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Connecting All Americans Link Hoewing

VP, Internet and Technology PolicyJuly 15, 2007

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Broadband Penetration Rankings – By Household

EU25: 39% Internet, 23% Broadband

US50: 70% Internet, 42% BroadbandSource: Pew Internet & American Life Project, “Home

Broadband Adoption 2006”, May 28, 2006

Source: European Commission, “E-Communications Household Survey”, July 2006

State Data Source: Render Vanderslice & Associates, September 2006

Key Takeaways:• US Internet & Broadband

Adoption Significantly Higher than EU Overall

• Internet US 70% vs. EU 39%• Broadband US 42% vs. EU 23%

• On a state-by-state basis:• The most penetrated US states

compare favorably with the most penetrated EU countries (US States would be 8 of the top 10)

• The least penetrated US states are above the EU average (23%).

Bottom 3 US StatesTop 3 US States

Page Page 22

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Platform Competition – Lacking in Europe

Country Total

country DSL lines

Cable Internet broadband

connections (total)

Total Other BB infrast. (FttH, Sat., WLL, other)

Belgium 1,351,482 630,000  0

France 10,219,301 600,000  0

Germany 11,305,352 284,250  76,600

Italy 7,038,612 0  343,000

Netherlands 2,727,121 1,550,000  63,000

UK 8,173,113 2,870,354  8,500

Europe Total / Average 40,757,959 5,934,604 491,100 

The majority of European markets have a small non-DSL infrastructure, and cable penetration – particularly – for most of Europe is at less than 21%.

Unbundling of DSL throughout the EU is, in large part, to compensate for a lack of platform competition.

European Competitive Telecom Association (ECTA), ‘Scorecard’ 1st quarter 2006.

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Record Year for BB Growth

20 largest cable and telco providers in the U.S. combined added over 10.2 million new BB subscribers in 2006

For 2006, Verizon added 1.8 million new BB subscribers

These providers now serve over 53.3 million BB subscribers, with cable controlling ~55%

Source: Leichtman Research Group

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Broadband penetration in the U.S., 2000-2007

Home Broadband & Dial-Up Penetration (% of adult Americans)

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Broadband Dial Up

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Today’s U.S. Broadband Market is Highly Competitive

Most households can get broadband:

82% DSL

94% Cable

50,000 WiFi Hotspots exist nationwide

Broadband over powerline now competing in dozens of locations

The percent of households subscribing to broadband has exploded:

More than 50% of all homes have broadband

Carriers are offering lower entry prices for their broadband services:

Verizon offers $14.95 DSL

Carriers are improving the high-speed options available to customers:

Verizon FiOS 50 Mbps

Cablevision 16 Mbps

Mobile carriers have introduced new services and networks:

EVDO (700 kbps average speed) available to 255 million Americans

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Customer Time Spent in Selected Forms of Electronic Communication

33%

16%

9%

9% 2%

31%

Traditional Phone Talk

Cell Phone Talk

Using IM on PC

Sending Email

Texting on Cell Phone

VoIP Cable or B'band

Consumers daily total use is 5.25 hours! Multitasking plays a role. No one form

dominates.

Sources: (1) “Multitasking Drives Consumer Consumption of Media”, Yankee Group, Jan 26, 2007, Exhibit 1 "Average Media Consumption (Hours per workday) in the United States… " (excerpts) (2) Households in US, 2005 - www.census.gov/population/socdemo/hh-fam/hh1.xls (shows 113M HH in 2006) (3) “The VoIP Evolution Continues: Forecasting Broadband VoIP and Cable Telephony”, Yankee Group, Aug 2006, Exhibit 3 shows 8.5M VoIP HHs (4) “Worldwide Email Usage 2005-2009 Forecast”, IDC, Dec 2005, Table 15 North American and Worldwide Average Daily Person to Person Email Messages Sent – shows 11.97 person to person emails sent. (5) “Daily Internet Activities”, www.pewinternet.org/trends/Daily_Internet_Activities_1.11.07.htm shows 93M Adults use the Internet on any given day.

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Verizon’s Broadband Strategy Includes . . .

Fiber-to-the-premises (FTTP) Next generation network technology 9 million homes passed by end of 2007 5/2 Mbps; 15/2 Mbps; 30/5 Mbps; 50/5 Mbps (in some markets) –

Advancing now to GPON and potentially 100s of megabytes to homes

DSL Continue to deploy as ubiquitous data network Speeds of 768 kbps and 3 megabytes available Deployed to over 80 percent of all our customers

Wireless 3G deployed today 255 million Americans (5/6s) can access today Up to 700 kbps on average available EVDO Rev A now being deployed in dozens of cities with upload

speeds in particular several times higher than current EVDO Moving toward 4G - other wireless technologies (WiMax) in trials

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Verizon FiOS Strategy

FTTH/FTTP Update – April 1, 2007

FiOS – began in 2005 – an all-digital fibre-optic network that extends to the customers’ premises (FTTH / FTTP)

- FiOS TV – now offered in 400 cities to over 3.5 million customers

- “Triple play” – also supports voice and high-speed Internet at up to 100/10 Mbps in more than 1,600 cities in 16 states

- More capacity for digital & HDTV, and unparalleled IP bandwidth for on-demand & niche programming

- Unprecedented interactivity to support new business opportunities in voice, data, video, conferencing, etc.

2Q’07 Deployment Status:

Over 7 M premises passed

1 M FiOS high speed customers

350,000 plus FiOS TV customers

Nearly 1 million TV customers in total (satellite/FiOS)

2007 Deployment Objectives:

Pass 9M premises passed

2010 Deployment Objectives

Pass 18M premises by 2010

What is Verizon Doing?

Page Page 99

Verizon CapEx spending on FiOS will total of $23 billion by

2010

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Percent of Residents with No Choice inInternet Service

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Source: Pew Internet and Society Project

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Connect Kentucky – the Model

Private-public partnership managed by a non-profit organization Trust, reliance on private sector wherever possible

Focus on BOTH supply and demand – build it and they will come not enough

Must find out where the “holes” are where broadband is not – mapping Work with companies to get data – strong non-disclosure agreement and non-profit

not subject to FOIA Develop effective GIS mapping system

Continuously report progress to political leaders

Create eCommunity leadership teams Teams consist of local members from nine different groups (listed in next slide) Conduct economic and business analysis

Promote deployment – focused on private players first Aggregated demand and market analysis developed through eCommunity work Private players may decline and if so, other options – including RUS loans working

with local governments – are used

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Connect Kentucky - Mapping

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The Connect Kentucky Model Works

Kentucky went from among the bottom states on deployment to one of the top five

Kentucky will be at 100% deployment by year’s end

Kentucky has reached 42% penetration of broadband

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Connect Kentucky Model Produces Results

U. S. model – platform competition, remove constraints on investment – has worked and is working

Mapping is important but it alone does not produce results In fact it can be harmful if not linked to effective programs focused on

encouraging deployment and use

Non-profit led, private-public partnership is results focused Community based with objective to “fill the holes”

Data comes in many formats – gathering it and effectively teasing out key conclusions is not easy GIS systems are almost rocket science

Focusing on the demand/uptake side of the equation is critical too

Connect Kentucky results speak for themselves