Digital Agenda in Europe: The role of the market Brussels, June 16, 2011 Alfredo Baptista, CTO CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of Portugal Telecom is strictly prohibited
Mar 27, 2015
Digital Agenda in Europe: The role of the market
Brussels, June 16, 2011
Alfredo Baptista, CTO
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of Portugal Telecom is strictly prohibited
2
Contents
Fibre as a key driver of competitiveness in the wireline business
PT as a case study in fibre network deployment
Fibre as a strategic pillar for each business unit
3
Strong competition from cable operators in Portugal in 2007
Source:Screen Digest
100% =Others
2007
1,390
75%
20%
5%
2004
1,252
79%
17%
4%
Pay-TV market share(thousands of subscribers)
Two dominant players in pay-TV… … with strong positioning in the broadband market
PT market share (2007)Percentage
25
69
-44pp
ULL areasNon-ULL areas
Broadband penetration (2005)Percentage of house
4421
ULL areasNon-ULL areas
x2
Ranking
#1
#2
#3
Non-ULL areas ULL areas
4
PT launched an IPTV offer supported by disruptive communication
Multiscreen and QoS
TV anywhere
Largest distribution and support network
Tailored offerVariety of channels, VoD with 2,000 titles
Content
New TV experiencePersonalized, Interactive
Functionalities
Communication
Disruptive communicationHigh recall levels
5
This offer captured an existing opportunity in the market2007
*Static TV guide with no updates**Pay-movies available at specific pre-scheduled timesSource:Screen Digest; WMM Global Insight
Relative importance of attribute (beyond price)Percentage
2
4
Domotic
Fixed voice
Brand 10
Broadband 12
TV 29
Interest in servicesPercentage of homes in Portugal
Digital recording 24
VoD 27**
TV Guide/EPG 27*
Live-pause 33
HD 41
21Gaming
Cable offer in 2007
*
**
IPTV
… with room for improvement in advanced services offerTV offer is a driver of operator choice…
6
… and underpinned the turnaround of wireline business
-3.4-3.8-4.4-4.9-5.7-6.1-7.3-8.3-9.1
-12.2-12.1-10.8
Q4Q3Q2Q1Q4Q3 Q4Q3Q2Q1Q2Q1
Revenue growth%.YoY
Voice retail accesses growth %. YoY
1.3
-0.3
3.02.0
-4.3-3.9-5.7-5.5-6.0
Q4Q3Q2
-0.6
Q1Q4Q1 Q3
-0.3
Q2
-3.6
Q1Q4Q3Q2
2007 2008 2009
2007 2008 2009
Meo IPTV drove turnaround of wireline business by 2009
Meo success is an European case-study…
+22pp
-14pp78%64%
ZON (cable)
Other
2009
13%
23%
2007
21%1%
23
84443
1 5432
Operator
Source:Anacom; Annual reports
Pay-TV market share
Market share 21 months after launchPercentage
7
Technological evolution of cable technology…
Strong cable investment in technological evolution beyond copper infrastructure capabilities
DOCSIS 3.0 maximum internet connection speedMbps
360
200
30
2010200920082007
N.a.
House-hold coverage%
0 5 42 52
… beyond copper infrastructure capabilities
Connection speed (Mbps)
Accesses%
100 12 16 8
~70%
1 SD TV
100%
1 HD TV
2 SD TVs
FTTH
ADSL
Source:Annual reports
8
Local market context favourable towards investment in fibre rollout
• Efficient deployment fostered by full access to nationwide duct network
• Only competitive commercial alternative in high cable penetration and competition areas
As a result, PT launched an ambitious FTTH rollout plan
Note:Some double counting on the total homes passed may occur due to the possibility of the same home being served by more than a providerSource:FTTH Council
“The launch of PT’s FTTH offer gave a boost to fibre technology in Portugal” -- Anacom (July 2010)
1 million homes passed with FTTH in 2010 and the goal of 1,6 million by the end of the year
PT FTTH passed homesThousands
400
2011
2009
x4
2010
1,000
1,600
9
Contents
Fibre as a key driver of competitiveness in the wireline business
PT as a case study in fibre network deployment
Fibre as a strategic pillar for each business unit
10
Structured end-to-end fibre rollout processKey activities
Rollout success
Construction processPreparation and training
Technological solution
1 2 3
4
• Selection of efficient architecture technology (GPON)
• RF-overlay to allow multiple TV sets
• Field force transformation program
• Dedicated field force training academy
• Strategic partnership ecosystem for technology, construction and R&D
• Structured, end-to-end construction process
• Technical and commercial geographic viability studies
• Productivity-enhancement support processes and tools
• < 200€ of Capex per home passed
• Installation efficiency and reduced maintenance needs
• Impact on customer base growth both through new clients and reduced churn
HQ Cabinet
ONT
ONT
ONT
OLT Splitter
11
Selection of GPON and RF-overlay technologies
Selection of GPON due to its potential and efficient architecture
• Higher speeds (100 Mbps vs. 24 Mbps for ADSL 2+)
• Better QoS with less down time
• Less opex with reduced energy consumption (~2.5 to 5 times less)
• Less space required, with equipment 4 to 7 times more concentrated
• Lower capex with reductions between 30 and 60%
• Potential to increase bandwidth with emerging NGN PON (10GPON, WDM-PON, etc.)
Introduction of RF-overlay as a competitive advantage
Key sources of advantage
• Unlimited number of TV sets (with ~70 channels)
• Significant reduction of investment in customer acquisition
• Simplification of home installation, which should allow for lower investment
• Reduction of IP bandwidth dedicated to TV streams allowing for broadband offers with higher speeds
IP Signal RF SignalONT
WiFiHome
Gateway VOIP
STB …
HQ Cabinet
ONT
ONT
ONT
OLT Splitter
1
xDSL
Advantages vs. ...
Ethernet 2P
12
Transformation and training of field force
Requalification of internal field force “academy” Dedicated training center for SPs
• Training of internal technicians to boost efficiency and client satisfaction
• Selective process for ~330 high skills technicians with a 12-month rotation in the academy
# of technicians by age 2007
2009
2009: average age of 43
2007: average age of 45
• Compulsory certification process for all SPs
• Quality assessment tests to SP equipment
• Real-life situation practical tests for SP technicians
• Technical activity support tools training (e.g., PDA)
2
13
Ecosystem of partnerships to deliver leading-edge fibre solutions at scale
Objective PT initiatives
Technologysuppliers
Strong partnership with leading suppliers
Partners
Fast rollout, building on strong external SPs and internal technical know-how
Construction providers
• Launch of a tender bid to select partners to design and construct the fibre network (6 service providers selected, including the 4 copper SPs)
• Creation of a G-PON project office to supervise the rollout
• Leverage of best fibre suppliers to define key network architecture criteria
• Supplier selection takes into consideration in-depth technical analysis and logistics capabilities
Build state-of--the-art knowledge and technologies for future needs
R&D specialists • WDM-PON ONT project with the objective
of massifying ultra-high speed access (>2 Gbps)
• Advanced technological platform (IMS) for development of convergent multimedia services
2
14
Innovative processes to ensure efficient end-to-end construction
Fusion process
Clear curve
Innovative efficient construction methods
• Improved signal quality
• Reduced cost
• Faster installation
• Increased cornering angles (up to 90º)
Theoretical viability
Real viability
Detailed evaluation of viability
• Ranking of market potential• Consistency of geographical
assessment
• SP capability and workload assessment
• Commercial and technical on-site survey
Commerciallaunch
Sign-off
Construction stages Key challenges
• Market potential vs. penetration trade-off
• Consistency in selection criteria between different areas
• Assessment of construction and new duct needs
• Flexibility in design to avoid interference with other utilities’ ducts
• External factor delays• Lack of qualified work force
• Optical system test under harsh conditions
• Trade-off of acceptable maximum values and sample size
• Trade-off between availability and delay of commercial launch
Construction
Project
Evaluation
3
15
Efficiency coupled with superior customer experience
Increased customer satisfaction Better quality of service
Increased usage More TV sets per customer
Meo churn rate%
Meo repairs2011
Customers with RF-overlay%
Average traffic/accessHigh speed internet downstream (2009). Kbps
0
50
100
150
200
GPON
xDSL
4x
Meo fibre launch
-4pp
1Q111Q10
-85%
FTTHADSL
38<2 TV sets
>2 TV sets62
16
Contents
Fibre as a key driver of competitiveness in the wireline business
PT as a case study in fibre network deployment
Fibre as a strategic pillar for each business unit
17
Fibre optics brings advantages across the market segmentsF
ibre
Op
tic
Cab
le
Residential
Business
Mobile Backhaul
Community
• Multiple TVs without requiring STB• High-speed internet with high upload speeds• Digital TV with STB giving access to advanced services• Voice calls with advanced IP functionalities• Utilisation of Femto cells to improve indoor coverage
• Disruptive cost structure will allow massification of optical solutions on the business market and enabling medium and small companies access to better communications
• Fibre Optic spread across the cities and towns will lower the CAPEX to migrate the Mobile Network to LTE, due to less costs on the backhaul
• e-Education: sharing of educational materials (including video)
• e-Government: efficiency in constituents-government relation• e-Health: remote telemedicine and teleassistance • e-Security: all law enforcement connected by a single network
IPTV stream
VOIP
Analog RF TV
Broadband
FentoCell Backhaul
18
Fibre allows for a range of advanced residential services
Fibre enables new advanced services…
• Full 3D
• Super HD
• Gaming-on-demand
• High speed internet
• Next-generation homes
• Surveillance system
• Internet-enabled household appliances
• Real-time monitoring (e.g., energy consumption)
… and accelerates download/upload speeds
Download time for a DVD movie*Minutes
Fibre (100 Mbps)
7
ADSL (24 Mbps)
31
Upload time for a 100 photos**Minutes
Fibre (10 Mbps)
7
ADSL (1 Mbps)
75
* 5 GB**500 MB
Advanced services
Intelligent homes
19
Fibre as enabler of an enhanced customer experience
Advanced applications Available everywhere Home of the future
• Customized music
player
• Cloud-based
gaming
• Multi-screen and
multi-platform
• Remote access
from all devices
• Real-time energy
monitoring
• Remote control of
home appliances
20
Advanced convergent offers for Corporate and SME customers leveraging fibre infrastructure
• Convergent F-M voice & data solutions with access to subsidized equipment (e.g. PC, PBX)
• Integrated and vertical offer with business specific software
• Flexible pricing solution per workstation
• Unlimited wireless voice and flat rate data plans
• One-stop-shop for advanced IT/IS solutions
• Focus on Business Process Outsourcing providing flexibility and scale
• Machine to Machine process optimization and efficiency enhancement
SME offer Corporate solutions
Cloud Computing
• Superior cloud-based offer leveraging strategic partnerships focusing on IaaS and SaaS
• Adaptable, scalable and highly reliable platform based on multi-tenant infrastructure
21
876
476
1Q083Q07
505
646
3Q10
769
1Q11
3Q09
211
384
1Q093Q08 1Q10
MEO customersThousands
• Video-on-demand
• Launch of advanced settop box
• Disney Channel• European club soccer• Euro 2008 in HD
• MEO Fibre• Remote EPG/PVR on phone and PC
• Launch of Meo@PC
• First 3D broadcasting
• Multi-room PVR
• New widgets
Pay-TV market share%
+30pp
-23ppCable
Others
1Q11
55
13
31191
78
2007
Fixed lines net addsThousands
-12-30
-103
1Q07
-88%
1Q09 1Q11
Meo’s success has become a case-study
22
All in all…
… fibre is a viable technology in competitive markets
… efficient planning and deployment in a structured end-to-end process are key for success
… fibre is at the core of every business unit’s strategy
Digital Agenda in Europe: The role of the market
Brussels, June 16, 2011
Alfredo Baptista, CTO
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of Portugal Telecom is strictly prohibited