Regulatory actions for the development of Broadband

in Portugal

João Castro – ANACOM"The Prospects of Broadband in the Mediterranean", International Conference in Athens – 2nd May 2006

2

Agenda

1. Broadband market in Portugal

2. Regulation of broadband wholesale markets

• Local Loop Unbundling

• Bitstream access

3. Results

3

Agenda

1. Broadband market in Portugal

2. Regulation of broadband wholesale markets

• Local Loop Unbundling

• Bitstream access

3. Results

4

Broadband Coverage

TV CABOOTHER CABLE OPERATORS

CablePOPULATION

DENSITY1800 ADSL 1800 ADSL

enabled enabled MDFsMDFs100% Population

Copper

OLOsOLOs colocatedcolocatedin 187 in 187 MDFsMDFs

>50% Population

Bi-directional Cable network

>70% Households

5

Other Broadband Technologies

UMTS Higher diversity of offers; increasing

FWA With higher potential of development

SATELLITE Reduced utilization

WI-FI Introduced in 2003; increasing

PLC Commercial trials

DVB-T Under evaluation

6

Broadband market structure

OLOs (Cable & ADSL) Grupo PT

(ADSL)

Grupo PT (Cable)

Cabovisão (Cable)

Grupo PT

OLOs

OLOsGrupo

PT

CABLE

ADSL

58%

42%

> 1,2 million customers end 2005

Data as end of 2005

7

Agenda

1. Broadband market in Portugal

2. Regulation of broadband wholesale markets

• Local Loop Unbundling

• Bitstream access

3. Results

8

Wholesale Broadband Markets

• Wholesale unbundled access market (Market 11)

SMP Undertaking • PT Group companies that work in this market

• Access to local loops and sub-loops• To publish a reference offer• Non-discrimination• Cost accounting and accounting separation• Cost oriented prices• Availability of accounting records

Remedies

9

LLU – ANACOM INTERVENTIONSSUPPLY TIME PRICES SLAs PROCESSES INFORMATION

DEC-04December 10

Reduction of supply time (draft decision)

JAN-05

FEB-05 February 17Reduction of supply time (decision)

February 9Prices reduction (draft decision)

MAR-05

APR-05 April 13Prices reduction (decision)

MAY-05

JUN-05June 24

Market analysis - Maintenance of cost oriented prices obligation

JUL-05July 8

Increase of compensations (draft decision)

July 28Simplification of contract rescisssion within LLU context (draft decision)

AUG-05

SEP-05 September 20Proposal of 2006 RUO (decision)

OCT-05

NOV-05 November 8Increase of compensations (decision)

DEC-05 December 142006 prices (draft decision)

December 14Simplification of contract rescisssion

within LLU context (decision)

December 14Statistic data regarding LLU (draft

decision)

JAN-06

FEB-06February 7

Statistic data regarding LLU (decision)

MAR-06

APR-06 April 132006 prices (decision)

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LLU – InterventionsSUPPLY-TIME

PRICES• Important reduction of supply-time

• Steady reduction of prices of several LLU services

SLAs

PROCESSES• SLAs adjustments ensuring more accurate quality of service

• Simplification of contract rescission processes

Information

• Provision of comprehensive and timely statistical data allows close monitoring of the market

11

LLU Full Access Prices

- €

20 €

40 €

60 €

80 €

100 €

120 €

140 €

160 €

ES NL PT IT DK DE BE FR UK AT EE IE LU FI SE

Source: Cullen International - Feb 2006

ONE-OFF CHARGE (FEBRUARY 2006)

- €

2 €

4 €

6 €

8 €

10 €

12 €

14 €

16 €

EE IT DK PT FR NL UK FI DE AT BE ES SE LU IE

Source: Cullen International - Feb 2006

MONTHLY FEE (FEBRUARY 2006)

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LOCAL LOOP UNBUNDLING

Number of unbundled accesses

0

20.000

40.000

60.000

80.000

100.000

120.000

1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06

∆ = 67%

∆ = 51%

Source: ICP-ANACOM

• OLOs reach 50% of Households

• 51% increase in the number of LLU last quarter

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WHOLESALE BROADBAND MARKETS

• Wholesale broadband access market (Market 12 – includes broadband access supported on PSTN and cable networks)

SMP Undertaking • PT Group companies that work in this market

• Access to PSTN on several network points• Non-discrimination• Cost oriented prices and price control wholesale ADSL = [retail (ADSL ; Cable) – cost ]• Cost accounting and accounting separation• To publish the Reference Offer• Availability of accounting records

Remedies

14

Ladder of Investment

Backbone NetworkAccess NetworkIn-home

ATMNetwork

BACKHAULACCESS

IP Network WWW

ULL ATM IP

+Flexibility

InvestmentService Differentiation

Own Network–

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Wholesale ADSL Offer Interventions

ATM ACCESS

• Access at BBRAS plus ATM Regional and National levels allows OLOs to use their resources more efficiently and diversify their offers.

PRICES

• Avoidance of margins squeezes

NEW OFFERS

• Enforcement of transparency and non-discrimination when introducing new offers in the market

• Higher bit-rate wholesale offers

16

Agenda

1. Broadband market in Portugal

2. Regulation of broadband wholesale markets

1. Local Loop Unbundling

2. Bitstream access

3. Results

17

Broadband UtilizationBroadband accesses

0

250

500

750

1.000

1.250

1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05

Thou

sand

s of

acc

esse

s

LLU

Rede ADSL PT

Cable Modem

Source: ICP-ANACOM

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Broadband Penetration

Evolução da taxa de penetração da banda larga em Portugal

0%

5%

10%

15%

20%

25%

I II III IV I II III IV I II III IV

2003 2004 2005Fonte: ICP-ANACOM

Broadband penetration rate in Portugal

Source: ICP-ANACOM

Taxa de Penetração da Banda Larga (3.º Trimestre de 2005)

0%

5%

10%

15%

20%

25%

DK NL FI SE BE FR UK LU AT EE DEUE25MT PT ES IT SV LV IE HU LT CZ CY SI PL EL

Fonte: ECTA Scorecard 3T2005; ICP-ANACOM; Eurostat

Broadband penetration rate (3rd quarter 2005)

Source: ECTA Scorecard 3T2005; ICP-ANACOM; Eurostat

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Higher Bit Rates

Distribution of ADSL accesses according to downstream bit rate

1st Quarter 2005

1024 Kbps13%

Up to 512 Kbps86%

Up to 512 Kbps 768 Kbps 1024 Kbps2048 Kbps 4096 Kbps 8128 Kbps

1st Quarter 2006

4096 Kbps36%

Up to 512 Kbps33%

2048 Kbps29%

Up to 512 Kbps 768 Kbps 1024 Kbps2048 Kbps 4096 Kbps 8128 Kbps

Note: These values are based on broadband accesses provided through wholesale offer "Rede ADSL PT"

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Retail prices

• Price reduction

• Voice and broadband offers supported on LLU

Source: ICP-ANACOM

0

10

20

30

40

50

60

70

80

Itália

Suéci

a

Hola

nda

Port

ugal

Ale

manha

Rein

o U

nid

o

Irla

nda

Din

am

arc

a

Áust

ria

Luxem

burg

o

Esp

anha

(€/m

ês s

/ IVA

)

Mensalidade Máxima Mensalidade Mínima MédiaMaximum monthly fee Minimum monthly fee Average

Italy

Swed

en

Net

herla

nds

Ger

man

y

Irela

nd

Uni

ted

King

dom

Den

mar

k

Aust

ria

Luxe

mbo

urg

Spai

n

(€ p

er m

onth

with

out V

AT)

Gap of price changes for 2 Mbps offers

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Broadband Consumption

Key factors for broadband consumption in Portugal:

– Personal computer ownership

– Occupation level

– Prices / Income

– Education levelSource: ICP-ANACOM – Inquiry on broadband Internet access in Portugal 2004

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Other Initiatives• 100% Broadband connections on every school • Tax incentives for acquisition of PCs by students• To promote the development of second-hand PC market

with guaranties• To increase the number of public spaces with free

broadband access• E-Government initiatives:

– Public e-Procurement– Electronic Invoices in the Public Administration– Public Administration services online (Citizen Portal)

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In conclusion…

• Broadband development depends on several factors.

• ANACOM has actively ensured a level playing field• Cost orientation; non-discrimination; transparency; Access.

• Prices; Supply time; Processes; Information/ Monitoring

• Competition is thriving

• Prices are decreasing

• Bit rate is increasing

• Penetration is steadly increasing

joao.castro@anacom.pt"The Prospects of Broadband in the Mediterranean", International Conference in Athens – 2nd May 2006

Thank You

Regulatory actions for the development of Broadband

in Portugal

24