Universal Access Policies to Connect the Unconnected

1. Universal Access Policies toConnect the Unconnected Gabrielle Gauthey – Senior Vice-President Public Affairs Global Industry Leaders Forum (GILF) Beirut November 9th 2009

2. How to connect the unconnected? • Fixed voice universal service • Mobile voice (2G) universal service • 3G and beyond • Fixed broadband universal access policies • Next Generation Access networks • Wrap up

3. Fixed Voice Universal Service funding • Universal Service Fund, a cost-effective universal access solution for voice • Cost includes :tariff compensation, geographic equalization, public phones, social tariffs, directories. Total cost is reduced by immaterial advantages. Source Arcep Oct 2009

4. Mobile voice universal access : how to best achieve 2G coverage? • #1 : encourage coverage commitments when licensing spectrum • #2 : introduce coverage requirements when renewing licences • e.g. 98% of population, coverage of transportation infrastructures; • #3 : achieve white zones coverage • where no operator is present… • through public funding; • #4 : foster competition in white and grey zones • through private agreements and funding… • infrastructure sharing… • roaming agreements White zones in Blue Mobile Coverage White zones Grey zones – 1 operator Grey zones – 2 operators Black Zones – more than 2 operators Source : Arcep Report on Mobile Services – August 09 % Territory % Population

5. 3G and beyond : mobile services universal access? • Include coverage obligations in the licensing process and monitor its effectiveness • e.g. in France 99.3% for SFR, 98% for Orange and 75% for Bouygues Telecom • Manage spectrum allocation (lower bands allocation) • 3G - 900 MHz refarming • LTE – 800 MHz Digital dividend allocation + 2.6 GHz • Push for active infrastructure competition for both 3G and LTE • infrastructure (pole, masts) sharing • Improvement of backhauling capacity through public/private partnerships

6. The key drivers of a successful Broadband universal access policy • Competition through active infrastructures has been the main driver behind the development of broadband: • Geographic extension of local loop unbundling has encouraged France Telecom to equip all of its MDF (Main Distribution Frames) for ADSL • France has joined European leaders in terms of penetration… • …and is in first place for "triple play" • Three major drivers have made this increase in investments possible • Dynamic operators, both incumbent and new entrants • Regulation : LLU first, bitstream as a complement • Local authorities intervention has been crucial in the expansion of broadband coverage

7. Growth of the broadband access base Dynamic of the French broadband market DSL coverage as of June 30 2009 1999 … 2002 2003 2004 2005 2006 2007 2008/2009 1st fixed-mobile Convergent offer 1st TV/DSL offer 1st Very high speed FTTH offer 1st broadband/ DSL offer 1st telephony /DSL offer 512kb/s 100 Mb/s 24Mb/s 8Mb/s 1Mb/s ADSL ADSL2+ FTTH Evolution of broadband technologies and services

8. Open wireline backhaul are key to handle both mobile and fixed access traffic growth • Typical telecommunications network architecture Role of backhaul networks: • Cost effective coverage of medium and low density areas; • Stimulate competition and innovation; • Anticipate bandwidth demand increase for all access technologies (fibre, LTE, Wimax,…); • Future proof investment for local authorities; • Enhanced connectivity for public services (schools, hospitals, universities,…) and business parks

9. Local Authorities have played a crucial role in Broadband coverage • In recent years, local authorities have played a key role in the digital development of their regions in partnership with operators • Arcep first impact assessment: • 86 projects – 53 of which are running • 2 billion € invested • Major consequences : • Less expensive coverage of rural areas • Expansion of LLU • Fostering of local operators

10. 20,9 M households 988 CO unbunling : local community bakchaul network 4,0 M households 773 CO unbundlig : alternative carriers backhaul networks + France Telecom dark fiber rental 2,4 M households 913 CO unbundling : alternative carriers backhaul networks 14,4 M households Number of unbundled CO’s according to backhaul network ownership Impact on unbundling 37% of French central offices are unbundled through Local Communities backhaul networks

11. Which competition model for NGA ? How to promote investments and universal access? • No doubt very high bandwidth is the technological evolution in the medium term • to meet growing demand for content • to assist the concomitant rise in speeds • All countries are facing the challenge. Some are ahead like Japan and the US. In the EU major players have announced fibre deployments • Investments are huge – 10 to 20 times copper broadband - and will need to be spread over several years • several hundred euros per connectable home • Investments will happen differently according to country specificities and legacy networks topography (FTTN, FTTH) • The questions are : • How to promote investments beyond dense areas from start and allow reasonable return? • How to avoid useless duplication of non-essential infrastructures in reduced dense areas? • How to adapt regulation and public intervention to ensure universal access and avoid increasing risk of digital divide?

12. NGAuniversal access :investment model according to geographical segmentation Private investments will prevail in “market driven” whereas public intervention will be needed in low density “policy driven” areas

13. Europe trends for NGA roll-out: Public Policy levers to foster NGA investments, coverage and PPPs • Legislative lever in many countries (France, Spain, Italy, Portugal, …) • Sharing of the fiber last drop through mandatory agreements between operators and landlords • “right to fiber” • Mandatory fiber pre-cabling for new buildings • Regulatory lever • Regulator’s concern is to make sure competition is preserved on the active part of the network to stimulate differentiation and innovation • Asymmetrical regulation (duct access) • Symmetrical regulation (last drop and in house wiring) • Public policy lever • Economy recovery package • Digital Economy plans • Intervention of local authorities (PPPs)

14. Overview of Recovery, Digital Economy plans & PPPs worldwide EU recovery plan • Achieve 100% broadband coverage in EU by 2010 • 1 B € earmarked for rural broadband • Creation and/or upgrade of access, backhaul and passive infrastructure China’s recovery plan • 4 Trillion RMB 09-10 • ICT included in pillar industries program Australian National Broadband Network • 100 MB/s to 90% of subscribers • 43 B A$ ( 23 B €) New Zealand “Broadband Investment Initiative” • 1.5 B NZ $ investment plan announced March 09 Greek FTTH Public-Private Partnership • 2.1 B € investment • Target : 2 million homes passed by 2012 Digital Britain • 2 Mb/s universal broadband access service in 2012 • 200 M £ NGA fund is created to speed-up deployments • Local Communities involvement in low density areas Italian broadband plan • 800 M € to be allocated to achieve broadband coverage in Italy French digital plan • 750 M€ will be invested by Caisse des Dépôts et Consignations to roll-out shared optical loops + German BB plan and coming bradband plans in Poland, Russia,... American Recovery and Reinvestment Act • 7.4 B $ to provide broadband to rural, unserved and underserved areas • 4.5 B$ for electric grid modernization (“smart grids”) • 2 B $ for health IT programs • 29 B $ for transportation programs (highways safety, fraffic monitoring,...)

15. US Broadband Funding via the“American Recovery and Reinvestment Act” (ARRA ) – Rural & Verticals NTIA Funding Breakdown NTIA: Broadband Technology Opportunities Program (BTOP) Dept. of Commerce - $4.7 B to provide BB to un-served and underserved areas. RUS (Rural): $2.5 B to provide loans, loan guarantees, grants. At least 75% of each project‘s territory must be rural w/o BB • Energy projects (4.5B$), • Health IT (2B$), • Transportation (29B$), • Public Safety Source: Educase 2009

16. Australia and New Zealand PPP projects • New Zealand“Broadband Investment Initiative” PPP launched March 09 • Government’s goal is to accelerate roll-out of ultrafast broadband to 75% of New Zealanders; • Priority is given for the next six years to business users, schools, health services, greenfield developments and tranches of residential areas ; • Government will invest 1.5 B $NZ alongside additional private sector investment. • Australian “National Broadband Network” PPP project announced April 09 • 100 Mb/s (FTTH technology) to 90% of Australian broadband subscribers and min 12 Mb/s for the remaining 10% of the population (DSL, HFC, Wireless technologies); • A$ 43 B ( 23 B€) investment – network will be built, owned an operated by a PPP ( “NBN Corporation”) owned 51% by the Federal Government and 49% by private sector – spinoff to full private ownership foreseen within 5 years; • “NBN Corporation” will act as a wholesale only company.

17. United Kingdom “Digital Britain”: public funding for universal access and NGA • Digital Britain final report (June 16 09) • Universal broadband access by 2012 • 2 Mb/s Universal access will de delivered by a mix of wired and wireless technologies - 200 M £ public funding • Creation of a fund for investment in the next generation of superfast broadband to ensure it is available to the whole country • 50 pence monthly tax on all fixed copper lines - 150/175 M £ per year • Accelerating current and next generation mobile coverage and services • Push for a rapid transition to next generation mobile (4G) and universal 3 G coverage • Highly competitive mobile market • Ofcom Report on Superfast broadband (March 09) • BT/Openreach receives green light to invest in NGA (mix of FTTN and FTTH in greenfield areas) • Mandates BT/Openreach to offer wholesale bitstream with pricing flexibility • No duct sharing for the moment

18. Greece : € 2.1 B NGA PPP • Governmental initiative launched en of 2007 with the objective to leapfrog traditional broadband and deploy very high speed connectivity in Greece : • FTTH coverage target of 2 M households in 56 cities including Athens and Thesssaloniki; • 2.1B€ investment budgetwithin 2010-2017 for fiber passive infrastructure – PPP investment model • PPP funding split : 700 M€ Greek State, 700 M€ European Investment Bank low-rate loan, 700 M€ private partners; • PPP management will be granted to private partners for 30 years; • Project will be separated in 3 parts each part covering a distinct geographical area of the country by a different PPP. • Next steps • Public consultation and approval of the project by EU DG Comp in July 09 • Legal framework to be adopted before end 09 • PPP tender will be issued beginning of 2010

19. France : PPP will be key for NGA roll-out • France Numérique 2012 report (Sept 08) aims at transforming France in a “best in class” digital nation - 4 priorities: • 100% broadband coverage ( min 512 Kb/s) and speed up very high speed network rollout • Development of digital content and service offer • Promotion and diversification of digital usages by citizens, enterprises and public administration • Improvement of digital economy public governance • 750 M€ from “Caisse des Dépôts” to foster NGA/PPP investments: • Caisse des Dépôts et Consignations (state-owned investment bank )announced in June 09 a 750 M€ investment plan from 2009 to 2011 in shared optical local loops • Private operators and local communities are likely to co-invest with Caisse des Dépôts in order to speed up deployments • French State bond emission (“Grand Emprunt”) Sept 09 • Digital projects could be eligible to funds collected through the bond emission • A share of these funds may be allocated to fibre networks roll-out • Green Light from the EU Commission to CG 92 FTTH SGEI is likely to unleash private and public investments in similar projects

20. Key takeaways on Next Generation Access policies • Transition from broadband to Next Generation Access networks is a revolution which represents a dramatic change in the level of investments: 250 to 300 B€ will be required to roll-out NGA in the EU, 23 B€ in Australia • Risk of broadening the digital gap between regions is high and this is why many nations have decided to put universal access high on their recovery agenda and digital economy plans • From a policy perspective the key driver of NGA success and universal access is a close collaboration between all stakeholders -incumbents and new entrants, national and local government, vendors and users • From an NGA investment perspective, Public Private Partnerships are gaining worldwide traction both at national and local level as they allow : • Anticipation of the future by rolling-out of backhauling capacities • Cost-effective roll-outs in lowering market entry barriers, preserving diversity and innovation • More competition and differentiation • Acceleration of NGA coverage in grey and white areas

21. “Connecting the unconnected” wrap up Universal Access Policies toolbox and levers : no « one size fits all » solution Fixed Voice • Universal Service Funds • Easy to manage • Plain service : no major QoS issue or service differentiation • Price equalization mechanisms can be introduced • Cost decrease in the long run • Not the solution for broadband • Licensing incentives & agreements • Licensing lever : link spectrum granting to coverage commitments, introduction of coverage requirements in new licences • Policy lever : Operators, Local Authorities and Regulators agreements to provide mobile services in white areas (masts and poles sharing, roaming) and open backhauling • Regulatory lever : passive infrastructure sharing, digital dividend spectrum allocation • Regulated wholesale offers & PPPs • Copper Regulation : LLU for service differentiation , bitstream as a complement • Fibre regulation : asymmetrical (duct access) and symmetrical (last drop) • Local authorities intervention (open backhauls, PPPs) Mobile Voice & Services Fixed Broadband & NGAs