Cable-Telco-Wireless Competition in Florida: Facts and Consequences
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Cable-Telco-Wireless Competition In Florida: Facts and Consequences T William E. Taylor Senior Vice President 35th Annual PURC Conference February 5-6, 2008 Intermodal Competition and Telecommunications Deregulation Overview July 2006 § Updated state of competition in Intermodal Competition in Florida Telecommunications Florida (2006): Prepared for: BellSouth Telecommunications, Inc., Embarq Florida, Inc., Verizon – Wireline carriers Florida Inc., and Windstream Communications Florida, Inc. – Intermodal carriers By William E. Taylor — Cable Senior Vice President Harold Ware — Wireless Vice President Joel M. David — VoIP Senior Analyst http://www.psc.state.fl.us/library/filings/06/06521-06/nera%20fl%20white%20paper.doc § Effects on regulation – Parity across platforms – Universal service – Wholesale regulation 1 Intermodal Telecommunications Competition in Florida 2007 Intermodal Telecommunications Competition in Florida THEN: Florida PSC: “Status of Competition in the Telecommunications Industry as of May 31, 2005”: § [A] report on local competition would be incomplete without [an]analysis of the alternatives, such as wireless, cable (VoIP-based), broadband, and …(VoIP). These…intermodal competitors…have developed and evolved to challenge the traditional telephone wireline companies for market share. (p. 2) § Simple CLEC market share …understates the true market share held by competitors including wireless, cable, and other IP-enabled (Internet Protocol) providers. The gap between the CLEC market share and the true size of the competitive market share is unknown today, but we believe it will continue to grow as alternatives become more generally accepted. (p. 3) § In previous years, the analysis of this statutory requirement has focused primarily on the wireline sector of the telecommunications market. As noted throughout this report and the 2004 report, wireless and, to a lesser extent, VoIP competition have become asignificant portion of the voice communications market…increasing numbers of customers are replacing traditional wireline service with these options and, therefore staff must conclude that they are providing functionally equivalent local exchange service to residential and business customers…. (p. 69) 3 Telecommunications Competition in Florida NOW: Florida PSC: “Status of Competition in the Telecommunications Industry as of May 31, 2006”(pp. 2-3) § Wireless, VoIP, and broadband services are fulfilling the expectations of competition and represent a significant portion of today’s communications market in Florida…. – Wireless… – VoIP… – Broadband… § Florida’s communications market continues to evolve as new technologies and services become more widely accepted. Estimates of wireless substitution for wireline service have increased from prior years, and this trend is expected to continue in the near future. In the most recent reporting period, Florida cable companies expanded the number of markets in which they offer voice services, and it is expected that even more Florida markets will have access to cable-provided voice offerings in the coming year. Finally, Vonage, a nationally known VoIP provider, has reported a substantial number of Florida subscribers at the present time. These facts, coupledwith continued residential access line losses by ILECs, suggest an active market for voice communications services in many areas of Florida. 4 Wireline Subscription § Year-end 2000: about 3.4 million more 20,000,000 CLECs 18,000,000 ILECs mass market (residence and small Wireless Subscribers Wireless plus Residential (Small Business) Broadband 16,000,000 s r e b business) wireline access lines than total i 14,000,000 r c s 12,000,000 Sub wireless subscribers and mass market r o s 10,000,000 e n i high-speed broadband lines. L 8,000,000 f o r e 6,000,000 b m u 4,000,000 § Year-end 2002: about 1.3 million fewer N 2,000,000 mass market wireline lines than total 0 wireless subscribers and mass market 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005 12/31/2006 Note: Due to differences in reporting, 2005-2006 data are not comparable to previous. broadband lines. Source: FCC December 2000-December 2006 Local Competition and High-Speed Internet Reports. § Year-end 2006: about 12 million fewer ILEC and CLEC mass market lines 12,000,000 Actual Lines 10,000,000 combinedthan total wireless and mass es Predicted Lines n i L s 3.3 million lines s market broadband lines. e 8,000,000 cc A d e h 6,000,000 c t i w S § Trending residential access lines using l a i t 4,000,000 n e d i the historical relationship with population s e suggests a more rapid reduction in R 2,000,000 - wirelines. 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 5 Wireline Usage 50,000,000 45,000,000 Actual Local Calls § A dramatic decline in expected wireline Predicted Local Calls s) 40,000,000 nd a 35,000,000 us usage in Florida based on historical o 27 billion calls h (T 30,000,000 s l l relationships with population. a 25,000,000 C l a c 20,000,000 Lo l a 15,000,000 nnu A 10,000,000 5,000,000 - 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 § A similar dramatic reduction in Florida 15.0% 13.0% wireline long distance usage, as 10.0% es t 7.8% 7.2% nu i 6.6% 5.9% measured by the average annual M s s e 5.0% c c A 2.1% changes in switched access minutes n i e g n a 0.0% h C 1995-2000 compared with 2000-2006. l a nnu A -5.0% -4.2% -3.9% -5.6% -6.8% -10.0% BellSouth Verizon Embarq Windstream Total of 4 Carriers 1995-2000 2000-2006 Source: FCC, National Exchange Carrier Association, Network Usage Data. 6 Cable Telephony Table 3 § Cable telephony is widely Advanced Cable Services Are Widely Available in Florida Homes Passed Percent of Homes Passed available across Florida. Broadband Telephony Broadband Telephony Company Total Ready Ready Ready Ready Comcast 3,392,721 3,304,487 1,203,565 97.4% 35.5% – Cable passes 95% of Bright House 2,024,048 2,024,048 2,005,903 100.0% 99.1% Knology 334,379 334,379 334,379 100.0% 100.0% households Cox 332,308 332,308 332,308 100.0% 100.0% Atlantic Broadband 54,748 54,748 - 100.0% 0.0% Advanced Cable 44,255 44,255 44,255 100.0% 100.0% Mediacom 28,158 28,158 25,472 100.0% 90.5% – Cable penetration is 78% of Other 40,909 27,335 - 66.8% 0.0% Total 5,917,147 5,815,339 3,611,503 98.3% 61.0% homes passed Note: Because Knology is an overbuild operation, Knology homes are subtracted from the totals shown. As a result, totals include the primary provider only and may thus understate the services available. – Broadband deployed to 98% of Comcast includes the former Adelphia and Time Warner systems in Florida. Source: Warren Communications News, Cable Fact Book, GIS Format. homes passed Table 5 – Telephony enabled to 63% of Cable Telephony Share of Households homes passed. Cable Telephony Share of Households Population Density First Half of Oct. 2005 - § A substitute for basic telephone Area (persons/sq. mile) 2005 Mar. 2006 MSA Group 1 over 1,000 1.4% 4.7% service? MSA Group 2 500-1,000 0.8% 3.9% MSA Group 3 Less than 500 2.5% 4.4% Non-MSA Area 0.4% 3.7% Statewide 1.6% 4.4% Source: Cable share: TNS Telecoms ReQuest® Consumer Survey. 7 Cable Telephony § National penetration rates for Cox 21.6% Knology 20.8% cable telephony. Cablevision 19.4% Bright House 11.1% – Data presented in chronological Time Warner 8.0% Comcast 5.0% order of deployment (from top Charter 4.9% to bottom) Insight 11.6% Mediacom 9.1% – Penetration increases 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: VoIP Deployment & Strategies Update: Cable Operators , Broadband Advisory Services, Pike & Fischer, July 2006, p. 3; Bright House Networks Press Release, More than 225,000 Florida Families Switch significantly with time. to Bright House Networks Digital Phone: Now Announcing a Florida Unlimited Calling Plan , May 2, 2006 and Table 1; Knology Inc, SEC, Form 10-Q, March 31, 2006, p. 12. 140 100% C Circuit Switched Homes Passed a b l 90% e VoIP Homes Passed T 120 e s) l e n ph § Cable telephony availability is o i 80% l l Cable Telephony Homes Passed i o n M as % of All U.S. Homes y ( 100 70% H d e o m forecasted to increase ss a 60% e s P 80 P s e a ss m 50% o e d H dramatically. a y 60 s n 40% % o h p o e f l e 40 30% A T l l e U l b . 20% S a . C 20 H o 10% m es - 0% 2002A 2003A 2004A 2005A 2006E 2007E 2008E 2009E 2010E Source: J. Halpern, et al., Bernstein Research, Quarterly VoIP Monitor: VoIP Growth Still Accelerating , April 18, 2006, Exhibit 12. 8 Cable Telephony 25 20.0% 18.0% Cable Telephony Subscribers 20 16.0% Sh § Cable telephony penetration is Share of U.S. Households a re s) n 14.0% o o f forecast to grow rapidly 15 12.0% U . Milli S ( . s H r 10.0% e o b u i 10 8.0% s e cr h s o b 6.0% l ds § But from a small base as a Su 5 4.0% proportion of addressable 2.0% - 0.0% households.