1. Copyright © 2004, Technology Futures, Inc. 1 Assessment of Wireless Broadband as a Competitor to Wireline Broadband Ray Hodges www.tfi.com Technology Futures, Inc. rhodges@tfi.com June, 2011 The Georgia Telephone Association

2. Copyright © 2004, Technology Futures, Inc. 2 Technology Futures, Inc. (TFI) Founded in 1978 We provide technology management, strategy, and forecasting services Strong futures focus. We assist with forward-looking market, financial, strategic, technology, research, and science plans Each of our consultants has 20 years or more of professional experience. We use a wide range of practical, proven technology forecasting, ideation, and management methods, e.g. Five Views of the Future™ Our customers include: International Startups Emerging Companies Established High-tech Firms Major Telecom Providers Regional Development Organizations Academic Institutions Key Government Agencies Consulting Groups and Contractors.

3. Copyright © 2004, Technology Futures, Inc. 3 Telecommunications Technology Forecasting Group (TTFG) TTFG Members AT&T Bell Canada Qwest Verizon Founded 1985 Promotes the use of formal methods for forecasting the evolution of the telecommunications network. Supports forward-looking financial, regulatory, and planning activities. Instrumental in the industry’s movement toward realistic depreciation schedules for regulation, valuation, financial reporting, planning, etc. Sponsors research for independent assessment of the rapid changes in telecommunications technology and competition. www.tfi.com

4. Copyright © 2004, Technology Futures, Inc. 4 Assessment of Wireless Broadband as a Competitor to Wireline Broadband Short Review and Update of My 2005 Presentation Take a Quick look at Wireless’ Role in POTS Decline TFI’s 2011 Wireless Forecast 4G Capabilities Assessment of 4G’s Ability to Replace Wireline Broadband (DSL & FTTH) Including Rural Areas

5. Copyright © 2004, Technology Futures, Inc. 5 Forecast Narrow Band Access lines by Carrier Type (2005 View)

6. Copyright © 2004, Technology Futures, Inc. 6 Narrowband Access Lines Data Source: FCC Note: Approx 1.8M ILEC and 2.1 CLEC Access Lines were added to the sample at YE 2005

7. Copyright © 2004, Technology Futures, Inc. 7 Access Lines Per Household

8. Copyright © 2004, Technology Futures, Inc. 8 Wireline Access Line Displacement

9. Copyright © 2004, Technology Futures, Inc. 9 U.S. Wireless Only Households

10. Copyright © 2004, Technology Futures, Inc. 10 Adults in Wireless Only Households (July/Dec 2008) (Jan/Jun 2010)

11. Copyright © 2004, Technology Futures, Inc. 11 2011 US Wireless Forecast

12. Copyright © 2004, Technology Futures, Inc. 12 Subscriber Penetration Rates

13. Copyright © 2004, Technology Futures, Inc. 13 2011 Wireless Subscriber Forecast

14. Copyright © 2004, Technology Futures, Inc. 14 2011 Subscriber Forecast

15. Copyright © 2004, Technology Futures, Inc. 15 2011 US Wireless Forecast

16. Copyright © 2004, Technology Futures, Inc. 16 U.S. Broadband Households by Nominal Data Rate

17. Copyright © 2004, Technology Futures, Inc. 17 Broadband Wireless Unlike current 3G technology, which is nominally classified as broadband but lacks the capacity to deliver true broadband service on a large scale, 4G wireless is a contender

18. Copyright © 2004, Technology Futures, Inc. 18 Radio Interface Progression 200520062007200820092010 LTE  1.25-20 MHz  100/50 Mbps HSPA+  2x 5 MHz FDD  40/10 Mbps  850/1900 MHz HSUPA  2x 5 MHz FDD  14.4/5.8 Mbps  850/1900 MHz WiMAX HSDPA  2x 5 MHz FDD  14.4/2.0 Mbps  850/1900 MHz WCDMA  2x 5 MHz FDD  0.384/0.384 Mbps  850/1900 MHz EV-DO Rev 0  2x 1.25 MHz FDD  2.4/0.15 Mbps (DL/UL)  850/1900 MHz EV-DO Rev A  2x 1.25 MHz FDD  3.1/1.8 Mbps  850/1900 MHz EV-DO Rev B  1.25-20 MHz FDD  4.9/1.8 Mbps  850/1900 MHz EV-DO Rev C (UMB) (“DBA”)  1.25-20 MHz FDD  70+/30+ Mbps  850/1900 MHz Fixed WiMAX  1x 10 MHz TDD  15/5.3 Mbps  2.5/5.8 GHz Mobile WiMAX  1x 10 MHz TDD  14/5.3 Mbps  2.5 GHz Mobile WiMAX  1x 10 MHz TDD  32/7 Mbps  2.5 GHz Cellular VZ Current VZ Target Radio Interface Note: All speeds are theoretical maximums. Device and deployment configurations will constrain attainable throughput capabilities.

19. Copyright © 2004, Technology Futures, Inc. 19 LTE Transforms Wireless Access and Core Networks to All-IP e 19 |

20. Copyright © 2004, Technology Futures, Inc. 20 Technology Throughput 0 1 2 3 4 5 6 7 8 TodayLTE Mbps Latency 0 10 20 30 40 50 60 70 80 TodayLTE msec Cost Efficiency 0 Cost per MB TodayLTE

21. Copyright © 2004, Technology Futures, Inc. 21 Expected Performance Bandwidth =10MHz Peak (Mbps) Average Sector (Mbps) Average User (Mbps) Antenna Configuration Downlink8612-157-122x2 MIMO Uplink285-63-51x2 SIMO Throughput Latency (Round trip airlink) EVDO ~ 50-70 msec LTE ~ 30-40 msec

22. Copyright © 2004, Technology Futures, Inc. 22 LTE-Speed Dependent on how much spectrum Average Throughput 0 1 2 3 4 5 6 7 8 5 x 510 x 10 Mbps

23. Copyright © 2004, Technology Futures, Inc. 23 Important developments since 2005 The acquisition of additional spectrum by the wireless broadband industry, especially in the 700 MHz band. The potential of much more spectrum being made available in the next several years as envisioned in the National Broadband Plan[1].[1] The explosion in demand for wireless Internet access (and wireless data applications in general) epitomized by the iPhone and Android phones. The clash between the user’s expectation that wireless data throughput be like wireline’s and the reality that 3G capacity is severely limited, even if advertised peak data rates are similar. This has led to tiered pricing for 3G and it may for 4G as well. [1] FCC, Connecting America: The National Broadband Plan, Chapter 5. [1]

24. Copyright © 2004, Technology Futures, Inc. 24 Most Significant New Threat Is Broadband Wireless (4G)

25. Copyright © 2004, Technology Futures, Inc. 25 Our findings, which follow, are neither simple or without qualifications. Radio technology is not simple and there are unresolved issues. Finding #1: 4G wireless broadband has the potential to universally replace wireline broadband at DSL speeds Finding #2: In urban and suburban areas, 4G wireless broadband has the potential to be competitive with wireline broadband at VHS broadband speeds and a significant number of households may abandon wireline VHS broadband in favor of wireless. However, wireless is unlikely to completely replace wireline VHS broadband in these areas. Finding #3: In rural areas, 4G wireless broadband has the potential to be competitive with wireline broadband at VHS broadband speeds and a significant number of households that have access to wireline VHS broadband may abandon it in favor of wireless. Also, wireless broadband may delay the deployment of VHS broadband, especially by ILECs, to rural areas. Finding #4: Wireless broadband at higher data rates (50 Mb/s and above) will likely have to wait for 5G (or 4.5 G) to be competitive on any reasonable scale with wireline.

26. Copyright © 2004, Technology Futures, Inc. 26 Radio spectrum is the lifeblood of wireless broadband Currently 534 Megahertz (MHz) of spectrum are licensed to wireless carriers at the frequencies most useful for wireless broadband. Of this, 120 MHz (50 MHz of spectrum assigned to the original cellular carriers in the 1980s and 70 MHz from former UHF television channels auctioned in 2008) are in frequency bands below 1000 MHz which have the most ideal radio characteristics regarding range and building penetration. The other 414 MHZ (including 120 MHz of PCS licenses auctioned to cellular carriers in the 1990s and almost 200 MHz acquired by the Clearwire/Sprint-Nextel partnership) are at frequency bands between 1500 and 2700 MHz which have shorter range for cellular applications.

27. Copyright © 2004, Technology Futures, Inc. 27 The National Broadband Plan (NBP) (NBP) recommends another 300 MHz of spectrum in bands between 470 MHz and 2700 MHz be made available within the next 10 years for wireless broadband. Some of this “new” spectrum is already assigned to broadband and it will be reasonably easy to add to the total. Other spectrum, such as the 120 MHz of premium spectrum below 700 MHz (currently assigned to broadcast television) will not be acquired for wireless broadband without a fight, especially by 2015 as the NBP proposes.

28. Copyright © 2004, Technology Futures, Inc. 28 Planned and Proposed Radio Spectrum for Wireless Broadband - Summary

29. Copyright © 2004, Technology Futures, Inc. 29 An important element of cellular design is subscriber density, i.e., the number of subscribers per square mile. Subscriber density depends on the household density (households per square mile) and the household take rate. Alternatively, population density and the population take rate can be used. For wireline services, we usually use households, while for wireless services we usually use population. Here, we focus on households because we are considering competiveness with wireline service, but remember that each household subscriber may be generating mobile traffic for one or more parties as well as “fixed” traffic from the household.

30. Copyright © 2004, Technology Futures, Inc. 30 Population and Household Density by Category

31. Copyright © 2004, Technology Futures, Inc. 31 Housing density is actually a continuum

32. Copyright © 2004, Technology Futures, Inc. 32 Cost per Subscriber for Capacity Constrained Cells

33. Copyright © 2004, Technology Futures, Inc. 33 One needs to know the details of total spectrum, frequency, terrain, population density, take rates, data demand, etc. to tell which of the situations apply From a cost perspective, a very high-capacity, very high-volume system could compete with: Low-end DSL because in all cases the cost is under $200 per subscriber. High-end DSL under the low cost scenario especially with cells small enough for maximum efficiency where the cost is under $500 per subscriber. Low-end VHS broadband because, in most cases, the cost per subscriber is under $1000. Typical VHS broadband under the low cost scenario especially with cells small enough for maximum efficiency where the cost per subscriber is under $1200.

34. Copyright © 2004, Technology Futures, Inc. 34 Conclusion for Rural Areas 4G wireless broadband has the potential to be competitive with wireline broadband at VHS broadband speeds and a significant number of households that have access to wireline VHS broadband may abandon it in favor of wireless. Also, wireless broadband may delay the deployment of VHS broadband, especially by ILECs, to rural areas.

35. Your Bridge To The Future Copyright © 2001, Technology Futures, Inc. Technology Futures