Presented by:Michael C. Render

North American FTTH: 10 Year Report Card

FTTH's Second Decade Begins:Where We Are, Where We Are Going

Has FTTH Had An Impact?

Economy

Quality of User Experience

New Technology

Has FTTH Become A Household Name?

Consumer Recognition

Have We Overcome Challenges?

Political

Funding

Has FTTH Deployment Grown? Will It Continue?

Greenfield Construction

Existing Overbuilds

“Has FTTH Had An Impact?”….

….Economy (Grade: A)

How would you best describe the organization you work for?

Select one:

• RBOC• ILEC• CLEC• MSO• Municipal government• State or regional government• Real Estate Developer/Integrator• End-user business• Consultant• Equipment vendor• Contractor

Billions In Home Based Business Impact

- Average revenue from home- based businesses in FTTH homes is $59,780

- Revenue for FTTH home-based businesses is $46.7 Billion

- Revenue estimated to be related to FTTH performance is $11.1 Billion *

* 11% said their business would not be possible without FTTH, and 64% said it is more efficient

FTTH Enhanced Home -Based Business Reported

Billions In Traditional Economic Development/GDP Growth

Auburn IN Cooper Tire Expansion Kutztown PA Film production companies

Bristol TN LENOSIWSCO VA Data Centers

Bristol VA Mason County WA CGI Louisville Slugger

SimsYahoo Technology companies

Online engineering firmsMorristown TN Colgate Palmolive 

Grant County WAPowell WY Alpine Access Virtual Call Center

IntuitWindom MN Trucking companies

Independence OR Metal fabrication companies

MSN (Microsoft)Ask Jeeves

Douglas County WA Sabey Corporation

Chelan County WA

Media General

Northup Grumman

Billions In Environmental Savings

- 1 day per month average (Nearly 12% work more from home directly because of FTTH – an average of 9 days more)

- US Carbon Emissions reduced by .06% (5.5% of citizens * 3% * 40%)

- FTTH also lowers energy use, road maintenance, accidents, unproductive hours…

Days worked from home increased 1 day per month on average:

Extra Days From Home Reported

“Has FTTH Had An Impact?”…

…Quality of User Experience (Grade: A+)

Reliability – service uptime

Broadband speed

Installation process

Consistency of speed

Provider’s customer service

Much Higher Satisfaction With Internet Aspects FTTH Versus Cable Modem

12

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

76%

69%

65%

56%

48%

39%

38%

37%

Column2

Cable

Quality of HD picture

Standard television

Number of HD channels

VOD

Much Higher Satisfaction With Television Aspects FTTH Versus Cable

13

16.6

12.2

7.0

5.2

10.8

6.9

1.5

2.9

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010

FTTH

Cable modem

DSL

Much Higher Tested Download PerformanceMedian Mbps By Year

4.5

2.4

1.8

1.0

1.4

0.5

0.40.7

0

1

1

2

2

3

3

4

4

5

5

2007 2008 2009 2010

FTTH

Cable modem

DSL

Much Higher Tested Upload PerformanceMedian Mbps By Year

FTTH

DSL

FTTN

Cable modem

Wireless

Far Fewer Modem Reboots Reported Per Month

16

Speed/ faster/ better Internet/ bandwidth Picture clarity/ video clarity

Reliability/ consistency/ no hassles Bundle of several services on one bill

Cost Fewer weather disruptions

Quality Number of channels/ entertainment choice

Better customer service General positives - pleased to have it

DVR Convenience

Better than previous cable company Video-on-demand/ movie downloads

No satellite dish Better technology/ up-to-date

Lines are buried/ No overhead Can run two computers at once

Easy installation Other

Users Clearly Understand Key Advantages Of FTTH

Open End Responses

17

“Has FTTH Had An Impact?”…

…New Technology (Grade: C)

Shop online

Play single player games

Upload large files

Download or stream video to computer

Play multi player games

Upload video content to Internet

Use VOIP for audio

Use two-way video conferencing

Transfer files for remote offsite storage

Download or stream video to television set

Use remote software / “cloud computing”

Use remote monitoring camera video

Participate in a virtual world

Some Increased Use Of Advanced Internet Applications

Among FTTH Users Under Age 40 By Year

19

Business video conferencing

Very large HDD with super resolution

Advanced websites/ full video

Remote home and pet monitoring

Online face-to-face healthcare

Advanced online shopping

One device for TV, Internet, & phone

Two-way video calling

Advanced online college

3D TV

There Is Interest In Futuristic Services Current FTTH Users Under Age 40

20

Online face-to-face healthcare

Very large HDD with super resolution

One device for TV, Internet, & phone

Advanced online shopping

Two-way video calling

Remote home and pet monitoring

Advanced websites/ full video

Business video conferencing

3D TV

Advanced online college

There Is Interest In Futuristic Services Current FTTH Users Age 55+

21

4.5

2.4

1.8

1.0

1.4

0.5

0.40.7

0

1

1

2

2

3

3

4

4

5

5

2007 2008 2009 2010

FTTH

Cable modem

DSL

FTTH Upload Performance Will Become A Competitive Advantage

Median Mbps By Year

“Has FTTH Become A Household Name?”…

…Consumer Recognition (Grade: C)

2009

2010

General Public Awareness Of FTTH Is Still LowBy Year

24

Non FTTH Users:

Internet from a direct fiber optic line

Green space / walking, jogging

24 hour neighborhood patrol

Community pool / park

Fitness center / Clubhouse

Current FTTH Users:

Internet from a direct fiber optic line

Green space / walking, jogging

24 hour neighborhood patrol

Community pool / park

Fitness center / Clubhouse

Yet When Described, Users Understand The Importance Of FTTH In New Home Development

25

“Have We Overcome Challenges?”…

…Political (Grade: A)

“Have We Overcome Challenges?”…

…Funding (Grade: B-)

Nearly $40 Billion In Investment To Date

Total U.S. Telco & Cable Capital Expenditures Are Stable

2007 2008 2009 2010P

RBOC Wireline $25.23 $25.41 $22.00 $19.40 Internal ReportsWireless(RBOC & Other) $19.87 $20.90 $21.40 $25.20 Inernal reports / TreflisMSO's $12.00 $11.40 $10.50 $11.00 Skyline MarketingILECs CLECs $4.00 $5.10 $3.90 $4.10 Skyline MarketingTotal $61.10 $62.81 $57.80 $59.70

Alternative source (total): $61.60 $56.90 $57.70 Avian Securities

Total North American Telco & Cable Capital Expenditures Are Stable

2007 2008 2009 2010P

TOTAL US $61.10 $62.81 $57.80 $59.70 Combined RVATOTAL Canadian $8.40 $8.50 $9.70 $9.00 IDCTOTAL US & Canada $69.50 $71.31 $67.50 $68.70

But There Is Competition For Telecom Capex

16.6

12.2

7.0

5.2

10.8

6.9

1.5

2.9

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010

FTTH

Cable modem

DSL

Tested Download Performance Of BroadbandMedian Mbps By Year

DSL broadband speeds are falling far behind the competition. Telcos are starting to lose subscribers and need an FTTH update. This is reaching severe levels in some areas, such as eastern Canada.

WirelessWireline

Smartphone penetration is expected to increase from 15% to 70% in just three years with the increasing use of higher bandwidth applications. Some see this as an impending crisis.

30

National public investment

Private investment

Other Investment Offers Opportunities

Municipal public investment

“Has FTTH Deployment Grown?”…

…Greenfield Construction (Grade: B-)

…Existing Overbuilds (Grade: A-)

FTTH Homes Passed Have Grown Cumulative – North America

100 x Growth since 2001

FTTH Homes Connected Have Grown Cumulative – North America

FTTH Penetration Has GrownCumulative – United States

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Passed

Connected

But FTTH Penetration Is Not UniformPercent Of Households Connected

+

2006 2007 2008 2009 20100%

10%

20%

30%

40%

50%

43.6% 41.1% 44.0%

39.7%

41.4%39.7% 41.0%

41.2% 40.4%

35.8%

11.9%13.1%

8.9%

11.9%13.4%

4.0% 3.0% 2.4%

3.2%3.3%

0.8% 1.8% 3.4%

4.8% 6.1%

Cable modem

DSL

Wireless

Other broadband

FTTH

FTTH Internet Use Has Steadily Grown Broadband Type Primarily Used At Home

USA By Year

There Has Been Some Short Term Slowing Of Growth

3,454,876

2,716,967

9,874 109,190

2,283,624

4,170,628

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

FTTH Homes PassedAnnual Change – North America

1,118,7701,165,683

5,569 41,813 177,271

1,603,066

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

FTTH Homes ConnectedAnnual Change – North America

164,252

643,967

481,945

359,856

280,133

149,853

109,5822,000 12,852 55,646

140,622

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Greenfield FTTH Homes Connected Will IncreaseAnnual – North America

1,273

1,4991,716

1,046

622

447

600

9501,100

1,250

1,300

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Single Family Housing StartsAnnual – North America

Greenfield Will Finally Take Off As Older Copper-Based Developments Are Filled

2000-2004 (9 million lots developed, 2.5% FTTH)

2005 (2 million lots developed, 15% FTTH)2006 (1.3 million lots developed, 37% FTTH)2007 (.9 million lots developed, 50% FTTH)2008 (.4 million lots developed, 55% FTTH)2009 (.4 million lots developed, 60% FTTH)

2010 (.62 million lots developed, 62% FTTH)

2011 (.66 million lots developed, 64% FTTH)2012 (.8 million lots developed , 66% FTTH)2013 (.81 million lots developed, 69% FTTH)2014 (.87 million lots developed, 70% FTTH)

2015 (1.2 million lots developed, 73% FTTH)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10%

6%

16%

65%

3%

Very unlikely

Somewhat unlikely

Somewhat likely

Very likely

All customers have FTTH

Likelihood Of Overbuilds Still Look Good In Many Sectors

Adding FTTH: Current Non RBOC FTTH Providers

43

Telecom Video Was An Early DriverFTTH Video Homes Connected

Cumulative – North America

MSO’s (Docsis2, Docsis 3)

Verizon (DSL, FTTH)

Other RBOC (DSL, FTTN)

Broadband Line Loss Will Become A DriverNet Broadband Adds 2009

45

Source: Leichtman Research

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

3.2%

1.3%

1.1%

MSO’s (Docsis2, Docsis 3)

Verizon (DSL, FTTH)

Other RBOC (DSL, FTTN)

46

Source: Leichtman Market Research

Broadband Line Loss Will Become A DriverNet Broadband Adds First Half 2010

How many additional North American homes do you expect to be passed by FTTH or FTTB in next

5 years (by the end of 2015)?

Select one:• 3 million or less• 6 million• 9 million• 12 million• 15 million or more

Note: Much of the RBOC decline has already occurred.

North American FTTH Will Begin A New Mild Increase- With More Explosive Growth Possible

Key:Yellow – stableLight green – moderate growthDark green – strong growth

REPORT CARDGrading Period: Yrs 1-10 11-20 21-30

IMPACTS:Economy AQuality of User Experience A+New Technology C + CONSUMER RECOGNITION: C GROWTH:Greenfield B-Existing Overbuilds A-

OVERCOMING CHALLENGES:Politcal AFunding B-

GRADE AVERAGE B

Overall… The FTTH Picture Looks Positive!

Q&A

Broadband Properties Magazine homepage: www.bbpmag.com

Also at Broadband Properties Magazine: www.munibroadband.com

For a replay of this Webinar, and for upcoming webinar events, don’t forget to check out our municipal broadband webinar site at www.Muniwebinar.com

Contact Mike Render at mrender@rvallc.com Or visit www.RVALLC.com

For the complete report of FTTH deployment in our October issue, featuring Mike Render’s data:www.bbpmag.com/2010mags/oct10/BBP_Oct10_FTTHMarketReport.pdf