Executive Summary

Over the last few years the US telecommunications sector has undergone fundamental transformation. Telecommunications is no longer a separate industry. It has converged with the broadcasting, broadband Internet access, mobile (wireless) and electronic equipment industries, and become one of the most competitive communications arenas in the world.

This report analyses and documents the forces behind this transformation, delivers a deep and up to date understanding of a dynamic industry undergoing change, and sets a foundation for accurate predictions about its future.

In the USA, telecommunications is no longer a separate industry. It has converged with the broadcasting, broadband Internet access, wireless and electronic equipment industries.

Players in the converged communications industry compete to deliver triple-play service bundles of voice, Internet access and TV/video content services to the customer.

Players include fixed-line carriers, cable TV operators, satellite TV operators, mobile carriers, ISPs, and new broadband technologies such as Broadband over Powerline (BPL), WiFi and WiMax.

In 1996, the Clinton administration attempted to stimulate competition by passing the 1996 Telecommunications Act, which attempted to force the Incumbent Local Exchange Carriers (ILECs) to unbundle their networks. When the Bush administration took office in 2001, government strategy reversed from intervention to a hands-off policy. The government stood back and allowed new technology, especially VoIP to take the monopolistic power over telecommunications away from the ILECs. The 1996 Telecommunications Act has been overturned, but competition has not reduced. It has intensified and is now a war between infrastructures rather than resellers.

In November 2003, the government enforced Wireless Local Number Portability (WLNP). In the USA, fixed-line and wireless numbers are interchangeable and portable. This directive not only removed barriers to competition between wireless carriers, but also between fixed-line and wireless carriers, and started the trend for young professionals to ‘cut the cord’ and substituted their landline for a wireless only connection.

Virtually all competitive barriers have been removed, and now a larger number of players compete in the same communications market.

Market consolidation

Wireline – the long distance providers AT&T and MCI have been taken over and the market is now dominated by three Regional Bell Operating Companies (RBOCs), Verizon, SBC and BellSouth;
Wireless – recent mergers and acquisitions have concentrated the wireless market into the hands of three players Verizon Wireless, Cingular and Sprint Nextel;
Cable – the cable triple play market is dominated by three MSOs, Comcast, Time Warner and Cox;
Satellite – there are two satellite DBS operators, News Corp’s DirecTV network and EchoStar’s Dish network.


Infrastructure development

Wireline – The RBOCs are spending billions to build out Fibre-to-the-Home (FttH) networks to deliver high-speed broadband to their customers to be able to compete effectively in triple-play;
Wireless – the wireless carriers are racing to build out their 3G networks and launch triple play services;
Cable – the MSOs are upgrading their networks to deliver high-speed networks to compete with the rollout of FttH by the telcos;
Satellite – the satellite networks are upgrading their networks and launching new satellites to deliver broadband Internet access and interactive TV features.


New disruptive technologies

VoIP – has entered the mainstream and transformed the telecommunications market. It has enable new players to enter the telecommunications arena from ISPs such as Vonage and AOL, to cable MSOs, and new technology that provide a broadband Internet connections such as WiFi, WiMax and BPL;
WiFi – a disruptive technology that allowed new operators into the lucrative broadband access market. In the USA, WiFi has now largely merged with the wireless carriers and become part of their cellular services;
WiMax – an emerging technology that threatens to disrupt the communications industry, wireline and wireless sectors alike. Championed by Intel, in a few years WiMax could be built in to the motherboards of all new laptop computers, much like WiFi;
BPL – Broadband over Powerline could give the powerful US power utilities access to the US communications market by building low cost communications infrastructure over the existing electrical power distribution network.
New services and electronic equipment – the convergence for all services to be delivered over broadband has created an environment of immense innovation in communications equipment and services including:

DVRs, plasma screens and home entertainment networks;
IPTV, Interactive TV, HDTV and Video on Demand (VoD);
TV over mobile and Global Positioning Systems (GPS).
In 2005, all sectors of the US communications industry related to digital technology, including telecommunications, broadcasting and broadband, will have double digit or higher growth in subscribers. Telecommunications copper wire local access lines, and analogue TV broadcasting, will decline in subscribers or have a minimal increase.

1. KEY STATISTICS
2. TELECOMMUNICATIONS MARKET OVERVIEW
2.1 Wireline market
2.2 Wireless market
2.3 Internet access market
2.4 Timeline – 1969-2005
3. REGULATORY ENVIRONMENT
3.1 Overview
3.2 Regulatory authorities
3.3 History
3.3.1 Overview
3.3.2 Telecommunications Act 1996
3.3.3 Foreign competition
3.3.4 The FCC and satellite services
3.4 Merger and acquisition activity
3.4.1 Overview
3.5 VoIP and convergence – the new environment
3.5.1 Growth of IP telephony
3.5.2 Convergence and the new competitors
3.6 Access and unbundling
3.6.1 Unbundling network access
3.6.2 RBOCs ordered to share Internet lines
3.6.3 FCC unbundled network triennial review order of 2003
3.6.4 Cable broadband services confirmed as ‘information services’
3.6.5 DSL also ruled as being an information service
3.7 Number portability
3.7.1 Toll-free numbers
3.7.2 Local number portability
3.7.3 Wireless local number portability
4. MAJOR TELCOS - STATISTICS AND ANALYSIS
4.1 US telecom industry players
4.1.1 Analysis and predictions
4.2 Industry structure – RBOCs, ILECs, CLECs and IXCs
4.3 Major players
4.3.1 AT&T Corporation
4.3.2 BellSouth Corporation
4.3.3 SBC Communications
4.3.4 Sprint Corporation
4.3.5 Qwest Communications
4.3.6 Verizon Communications
4.3.7 MCI (WorldCom)
5. INTERNET MARKET - ANALYSIS AND STATISTICS
5.1 USA vs rest of world
5.1.1 International statistics
5.1.2 USA slides in Internet leadership
5.1.3 Global leader in Internet information
5.2 USA Broadband
5.2.1 Broadband development
5.2.2 Broadband connectivity
5.3 USA Internet usage
5.3.1 Internet usage patterns and demographics
5.3.2 Web surfing
5.3.3 Web advertising and e-commerce
5.4 USA ISP market
5.5 E-mail
5.5.1 E-mail spam
5.5.2 Anti spam legislation
5.6 Instant messaging (IM)
6. VOIP MARKET - ANALYSIS AND STATISTICS
6.1 Market overview and analysis
6.1.1 Early development – 1995 - 2002
6.1.2 Cable companies enter VoIP market – 2003 - 2004
6.1.3 VoIP enters the mainstream – 2005
6.1.4 Winners and losers
6.1.5 RBOC response
6.2 VoIP market research
6.2.1 VoIP industry forecasts
6.2.2 VoIP adoption and awareness surveys
6.3 VoIP technology in the US
6.4 VoIP Government Policy and FCC regulation
6.4.1 VoIP Regulation
6.5 VoIP over the Internet
6.5.1 Overview
6.5.2 IP Telephony gateways
6.5.3 Value-added features
6.5.4 The move to hosted VoIP solutions
6.5.5 Consumer adoption of VoIP
6.6 VoIP over IP networks
6.6.1 Overview
6.6.2 Circuit-to-packet network migration
6.6.3 IP-based private networks and computer telephony integration
6.7 Major and emerging players
6.7.1 Categories
6.7.2 Alternative providers
6.7.3 Major telcos
6.7.4 Cable companies
7. BROADBAND MARKET
7.1 Cable modem and DSL
7.1.1 USA left behind in broadband development – Analysis May 2005
7.1.2 Overview and analysis
7.1.3 Market structure
7.1.4 Government assistance
7.1.5 Broadband statistics
7.1.6 Cable modems
7.1.7 Digital Subscriber Line (DSL)
7.2 Fibre-to-the-Home (FttH)
7.2.1 Overview
7.2.2 FttH network rollout
7.2.3 FttH market forecasts
7.2.4 RBOC FttH roll-out
7.2.5 Community FttH networks
7.2.6 Government policy and regulation
7.3 Wireless broadband market
7.3.1 Overview and analysis
7.3.2 WLAN (WiFi)
7.3.3 Wireless MAN (WiMAX)
7.3.4 Multipoint Distribution Service (LMDS and MMDS)
7.3.5 Satellite broadband
7.4 Broadband over Powerline (BPL)
7.4.1 Overview
7.4.2 BPL forecasts
7.4.3 BPL deployment issues and obstacles
7.4.4 BPL technology
7.4.5 BPL regulations
7.4.6 BPL deployments
7.4.7 BPL industry players
8. CONVERGENCE – TRIPLE PLAY
8.1 The triple play market
8.1.1 USA overview
8.1.2 Triple play in cable
8.1.3 Triple play in wireline
8.2 Convergence – Digital TV and Interactive TV
8.2.1 US Broadcasting market
8.2.2 Terrestrial FTA DTV
8.2.3 Cable DTV
8.2.4 Satellite DBS
8.2.5 IPTV
8.2.6 Consumer electronics
8.2.7 Regulatory issues
9. MOBILE MARKET
9.1 Overview and statistics
9.1.1 Market statistics
9.1.2 Wireless carrier statistics
9.1.3 ARPU statistics
9.2 US wireless market
9.2.1 Market consolidation
9.2.2 Market convergence
9.2.3 Market analysis
9.2.4 Market predictions
9.3 Significant market developments
9.3.1 Wireless Local Number Portability (WLNP)
9.3.2 MVNO market
9.3.3 Prepaid market
9.3.4 3G
9.3.5 WiMAX
9.4 Major operators
9.4.1 US wireless market
9.4.2 Company comparisons
9.4.3 Acquisitions and mergers
9.4.4 Major wireless operators
10. GLOSSARY OF ABBREVIATIONS


Exhibit 1 – Keystones in telecommunications – 1969 - 2005
Exhibit 2 – Significant telecom deregulation milestones – 1969 - 2005
Exhibit 3 – Spam statistics – 2004 - 2005
Exhibit 4 – Components of network convergence
Exhibit 5 – Fibre optic network build out – February 2005
Exhibit 6 – Top seven US WiFi hotspot operators – March 2005
Exhibit 7 – IEEE approved WiFi standards – March 2005
Exhibit 8 – LMDS and MMDS technologies in the USA
Exhibit 9 – BPL fast facts
Exhibit 10 – Evolution of RBOC triple play network capabilities per household - 2005 - 2008
Exhibit 11 – RBOC and DBS alliances and customer gains in 2004
Exhibit 12 – Satellite DBS HDTV programs – March 2005
Exhibit 13 – MSO cable modem value-added services – 2004
Exhibit 14 – MSO VoIP deployment – 2004
Exhibit 15 – FCC requirements for transition to digital transmission - 1998 - 2006
Exhibit 16 – Wireline and wireless carrier alignment – June 2005
Exhibit 17 – Selected US MVNOs – May 2005
Exhibit 18 – Comparison – WiMAX and 3G WCDMA HSDPA
Exhibit 19 – Major completed mergers and acquisitions – 2000 - 2005




Table 1 – Estimated US telecom, broadcasting and Internet subscribers – December 2005
Table 2 – Country statistics – 2004
Table 3 – Telephone network statistics – 2004
Table 4 – VoIP statistics – 2004
Table 5 – Internet provider statistics – 2003
Table 6 – Internet user and PC statistics – February 2005
Table 7 – Broadband statistics – 2004
Table 8 – Mobile statistics – March 2005
Table 9 – Broadcasting statistics – 2004
Table 10 – National telecommunications authorities
Table 11 – Telecom industry revenue – 2001 - 2008
Table 12 – Telecom revenue by sector – 2004
Table 13 – Revenue comparisons for major telcos – 2000 - 2004
Table 14 – AT&T financial summary (continuing operations) – 2000 - 2004
Table 15 – BellSouth revenue summary – 2000 - 2004
Table 16 – BellSouth Communications group operating statistics – 2000 - 2004
Table 17 – SBC revenue summary (continuing operations) – 2000 - 2004
Table 18 – SBC operating statistics – 2002 - 2004
Table 19 – Sprint financial summary (continuing operations) – 2000 - 2004
Table 20 – Qwest financial summary – 2000 - 2004
Table 21 – Verizon financial summary – 2000 - 2004
Table 22 – MCI revenue summary (restated for continuing operations) – 2000 - 2004
Table 23 – Top ten ranking by country for Internet users – February 2005
Table 24 – Top ten ranking by country for Internet penetration – March 2005
Table 25 – OECD countries broadband penetration – 2004 compared with 2001
Table 26 – USA broadband penetration and ranking among 30 OECD countries – 2001 - 2004
Table 27 – Top twelve ranking by country for growth of at-home Internet usage – February 2005
Table 28 – Top ten ranking by country for number of host computers – 2003
Table 29 – USA # of host computers and proportion of hosts worldwide – 1994 - 2003
Table 30 – Home Internet connection speeds – 1999 - 2005
Table 31 – At-work Internet connection speeds – 2000 - 2005
Table 32 – Internet users – 1996 - 2005
Table 33 – Internet penetration demographics – May - June 2004
Table 34 – Top ten US search engines during April 2004
Table 35 – Top six US portal Websites during April 2004
Table 36 – Top ten Website advertisers by parent company during February 2005
Table 37 – Online retail sales – 2003 - 2008
Table 38 – Number of ISPs – 1997 - 2004
Table 39 – ISP residential subscribers, market share and annual growth – March 2005
Table 40 – Annual e-mail volume – 1996 - 2007
Table 41 – Average daily e-mail volume per user by type of e-mail and account – 2004
Table 42 – Source of spam by country – 2004
Table 43 – Top 10 products pitched in spam messages in August 2004
Table 44 – Residential VoIP subscribers by operator – 2003 - 2005
Table 45 – Residential VoIP subscribers and revenue – 2003 - 2009
Table 46 – VoIP adoption survey among businesses – April 2005
Table 47 – Cost of voice packet call versus voice circuit call – 1998; 2003
Table 48 – Percentage of subscribers in local VoIP market – 2003 - 2004
Table 49 – OECD countries broadband penetration – 2004 compared with 2001
Table 50 – USA broadband penetration and ranking among 30 OECD countries – 2001 - 2004
Table 51 – Broadband subscriber growth – 1999 - 2004
Table 52 – Broadband subscribers by technology – 2000 - 2004
Table 53 – High-speed lines by type of provider – June 2004
Table 54 – Top 20 broadband Internet providers – 2004
Table 55 – Cable TV and cable broadband subscriber growth – 2004
Table 56 – Cable modem subscribers and annual change – 1998 - 2004
Table 57 – Cable modem subscribers for the top 10 providers – 2002 - 2004
Table 58 – DSL subscribers by major carrier – 2002 - 2004
Table 59 – DSL subscribers and annual change – 1999 - 2004
Table 60 – ADSL subscribers by type of provider – June 2004
Table 61 – Projected rollout of fibre networks (FttH and FttN) – 2005 - 2010
Table 62 – Public WiFi hotspots – top 10 countries, cities and location types – March 2005
Table 63 – Comparison – WiMAX and 3G UMTS
Table 64 – Costs of spectrum and equipment – WiMAX versus LMDS
Table 65 – Top 10 Wireless Internet Service Providers – May 2005
Table 66 – BPL lines and revenue forecasts – 2003 - 2006
Table 67 – Triple Play households in USA – 2005, 2010, 2015
Table 68 – Growth of digital subscribers and cable broadband – 2004
Table 69 – Uptake of cable VoIP – 2003 - 2008
Table 70 – Broadband subscribers – cable vs DSL – 2004
Table 71 – Projected rollout of fibre networks (FttH and FttN) – 2005 - 2010
Table 72 – Broadcasting coverage and subscribers – 2004
Table 73 – HDTV adoption – 2008 forecast
Table 74 – Homes passed by cable HDTV service – 2002 - 2004
Table 75 – Seven national FTA broadcasters – 2004
Table 76 – Terrestrial DTV coverage – February 2004
Table 77 – Cable network coverage – December 2004
Table 78 – Digital cable subscribers – December 2004
Table 79 – CAPEX in cable infrastructure upgrades – 1996 - 2005
Table 80 – Cable broadband availability, DTV and broadband subscribers – 1999 - 2005
Table 81 – Bundled MSO packages – September 2004
Table 82 – Cable MSOs ranked by subscribers and market share – 2004
Table 83 – MSO deployment of DVR service – 2004
Table 84 – MSO residential VoIP subscribers – 2003 - 2005
Table 85 – Ratings of cable TV vs national FTA programs – 1992 - 2003
Table 86 – Satellite DBS subscribers by network – 2000 - 2006
Table 87 – DBS/RBOC partnership customer gains – 2004
Table 88 – Digital TV sets and display sales to dealers – 1999 - 2004
Table 89 – DVR sales to dealers – 2003 - 2004
Table 90 – Wireless market statistics – March 2005
Table 91 – Wireless subscriber growth – 1994 - 2005
Table 92 – Wireless market – revenue, roamer revenue, ARPU and employees – 1994 - 2004
Table 93 – Number of cell sites – 1994 - 2004
Table 94 – Wireless customers by operator – 2001 - 2005
Table 95 – Wireless subscriber market share and annual growth by operator – March 2005
Table 96 – Annualised revenue and ARPU of selected operators – 2004
Table 97 – Average local monthly bill and average local call length – 1995 - 2004
Table 98 – Prepaid subscriber growth – 2004 - 2005
Table 99 – Prepaid subscriber growth by quarter – 2003 - 2005
Table 100 – Revenue comparisons for major carriers – 2000 - 2005
Table 101 – Wireless customer comparisons for major operators – 2000 - 2005
Table 102 – Major acquisition and merger agreements – 1998 - 2005
Table 103 – Alltel financial summary – 2000 - 2005
Table 104 – Alltel wireless operating statistics – 2000 - 2005
Table 105 – Cingular financial summary – 2000 - 2005
Table 106 – Cingular operating data – 2000 - 2005
Table 107 – Sprint financial summary – 2000 - 2005
Table 108 – Sprint wireless operating data – 2000 - 2005
Table 109 – Nextel financial summary – 2000 - 2004
Table 110 – Nextel operating statistics – 2000 - 2005
Table 111 – T-Mobile revenue – 2000 - 2005
Table 112 – T-Mobile operating statistics – 2001 - 2005
Table 113 – Cellular financial summary – 2000 - 2005
Table 114 – Cellular operating statistics – 2000 - 2005
Table 115 – Verizon revenue – 2000 - 2005
Table 116 – Verizon domestic wireless customers – 2000 - 2005
Table 117 – International operating statistics – December 2004