1. Commercial in confidence The economic challenges of reaching broadband ubiquity Speeding up NGN ubiquity: a pillar for digital growth Athens, 13 February 2014 Dr Matt Yardley

2. Commercial in confidence Introducing Analysys Mason 2 ▪ EC – Digital Agenda (costs, benefits, funding models, incentive policies) ▪ ITU – PPPs for universal broadband ▪ EIB – market development and funding models ▪ Operators – NGA strategy ▪ Governments – national broadband plans and state aid ▪ Regulators – competition issues in NGA ▪ Investors – NGA transactions

3. Commercial in confidence Ubiquity costs 3 First 75% homes Last 25% homes € N bn Source: Analysys Mason, typical fixed NGA cost analysis

4. Commercial in confidence Rural costs vary strongly depending on technology – fixed vs wireless … 4 Wireless Fixed Cost % of homes covered Indicative

5. Commercial in confidence … and these two critical aspects are highly market-dependent 5 Wireless Fixed Cost % of homes covered Indicative

6. Commercial in confidence The final 5% is now a hot topic in the UK 6 UK Government target Government funding Coverage (premises) Broadband service specification End 2017 target £250m committed 95%Superfast (>24Mbit/s) End 2018 target Not yet committed At least 99% Not yet defined Government will explore how to solve this with industry using “more innovative fixed, wireless and mobile technologies”

7. Commercial in confidence UK FTTC speed variability is narrower than in 1 st gen. broadband – good news for the DA 7 Source: Ofcom data, 2013 Speed (Mbit/s) 8-10pm weekdays 30.6 3.5 24 hours 30.9 3.5 Max 33.1 3.0 Av min Av variance 81% of headline 8-10pm weekdays 59.3 3.4 Speed (Mbit/s) 24 hours 60.4 3.5 Max 64.2 3.3 Av variance Av min 78% of headline 38Mbit/s packages 76Mbit/s packages

8. Commercial in confidence Outcomes will also depend on how Member States implement policy ▪ There is some latitude in interpreting the DA targets which will impact solutions across Member States – A very rigid view on 30Mbit/s, i.e. to all users under all conditions, would effectively eliminate wireless (by driving up costs to levels higher than fixed) ▪ There is an inherent tension between playing it safe with incumbent operators vs stimulating new competition – The sustainability risks are greater in rural areas – driven by cash-flow issues more than set-up costs ▪ Member States need to think hard about geographic carve-ups – This can have unintended consequences 8

9. Commercial in confidence Public policy questions still remain ▪ Funding: Our EC work suggests a funding gap of €60 billion to meet DA 30Mbit/s coverage & 100Mbit/s take-up targets ▪ Demand-side: – Connecting “the unconnected” (see below) remains a major challenge, with multiple issues involved 9 Source: Ofcom CMR 2013

10. Commercial in confidence These are exciting times! ▪ Future of UHF radio spectrum (EC High Level Group) ▪ Media consumption uncertainties: – Broadcasting to mobile networks – Prospects for linear TV distribution on fixed networks (e.g. using multicast) ▪ Drivers for QoS in networks (e.g. cloud, public services) and business model implications ▪ Growing day-to-day reliance drives need for resilience – perhaps less well understood that it should be 10

11. Commercial in confidence Thank you 11 Dr Matt Yardley Partner (UK) matt.yardley@analysysmason.com +44 7766 058 242