Mobile Markets:
The US Experience
Dennis Weller
Chief Economist
Verizon
Mobile Economics
ARCEP
26 March 2007
Verizon: Profile
 Verizon Wireless
 59 million subscribers
 Verizon Telecom
 45 million lines
 7 million broadband customers:
 700,000 FiOS Internet
 189,000 FiOS TV
 Verizon Business
 Operations in 150 countries
 Serves 97% of Fortune 500
 World’s most connected IP network
2
Verizon Wireline Footprint in US
3
$7.6
$8.1
$10.5
Avg. of Fortune 10 Companies*
$6.1
$7.4
$12.9
Chevron
$6.9
$8.0
$8.5
GM
$6.0
$8.3
$7.6
AIG
Capital Expenditures (in billions)
$0
$5
$10
$15
$20 $7.3 $25
$30
$35
$40
$45
$6.8
$7.3
Ford
$4.2
$5.4
$8.0
AT&T
$12.8
$15.5
$16.3
Verizon
$5.5
$6.0
Intel $3.5
$12.5
$13.5
$15.8
Wal-Mart
$4.2
$4.6
$4.2
IBM
$12.2
$14.0
$15.6
GE
$4.0
$4.4
Avg. of 28 Dow Companies* $3.5
$12.1
$13.3
$15.2
Exxon Mobil
$3.5
$3.5
Home Depot $3.8
$6.4
$13.4
$14.6
ConocoPhillips
$3.7
Citigroup $2.7 $3.5
$7.6
$8.1
$10.5
Avg. of Fortune 10 Companies
Pfizer $3.3 $2.7 $2.2
$6.1
$7.4
$12.9
Chevron
Johnson & Johnson $1.9 $2.5 $2.7
$6.9
$8.0
$8.5
GM
Procter & Gamble $2.1 $2.2 $2.8
$6.0
$8.3
$7.6
AIG
Caterpillar $2.0 $2.4 $2.4
$6.8
$7.3
$7.3
Ford
Hewlett-Packard $2.1 $2.0 $2.5
$4.2
$5.4
$8.0
AT&T
Altria $1.8 $2.2 $2.2
$5.5
$6.0
Intel $3.5
$2.8
Alcoa
$4.2
$4.6
$4.2
IBM
Walt Disney
$4.0 McDonald's
$4.4
Avg. of 28 Dow Companies* $3.5
$3.5
$3.5
Home Depot $3.8
Merck
$3.7Boeing
Citigroup $2.7 $3.5
Pfizer $3.3 $2.7 $2.2 DuPont
Year Ending Sept./Oct.
Johnson & Johnson $1.9 $2.5 $2.7 Microsoft
2004
2005
2006
Procter & Gamble $2.1 $2.2 $2.8
3M
Caterpillar $2.0 $2.4 $2.4 Coca-Cola
Hewlett-Packard $2.1 $2.0 $2.5
$1.8
Google
$2.2Technologies
Altria $1.8 $2.2
United
$2.8
Alcoa
Honeywell
Walt Disney
American Express
McDonald's
*Excludes Verizon. Data for JPMorgan & Chase are not available.
Merck
Companies in the Dow Jones Industrial Average: 3M, AIG, Alcoa, Altria, American Express, AT&T, Boeing, Caterpillar, Citigroup, Coca-Cola,
Boeing
DuPont, Exxon Mobil, GE, GM, Hewlett-Packard,
Home Depot,
Honeywell,
IBM, Intel,&Johnson
Johnson,
JPMorgan & Chase, McDonald's,
*Excludes Verizon.
Data
for JPMorgan
Chase&Sept./Oct.
are
not available.
DuPont
Year Ending
Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon, Wal-Mart, and Walt Disney.
Microsoft
2004 Average:
2005 3M, 2006
Companies in the Dow Jones Industrial
AIG, Alcoa, Altria, American Express,
3M
Companies in the Fortune 10: Exxon Mobil, Wal-Mart, GM, Chevron, Ford, ConocoPhillips, GE, Citigroup, AIG, and IBM.
AT&T, Boeing, Caterpillar, Citigroup, Coca-Cola, DuPont, Exxon Mobil, GE, GM, Hewlett-Packard,
Coca-Cola
Home Depot, Honeywell, IBM, Intel, Johnson & Johnson, JPMorgan & Chase, McDonald's, Merck,
Sources:$1.8
Reuters data; company reports.
Google
Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon, Wal-Mart, and Walt Disney.
United Technologies
Honeywell
Companies in the Fortune 10: Exxon Mobil, Wal-Mart, GM, Chevron, Ford, ConocoPhillips, GE,
American Express
Citigroup, AIG, and IBM.
Capital Expenditures of US Companies
*Excludes Verizon. Data for JPMorgan & Chase are not available.
Sources: Reuters data; company reports.
*Excludes Verizon. Data for JPMorgan & Chase are not
4
Market Structure of US Wireless
 Verizon
 AT&T
 Sprint/Nextel
 T-Mobile
 Alltel
 Other players
 Cable consortium
 Regional carriers
5
1990s Reform of US Wireless Policies
 Increased spectrum, capacity, competition
 “Light touch” regulation
 Preemption of states
 Flexibility in technology
 Verizon, Sprint, Alltel are CDMA
 AT&T, T-Mobile are GSM
 Flexibility in use of spectrum
 Development of secondary market
 3G service without 3G license
6
Compensation for Wireless
Termination in the US Market
 A “calling party pays” system
 Local traffic from a wireline carrier pays
$0.0007 per minute for wireless termination.
 Wireless carriers have commercial
agreements to exchange traffic on a “bill and
keep” basis
 Long distance carriers do not pay to
terminate traffic on wireless carriers
7
Wireless Termination in Europe and the US
Termination rate in US cents per minute
0
5
10
15
17.09
Luxembourg
13.3
EU average
9.29
Sweden
US
20
0.07
8
Performance of US Wireless Market
 Rapid growth in subscription
 19% annual growth over last decade
 233 million subscribers
 More wireless than wireline
 Lower prices
 Flat-rated packages include nationwide calling
 Increased usage
 Average usage per wireless handset:
 832 minutes/month in US
 149 minutes/month in Europe
 More total wireless minutes in US than wireline
9
US Retail Market for Wireless
 Most offers count minutes in and out
 But some offers count only minutes out
 Flat rate offers for “buckets” of minutes
 Unlimited off-peak minutes
 Unlimited on-net minutes
 Nationwide coverage
 Most roaming is free
 “Family share” plans
 Handsets are subsidized
 Numbers are portable
 Geographic numbers from same pool as wireline
 MVNOs are common
10
Future Development and New Services
 Broadband
 Video
 Shopping
 Gaming
 Payment
 Integration between wireline and wireless
 New solutions for business
 IP
11
Growth of Wireless Broadband
High Speed Net Adds by
Type, Dec. 2005 – June 2006
 In 1H06, total high-speed
lines grew 26%, from 51.2
million to 64.6 million lines
7.9
8
7
 59% of all adds were
 From June 2005 to June
2006:
 Mobile wireless’ share
of total broadband lines
rose from 1% to 17% of
total broadband lines.
6
Millions
mobile wireless
subscriptions.
5
4
3.1
3
2.0
2
1
0.5
0
ADSL
Cable
Other Wireless
Modem Broadband
12
13
Pricing of VCAST Service
V CAST VPak $15 per Month
Unlimited Basic Video Clips
Unlimited Data Transport
News
Sports
Entertainment
Weather
Get It Now services
Access to Premium Content
Get Games**
Get Tones**
Get Wallpaper**
Get Going**
Mobile Web 2.0
VZW Today
Unlimited Browsing
• Partners include Comedy Central, MTV, News Corp,
20th Century Fox
• NBC News tailored for mobile
• Exclusive mini-episodes of popular TV shows
• More than 300 clips updated daily
14
Verizon iobi Home
IP Enabled Telephone Service
15
VerizonOne Concept
2-way Multimedia Communication
16
Access Point - Client
• iobi desktop client allows
CALL
FORWARDING
VOICE MAIL
users to manage their
communications from their PC
CALL LOGS
• Most convenient access point
from your office or home PC
CONTACTS
• Send SMS or e-mails with a
mouse click
SEND MESSGAGES
• View your weather information
17
Service Control
IM
SMS
Messaging
VM Alert
VM Retrieval
iobi
End User
Portal
Outlook
Broadsoft
Application
Server
Conferencing
And
Collaboration
Web Sharing
L1 Gateway
EPG
Addr book
Calendar
Content
Directories
PSTN/VoIP
Call Control
Internet
ISCP™
MSC
MGC
SSP
MSC
VM
SSP
TG
18
Traffic Flows Among 20,000 Autonomous
Networks on the Internet
19
Lost?
20
STM-1 IP Transit Prices in London
21
VOIP Peering
 VOIP traffic exchange:
 Some services (e.g. SKYPE) don’t use telephone numbers –
route IP to IP
 Today, services that use phone numbers (e.g. Vonage)
usually route through PSTN, even if both customers are
VOIP
 “VOIP peering” will allow VOIP to be exchanged on
an IP basis, even if phone number is used
 Data base lookup provides concordance between telephone
number and IP address of recipient
 Several systems now under development
 Depends on what service customer buys, or on agreements
among providers
22
Challenges for Future of IP Market
 Threat of regulation
 As next-generation platforms converge with Internet,
collision between Internet traffic model and traditional
regulation of voice traffic exchange
 Adding new dimensions to Internet market model





Quality
SMS
VOIP
Content
Security and privacy
23