Next Generation Access (NGA) Technology and Regulatory Issues

1. FORUM ON NEXT GENERATION STANDARDIZATION (Colombo, Sri Lanka, 7-10 April 2009) Next Generation Access (NGA) Technology and Regulatory Issues Satya N. Gupta, Chief Regulatory Advisor BT Global Services-SAARC Region

2. Agenda • Next Generation Network Architecture – Layered approach • Next Generation Access (NGA) • NGA – Superfast Broadband • NGN Regulation – UK Approach • Enabling Regulation for NGA

3. NGN – a layered architecture distributingintelligence at every layer Application Layer Application Services Internet Control Bearer Service Control Layer Softswitch Control IP Service Switching Transport Layer (core and access) Metro Optical Media Gateways PSTN X X X X X X X X X X Multiservice Packet Switching RAS Broadband Access DSLAM National Optical ACCESSNETWORK GbE Frame/ ATM CORE NETWORKS CPE Wireless

4. Practical NGN architecture Source: ASTAP05/WS-IP&NGN/13

5. Technologies for Next Generation Access (NGA) Now ADSL2+ FTTC (+VDSL) FTTP (All homes) Downstream Headline 8 Mbit/s 24 Mbit/s 40 Mbit/s 100 Mbit/s Downstream Typical 5 Mbit/s 10 Mbit/s 20 Mbit/s 30 Mbit/s Upstream Headline 0.8 Mbit/s 0.8 Mbit/s 10 Mbit/s 50 Mbit/s Upstream Typical 0.4 Mbit/s 0.4 Mbit/s 5 Mbit/s 15 Mbit/s Cost of Deployment £200  £400/line ~£600/line Regulatory Impact Regulatory issues to be resolved

6. BT UK’s Current Network PSTN Copper PSTN K Stream Leased lines DSL PDH access ATM IP Fibre SDH VC-12 SDHaccess SDH VC-4 PDH access PDH ~ 1k sites ~ 15k sites ~ 400k sites End User ~ 2k sites ~ 5.5k sites ~ 100k sites

7. Today’s Broadband Downstream Headline 8 Mbit/s Downstream Typical 5 Mbit/s Upstream Headline 0.8 Mbit/s Upstream Typical 0.4 Mbit/s UK Access Today Local Exchange (5.6k) Core network ~ 4m Distribution Points (Lines split almost 50:50 between overhead & underground) Backhaul Current LLU demarcation point E-side Cables Overhead Distribution Telephone Pole ~8m Street Cabinet ~90k ADSL1 D-side Cables Customer Home ~26m Underground Distribution

8. Next Generation Simplified Network BT’S 21CN Multi-service access Converged Core Class 5 Call Server Copper WWW IP-MPLS-WDM Fibre & Copper ISP Content Wireless -5.5k sites -100 sites End User

9. Access Tomorrow Core network Fibre-to-the-Premises (FTTP) Backhaul Overhead Distribution Fibre Fibre • FTTP “Cut-Over” • Being planned for “Greenfield” • Single, high-quality network • Big investment, big savings • Paves the way for super fast future… Underground Distribution Fibre

10. 21CN – Key Milestones 2011 21CN completes 2010 Next generation broadband available to >20m end users.21CN migration substantially complete 2009 Next generation broadband available to >16m end users. ~ 65% of broadband and ~50% of PSTN lines migrated 2008 UK wide migration to 21CN begins. Next generation broadband product available to ~50% of UK. > 15% of PSTN lines migrated 2007 ~50% of UK broadband services delivered over 21CN 2006 Strategic vendor contracts signed. UK migration plan announced. Part of the IP/MPLS core network in place. Migration control centre established. Comprehensive testing and trials. End user communications strategy enacted. End user migration begins 2005 Industry engagement via Consult21 gains pace. Strategic vendors announced. First service launches based on reusable capabilities 2004 BTs 21CN vision announced. Consult21 launched. Converged network architecture developed.Voice transformation trial underway

11. New Era of NGN Regulation Promoting Investment and Innovation • BT’s Undertakings offered in lieu of reference to Competition Commission in September 2005 • Regulation to be focused on bottlenecks • Incentive to invest in NGNs and Innovate • Expectation of reduced regulation downstream • Promote infrastructure-based competition • Benefits the consumers, operators and UK economy • Incumbent to compete fairly on a level playing field Creating a climate of confidence for infrastructure Competition, Investment and Innovation

12. Regulatory Context in the UK • Ex-ante regulation • Applies to defined markets where a communication provider has Significant Market Power (SMP) • Provision of network access/interconnect, non-discrimination, cost-oriented prices, etc. • BT’s Undertakings – NGN specific section • No foreclosure of network access without consultation • Charges to be based on efficient network design • Network access to be provided on Equivalence basis • Industry group to agree transition to NGN interconnect • Compensation arrangements

13. Regulation and NGN – Key Issues • Investment – “Regulatory certainty” • NGNs are driven (in part) by cost savings • Investment requires demonstrable shareholder value • Regulators face a difficult challenge • No one can “build it and they will come” on revenue bet • NGNs/NGAs are disruptive to traditional boundaries • They challenge past regulatory assumptions(e.g. thin & dispersed vs. fat & fewer interconnect, minutes & miles vs. capacity & QOE) • Regulation needs to become simpler • Requires collaboration amongst incumbents, regulators and Competitive communications providers. • Over regulation could restrict converged service innovation

14. BT’s Consulation Approach Consult 21 • Consult 21 launched Summer 2004 • Largest voluntary consultation of its kind ever undertaken in our industry 650 people from industry involved • Remit is open and transparent consultation with wholesale customers (CPs) • Director recruited from a CP • 10 Working Groups, including: • Product Migration from 20CN to 21CN(E.g. PSTN Interconnect, Broadband, Ethernet) • 21CN Migration Management • Communications • Commercial • Each WG has BT and Industry Co-Chairs • Industry Steering Board (Ofcom monitors) • All proceedings published on the Internet

15. Functional Separation - Wholesale Concept

16. Next Generation Broadband:A bold vision for the UK UK’s biggest super fast broadband investment: £1.5 bn Accessible by up to 10 million homes by 2012 Range of speeds up to 100mbps: with >1,000mbps potential Basis for nationwide demand led roll out World’s most open super-fast network Need for the barriers to investment being removed 2

17. Building on Success UK has world leading availability & take up… • BT’s multi-billion pound investment has ensured everyone can be part of the broadband revolution • 10 million kilometers of fibre already in the network • 120,000 businesses have fibre to the premises • 10 million people work from home using broadband • Higher take up in rural areas than in cities …and provides massive choice to consumers • Massive customer choice from 200 ISPs • Among the lowest prices in the world • Opportunity to learn from the experience of others • All fibre based services from BT will be wholesaled to other ISPs 5

18. The Next Chapter: a ‘mixed economy’ model Enhanced copper Fibre • Fibre to the home in Ebbsfleet • Operational trials of fibre to the cabinet • ADSL2+ roll out makes speeds of up to 24 Mbps available to 40% population 2008 FY* • Fibre available to millions of homes and businesses • BT backhaul investment reduces network bottlenecks • Widespread access to ADSL2+ and speeds of up to 24 Mbps 2010 FY • Fibre roll-out brings range of speeds up to 100Mbps • Fibre available to up to 10 million families • Olympic village, a fibre showpiece case • Continuing to develop technologies to enable faster speeds and more services 2012 FY *2008FY = 08/09 financial year 7

19. What it means for consumers TODAY… TOMORROW… Multi viewing High Definition TV... Fast internet... Instant messaging… Advanced High Definition gaming experience… VoIP… High Definition video conferencing… BT Vision… A world of new possibilities from super-fast broadband Virtualisation, Cloud Computing, Collaboration iPlayer… …But growth of simultaneous usage raises potential peak bandwidth issues for the future …Assured high quality experience even with simultaneous usage of all new high speed applications and services 8

20. What it means for businesses • Bringing big business fibre services to smaller businesses: speeds > 1 Gigabit • Improved choice in access speeds providing UK businesses with a competitive edge • Two way speed allowing collaboration across locations between customers and suppliers • Improved flexibility in remote and home working 9

21. Removing the barriers to investment We need to have… • the chance to earn a fair return if investment is successful • principle based regulation that avoids red tape • removal of outdated rules, such as having to deploy copper cables in parallel to fibre • assurance that other UK companies will wholesale their fibre services just like we will • freedom from responsibility for other operators’ past investment 11

22. Next Generation Broadband for the UK • The UK already has world leading availability • The UK already has world leading take up • The UK already has world leading competition and prices • BT wants to give the UK world-leading speeds and capacity through Next Generation Broadband 13

23. Enabling Regulatory Initiative for NGA Ofcom (UK) • Allowing wholesale pricing flexibility- Enabling ROI appropriate to risks • Minimizing efficiencies in Network Design- Forbearing Technical Regulation • Supporting use of new and more flexible wholesale services • Safeguarding the opportunity for further infrastructure based competition • Symmetric Regulation for all new infrastructure(Mandated Sharing)

24. THANK YOU Satya N. Gupta Satyen.gupta@bt.com