*Pages 1--4 from Microsoft Word - 49946.doc* “Characteristics of the U. S. Broadband Market” For Delivery by Donald Abelson July 1, 2005 RITE Broadband Symposium Slide 1: Title slide Broadband access is the key to development and growth in this digital information age. It’s a key that can open the educational and economic opportunities of the world to rural communities across America, helping people to enrich their lives. That is why facilitating access to broadband is one of the core policy goals of the FCC. Our Congress shares the FCC’s keen interest in promoting broadband deployment. Section 706 of the Telecommunications Act of 1996 directs the Commission to remove regulatory barriers to deployment and to take other steps necessary to stimulate infrastructure investment. We have been actively pursuing this statutory goal by removing regulatory impediments to investment by wireline carriers, allocating more spectrum for wireless broadband services, and adopting spectrum policies that foster the development of other broadband technologies. It is increasingly clear that broadband technology will fundamentally reshape the way we communicate, the way we work, the way we learn, the way we receive health care, and the way we are entertained. Slide 2: Internet Growth – US Households Online – Chart Since 1996, there has been a dramatic increase in investment throughout the communications sector. As you can see here, investment in the Internet has exploded. Internet access has increased from 40 million households in 1996 to more then 170 million households today. An astounding 99% of public schools now have internet connections. Slide 3: High Speed Line Growth 1999- 2004 – Chart High speed line growth has also been drastic and dramatic. As a point of reference, in the United States, the term “high speed” describes services with more than 200 kbps capability in at least one direction. This growth is due in large part to several steps the Commission has taken to promote deployment of new broadband networks. As I will explain in more detail later and as my colleague Jeremy Miller will explain in much more detail in a separate presentation, we removed unbundling requirements on newly deployed fiber to the premise and we also provided regulatory relief for new hybrid fiber- copper facilities, deregulating the fiber and new packet- based technologies that provide broadband services today. 1 And the Commission has pursued innovative and flexible spectrum policies that enable new broadband services to flourish. Investment in broadband in particular has been vigorous. As you can see, as of December 2004, over 32.5 million high speed lines connected homes and businesses to the internet – a dramatic increase from 1999. Slide 4: Cable vs. DSL broadband subscribers in the U. S. – Pie Chart Competition among our broadband platforms is intense. Of the 32.5 million broadband connections in the U. S., most are through cable modems, but DSL connections are not far behind. Fiber, wireless, or satellite technologies make up the rest of the connections. Slide 5: Historical Residential Broadband Market Share DSL/ Cable 1999- 2004 – Chart As I mentioned previously, the Commission has removed unbundling requirements on newly deployed fiber to the home and fiber to the curb and provided regulatory relief for new hybrid fiber- copper facilities. We were able to do this because, unlike in Japan, competition between cable modems and DSL is fierce. The competition between DSL and cable modems has been lively for years, with the gap between the two narrowing. However, cable modems have always been the choice of more consumers. In each quarter for the last 4 years, 2/ 3 of new subscribers have gone to cable broadband. This is attributed to the high number of cable television subscribers in the United States. Cable television remains the predominant technology for the delivery of video programming covering 71.6 percent of all those who watch something other than free- to- air television. 97 percent of U. S. television households are passed by a cable system. Slide 6: Cable Modem Growth in the US 1999- 2004 – Chart This chart shows the exponential growth of cable modem growth since 1999. Today the use of cable modems stands at to 18.6 million lines, up from only 1.41 in 1999. Slide 7: DSL Price Drop (Verizon v. SBC) – Chart This vibrant competition between DSL and cable modems is what enabled the Commission to deregulate the provision of DSL without risking an increase in DSL prices. Since February of 2002, prices of DSL have dropped about 40%. Slide 8: States with FTTH Deployment – Chart Fiber to the home is also spreading in the United States. Twenty of our states have fiber to the home deployed. We expect these numbers to increase with our decision to remove most unbundling obligations for provision of fiber to the home. 2