gabrielle gauthey - alcatel lucent - 20140508 inca-transform digital conference gg v1

COPYRIGHT © 2011 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

TRANSFORMING EUROPE’S DIGITAL INFRASTRCUTURETRANSFORM DIGITAL CONFERENCE

GABRIELLE GAUTHEY, EVP ALCATEL-LUCENT8 May 2014

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Ubiquitous BROADBAND and MOBILE access

User-friendlyDEVICES

Compelling CONTENT,APPLICATIONS and VIDEO

Always on, anytime, anywhere connectivity

Creating the perfect storm to force change

SMARTPHONE AND WIDESCREEN ADOPTION ARE THE KEY DRIVERS FOR DATA TRAFFIC GROWTH

Source: Traffic Index, 2012 - Bell Labs modeling

2011- 2016

25 XMORE MOBILE DATA TRAFFIC

SMARTPHONES

2.5bn devices by 2015

70% of the OVERALL TRAFFIC is mobile

VIDEO COMMUNICATIONS

70% of the Internet traffic

M2M

3 X growth in the next 5 years

DATA EXPLOSION REQUIRES NEW INVESTMENTS IN ACCESS AND CORE NETWORKS

NETWORK: AN ESSENTIAL BRIDGE BETWEEN YOUR HAND-DEVICES AND THE CLOUD

COMPUTING

GAMING

STREAMING

STORING

COMMUNICATING

ULTRA-BROADBAND• FTTH, FTTx• LTE, Macro Cells, Small

Cells

CLOUD -IP NETWORKING• IP Routing and IP Transport• IP Platforms: IP Video, SDN, IMS,

Cloud, Customer Care, Payment and Charging, Policy and Network Intelligence

ULTRA-BROADBAND

High Scalability

High Reliability

High Simplicity

MPLS

QoS, QoE

Resiliency

Equipment stability

Management Automation

Eth OAM

Demarcation

Synchronization

High BW

Dense platforms

Management Suite

Fast Troubleshooting

Security

IPv6

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A WALL OF INVESTMENT NEVER EXPERIENCED BEFORE

DA: call for 200B€ min in NGA infrastructures

New Competition Models (Telcos vs. OTTs)

Other verticals seeking Carrier Grade performance (Government, Finance, Utilities, Transport…)

Boost in CAPEX(15% CAGR in IP, optics, SW, FTTx and LTE)

CLOUD-IP

NETWORKING

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EU IS LAGGING BEHIND

DA BB targets for 2020

- 100% Coverage of 30Mbps => 54% HH- 50% take-up rate of at least 100Mbps => 2% HH

FTTH and FTTB have a

combined share of 25.8% within NGA lines,

and only 5.1% of all fixed broadband lines

as opposed to 42% in Japan,

58% in South Korea and 9% in the US

Average EU high-speed (min 30Mbps)BB penetration is below 5%

Source: EU Scoreboard 2013

TELECOM NETWORK STRUCTUREA LAYERED MODEL

Each layer has very a different financial profile and needs to be addressed adequately

Services, Content & Apps(residential, public & business)

Active Network(network equipments,

business & operation support)

Passive Infrastructure(trenches, ducts, fibre)

End-user

>200 B€

Investment needed Payback

Few m-3 y

5-7 y

10-15 y

20%

80%

ROI

Risk

Infrastructure

roll out

Lack of investment in NGA networks

NO FIT BETWEEN INVESTMENT PROFILES AND INFRASTRUCTURE OPPORTUNITIES

Infrastructure

Funds

Telecom Operators

Insufficient ROI:• Cherry picking• Digital Gap• Wait and see

High risk :• No focus on Telecom• Wait and see

Solution calls for: CAPEX reduction to increase ROI, long-term commercial agreements to lower risk

very low

Indication of sectorial funds focus over the next two years

0 1 2 3 4 5

10.Infrastructure services

1.Energy

2.Roads

3.Rail/Metro

4.Ports

5.Airports

6.Water

7.Waste

8.PPP/PFI

9.Telecoms

TELECOM INDUSTRY DOES NOT SEEM TO FULLY MEET THE REQUIREMENTS OF INFRASTRUCTURE FUNDS

Source: Contribution, Deloitte 2010, Arthur D. Little

Conditions for infrastructure funds to invest

Investors seeking exposure to a periodic, stable and guaranteed cash flows

Need for a regulated market with contained competition and strong barriers to entry

Necessity to make investments fit with infrastructure funds’ risk profile:

Advocate for separation of passive layer vs. active and retail to lower risk on the passive layer part

Guarantee of a single fibre network in case of operating cable operators

Participation of the incumbent in the Netco preferred

very high

All Rights Reserved © Alcatel-Lucent 2014• 9 | RIP FRANCE

THE FRENCH REGULATORY APPROACH: COMBINATION OF LLU AND BITSTREAM

Competition through active infrastructures on top of a common passive infrastructure has been the main driver behind the development of broadband:

• Geographic extension of competition has encouraged France Telecom to equip all of its central Offices for ADSL

• France has joined European leaders in terms of penetration…• …and is leading in "triple play“ and IPTV services

Three major drivers have made this increase in investments possible:

• Dynamic operators, both incumbent and new entrants• Regulation : LLU first, bitstream as a complement• Local authorities intervention has been crucial in the expansion of

broadband coverage through the RIP (Réseaux d’Initiative Publique – Public Authorities Networks)

Where do we come from in Broadband deployments?Where do we come from in Broadband deployments?


OPEN WIRELINE BACKHAUL IS KEY FOR BOTH MOBILE AND FIXED TRAFFIC GROWTH

Role of backhaul networks:

Cost effective coverage of medium and low density areas;

Stimulate competition and innovation;

Anticipate bandwidth demand increase for all access technologies and services (fibre, LTE, DTT,…);

Future proof investment for public initiatives particularly for local authorities;

Enhanced connectivity for public services (schools, hospitals, universities,…) and business parks


FRENCH LOCAL AUTHORITIES INTERVENTIONS IN TELECOM INFRASTRUCTURES IN THE PAST 10 YEARS

Legal form

• Mainly DSP (« concessions »);• Choice by local authorities of one operator/delegator;• Wholesale offers negociated with local authorities;• Coverage and wholesale catalogue imposed by local authorities;• Maximum 70% subsidy (=> operational risk left to the private delegator);• Network remains local authority’s property.

Operating mode

• Graduation of intervention according to the density and the presence or absence of operators

• Passive infrastructures in denser areas (mainly open fiber backhauls) with the objective to connect a maximum of NRF’s and wireless BTS

• Equipement of business parks;• Activated whosesale offers in the less dense areas;• In some rural areas : retail operators


FRENCH LOCAL AUTHORITIES HAVE PLAYED A CRUCIAL ROLE IN BROADBAND COVERAGE

In the past 10 years, local authorities have played a key role in the digital development of their regions:

• 50% of the regions and 2/3 of the departments are impacted

• Around 150 RIP large projects ( > 30 K inhabitants)

• 55 K km of FO deployed

• More than 3.5 B € of Public/Private investments:

• 1.8 B € of public investment and subsidies

• 1.7 B€ of private investment


913

773

988

CO unbundling : alternative carriers backhaul networks

CO unbundlig : alternative carriers backhaul networks + France Telecom dark fiber rental

CO unbunling : local community bakchaul network

14,4 M households

2,4 M households

4,3 M households

21,2 M households

Number of unbundled CO’s according to backhaul network ownership

40 % of French central offices are unbundled through Local Communities

backhaul networks by end 2009

Summary of the Local Authroities (RIP) Projects ImpactsCoverage/ Reduce the Digital Divide Gap

~

2010: 98% of the population covered by ADSL

Up to 2013: 1 out of 6 FTTH homes passed through RIP


Summary of the Local Authroities (RIP) Projects ImpactsFoster Competition

2013

1. Ratio of unbundled lines (2013)

2. Ratio of unbundled Central Office (2013)

3. More than 10 operators available for 53% of the Local authorities networks (RIP)


Summary of the Local Authroities (RIP) Projects ImpactsReduce the Internet Access Cost – More affordability

2013

A tariff differential ranging from 8 to 64% on (Fiber To The Office) prices to the entreprises compared to Orange prices in 2013

More than 100 M€ of surplus purchasing power are distributed annually to households and businesses

60 € yearly savings per household for an ADSL subscription


Broadband: The French Case Local Authorities –Private Companies Operating Public Networks

European Policy

• CEF now mainly focused on digital services — since downsizing from 9 to 1 B€

• TSM had incentives to infrastructure sharing, nothing on funding but now focused roaming and NN

What would be beneficial for both investors and operators? To be focused on reduction of market risk rather than subsidy

To increase liquidity by enabling project finance, and attract long term private equity and banks

To finance the construction phase separately from the operation phase

EUROPE DOES NOT PROMOTE ANY INVESTMENT MODEL

• New access networks roll-out is not an evolution but more the building of a new essential infrastructure for the 40 years to come. On 70% of the EU territory, a single infrastructure is viable.

• Need for more fibre, as deep as economically viable, which has all the characteristics of an essential infrastructure

• Move away from the dogma of infrastructure competition, embrace the era of virtual/NG bitstream wholesale

• Secure the investment through a long term “regulatory” contract guaranteeing return on investment and openness

• The achievement of the ‘EC digital agenda targets’ requires new investment models

• Intervention from long term investors would be a key enabler to improve current networks roll-out dynamics

• National approach but regional implementation is often preferable

CONCLUSION

DIGITAL

AGENDA

TARGETS

ACHIEVEMENT

REQUIRES

INNOVATING

AND FLEXIBLE

NGA SOLUTIONS

gabrielle gauthey - alcatel lucent - 20140508 inca-transform digital conference gg v1

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