An Incumbents Approach To A Financially Feasible Ftth Strategy

An incumbent’s approach to a financially feasible FTTH Strategy Jess Julin Ibsen Executive Vice President & CTO Networks TDC A/S

FTTH Council Europe Conference, Feb. 2009

Price decreases in the Danish telecommunications market “The health sector, restaurants and hotels as well as bread and cereals, among others... are more expensive in Denmark than the EU9 average. On the other hand, fish and communications (post, telecoms equipment and telecoms services) are significantly less expensive… Especially the price of telecoms services is lower than the EU9 average.” Competition Report 2007 Telephony prices

Int ernet and Broadband prices

K ro ne r

3000 2500 2000 1500

K ro ne r

700 600 500 400 300 200 100 0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 fastnet 900 min (kvartalspris) mobil 270 min (kvartalspris)

1000 500 0 1998

2000

År

mobil 450 min (kvartalspris)

2002

2004

2006

2008

internet 600 min (kvartalspris)

År

ADSL 512/128 (månedspris) ADSL 2048/512 (månedspris)

Kilde: ITST: Hallo, hallo, ved du hvad det koster? November 2008

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FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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Denmark is #1 in broadband penetration Denmark Netherlands Sw itzerland Korea Norw ay Iceland Finland Sw eden Canada Belgium United Kingdom Australia France Luxembourg United States Japan Germany Austria Spain New Zealand Italy Ireland Portugal Czech Republic Hungary Poland Greece Slovak Republic Turkey Mexico 0,0

DSL Cable Fibre/LAN Other

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

Source: OECD, June 2007

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Focus on the customers’ needs… The potential to achieve added value is not in the product itself, but in what the Danish customers can use the product for in their lives and businesses. Our customers require content through Dual-play, Triple-play and combinations with mobile telephony and mobile broadband. They DO NOT care about the media or underlying solution (fiber/copper).

Currently few customers require 20 Mbit/s+ solutions ”We do get customers, but they are coming more slowly than we had expected. We have not yet seen an increased demand for fiber based upon new services. So the sales of high speeds and add-on services have disappointed compared to our original expectations”. Flemming Poulsen, Chairman of the Board, Midt Vest Broadband A/S 11-02-2009

FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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Strategic intent – financial feasibility ƒ A sound business case require: ƒ ƒ ƒ ƒ

Technology availability Customer needs/requirements for content and services Content/services must require the technology How far ahead can we see the market development ? (price erosion/technology development/technology degredation)

ƒ Fiber is the technology of the future ƒ TDC develops our network reacting to customer requirements rather than to technology blueprints ƒ Sound ROI ƒ Services delivered in a “hybrid model” optimizing the usage of as well our fiber as our copper access networks (FTTC/FTTN) ƒ TDC believe that the existing copper access network can deliver sufficient bandwidths for 90 percent of all users for at least the next 5 years.

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FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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Architecture – functional it’s about protocols... an incumbent’s challenge IP centrex

Business trunking

Duét

Private VoIP VoIP softswitch

IMS WDM Cable modem

xDSL

Coaxial

SDH PDH

PON

ATM Fibre Ethernet

Copper pairs

IP SDH PDH

Mobile

MPLS PSTN ISDN

Fiber

Service layer

Landline network Control layer Transport

Ethernet

2G/3G Radio

WiFi, Wimax etc.

Access

Physical media

Terminals

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Architecture – all-IP NGN ƒ The challenge of managing a considerable set of legacy services and platforms. ƒ TDC operates all main NGN platforms today, thus realizing all-IP is primarily a matter of decommissioning legacy platforms and migrating legacy services.

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The current status ƒ TDC has more than 45,000 km trunk fiber to approx. 2,000 nodes – more than 600 Gbps used capacity ƒ More than 250,000 km of copper access network and 12,000 km of fiber access network ƒ TDC has access fiber network to more than 60,000 Danish households ƒ TDC has more than 10,000 dedicated business access fibers ƒ We expand the fiber access network to more than xx,000 new builds yearly ƒ And whenever we replace existing Copper Access connections, we do it using fiber (hybrid cables) But we do not believe that the market is ready for us to deliver our services over fiber – yet…. We would not currently have a financially feasible business case for the specific services delivered to end-users 11-02-2009

FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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Coverage is key Exchange areas

ƒ TDC utilizes it’s existing exchange area infrastructure and investments in buildings and housing for GPON and DSLAM deployments ƒ All exchange areas and nodes are fiber connected ƒ Denmark is divided into 1,183 exchange areas (EAs). On average, the exchange areas cover 30 sq km.

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FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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What we do: A compound build-out strategy ƒ TDC builds fiber for: ƒ trunk/transport network ƒ Distribution network (to DSLAM’s (FTTC/FTTN), GPON’s, mobile masts) ƒ Business customers (FTTB) – P2P – more than 1,000 new customers annually ƒ Access network (hybrid fibers) ƒ Replacement of degraded fiber (20 year old fiber turns milk-white)

ƒ TDC builds access: ƒ TDC is currently deploying fiber to the node (FTTN)/fiber to the curb (FTTC) ƒ GPON for the residential market ƒ P-2-P fiber solutions for businesses

ƒ Clearly defined service road map: ƒ Copper– 20 Mbit/40 Mbit/50 Mbit/80 Mbit/100 Mbit ƒ GPON based residential services ƒ Increased speeds on P-2-P FTTB solutions

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TDC’s network structure, mid-2008 Trunk network

Fiber to business customers

E

Access network

Large distance to exchange, limited bandwidth

Fiber to mobile masts

X

X X

E X

X

X X

Short distance to exchange, high bandwidth possible

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E

Exchange building with ADSL and VDSL2

Fiber in the trunk network

X

Fiber distribution point

Fiber in the access network

X

Copper distribution point

Copper in the access network

Land development sites + maintenance/repair

Land development sites with hybrid fiber

FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

~10,000 ~12,000 km ~60,000 11

2008 – 2009: DSLAM’s – larger bandwidth on the copper network, fiber closer to the customer Trunk network

Access network

Fiber to business customers

Possibility of bandwidths exceeding 20 Mbps

New micro node with VDSL2 and fiber connection

E

M

X X

E X

X

X X

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E

Exchange building with ADSL and VDSL2

Fiber in the trunk network

X

Fiber distribution point

Fiber in the access network

X

Copper distribution point

Copper in the access network

M

Micro node with VDSL2

Land development sites + maintenance/repair

FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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2009- :Fiber closer to the customer – basis of further development Trunk network

Fiber to business customers

E

Access network Fiber to mobile masts

M

X X

E X

X

X X

Land development sites + maintenance/repair

Introduction of fiber services using GPON and splitters

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E

Exchange building with ADSL, VDSL2 and FTTH

Fiber in the trunk network

X

Fiber distribution point

Fiber in the access network

X

Copper distribution point

Copper in the access network

M

Micro node with VDSL2

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FTTH deployment strategy GPON technology ƒ ƒ ƒ ƒ

Up to 64 customers on one fiber port Passive optical split (1:64) in the primary distribution cabinets 2.5/1.25 Gbps overall capacity per fiber port 3,500-7,000 customers per rack

Exchange Fiber primary distribution cabinet 100-1,000 customers Main distribution network

GPON system

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Customer Splicing point

Distribution network

Optical distribution frame Modular splitters

typically 2-5 km

Two fibers

Two fibers per customer

Drop cable

Through-splicing of two fibers per customer

typically 500-1,000 m

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Services Strategy: Products ready to launch when customers has the req’t. ƒ 2009: ƒ ƒ ƒ ƒ ƒ ƒ

(Jan) TDC launches integrated Dual-play and Triple-play packages 20 Mbit/s standard service offerings 40 Mbit/s standard service offerings Dual-pair service offerings doubles existing access speeds Quad-play services FemtoCell based services for Business and Residential markets

ƒ 2010-: ƒ TDC launch of first fiber based services to the residential market (Dual-play, Triple- play and Quad-play) on GPON when we see the commercial requirement ƒ 50 Mbit/s standard service offerings + dual-pair ƒ Increased speed on FTTB solutions ƒ Large amount of VOD services ƒ Higher speeds on most platforms

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Conclusion: “Build the Boat while sailing…” ƒ Yes, fiber is the technology of the future – but the future is not today ƒ What our customers wants are services – Dual-play, Triple-plays and combinations with mobility ƒ Our customers should not care about the underlying technology – as long as speed, stability and quality meet their expectations ƒ TDC questions the FTTH strategy employed by the Danish Utility Companies – it is not financially feasible ƒ TDC will launch the first fiber based services the moment our customers has the requirements – and we can make a healthy business case ƒ But we will continue to deliver high speed and high quality services on as well fiber as copper for years to come ƒ TDC strongly believes that combinations of FTTH, FTTB and copper based solutions are the only financially feasible approach

Do it intelligently – this is Business – not Philanthropy 11-02-2009

FTTH Council Europe Conference/Jess J. Ibsen, TDC A/S

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