Residential Broadband

Group AJohn ChuangTushar Dani

Ilin TsaiIlya Bagrak

Alexandra Fedyukova

Residential Broadband

Introduction Market and competition Technology Economics Policy and regulation Conclusion

What is Residential Broadband Technologies that provide a high-bandwidth

connection to the Internet for residential consumers

Replacement for the now fading residential dial-up technology

Entirely new online experience Watching a video stream, Downloading music in seconds, Video and voice chats Real-time gaming

This presentation is limited to US residential Broadband market

Growth and Penetration

Fast growth, 11% increase per year Reached more than 50% penetration already across internet

households Several competing broadband service providers

Telephone companies, wireless carriers, cable TV service providers and satellite providers

PlayersDSL SBC Verizon Bellsouth Quest

Cable Comcast Time Warner Brothers Cox Charter Cablevision

New technologies: • Wi-Fi (Google cloud in San Francisco, hot spots)• Satellite Signals• Wi-Max• BPL (broadband over power lines)

Market segments & Prices: 1

Competition for Broadband subscribers is bifurcating Low end emphasizing price High end emphasizing speed

DSL companies primarily target low price segment Started penetrating into high end market, Verizon’s FiOS (15

mbps) Cable companies have elected to stay exclusively at

the high end Bundling as a way to reduce churn rate & attract new

customers Triple and even quadruple play

Market segments & Prices: 2

DSL Technology

Limited distance to central office (CO) Dedicated line from CO to home Asymmetric flow Typical speeds up to 1.5Mbits/s downstream

Cable Technology

Shared lines to the nearest splitter Generally higher speeds Reaches more households since distance limitation is

removed Typical offering 4Mbits/s Last Mile advantage

Future Technology WiMax

Metropolitan Area Networks (MANs) 3-5 miles range, no direct line of sight required 2Mbits/s practical limit Can use existing cell towers

Broadband over Power Lines (BPL) More pervasive infrastructure, but requires extra

equipment Up to 2.7Mbits/s Superimposing analog signal over AC Small deployments in operation (e.g. Manassas,

Virginia 10MBits/s for $30.00 a month)

• Broadband as a Commodity. •Some people have 3 to 4 providers to buy from•Tend to buy bundled services• Switching costs are low, unless annual contracts

• Large number of equipment suppliers are availablee.g. Nortel, Lucent, Cisco, Nokia etc.• Limited companies actually own network lines, and heavily depend on network owners

•TV, Music•Newspapers •Telephone etc

• Broadband over power lines• Wi-Fi free internet (Google)• Municipal utility internet• Wi-Max

Cable and DSL Co.•“cut-throat” competition•Trend to provide a bundle of services •Cable companies converging from video to telephony - Cox, Comcast•Telecom companies converging from telephony to video- SBC, Bellsouth, AOL

New entrants

Suppliers Buyers

Substitutes

Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Porter's Five Forces Model

Policy and RegulationExisting situation

US is 16th in the world in broadband penetration (ITU 2005 report)

Why is US so far behind? “monopolistic structure, entrenched management,

and political power of incumbents” failure of effective policy and regulation for

broadband industry (e.g. ,FCC regulation on spectrum allocation policy)

Legislative tug-of-war Preserving Innovation in Telecom Act of 2005 Community Broadband Act of 2005

Policy and Regulation

Need for national broadband strategy Continue to encourage highly successful open

access model in Japan competitors may use existing residential telephone

infrastructure for a modest fee competition and innovation cheap, high-speed

broadband access Regulations for emerging technologies

FCC: better allocation of wireless spectrum Municipal WiFi usage

Mixture of legislative, regulatory, and investment initiatives

Conclusion Market & Players

Broadband will replace dial-up The Battle is still pretty much between Cable and DSL

companies Technology

New technologies such as BPL, Wi-Max, Satellite are emerging, but are not great threat to existing Cable & DSL

Economics Bundling as a way to keep existing and attract new customers Segments based on Price and Speed

Regulation Need for national broadband strategy, open access, economic

incentives

Conclusion Cable companies have advantage due to their

infrastructure and “quadruple play”

They will be top player in coming years

No winner take all conditions, Cable companies, DSL companies, and new technologies will co-exists

Thank you Clap & Questions