Convergent Services Trends

Fiber to the Home: Myths versus Realities Michael Kunigonis Corning Optical Fiber Market Development Manager Asia [email protected] 18 March 2004

Convergence India

Agenda • Broadband Overview • Myth: There are no applications that need FTTH • Myth: FTTH is not economically viable • Myth: FTTH is years away…“not in my lifetime” • Myth: Last-mile fiber is a monopoly • Apply these lessons learned to India

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Convergence India 2004 Corning Optical Fiber

Network description -- Holistic network Long Haul Network

Fiber Copper / Coax

Metropolitan Network Metro Core

Metro Edge

Local Access Network Feeder & Distribution

Drop & Premises

cell site

CATV •• ••

Copper Copper replaced replaced by by fiber fiber (95%) (95%) New New construction construction is is fiber fiber

Penetration of fiber 3

Convergence India 2004 Corning Optical Fiber

••

Majority Majority is is copper copper (95%) (95%)

Global Broadband Statistics -- An update

North America

Europe

29 M subscribers

19 M subscribers

Cable modem leads

DSL leads

Broadband lines by region North America 32%

North America 9%

Growth starting to slow

Strong growth CALA

150 k FTTH subs

380 k FTTH subs

Asia 45%

0%

EMEA 23%

CALA 2%

43 M subscribers DSL Leads

2 M subscribers Q4 2003

Australasia Asia 68%

EMEA CALA 21%

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FTTH lines by region

Deep penetration

DSL leads Growth picking up

1.1 M FTTH subs Convergence India 2004 Corning Optical Fiber

Trends and Drivers

-- Convergent Services • Technology Technology is is enabling enabling carriers carriers to eliminate service boundaries • Carriers Carriers are moving toward convergence of services –– Offering Offering the the “triple “triple play” play” of of voice, voice, video video and and data data in in order order to: to: •• Fend Fend of of competition competition •• Reduce Reduce customer customer churn churn •• Increase Increase sagging sagging revenues revenues

WIRELINE VOICE PRIVATE

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SERVICES via BROADBAND

WIRELESS PUBLIC DATA VIDEO

CONVERGENT TRANSFORMATION Convergence India 2004 Corning Optical Fiber

FTTH Myths • There are no applications that need FTTH

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Convergence India 2004 Corning Optical Fiber

Myth: There are no applications that need FTTH -- Game On! ••

Internet Internet games games account account for for 9% 9% internet internet of of traffic traffic in in 2002; 2002; 50% 50% forecasted forecasted increase increase for for 2003 2003

••

Stressing Stressing existing existing networks networks –– X-Box X-Box private private network network –– PS2 PS2 controlled controlled release release of of adapter adapter

••

Gaming Gaming industry industry examples: examples: –– Driving Driving broadband broadband in in Korea Korea ;; 90% 90% Internet Internet users users play play games games –– iResearcher iResearcher reports reports Chinese Chinese users users for for feefeebased based online online games games will will reach reach 9.2 9.2 million million in in 2003 2003 and and 14.3 14.3 million million in in 2004 2004 •• NetEase.com NetEase.com earned earned $8.5M $8.5M in in revenues revenues during during Q4’04 Q4’04 alone alone (31.8% (31.8% increase increase QOQ; QOQ; aa 222.2% 222.2% surge surge YOY) YOY)

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Convergence India 2004 Corning Optical Fiber

Myth: There are no applications that need FTTH -- Video On Demand (VOD)

Typical download rates for Braveheart Technology

Minutes

Hours

Modem 56 kb/s

Days 2

ISDN 128 kb/s

20 12

DSL 1 Mb/s

2.5

Cable 2.5 Mb/s

1 45

FTTP

0.4

Source: FTTH Council 8

Convergence India 2004 Corning Optical Fiber

• VOD increasing increasing in in use use • Driver of bandwidth bandwidth demand • Services offered via… – Digital Cable Cable – VDSL – Movielink – CinemaNow – …but limited service or selection • Fiber Fiber will will be be the the inevitable inevitable solution to provide the most versatile service

Myth: There are no applications that need FTTH -- Remote applications • Telemedicine –– The The use use of of telecom telecom to to provide provide medical medical information information and and services services -- makes makes specialty specialty care care more more accessible accessible to to underserved underserved areas areas –– Store Store and and Forward Forward -- Transfer Transfer of of digital digital images images •• Teleradiology Teleradiology (X-rays, (X-rays, MRI) MRI) & & Telepathology Telepathology (pathology (pathology slides) slides) –– Two-Way Two-Way Interactive Interactive Television Television (IATV) (IATV) •• “Face “Face to to Face” Face” consultations consultations

• Teleworking –– By By the the end end of of this this year year 140 140 million million teleworkers teleworkers –– Telework Telework creates creates win-win win-win proposition proposition for for host host companies companies and and service service providers providers –– Employee Employee satisfaction, satisfaction, work work output output and and productivity productivity increases increases –– Broadband Broadband driver driver -- Broadband Broadband connectivity connectivity is is aa prerequisite prerequisite -Driving Driving toward toward symmetrical symmetrical connectivity connectivity 9

Convergence India 2004 Corning Optical Fiber

FTTH Myths • There are no applications that need FTTH • FTTH is not economically viable

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Convergence India 2004 Corning Optical Fiber

Myth: FTTH is not economically viable -- Cost declines: one vendors view

Dropping costs of FTTP deployment (includes labor, construction and electronics)

$9,000

$8,500 $7,500

$8,000

Large Scale Deployments

Cost in Dollars

$7,000 $6,000 $3,600

$5,000 $4,000

$2,300 $2,100 $2,000 $1,800

$3,000

$1,400

$2,000

$1,200

$1,000 $0

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Late 80's

Mid90's

1999

2000

2001

2002

Era

Convergence India 2004 Corning Optical Fiber

2003

2004

2005

Myth: FTTH is not economically viable -- Substantial OPEX savings • FTTH construction costs are only one piece to the puzzle • The cost of maintaining a fiber based network is far less than copper networks…perhaps as much as four to eight times less • FTTH will provide a competitive advantage to those carriers that deploy –– Continual Continual upgrades upgrades are are required required for for today’s today’s copper copper solutions solutions in in order order to to provide provide the the services services customer customer demand demand 12

Convergence India 2004 Corning Optical Fiber

Source: WaveOptics7

FTTH Myths • There are no applications that need FTTH • FTTH is not economically viable • FTTH is years away…“not in my lifetime”

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Convergence India 2004 Corning Optical Fiber

Broadband In Asia

-- Japan: e-Japan strategy FTTH Subscribers in Japan Total

Monthly Adds 100,000

1,200,000

90,000 80,000 70,000

800,000

60,000 50,000

600,000

40,000 400,000

Monthly Adds

Total FTTH Lines

1,000,000

30,000 20,000

200,000

10,000 0 Ja nu ar y ( Fe 200 br 2) ua M ry ar c Ap h ril M ay Ju ne Ju Se Au ly pt gu em st O be N cto r ov b e er Ja Dec mb nu em er ar b y er ( Fe 200 br 3) ua M ry ar ch Ap ri M l ay Ju ne Ju Se Au ly pt gu em st O be N cto r ov b e D em r ec b em er Ja be nu r ar y

0

Today’s Telecom Market (FEB ‘04) – 51M fixed line subscribers – 76M wireless subscribers – 14.1 broadband subscribers – 10.6M DSL – 2.5M Cable Modem – 0.96M FTTH

Month

••

e-Japan e-Japan project project initiated initiated in in 2001 2001 with with the the following following goals: goals: –– Japan Japan will will be be the the most most advanced advanced IT IT nation nation within within 55 years years –– 30M 30M high high speed speed subs subs (10 (10 Mb/s), Mb/s), 10M 10M ultrahigh ultrahigh speed speed subs subs (100 (100 Mb/s-FTTH) Mb/s-FTTH)

••

e-Japan e-Japan II: II: focuses focuses on on content content and and harnessing harnessing capacity capacity of of new new services services

Source: Ministry of Public Management--Information and Communications in Japan 14

Convergence India 2004 Corning Optical Fiber

Myth: FTTH is years away…“not in my lifetime” -- List of ‘US Optical Fiber Communities’*

Alabama Sylacauga Union Springs California Amerige Heights Canyon Hills Kenwood Lincoln Crossing Palo Alto Parc Metropolitan Poppy Measdoss Mission Bay Roseville Sacramento Talavera 15

Colorado Buckhorn Valley Chatfield Corner Colorado City Eagle Ranch Rye Florida LPGA Community Magnolia Lake Georgia Dunwoody Dalton Iowa

Cambridge Guthrie Center Huxley Slater Idaho Bear Creek Illinois Paxton Salem Indiana Bay Creek Gateway Crossing Rochester

Kansas Almena Hill City Luka Norton Osborne Quinter Sharon Turon Wakeeney Wamego Louisiana Squire Creek Homes Maine Norway Massachusetts Pine Hils Tauton Michigan Cobblestone Minnesota Alberta Chokio East Ottertail Evermoor Morris Nebraska Blair

Convergence India 2004 Corning Optical Fiber

Montana Baxter Meadows Ironwood Oklahoma Hinton Oregon Woodburn Pennsylvania Kutztown South Carolina Daniel Island Sandy Point Texas Burleson Canyon Gate Brazos Crystal Falls Grand Lake Estates Lake Ridge South Lakes on Eldridge Laredo Northpointe Rock Creek Victory Lakes Utah Deer Mountain Kamas Provo

Virginia Ashburn Brambleton Braemar-Bristow Bristol Independence Leesburg Purcellville Washington Chelan County Clallam County Douglas County Grant County Issaquah Highlands Mason County Wisconsin Berkseth-Baldwin Prairie View Reedsburg

New in 2003

Source: Render, Vanderslice & Associates

FTTH Myths • There are no applications that need FTTH • FTTH is not economically viable • FTTH is years away…“not in my lifetime” • Last-mile fiber is a monopoly

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Convergence India 2004 Corning Optical Fiber

Myth: Last-mile fiber is a monopoly -- Downtown Tokyo --- Competition! TEPCO (Fiber) Cable TV

TEPCO (CATV) Usen (Fiber)

Usen (music) NTT Fiber

NTT Telephones

Multiple fibers passing the same homes! 17

Source: Fujikura

Convergence India 2004 Corning Optical Fiber

FTTH Myths versus Realities

-- Lessons Learned Applied to India ••

FTTH FTTH deployment deployment is is aa reality reality today today –– Long-term Long-term solution solution for for broadband broadband networks networks –– Growing Growing steadily steadily but but still still hampered hampered by by myths myths –– New New applications applications are are driving driving traffic traffic growth growth

••

Why Why FTTH? FTTH? Why Why Today? Today? Why Why India? India? –– National National broadband broadband policies policies •• Convergence Convergence called called out out in in 10 10thth Five Five Year Year Plan Plan Objectives Objectives –– “building…infrastructure “building…infrastructure to to meet meet convergence convergence of of telecom, telecom, IT IT and and media” media”

–– Carrier Carrier increased increased competition competition •• Carriers Carriers grow grow by by offering offering new new services services via via advanced advanced networks networks

–– Fiber Fiber provides provides an an OPEX OPEX advantage advantage over over copper copper •• Access Access technology technology is is aa viable, viable, economic economic reality reality today today

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The The dawn dawn of of FTTH FTTH in in India India is is here! here! Convergence India 2004 Corning Optical Fiber