7Agenda AT&T U-verse Verizon FiOS AT&T vs. Verizon Sample Triple Play BundlesCable Company Progress, Strike and CounterstrikeRating the CompetitionOther ConsiderationsSummary and ConclusionsQuestions and AnswersAT&T U-verseU-verse Service DeliveryStrengths and WeaknessesResults and Future PlansVerizon FiOSFiOS Service DeliveryAT&T vs. Verizon Sample Triple Play Bundles (includes satellite video)Cable Company Triple Play Strike and CounterstrikeCable Company Progress to DateTechnology Advances: Switched Digital Video, DOCSIS 3.0, OCAPRating the Competition Today: Customer Buying CriteriaOther Considerations: Regulatory, Technology, Market conditionsSummary and ConclusionsQuestions and Answers
8AT&T U-verse Service Delivery FTTN/FTTP, VDSL, IPTV/MPEG-4, HPNA Graphics courtesy of and used with permission from AT&T
9U-verse Strengths & Weaknesses U-verse integral to AT&T’s “Three Screens” strategyAT&T U-verse’s Microsoft platform provides superior servicesAT&T offers more HD channelsAT&T offers additional technical supportWeaknessesAT&T has reported only 126,000 U-verse customers (Q307)Advanced features are not availableAT&T’s VDSL platform can reach speeds at a minimum of 25 Mbps, but much of the capacity is dedicated to deliver video
10AT&T Triple Play Results Residential Voice LinesBroadband AccessSatellite Video (DIRECTV and DISH)U-verse VideoNet Consumer Revenue ConnectionsResidential Voice LinesLost 1.3 million (Q107 through Q307, with 35.8 million retail consumer voice lines in service as of Q307 )Broadband Access (DSL, U-verse, and Satellite)Gained 808,000 consumer connections (Q107 to Q3 07, with million consumer broadband connections in Q307))Satellite Video (DIRECTV and DISH)Gained 302,000 (Q107 to Q307, with million satellite video customers in Q307)U-verse VideoGained 113,000 (Q107 to Q307, with 126,000 U-verse customers in Q307)Net Consumer Revenue ConnectionsGained 731,000 for nine months ending 9/30/07
11AT&T U-verse: Announced Future Plans 30 million living units with the U-verse fiber network by 2010, covering about 50 percent of living units and 33 percent of businesses.AT&T expects U-verse services will represent a multibillion dollar revenue stream over the next several years.AT&T projects it will have more than 1 million U-verse customers by the end of 2008.In 2008, AT&T plans: Whole-Home DVR, 2 HD streams at the same time, a media sharing capability, and 10 Mbps using VDSL pair-bonding.AT&T plans to pass approximately 30 million living units with the U-verse fiber network by the end of 2010 across its entire 22-state region. The initial build will cover about 50 percent of living units and 33 percent of businesses across the company’s local service footprint.The cost of deployment remains in the low $300 range per living unit passed.AT&T expects U-verse services will represent a multibillion dollar revenue stream over the next several years.The company is completing more than 10,000 new installations per week, and expects that to grow to more than 40,000 per week by the end of At this rate, AT&T projects it will have more than 1 million U-verse customers by the end of 2008.More than 90 % of U-verse customers bundle with broadband; 40 % of U-verse customers are new AT&T broadband users.In 2008, AT&T plans:Whole-Home DVR, in the 2H 2008, which lets customers watch recorded content on any TV in the home.The ability to watch 2 HD streams at the same time, in the Q2/Q3 08.A media sharing capability in Q108, which enables photos and music from any networked home computer to be accessed on the TV.A 10 Mbps downstream broadband connection available using VDSL pair-bonding.
12Verizon FiOS Service Delivery FTTP (B-PON, G-PON) MPEG-2, MOCA SuperHeadendHub OfficeServing OfficePSTN Circuit SwitchOptical Line TerminalHub SplitterONT
13FiOS Market Positioning StrengthsFiOS Internet penetration 20% and FiOS TV penetration15.2%Verizon’s FTTP architecture allows it to meet the bandwidth needs of consumers for the foreseeable future.Verizon has the flexibility to offer IPTV and VoIP.Verizon claims an industry-leading service rating for FiOS installations.WeaknessesVerizon still has a long way to go to achieve even 50% coverage.Verizon is under pressure to reduce its capital spending.Verizon has done little to match the full potential that a quadruple play can provide.StrengthsFiOS Internet penetration is at 20% and FiOS TV penetration is at 15.2% to available homes passed.Verizon’s FTTP architecture allows it to meet the bandwidth needs of consumers for the foreseeable future, and cable companies will be unable to offer the highest speeds FiOS enables unless the cable providers also deploy an FTTP architecture (DOCSIS 3.0 not withstanding).Verizon has the flexibility to offer IPTV with the feature-rich, interactive capabilities that IPTV can offer. Verizon’s plans for VoIP expansion are also enabled with the dedicated stream the PON architecture provides.Verizon claims an industry-leading service rating for FiOS installations with 84% of FiOS customers rating their installation as better than satisfactory. FiOS-based maintenance dispatches are 80% fewer than dispatches for traditional voice and DSL services. Verizon’s FiOS customer churn is less than 1.5%.WeaknessesVerizon still has a long way to go to achieve even 50% service area coverage compared to its base of 21.4 million primary residence customers. At the end of Q307, the FiOS network passed 8.5 million homes and businesses, and FiOS TV is now available to 4.7 million households.Verizon is under pressure to reduce its capital spending for FiOS services, although according to its Q107 report it is “not that far away” from its cost goals of $700 to pass a home with FiOS and $650 to connect each FiOS subscriber.Verizon has done little to match the full potential that a quadruple play can provide.
14Verizon Triple Play Results Residential Voice LinesFiOS Internet and DSL Broadband AccessFiOS TV and Satellite Video (DIRECTV)Net Consumer Revenue Generating UnitsResidential Voice LinesLost million lines YoY, with million primary residential voice lines in service as of Q307FiOS Internet and DSL Broadband AccessIn Q307, Verizon added 229,000 net new FiOS Internet customers; it has 1.3 million total FiOS Internet customers and 8 million total broadband connections.FiOS TV and Satellite Video (DIRECTV)In Q307 Verizon added 202,000 net new FiOS TV customers, and it has 717,000 total FiOS TV customers and more than 1.5 million total video customersNet Consumer Revenue Generating UnitsGained 88,000 RGUs YoY as of Q307
15Verizon FiOS: Announced Future Plans Verizon plans to pass approximately 18 million homes with FiOS by 2010.Verizon will continue to upgrade its FiOS data and video network and offer converged services.It has plans to increase its consumer portfolio of home networking services.The company’s long-term video strategy beyond FiOS includes offering additional channels and moving IPTV over the FiOS network.In 2007, Verizon began to deploy Gigabit PON (GPON) technology.Verizon plans to pass approximately 18 million homes with the FiOS network by 2010.Verizon will continue to upgrade its FiOS data and video network and offer converged services like gaming and local/targeted advertising as additional revenue sources. The company roadmap calls for increased innovation with the FiOS TV portal, enhanced on-demand features, enhanced interactive video features such as interactive shopping, extended multimedia support such as personalized video, interactive gaming, and personalized play-lists with search and recommended viewing.It has plans to increase its consumer portfolio of home networking services to include fixed mobile convergence, healthcare and home monitoring, media sharing and access, and network backup services.The company’s long-term video strategy beyond FiOS includes offering additional channels and moving IPTV over the FiOS network beginning with the Video Hub Office and extending IPTV to offer both video on-demand and multicast video programs.In 2007, Verizon began to deploy Gigabit PON (GPON) technology in 2007 which will boost capacity between the OLT and the ONT to 2.4 Gbps downstream (a fourfold increase) and 1.2 Gbps upstream (an eightfold increase) while decreasing the cost of FiOS network electronics by as much as 25%. Verizon will continue to increase the speeds available on GPON to allow more than 300 Mbps to each subscriber, with plans beyond 2010 to offer wavelength division multiplexing so each customer can be served by a customized wavelength.
16AT&T vs. Verizon: Sample Triple Play Features and Prices (Los Angeles Market 12-07)
17Q307 MSO Triple Play Progress Like Cox and Cablevision, other cable companies could achieve a 25-35% voice (VoIP) penetration rate within three years.Broadband penetration rates have not peaked but have slowed.Digital video penetration rates are good, but basic video customer growth is slowing or declining.MSOs are more willing to take voice and data customers without requiring a video subscription.
18MSO Strike and Counterstrike Against U-verse and FiOS Switched Digital Video: Being DeployedHD Channel Count SolutionDOCSIS 3.0: In trials, deploymentsBroadband Speed SolutionOCAP: Interesting OpportunityCounterstrike to IPTV?What about Quadruple Play ???
19AT&T and Verizon vs. MSOs: Sample Triple Play Features and Prices (California Markets 12-07)
20Rating the Competition Scale 1 (low) to 5 (high) Based on Customer Criteria Month Horizon
21Other Considerations Regulatory and Legislative Climate Content and Applications Providers without a NetworkGoogle, Microsoft, AOL, Wal-Mart, VonageThe Effect of Wireless (Mobile) IntegrationThe Future of Satellite ProvidersDIRECTV, DISHBreaking-up the 200-channel video package
22Summary and Conclusions Customers with choice will churn & (maybe) churn againFiOS and U-verse will reach their 2010 goal of 25-30% market shareCable companies will continue to win voice customersTriple-Play prices will not decline significantlyValue Added Services will drive ARPUSatellite still relevant as AT&T and Verizon “Plan B”