com/Sprint

begins3billionmarchto3G/21001039_35480249.html?tag=lia;rcol132

D.Dixon,TVonYourMobilePhone:VerizonWirelessVCAST(SamsungSCHa890,5/2005),Manifest

Technology,n/a,http://www.manifest tech.com/ce_wireless/wireless_vcast.htm.133

S.Higginbotham,EmbarqandCenturyTelMerge,BecomeCenturyLink,TheGigaOMNetwork,2009,

http://gigaom.com/2009/07/01/embarq andcenturytelmergebecomecenturylink/.134

CenturyTel,2004ANNUALREPORT,CenturyTelInc.,2005,at4,http://media.corporate

ir.net/media_files/irol/11/112635/annreports/04_annual_report.pdf.135

Verizon,AnnualReview2006,VerizonCommunicationsInc.,2007,at4,http://library.corporate

ir.net/library/11/112/112635/items/239821/CTLAnnualReview2006.pdf136

SprintNextel,Form10K,SprintNextelCorp,2005,at3,

http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=3328930&format=PDF.137

A.SchiskaLombard,SprintBeginsOfferingEVDOReadySprintPCSConnectionCard(TM)bySierraWirelessto

BusinessCustomers,SprintNextelCorp,2005,http://newsreleases.sprint.com/phoenix.zhtml?c=127149&p=irol

newsArticle_newsroom&ID=681282&highlight=.138

SprintNextel,Form10K,SprintNextelCorp,2005,at1,


EVDOForums,SprintEVDORevACoverageSightings,EVDOForums.com,2006,

http://www.evdoforums.com/thread3234.html.


43/70


44/70

44

monthsbehindthescheduledyearend2007.151AccordingtoTMobileslatestannouncement,theplan

tohavefull3Gdeploymentbytheendof2009iscurrentlyontrack.152

LeapWirelessannouncedinSeptember2005thatitplannedtoimplementEVDO3Gtechnologyin

2006investingabout$475m.153Inthe2006annualreportitconfirmedtherolloutofthistechnology

withacompletiongoalof2007.154

Inthecompanysannualreportfor2008,itindicatedthattherollout

wasnotentirelycompleted.155InJune2009thecompanysuccessfullycompletedthe3Grollout

throughouttheirentireservicearea.156

2006AT&TannouncedinJune2006thatitplannedtoreach19millionhouseholdswithitsUVerseFTTNDSL

systembytheyear2008.157Attheendof2007thecompanyreduceditsgoalto18millionhomespassed

bytheendof2008.158InJanuary2009thecompanysaidthat17millionhouseholdswerepassed,159

indicatingthatAT&Twasbehindtherevisedtargetbyatleastonemillionhouseholds.

CincinnatiBellannouncedinits2006annualreportthatitwouldinvestabout$30millionin2007to

buildupits3Gwirelessnetworkandtohave3Gserviceoperationalin2008.160Thecompanyspent$11

millionin2007,maintainingthedateforoperationallaunchas2008.CincinnatiBellplannedtospendan

additional$19millionin2008tocompletetheproject.161Theactualspendingonthe3Gnetworkin

151O.Malik,Finally,TMobileLaunchesaU.S.3GNetwork,TheGigaOMNetwork,2008,

http://gigaom.com/2008/05/05/t

mobile

launches

us

3g

network/.

152R.Halevy,TMobileForgesAheadWith3GRolloutStillNo3GBlackBerry,ContentNextMediaInc.,2009,

http://moconews.net/article/419tmobileusarollsoutsuperfast3ginpartsofphiladelphia/.153

K.Atkins(LeadMediaRelations),LeapUnveilsMobileDataStrategyforCricketandJumpMobileatCTIA

WirelessI.T.&Entertainment,LeapWirelessInternationalInc,2005,http://phx.corporate

ir.net/phoenix.zhtml?c=191722&p=irolnewsArticle&ID=760669&highlight=.154

LeapWireless,AnnualReport2006,LeapWirelessInternationalInc,2007,at29,


LeapWireless,AnnualReport2008,LeapWirelessInternationalInc,2009,at4,


G.Lund(MediaRelations),SecondQuarterResults,LeapWirelessInternationalInc,2009,

http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MTI1MjV8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1.157

AT&TInvestorRelations,Company'sExtensiveDSLNetworkExpandedtoReach95PercentofState,AT&T

Inc.,2006,http://www.att.com/gen/press room?pid=4800&cdvn=news&newsarticleid=22361.158

P.D.Shapiro,AT&TUversebytheNumbers,CableFAXMagazine,2007,

http://www.cable360.net/cablefaxmag/business/competition/telcos/26065.html159

DSLReports,AT&TSlowsUVerseBuildOut,dslreports.com,2009,

http://www.dslreports.com/shownews/ATTSlowsUVerseBuildOut100539.160

CincinnatiBell,AnnualReport2006,CincinnatiBellTelephoneCompany,LLC,2007,at115,

http://library.corporateir.net/library/11/111/111332/items/246974/2006AnnualReport.pdf.161

CincinnatiBell,AnnualReport2007,CincinnatiBellTelephoneCompany,LLC,2008,at86,

http://library.corporateir.net/library/11/111/111332/items/294111/CincinnatiBellNPS10KWrap1.pdf.


45/70


46/70


47/70

47

budgetfortheDOCSIS3.0andaWiFirolloutforthethreeyearperiodat$315m.180(WiFiwouldbea

freeadditionalservicetoCablevisionscablecustomers.)Thebuildoutwasplannedbecompletedby

2010.181Attheendof2008Cablevisionclai

broadband in america nov 12

Documents