Gabrielle Gauthey NextGen 09

Gabrielle Gauthey – Senior Vice-President Public Affairs

Leeds - November 17, 2009

NGAs : which public policies tofoster investmentsand accelerate deployments?

2 | NGA policies & Public Private Partnerships | November 2009 © Alcatel-Lucent 2009 All Rights Reserved

Summary

Very High Speed broadband market overview

Broadband policies and local authorities intervention in France

Next generation Access networks policies and regulation

Next Generation Access networks & public/private initiatives

© Alcatel-Lucent 2009 All Rights Reserved3 | NGA policies & Public Private Partnerships | November 2009

Very High Speed broadband marketoverview1


Very High Speed broadband is a booming market

A market of 140 million subscribers in 2014 (vs. 31 million in 2008)

Western Europe on a par with North America with more than 20 million residential subscribers

A great opportunity for Europe

Source: IDATE – September 2009

Growth of FTTH/B* and VDSL** subscribersaround the world between 2008 and 2014

Number of residential subscribers worldwide

* Fiber-to-the-home (FTTH) et Fiber-to-the-building (FTTB)** Fiber-to-the curb (FTTC) et Fiber-to-the-node (FTTN)


34%

66%

VDSL FTTH/B

Figures on Very High Speed broadband in Western Europe

FTTH/B are the prevailing architectures for Very High Speed broadband in Western Europe

6 countries represent 81% of the installed base

Very High Speed deployments per types ofarchitecture – end of 2008

Number of FTTH/B subscribers in keyEuropean countries – end of 2008

Sweden Italy France Norw ay Netherlands Denmark

Source: IDATE and FTTH Council Europe

66 %

34 %

32 %

24 %9 %

14 %14 %

7 %


European FTTH market breakdown : the weight of municipal networks in access

Note:FTTH (Fiber-to-the-Home) = fiber to the boundary of the home living space or business office space(FTTH Council definition)ILEC = former incumbent monopoly telco (PTT)CLEC = competitive or alternative telco or broadband providerMuni/Utility = network built by municipal local authority or by a power utility

Sources: IDATE & Heavy Reading, 2008

FTTH market shares in Europe:

0.0%

20.0%

40.0%

60.0%

80.0%

2007 8.5% 21.4% 70.2%

2012 43.0% 23.0% 34.0%

ILEC CLEC Muni/Utility

According to forecasts, municipalities and power utilities will still have - in WesternEurope - 1/3 of fiber access market share by 2012


Broadband policies and local authoritiesintervention in France2


The key drivers of a successful Broadband policy in France

Competition through active infrastructures has been the main driver behindthe development of broadband:

Geographic extension of local loop unbundling has encouraged France Telecom toequip all of its MDF (Main Distribution Frames) for ADSL

France has joined European leaders in terms of penetration…

…and is in first place for "triple play"

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


Dynamic of the French broadband market

Growth of the broadbandaccess base

2002 2003 2004 2005 2006

24M

b/s

8M

b/s

1M

b/s

512kb

/s

1st TV/DSL offer

1st telephony/DSL offer

1st fixed-mobileConvergent

offer

ADSL ADSL2+

Evolution of broadband technologies and services

1st broadband/DSL offer

1999…

DSL coverage as of June 30 2009

2007 2008/2009

FTTH

100 M

b/s

1st Very high speed FTTH offer


French local authorities have played a crucial role in Broadband coverage

In recent years, local authorities have played a key role in the digitaldevelopment of their regions in partnership with operators

Arcep first impact assessment: 86 projects – 53 of which are running

2 billion € invested

Major consequences : Less expensive coverage of rural areas

Expansion of LLU

Fostering of local operators

Vendée

Py rénées-Orientales

CU Bordeaux

CA Bay onne Anglet Biarritz

CA Perigueux

CU Grand Toulouse

CA Aix en ProvenceCA Aix en Provence

CA Rennes Métropole

CA Tours

Régie du Pay s chartrain

CA Seine EureCA Seine EureCA Seine EureCA Seine EureCA Seine EureCA Seine EureCA Seine EureCA Seine EureCA Seine Eure SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)SI Sipperec (CPL)

SI Sipperec (Irisé)

SAN Sénart (Ville Nouv elle)

CA Amiens

CU ArrasCU ArrasCU ArrasCU ArrasCU ArrasCU ArrasCU ArrasCU ArrasCU Arras

CU DunkerqueCU Dunkerque CA Valenciennes

CA Le Hav reCA Caen la MerCA Caen la MerCA Caen la MerCA Caen la MerCA Caen la MerCA Caen la MerCA Caen la MerCA Caen la MerCA Caen la Mer

CA Quimper

CA Vannes

CA Angoulême

SM Belfort Montbelliard HéricourtSM Belfort Montbelliard Héricourt

CU Le Creusot Montceau

CA Chalon Val de Bourgogne

CA Clermont FerrandCA Clermont FerrandCA Clermont FerrandCA Clermont FerrandCA Clermont FerrandCA Clermont FerrandCA Clermont FerrandCA Clermont FerrandCA Clermont Ferrand

CA Sicov alCA Sicov alCA Sicov alCA Sicov alCA Sicov alCA Sicov alCA Sicov alCA Sicov alCA Sicov al CA Castres Mazamet

CA Pau

Val-d'Oise

Essonne

Seine-Maritime

Eure

Seine-et-Marne

Yv elines Meurthe-et-Moselle

Somme

Moselle Manche

Côtes-d Armor Finistère

Charente-Maritime

Jura

Loire

Py rénées-Atlantiques Haute-Garonne

Tarn

CR Aquitaine

CR Bretagne Calv ados

Haute-Marne

Orne

CA Voiron

Ardèche

Ardennes

Ariège

Av ey ron

Cher Doubs

Gard

Hérault

Ille-et-Vilaine

Indre

Loiret

Lot

Lot-et-Garonne

Maine-et-Loire

Haute-Marne

Meuse

Nièv re

Oise

Bas-Rhin

Haut-Rhin Sarthe

CR Bourgogne

CR Alsace

CR Limousin CR Auv ergne

CR Corse

Réseaux d'initiative publique à fin juillet 2008

(projets couvrant plus de 60.000 habitants)

GUADELOUPEGUADELOUPEGUADELOUPEGUADELOUPEGUADELOUPEGUADELOUPEGUADELOUPEGUADELOUPEGUADELOUPE

GUYANEGUYANEGUYANEGUYANEGUYANEGUYANEGUYANEGUYANEGUYANE

MARTINIQUEMARTINIQUEMARTINIQUEMARTINIQUEMARTINIQUEMARTINIQUEMARTINIQUEMARTINIQUEMARTINIQUE

REUNIONREUNIONREUNIONREUNIONREUNIONREUNIONREUNIONREUNIONREUNION

Oise

Seine-et-Marne

Yvelines

Hauts-de-Seine

Val-d'Oise

Marchés de services départementaux

Hors DOM

4) Offres commercialisées (4)

Projets infra départementaux L.1425-1

Hors DOM

1) Etudes préalables (3)

2) Appel public à candidatures (5)

3) Délégataires retenus (14)


Projets départementaux L.1425-1

Hors DOM





Projets régionaux L.1425-1

Hors DOM






Impact of local authorities backhaul networks on unbundling in France

913

773

988

CO unbundling : alternativecarriers backhaul networks

CO unbundling : alternativecarriers backhaul networks+ France Telecom darkfiber rental

CO unbunling : localcommunity backhaulnetwork

14,4 M households

2,4 M households

4,0 M households

20,9 M households

Number of unbundled CO’s according to backhaul network ownership

37% of French central offices are unbundled throughLocal Communities backhaul networks


Open Wireline backhaul networks are key to handle both mobile and fixedaccess traffic growth

Typical telecommunications network architecture

Role of backhaul networks:

Cost effective coverage ofmedium and low density areas;

Stimulate competition andinnovation – on DSL first and fibrenext;

Anticipate bandwidth demandincrease for all accesstechnologies (fibre, LTE,Wimax,…);

Backhaul networks are futureproof investments - can be easilyfunded through PPPs;

Enhanced connectivity forpublic services (schools,hospitals, universities,…) andbusiness parks


Next generation Access networkspolicies and regulation3


Which competition model for NGA ? How to promote investments?

No doubt Very High Speed broadband is the technological evolution in the medium term

To meet growing demand for content

To assist the concomitant rise in speeds

All countries are facing the challenge. Some are ahead like Japan and the US. In the EUmajor players have announced fiber deployments

Investments are huge – 10 to 20 times copper broadband - and will need to be spread overseveral years

Several hundred euros per connectable home

Investments will happen differently according to country specificities and legacynetworks topography (FTTN, FTTH)

The questions are:

How to promote investments and allow reasonable return?

How to adapt regulation and public intervention to market, risk and policy driven areas?

How to prevent regression of competition and even foreclosure of the market?


NGA deployments : investment model according to geographical segmentation

Private investments will prevail in “market driven” whereas public

intervention will be needed in low density “policy driven” areas


Europe trends for NGA roll-out :Public Policy levers to foster NGA investments and PPPs

Legislative lever in many countries (France, Spain, Italy, Portugal, …)

Sharing of the fiber last drop through mandatory agreements between operators and landlords

“right to fiber”

Mandatory fiber pre-cabling for new buildings

Regulatory lever

Regulator’s concern is to make sure competition is preserved on the active part of the network tostimulate differentiation and innovation

Asymmetrical regulation (duct access)

Symmetrical regulation (last drop and in house wiring)

Bitstream as a complement in low density areas

Public policy lever

Economy recovery package

Digital Economy plans

Intervention of local authorities (PPPs)


How to encourage investments and competition throughactive infrastructures while tackling economical and operational concerns?

The last drop : an essential infrastructure- but where from?

Sharing of in-house wiring at the level of the building and access to ducts alone will not besufficient to guarantee sustainable competition in low density areas:

it is useless and too costly to roll out serial networks inside and towards each building

the natural monopoly is not limited to the fiber within the building

risk of an irreversible situation

Having a point of sharing higher up in the network raises a few issues :

in terms of technology, it has to be compatible with different technologies : PON and point-to-point

the physical location of the point of sharing depends of the topography, of the density and of the architecture of theoperator’s network

ducts ducts

point of sharing higher up in thenetwork

availability of ducts offer

copperSC

copperMDF


NGAs & public/private initiatives4


How to combine public and private initiatives? Transition from broadband to Next Generation Access networks is a revolution

which represents a dramatic change in the level of investments: 250 to 300 B€will be required to roll-out NGA in the EU, 23 B€ in Australia.

Risk of broadening the digital gap between regions is high and this is why manynations have decided to put this issue high on their recovery agenda and digitaleconomy plans.

From a policy perspective the key driver of NGA success is a close collaborationbetween all stakeholders -incumbents and new entrants, national and localgovernment, vendors and users.

From an NGA investment perspective, Public Private Partnerships are gainingworldwide traction both at national and local level if they allow : Anticipation of the future by rolling-out of backhaul capacities

Cost-effective roll-outs in lowering market entry barriers, preserving diversity and innovation

More competition and differentiation

Acceleration of NGA coverage in grey and white areas


South Yorkshire Digital Region

SYDRThales, Alcatel-Lucent and KingstonCommunications

Alcatel-Lucent is the design authority

Alcatel-Lucent also responsible for allequipment, network management platformsOSS and majority of BSS, installation,commissioning, and maintenance of thenetwork

54 exchange sites, 1589 Street Cabinets

VDSL based, but with 1,200 km of fibre(700km new dig)

Multiple Service Providers to the same enduser

“Businesses in South Yorkshire will be able to increase their competitiveness, develop new productsand business models and use IT in a variety of different ways as a result of this initiative – somethingwe can be proud of as a catalyst for this project.” Trevor Shaw, Executive Director of Finance forYorkshire Forward

one of the largest public sector-led openbroadband infrastructure initiatives in theworld.

Covering the urban and rural populations ofSheffield, Doncaster, Barnsley and Rotherham

a brand new, high speed open-accessinfrastructure

Covers majority of homes and businesses inthe region - some 1.2 million people.


The Baltic Business Quarter – a model for the future for Gateshead Council

Gateshead technology innovation

A unique business model for the UK

Designed from the start to give the highest

levels of built-in resilience

Capable of offering flexible and tailored

services

Fair and open access to all service providers

A compelling business case for everyone

The BBQ network to operate as an Open Access

Network & to provide last mile backhaul

services

“The launch of this new partnership is an exciting and ground breaking stepforwards in our continuing drive to bring more top quality businesses andjobs to Gateshead” Councillor Mick Henry, Leader of Gateshead Council

Alcatel-Lucent to deploy a blown fibresolution to link individual buildings

Services with bandwidths of up to 10Gb/savailable within the business park and up to2.5Gb/s off park


Overview of Recovery, Digital Economy plans & Public Private initiativesworldwide

Greek FTTH Public-Private Partnership

2.1 B€ investment

Target : 2 million homes passed by 2012

Digital Britain

•2 Mb/s universal broadband access service in 2012

•200 M£ NGA fund is created to speed-up deployments

Italian broadband plan

800 M€ to be allocated to achieve broadband coverage in Italy

French digital plan

750 M€ will be invested by CDC to roll-out shared optical loops

+ German BB plan and coming bradband plans in Poland,Russia,...

China’s recovery plan

4 Trillion RMB 09-10

ICT included in pillar industries program

Australian National Broadband Network

100 MB/s to 90% of subscribers

43 B A$ ( 23 B€)

New Zealand “Broadband Investment Initiative”

1.5 B NZ$ investment plan announced in March09

American Recovery and Reinvestment Act

7.4 B $ to provide broadband to rural,unserved and underserved areas

4.5 B$ for electric grid modernization(“smart grids”)

2 B $ for health IT programs

29 B $ for transportation programs(highways safety, fraffic monitoring,...)

EU recovery planAchieve 100% broadband coverage in EU by 2010

1 B € earmarked for rural broadband

Creation and/or upgrade of access, backhaul and passiveinfrastructure


www.alcatel-lucent.com

Gabrielle Gauthey NextGen 09

Technology

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