1

FTTH Developmentin Hong Kong

17 June 2009

2

The Fixed Line Liberalization History

•Close to 14 years•Free market approach•Three new entrant licenses granted in

1995•HKBN is the second batch of new entrant,

with license granted in 2000

3

The Model

•The Government Strategies–Light-handed approach–No pre-set limit on the number of licensees–No Government support

•The result–Only facility-based operator could survive. No

successful case on service-based operator (includingSONET)

–All operators survived are fully integrated one (ie.NetCo + OpCo + RSP)

4

The Survivors

5

HKBN –the only end-to-end NGN Provider

•The otheralternative networkoperator relies onleasing the cablefrom the incumbent(called Type IIInterconnection) toprovide the service,but HKBN does not

•We provide the end-to-end connectionby our own facilitiesfor all customers

HGC Fibre

PCCW Copper

HGC Exchange

NWT Exchange PCCW Exchange

HKBN Exchange

HKBN Fibre

NWT Fibre

BuildingMDF Room

PCCWTelephonyWire-line

Type II Interconnection atIn-building Level(Still available)

Type II Interconnection at Telephone ExchangeLevel (Phased out since 30 June 2008)

HKBN Fibre /Cat-5 Data Cable

6

FTTH Development in Hong Kong

•According to FTTHCouncil, the FTTH /FTTB+LANhouseholdpenetration in HongKong is around 30%

•There are around2,300,000 householdsin Hong Kong

•HKBN has around800,000 number ofsubscribers

7

Our Network at a Glance

•The second largestalternative network

•The whole networkwas built without anyGovernment support

•Two types oftechnologies–FTTB + LAN–FTTH (GPON)

1,500 –2,000active

buildings

1,000buildingsCorporate

2.3 millionhouseholds

1.5 millionhouseholdsResidential

The MarketSize

HKBN(Feb 2009)

NetworkCoverage

8

Do we need high bandwidth connection?

FibreHome1000

FibreHome200

FibreHome100

Metro-EthernetService

GPON Service

Not Applicable

50% of ourcustomersdemanding speednot able toprovided by thelegacy network

9

Do we need upstream bandwidth?

The Traffic Profile of HKBN’sfive 10G links to HKIX

Upstream Traffic

Downstream Traffic

10

Our Subscriber Growth

0

50

100

150

200

250

300

350

IPTV VoIP Broadband Access

Aug 2008 Mar 2009

Tho

usan

dS

ubsc

riber

s

11

The Falling PCCW Price

12

Raising HKBN Broadband Blended ARPU*

Rising ARPU + Subscription Growthis evidence of FTTX advantage

Note: * For exit acquisition and contract renewal

113123

148

175 175 177191 196

0

50

100

150

200

250

2H FY05 1H FY06 2H FY06 1H FY07 2H FY07 1H FY08 2H FY08 1H FY09

To

talB

road

ban

dB

len

ded

Ave

rag

e(H

K$/

Mo

nth

)

13

Our Underground Fibre Network

14

The High Rise Buildings in Hong Kong

•The local loop isnot the last milein Hong Kong

•The in-buildingnetwork is theactual “last mile”

•HKBN has builtour own in-building network

15

Our Superior In-Building Blockwiring

• Proper control oncable length

• Meet GigabitEthernet(1,000Mbps)standard

• SymmetricConnection

G/F1/F2/F3/F4/F5/F6/F7/F8/F9/F

10/F11/F12/F13/F14/F15/F16/F17/F18/F19/F20/F21/F22/F23/F24/F25/F26/F27/F28/F29/F30/F31/F32/F33/F34/F35/F36/F37/F38/F39/FR/F

FDF

FDF

SB

SB

SB

SB

40S

tore

ys(1

32m

etre

s)

16

Our FTTH (GPON) Deployment

•FTTH (GPON) wasintroduced sincemid 2007

•Update As of Jan2009–345,000

households and135 non-residentialbuildings

–Around 5,000customersconnected

In-Building Deployment(Splitter inside the FibrePanel)

17

Our Big Hairy Audacious Goal

• We built ournetwork fromscratch to 1 millionhouseholdscoverage within 32months after thegrant of license

• We are now thesecond largest inHong Kong

• We will repeat themiracle to be thenumber one by2016 0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Aug1999

Aug2001

Aug2003

Aug2005

Aug2007

May2009N

etw

ork

Cov

erag

e(N

umbe

rofT

hous

and

Hou

seho

lds)

18

Thank You