Elevate Certifiable Geniuses | Business Plan

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Elevate Certifiable Geniuses | Business Plan

Elevate Certifiable Geniuses | Business Plan

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  • 1. © 2013 Elevate, Inc. All Rights Reserved 1
  • 2. Executive Summary Elevate provides cloud-based broadband, voice, entertainment, mobile, and monitored security services for residential and business consumers through a proprietary direct service business model. Since our inception, we have built our brand around one simple concept; providing cloud based digital subscription services to residential and business consumers through a vast network of independent distributors. Our proprietary distribution model leverages a highly trained, independent workforce motivated to acquire new customers to earn commissions and personally deliver astonishing long-term customer experiences to earn an ongoing residual commission. This network of entrepreneurial-minded people are trained to develop and maintain one-to-one, long-term, personal relationships with each customer. We call them The Elevate Certifiable Genius. A Certifiable Genius becomes the go-to-guy for all things technology. Each customer relationship begins with a personalized, in-home meeting. An Elevate architect, working with an Elevate Certifiable Genius, designs the perfect solution to meet budget requirements and digital lifestyle needs using a proprietary diagnostic tool we call The Drawing Board. We save our customers up to 35% off their current monthly spend. We are able to deliver higher levels of service at reduced rates in part because of substantially lower customer acquisition costs and low overhead. At Elevate we offer a career opportunity in direct sales and service for highly motivated individuals who care about people first. Entering a career with Elevate requires drive, passion for service and technology, and personal integrity. We provide the tools for affiliates to succeed. Advanced training and certifications and continuing education programs combined with the latest technology and unmatched support make it possible for an Elevate Certifiable Genius to build and maintain a profitable book of business. We are the first in the industry to enable a highly-motivated individual to build a successful business with a clearly defined exit strategy without the high cost of a start-up, franchise or dealership. Our Core Business Customer experience combined with reliable technology is our core business. Technology continues to evolve while the customer experiences with technology has retreated. Today consumers depend more and more on reliable network connections and a broad range of applications to save money,andsimplify and manage their lives. Demand for broadband services is expected to triple every year for the next twenty years. Smart devices and applications are being developed to simplify life, reduce energy waste,optimize consumption, provide broad entertainment choices and increase security. Elevate provides a smart alternative to major service providers. We offer affordable solutions and simpledevices encompassed, for the first time, by a direct one-to-one relationship with a qualified expert. For decades the evolution of technology has been the key business driver for major network service providers. They have continued to escalate investments in technology and infrastructure while dramatically cutting budgets for customer care. The result is a gap between the subscriber and provider, leaving the consumer frustrated and willing to abandon the relationship. Elevate is filling this void by putting local, highly-trained people on the frontline. Our distributors are motivated to deliver a great customer experience by the industry’s only recurring commission plan. We are exploiting our competitor’s oversight of the customer experience by simply building a personal relationship with each subscriber. Cutting costs, through outsourcing the most critical component for customer retention, has been the mantra for more than two decades in the digital services industry. Elevate is reversing the trend. Our position is building loyalty versus locking customers into onerous contracts and hidden services fees. This is our strategy for winning the hearts and minds of the consumer. Elevate is pioneering a new standard founded upon one simple idea: make every subscriber count. We leverage best-in-class network services through strategic partnerships with the world’s leading network infrastructure companies. We operate a 100% cloud-based provisioning system enabling us to connect our © 2013 Elevate, Inc. All Rights Reserved 2
  • 3. customers to the fastest networks, most reliable IP and mobile communication platforms, and the most advanced emergency response monitoring centers. We have designed and built a proprietary platform enabling us to create and manage mutually profitable, high-touch customer relationships. Our direct service business model results in the highest customer retention rates and the lowest customer acquisition costs in the industry. While our competitors invest in getting the consumers attention, we invest in paying attention to the consumer. The average customer acquisition cost is in excess of $1500 per subscriber. At Elevate our average is less than $700. Our manufacturing partners have discovered methods to save as well. Our equipment delivers reliable connections and long-term performance at dramatically lower costs. Our competitors are forced to subsidize equipment costs to cover high manufacturing costs, sales commissions, and advertising spend. At Elevate we invest these dollars directly in our distributors and customers. The result is a happy customer and a team of motivated individuals committed to keep them that way. At Elevate, our people powered network enables us to be nimble enough to respond to market demands and frugal enough to deliver a low cost alternative and the industry’s only high-touch experience. Our History We started out serving young, ethnically diverse customers in households making less than $50,000 a year. We were among the first to offer a diverse portfolio of products and services that were attainable across the socioeconomic spectrum. Recently, we’ve expanded our focus to include value-conscious customers at all income levels as well as medium to small businesses. As we’ve grown, our team has expanded as well while maintaining aa common respect for each other, and a passion for the individual consumers we serve. Today Elevate is a nationwide, carrier-class provider with an expanding footprint, covering nearly 60 million households and millions of businesses across the United States. We are expanding in 2016 with a planned roll out of services in Europe and the South Pacific. With a diverse product portfolio and expanding international distribution, we are transforming our business, brand, operations and culture to offer customers value innovation like never before. We are leveraging our industry-leading cost structure to introduce lower-priced, higher-value service plans. We are pioneering affordable mobile broadband access with unlimited, all-inclusive service plans. We offer pricing flexibility that allows customers to pick and choose products and services tailored to their budgets and digital lifestyle requirements. Today we are working to connect subscribers to a robust hybrid 3G and 4G network that covers nearly 95 million potential customers, and we supplement that network with roaming agreements that provide high-quality coverage for nearly 95% of the U.S. population. Our best-in-class security, surveillance and automation suite offers affordable, reliable and flexible solutions. Elevate was founded in 2008 by Wright W. Thurston as a privately held company. During the first three years the company was focused on product development and building sustainable long-term partnerships with infrastructure and equipment providers. We perfected and fine-tuned our direct service business model and developed our nationwide recruiting and training programs. We completed the design and development of a unified training and certification process for our independent Certifiable Genius network. This process includes a comprehensive continuing education program designed to keep our people on the leading edge of evolutionary technology. We designed and deployed an enterprise resource management platform that includes real-time subscriber provisioning and billing, as well as vast integration projects with each of our strategic partners. We developed a nationwide logistics and scheduling system enabling us to keep our industry leading commitment to same day installations. During the early years we appointed Benjamin Ward Chief Sales Officer to head business development and sales. Mr. Ward was joined by Jordan Folsom as Vice President of the Certifiable Genius Network. Together they have deployed field sales operations in five strategic markets including Miami, Orlando, Phoenix, Los Angeles and San Diego. © 2013 Elevate, Inc. All Rights Reserved 3
  • 4. In March 2011 webegan the acquisition process of Zipadi Technologies, LLC., a multi-tenant, cloud-based application development framework and software-as-a-service platform to enhance our business-to-business product offering. In March of 2011 we completed a reverse triangular merger with Highland Business Services, Inc., making us a small cap publicly traded company on the OTC under the symbol HGLB. In August 2011 we expanded our leadership team appointing Kathy Roberts (CEO of Sante Fe Trust and former head of Discover Bank) to our Board of Directors. We created an Advisory Board adding industry experts Peter Ford (Orange Telecom, Light Squared), Peter Cannistra (Sprint, Clearwire), Donald Sutherland (Cold Stone Creamery, Divine Nature), and John Norton (Rent.com, Norton Enterprises) to provide our management team with clear objectives, technology insight and to assist in the development of deeper relationships with strategic partners. In October 2011 the company held it’s annual shareholders meeting with a unanimous vote to install the Board of Directors and a vote of confidence in the current management team. A motion to change the name of the company to Elevate, Inc. and make an application to change the company’s trading symbol to ELEV was passed and ratified. We believe our current trajectory predicts meeting the qualitative requirements to make application for listing on the American Stock Exchange or NASDAQ early in 2015. We are in the process of evaluating our options and we estimate making application in the first or second quarter of 2015. In October of 2011 our application for name change was finalized, making our trading symbol ELEV.OB. Elevate made a strategic decision in 2011 to operate as a public company in order to accelerate growth, maintain capital efficiency and develop a vehicle for monetizing assets and deliver bottom-line results and shareholder value. Our financial strategy includes a comprehensive asset management model backed-up by a sustainability plan allowing us to create and manage cash flow by monetizing assets through existing secondary markets. Elevate currently operates three independent business units and five wholly-owned subsidiaries. Our steadfast commitment to cost leadership and to mutually profitable, one-to-one relationships has driven our growth as a company, and it continues to motivate us at every level of our organization. Elevate employees and independent representatives work the way our customers live. We scrimp and save, so they can enjoy the best value on our products and services. We fine-tune our networks, so that they can enjoy unmatched services at industry-leading prices. We optimize every piece of hardware to maximize network performance and minimize capital expense – so that our customers can enjoy more value. When it comes to thinking big, no detail is too small – like sending bills by email to save paper. At Elevate we seek innovative thought leadership at every level to ensure the very best customer experience, we have developed a number of firsts such as our offer to pay customers by the hour for time spent on any customer support call lasting more than five minutes or our unprecedented customer rewards program that pays to tell to your neighbor about your Elevate experience. We expect our customers to expect more. Elevate is about finding new ways to offer people higher value, lower cost and meeting every single need by getting to know our subscribers personally and anticipating what they are going to want and need tomorrow. © 2013 Elevate, Inc. All Rights Reserved 4
  • 5. Our Business Elevate is bringing it all together for our customers, from revolutionary smart devices to next-generation entertainment services and sophisticated solutions medium and small businesses. Our diverse product portfolio includes fixed and mobile voice and broadband, security and automation together with a collection of software applications which are designed to maximize network services, save money and simply life. Since our inception, we have consistently provided innovative, reliable, high-quality products and services bundled with a unique one-to-one personal relationship with every customer. Today, our mission is to help our customers get more for less by enhancing their digital lifestyle, everywhere they live and work, and do it better than anyone else. We’re fulfilling this vision by creating new solutions for consumers and businesses and by developing a network of highly-trained, motivated professionals who care about every customer experience. Elevate is emerging as one of the leading providers of cloud-based digital services. We connect our customers to the nation’s fastest broadband networks equal to that of any U.S. carrier. Our digital services network covers nearly 90% of the households in the U.S. And we’re making huge advances in the entertainment and communications industry. For example, we’ve expanded our entertainment offerings to include television services such as Dish Network and DirecTV. It’s part of our core strategy to deliver the most popular subscriber services where people rely on them most — the mobile device, the computer and the television. As we continue to break new ground and deliver new solutions, we’re focused on delivering the high-quality customer service that is our heritage. Key Facts We are the first company to offer a complete integrated solution which offers voice, video, data, security and automation from a single provider. Elevate is pioneering same-day installations and account activations. We developed a proprietary logistics and field management system which enables us to deliver on this promise 90% of the time. Elevate operates a carrier-class Voice Over Internet Protocol (VoIP) switch offering fixed voice service anywhere a broadband connection is available. Elevate operates a virtual network and cloud-based provisioning and billing platform which is fully integrated with strategic partners enabling us to activate and bill customers efficiently and at a lower cost. We are the first to offer a one-to-one, long-term relationship with a dedicated expert at no additional cost. The first to offer a subscription based unlimited on-demand and on site technical service plan. Through strategic partnerships we are able to offer connections to the world’s most advanced and powerful global backbone networks, carrying 23.7 petabytes of data traffic on an average business day to nearly every continent and country, with up to 99.999 percent reliability. We offer nationwide IP-based communications services for residential consumers and businesses, with an extensive portfolio of Virtual Private Network (VPN), Voice over IP (VoIP) and other offerings—all backed by innovative security and customer support capabilities. © 2013 Elevate, Inc. All Rights Reserved 5
  • 6. Our Subscription Services Elevate owns and operates a cloud-based delivery and provisioning platform enabling us to deliver the fastest and most reliable digital services throughout North America. Through interconnect and wholesale agreements with global, national and regional carriers, Elevate is able to provision, manage, bill and deliver broadband Internet and VoIP services to residential subscribers and small business in major US markets with growing coverage in rural and smaller metro areas. Elevate operates a nationwide subscription-based monitored security and surveillance service throughout North America. Elevate is also an authorized reseller for the nation’s leading satellite entertainment companies. We offer subscription services for satellite TV and Radio. Elevate Digital Services Elevate Broadband Elevate provides high speed Internet access over cable, DSL, Fiber or terrestrial wireless 4G networks through interconnect agreements with national carriers. By establishing partnerships with multiple carriers, Elevate is able to provide overlapping coverage, or coverage through multiple technologies in any given area. Elevate Broadband Internet access is available at many different bandwidth levels and pricing to accommodate a wide residential and commercial market. Elevate Digital Voice Elevate digital voice is available in residential and commercial packages with both national and international rate plans. Elevate commercial digital voice is separately branded as Foxee Phone, as is packaged with business class communications and customer management software, including CRM and CMS software and eMarketing applications. Elevate Mobile Elevate leverages leading cellular network providers’ existing infrastructure to provide all inclusive, unlimited data and voice plans to its customers. Elevate’s mobile partner provides technical support. Elevate Security Elevate sells and services state-of-the-art home and business security alarm hardware, and provides 24 hour home protection through centralized national monitoring centers. Elevate Security systems utilize premium two-way cellular connection technology and integrated alarm panels as standard equipment. © 2013 Elevate, Inc. All Rights Reserved 6
  • 7. Elevate Energy Elevate Control systems integrate with Elevate Security systems for maximum efficiency and limited installation cost. Elevate Energy systems monitor and regulate energy consumption by controlling air temperature, lighting, water temperature and other environmental factors. Elevate Energy also monitors and regulates access to audio/visual systems, communications systems and physical locations within the home (such as medicine cabinets or chemical cabinets) and has recently added additional green energy technology such as surge protectors and energy efficient lightbulbs. Nerd Alert Elevate customers enjoy in-person, on-demand IT and technical support whenever they need it through Nerd Alert. Elevate Nerds are dispatched to a customer’s home to perform installation, configuration, or recovery services on a wide array of consumer electronics, software, and computer hardware. Customers are able to purchase Nerd Service on a one-time basis or on a subscription basis for a substantial discount. Elevate Genius Rewards Program Elevate distributors and customers can enjoy a rewards network that truly gives back. Combining nationwide discounts with a local rewards program similar to Groupon, participants also receive one-on-one Genius tech support, travel discounts and medical consultations live via webcam or phone without the cost of deductables or co-pays. mobile mobile © 2013 Elevate, Inc. All Rights Reserved 7
  • 8. Our Products Grae Elevate Grae is an Android-based handheld control and automation console that serves to integrate all Elevate services through a single user interface. Through Grae, Elevate customers can configure, maintain and otherwise control all aspects of their Elevate services, from arming an alarm system, to paying a bill, to uploading and installing new digital phone software features. Foxee Elevate brings its commercial-grade digital phone product to market through the sub-brand Foxee. Foxee incorporates the rich feature set of Elevate’s home digital phone offering into a robust customer communication platform that includes eMarketing, CRM and CMS applications. Zipadi Elevate operational systems utilize Zipadi technology to create device-nonspecific software applications for the Certifiable Genius and Nerd networks. Commercial customers can license Zipadi software to create their own rich media applications for the mobile and smart device hardware set. Operating Business Units Elevate Residential Elevate services are configured for either residential or commercial markets based on factors such as volume, support level, engagement and consultative pricing and regular rate scheduling. In some cases, Elevate residential services are augmented by commercial only software applications (as in the case of Foxee Phones). Elevate Consumer Products Elevate Consumer Products offers a wide array of smart devices and hardware. Elevate Grae is a Android tablet device which will offer a complete integrated smart system for homes and small businesses. This multi-function device will become the centerpiece of the Elevate digital services offering. Elevate Consumer products is also the research and development division at Elevate. Our development teams are working on a full line of consumer and business applications which will enhance our overall offering. Elevate Small Enterprise Elevate goes to market in the small business space with a combined digital phone and customer communications platform, commercial grade security alarm and facility control systems, and large bandwidth Internet access packages. Elevate offers continuous technical and application support and account management services through commercial divisions within the Nerd and Genius reseller networks. Elevate Infrastructure Elevate Infrastructure is a low voltage design, engineering and consulting practice. Elevate Infrastructure provides large scale design and integration services for commercial, light industrial, multi-family and enterprise applications. We offer complete systems integration for networking, security and surveillance, fire detection and suppression systems. Our current list of customers include large commercial contractors, national production home builders, hospitality developers and medical facilities developers. We have established relationships with notable brands including Diebold, Microsoft, and Linq360. Elevate Advanced Technical Services Elevate operates a growing nationwide network of independent professional installers who exclusively install and service Elevate systems and hardware. We currently offer licensed and authorized technicians in five major US markets. Elevate Certifiable Genius Network At the center of every customer engagement is The Elevate Certifiable Genius. Unlike other providers, who rely on impersonal sales and outsourced support agents, Elevate is sold and supported exclusively by an independent local professional who is capable of handling all support questions and technical issues. An Elevate Certifiable Genius develops and cultivates a long-term relationship with every single subscriber. The Elevate Certifiable Genius Network consists of a proprietary training and certification system and © 2013 Elevate, Inc. All Rights Reserved 8
  • 9. a continuing education program designed to ensure our people are always up to speed on the latest advancements in technology and their respective use cases. Elevate subscribers purchase from an Elevate Certifiable Genius. The relationship begins with an in-person needs analysis to ensure that we understand and deliver exactly what each customer needs to get the most out of their digital services. The relationship continues as the Certifiable Genius provides on-going support and personalized training on every product or service sold. When a subscriber needs help, the Certifiable Genius becomes the go-to-guy for all support questions. An Elevate Certifiable Genius is an independent business owner who represents exclusively the Elevate brand. He/she cultivate one-to-one personal relationships and manage their own book of business. They receive marketing and sales support, training and ongoing subscriber support from Elevate. An Elevate Certifiable Genius becomes an integral and permanent fixture for every subscriber. Our Brands Opportunity Traditionally service providers, including the industry giants, have grappled with their inability to maintain customer loyalty. We believe this is due to a lack of attention to the most fundamental aspect of loyaltyservice. As competing technologies reach parity in terms of performance and consumer perception, or as other competing carriers offer the same technology at a lower price, technology becomes moot. Customers will always abandon when the only differentiator is price. As a result carriers are forced to make huge investments in infrastructure and technology advancements while having to increase expensive advertising to remain relevant. The result is very little to provide attention to the customer. While increasing margins by outsourcing customer care and implementing hidden below the line charges may seem like a good idea, we believe it provides the opportunity to do better. At Elevate we call it “The Give a Crap Gap.” © 2013 Elevate, Inc. All Rights Reserved 9
  • 10. The Give a Crap Gap Service Gap – Traditional providers do not understand the needs or wants of their consumer. Customer acquisition and not customer loyalty is the primary focus. 57% of broadband customers report dissatisfaction with their service, and 84% of those that switch report that poor customer service was the primary cause. Experience Gap – The typical service professional in the digital services space is just skilled enough to operate a cash register or billing interface. Outsourced customer care and customer relationship management has lead to over-specialization in customer service - making it impossible for a single service person to have all the skills and authority to actually do anything constructive for a customer with a problem. Technology Gap – Technological advancement is outpacing most consumers’ ability to understand the differences between what they have now and what will be available in stores next, beyond simply the hope that ‘it will be better, faster, etc’. The net result is a gap between what consumers understand a service or product to provide, and what the product or service actually does. Consumers end up paying for technology that does not meet their needs. Pricing Gap – As technology-driven, and not service-driven, offerings become homogenous, pricing becomes more and more competitive. Providers who are eager to maintain margins and ensure future cash flows seek to lock consumers in to contracts through product bundling and similar strategies. Inevitably, such strategies simply serve to further frustrate consumers. Market Opportunity Large Addressable Market Opportunity – Elevate reaches a market of over 150 million potential customers in the United States. High Demand Opportunity – Demand for broadband is predicted to double every year for the next ten years. Socioeconomic Opportunity – Elevate offers products and services positioned to reach across the socioeconomic landscape. Residential Market Opportunity – Elevate reaches more than 80 million households in its target markets SMB Market Opportunity – Elevate has developed a line-up of unique products aimed to serve the SMB market. Currently we are positioned to approach more than 5 million SMB’s in our existing coverage areas Enterprise Market Opportunity – Elevate for Enterprise is a collection of Enterprise services and software offered exclusively by Elevate. Strategic Advantages Operational Advantage – Carrier class interconnect agreements make the Elevate network the largest hybrid 3G/4G network in the United States. Multiple agreements allow Elevate to transcend facilities based infrastructures to provide custom tailored products packages that are not limited to a single network. Competitive Advantage – Major service providers are not creating a relationship. Their relationship with the customer is based entirely on technology and price. Elevate products are sold and serviced through a direct service model leveraging aggressive and experienced local, independent owners that can build and cultivate one-on-one customer relationships. While others create long term customers through “locked in” contracts, we focus on building long term loyalty through personalized service. High Growth Low Cost Advantage – Demand for wireless broadband and cloud-based network services is projected to grow by more than 85% in the next five years. Informa predicts that by 2014, 30% of the world’s population (over 2.5 billion people) will access Internet-based goods and services through a wireless broadband network. Through existing carrier-level agreements with national 4G broadband service providers, and pending agreements with others, Elevate is structured to become a leading provider of wireless broadband services. © 2013 Elevate, Inc. All Rights Reserved 10
  • 11. Platform Advantage – Elevate has invested more than three million dollars in the development or acquisition of critical operational systems and applications. Our recruiting and sales training practices have been refined and perfected over a decade of record-setting performance. Finally, Elevate management has a relationship through past projects with a network of over 5,000 experienced and successful direct sales professionals who are looking for the next evolution in the industry. Situation Analysis Traditional digital services providers are unable to maintain customer loyalty because they have limited their value proposition to the benefits of the technology upon which they deliver their services, and in so doing have neglected to provide customers with a unique reason to remain loyal to their brand instead of their technology. As competing technologies reach parity in terms of performance and consumer perception, or as other carriers offer the same technology, infrastructure arguments become moot, and customers leave looking for a commoditized product at a lower price. Attempts to retain customers have focused primarily on product bundling and pricing strategies that ‘lock in’ a customer to a specific provider, forcing him to remain a customer because the alternative would be too time consuming and troublesome. Interestingly, consumers recognize this strategy for what it is, a strongarm tactic not designed to encourage loyalty, but to discourage attrition. As providers depend more heavily on discount pricing of commoditized services to attract and retain customers, the market will become ripe for a new player willing to offer more than just rhetoric concerning their network infrastructure, or the benefits of technology. Opportunity Elevate, Inc. comes to the digital services market with a profound competitive advantage bourn from a proven operational model, an intelligent network partnership strategy, and a hard-won insight into customer behavior. The key insight driving the creation of Elevate’s unique sales and service model is the understanding that at the end of the day, it is the relationship a customer has with his provider, and not his provider’s technology, that engenders loyalty. In other words, It’s never been about the technology, but about the total customer experience. To that end, Elevate has created a relationship-based direct sales and service model that leverages an army of aggressive, highly-experienced, and technically savvy independent contractors who are able to build and maintain one-on-one relationships with each and every customer in their area on behalf of the Elevate Brand. Elevate operates a technology agnostic network, which enables independent contractors, or Certifiable Geniuses, to configure product ‘stacks’ with component services from multiple, locally available infrastructures. Elevate Certifiable Geniuses have the latitude to configure product packages that make the most sense for their customers, irrespective of network technology, because Elevate’s network utilizes all technologies. Elevate is the answer to the telecommunication industry’s identity and customer loyalty problem. Through its direct sales network, Elevate can penetrate markets that have yet to adopt lucrative broadband technologies. As a consequence of its focus on local relationships, it can win and then retain existing broadband services users. And because of its technology agnostic network, it can continue to provide its customers with the latest digital services. © 2013 Elevate, Inc. All Rights Reserved 11
  • 12. Go to Market Strategy Elevate has developed a go to market strategy that: • • • • Identifies our various markets, including current perceptions and purchase drivers. Outlines our sales and service model. Articulates our messaging platform. Defines our corporate, retail, and recruiting marketing plan. RESIDENTIAL MARKET Current users - Research reveals that a substantial number of current broadband customers are dissatisfied with their provider’s services. Possible causes for dissatisfaction are a misunderstanding of the features, benefits and limitations of available network technology, misalignment of available products and the needs of the customer, or an outright lack of vital or competitive products in a customer’s geography. Customers who are unhappy with their provider’s service are likely to welcome an invitation to learn about other available services, especially those not inherently tied to a single delivery infrastructure. Among this segment of customers exists a great opportunity for education-based sales. New customers who are seeking to adopt broadband technology – Research reveals that a substantial portion of households in the United State have yet to adopt broadband internet access. Traditional providers see this segment of the market as the greatest opportunity for growth, and are eager to capture the loyalty of these consumers to meet revenue goals and to rebuild their damaged brands. This market segment is easy to reach, already engaged in the purchase cycle, and ready to make a decision. Members of this market segment are not as service driven as they are price driven, but may change according to their individual experiences with their chosen provider. New customers who are not seeking to adopt broadband technology – Many consumers have yet to adopt available access because they are not aware of new infrastructure build-outs. Others may have concerns that could be easily resolved if presented with the benefits of broadband technology by a trusted individual. These late adopters represent a segment of the market that can only be effectively migrated to broadbandbased services through a face-to-face, relationship-based, consultative sales scenario. SMALL BUSINESS MARKET Current Users – Commercial grade broadband data products offered by legacy providers typically feature higher speeds and bandwidth limits at higher subscription rates, but do not necessarily include more robust customer service packages; even though it is expected by customers in this segment. Many traditional providers do not offer fully integrated product packages that include all five of the most popular digital services and few if any of them offer additional software applications to support or implement their customers’ business operations. New Users – Similar to current users, new customers expect to pay greater fees, and would prefer access to more comprehensive customer support. Although some specific drivers may vary among segments, the need for quality customer support, including education about available products and services and the benefits and applications of each, is common to all. Additionally, each segment desires, and would likely make a purchase decision in favor of, a carrier that provides product packages that meet their specific needs. © 2013 Elevate, Inc. All Rights Reserved 12
  • 13. Sales and Service Model The Traditional Distribution Model is Failing Research shows that providers who rely on centralized sales and service models are unable to meet the customer service expectations of their install bases. High demand for broadband access has driven residential and commercial customers alike to accept poor service as a necessary evil, but only as long as no alternative exists. Once geographical network monopolies give way to continued network build out, and as options become available, consumers will abandon the providers that chose only to invest in their infrastructure and not in their relationships, especially when price and performance are not substantially different. The question, then, is how can Elevate bring digital products to the market in such a way as to create customer loyalty? The answer is genius. The Elevate Certifiable Genius Elevate understands that the latest technology alone is not enough to win and keep a customer. Therefore, Elevate has established a professional connectivity services Brand, and has developed a network of locally owned small businesses that create and cultivate relationships that produce sales and maintain customer loyalty. This direct sales and service force is comprised of aggressive, bright, highly-trained and experienced small business owners who have earned the right to represent Elevate in homes in their area. We call them Certifiable Geniuses. Certifiable Geniuses specialize in digital services delivered over broadband data networks. They are committed to building long-term meaningful customer engagements. They are compensated both on their ability to sell to new customers, and on their ability to retain and cultivate existing ones. Certifiable Geniuses are the raising of the bar in the broadband digital services industry. Elevate will recruit, train, certify and deploy thousands of Certifiable Geniuses throughout the U.S. and Canada, and will support them with lead generation activities that will supplement their independent sales efforts. Product Strategy Traditional providers have sought to win back disgruntled customers, combat rising attrition, and ultimately break parity with discounted product bundles. Voice, video and data packages have become the standard product configuration, and serve to tie a customer more closely to his provider. This strategy is not lost on consumers, 67% of whom recognize bundled services as a way to “lock them in” to a particular provider. Bundles have failed to provide any one carrier a competitive advantage because every carrier offers the same additional products. Once again, the only difference between providers is the underlying technology of their networks, and that was the problem to begin with. The Elevate Stack Elevate operates a different kind of network, which allows it to offer a better product. Instead of product bundles that are inherently tied to one delivery infrastructure, Elevate ‘Stacks’ are product configurations whose components services can be delivered irrespective of network technology. Elevate is able to transcend infrastructure technology because of the multiple carrier level agreements we have negotiated with many of the nations major providers. Whether is DSL, Cable, 4G Wireless, or Fiber Optic cable to the home, Elevate provides the customer with the flexibility to choose from among any locally available delivery networks. Elevate’s cloud-based digital are delivered through the Elevate Integration Panel – something of a ‘brain’ for the home. Customers who, with the help of a Certifiable Genius, configure an Elevate Stack of services can monitor and manage those service directly from the integration panel. With our product road map, iOS and Android based applications will allow that same management functionality to be extended to a custom-er’s mobile device. © 2013 Elevate, Inc. All Rights Reserved 13
  • 14. Elevate Stack Ecosystem TM Elevate Stack provides access to communications, applications and content through a monitored security system which provides a one touch button for concierge, help desk and emergency services. Communications Smart Home Phone Email / SMS Mobile Applications Security Content Television / Movies Video Surveillance Automation Games Music Security Elevate Network Ultra-High Speed Network Access Help Desk Services Elevate Control Panel VOICE . VIDEO . DATA . SECURITY © 2013 Elevate, Inc. All Rights Reserved 14 Concierge Services Emergency Services
  • 15. Elevate Enterprise Management System Proprietary Back Office Operations Platform Elevate operates a comprehensive back office management suite to facilitate Total Quality of Service. The Elevate Total Quality of Service is both an operational philosophy and a sophisticated back office system designed to deliver the very best customer experience. Customer Care Elevate has developed a proprietary CRM system which enables us to deliver one-to-one relationship management through a dedicated call center and a network of Certifiable Geniuses. Flexible Pricing Matrix Our cloud-based billing system is dynamic and scalable. This enables us to develop flexible product pricing and unique product offerings. Help Desk Elevate operates a 24 hour support help desk. Our help desk can be contacted by phone or live chat. Monitoring Elevate is able to provide sophisticated security monitoring services through an integrated cloud-based system © 2013 Elevate, Inc. All Rights Reserved 15
  • 16. Elevate Enterprise Management System Proprietary Back Office Operations Platform Elevate operates a comprehensive back office management suite to facilitate Total Quality of Service. Elevate Total Quality of Service is managed using an enterprise back office system developed exclusively for Elevate. The system provides reliable and scalable back office operations for managing quality of service and to manage engagements with customers, certified integrators, partners and stakeholders. Elevate Total Quality of Service Technology Ecosystem (TQOS) Elevate Dashboard Cymbeo CRM Cymbeo ERP Zuora Billing ZenDesk Help Desk WS Customer Self Help Contensive CMS Network Operations Elevate Data Network Elevate Voice Network Accounting + Finance Elevate Video Network Elevate Mobile Network Quality of Service Monitoring Emergency Monitoring Service Level Monitoring Network Monitoring Security Monitoring Help Desk Monitoring Concierge Monitoring ECI Services Monitoring Public Web Site ECI Replicated Retail Website ECI iPad App Elevate Enterprise Mananagement System Interface Customer iPad App ECI Web App © 2013 Elevate, Inc. All Rights Reserved 16
  • 17. Elevate Certifiable Genius TM Proprietary Sales and Management System Elevate is publicly traded digital services company which is locally operated in your neighborhood by a nationwide network of independent Elevate Certifiable Geniuses . TM The Elevate go-to-market strategy dispells traditional thinking about digital service providers by localizing sales and service through a network of highly-trained, locally owned and operated small businesses. Elevate Certifiable Genius is your local expert. He is a business owner who cares about every single customer. TM Elevate CERTIFIABLE GENIUS Residential Residential MDU SMB Enterprise B2B Channels to open Q1 2012 An Elevate Certifiable Genius must meet all certification criteria to achieve earn the right to be called a Genius. Elevate Technical Aptitude Test The Technical Apptitude Test (TAT) ensures that each Certifiable Genius has the required skills to effectively manage the total customer experience. Certified Sales Team Each CG must demonstrate their ability to recruit, train, motivate and manage an effective direct sales team. CG’s must maintain a minimum of 10 active Geniuses. Customer Engagement Total Quality of Service Each CG must demonstrate their ability to support customers by remaining actively engaged with their book of business. CG’s provide first tier support and must maintain the Total Quality of Service SLA with each customer. Organizational Structure Global CG Services National CG Services Regional CG Services Customer Support Help Desk © 2013 Elevate, Inc. All Rights Reserved Sales Support Help Desk 17 Technical Services Help Desk
  • 18. Messaging Platform The Elevate messaging platform provides the foundation for consumer, investor, and network facing marketing communications, and ensures consistency in our position across all audiences. The platform is derived from key consumer insights and outlines our market position, value proposition, brand promise, competitive messaging and messaging architecture. Key Insights Elevate has a story to tell; one that will be heard because it speaks directly to the real needs of the jaded broadband and digital services customer. The Elevate message is founded on a number of key insights into the habits and attitudes of the consumer: Key Market Insights Customer service is the biggest failure among large ISPs that are currently (or capable of) offering, bundled digital products. Attrition is primarily due to poor customer service, or lack of customer-centric business practices, and not price. Consumers are unable to brand beyond the technologies they utilize, yielding competitive messaging that is ultimately an infrastructure speeds and feeds battle. Carriers cannot transcend their infrastructure technology. Technology comparisons (eg. DSL vs. Cable vs. Satelite) among the data user community far outnumber carrier comparisons - probably due to technological exclusivity among carriers. Brand loyalty in the data space is non-existent. Market share has been primarily driven by perception of infrastructure technology. Most consumers aren’t concerned about the specifics of the technology, they just want the ‘best’, and they want somebody who feels responsible to fix it when it breaks. Digital services subscribers have been conditioned to believe that a poor customer experience is the price they must be willing to pay for affordable access to a reliable and legitimate network. The average digital services subscriber is NOT, and does not want to become, technically savvy. Technically savvy individuals are respected by customers who have encountered problems. They are seen as ‘good guys’ in an otherwise uncaring bureaucracy. The common customer trusts a technician more than a sales person. Data subscribers have a deep mistrust of their ISP resulting from poor customer service. Elevate should not try to compete with traditional, large ISPs on their own terms as most of the negative perceptions that plague those ISPs are a result of their massive size. Customers will hold a local small business representing a national brand to a different standard than a national brand representing itself. When represented by a local small business, Elevate neutralizes the “I’ve never heard of you, but I’ve heard of AT&T” concern. Customers respect technical knowledge, and consider it a valuable and marketable skill. The same cannot be said for sales or account management ability. Evangelical customer loyalty is only won after a brand has succefully resolved a customer’s problem. Therefore, and paradoxically, real brand loyalty in engendered only AFTER there is a problem with the product; it has nothing to do with the performance of the technology. Elevate will exploit the weakness of traditional carriers by offering a unique personal customer engagement. The Elevate Certifiable Genius is the difference. © 2013 Elevate, Inc. All Rights Reserved 18
  • 19. Market Position Elevate will position itself as the customer service leader by focusing marketing communications on its one-to-one distribution model and the benefits of local, relationship-based sales and support. “Elevate is a technology company that realized it likes people,” and other similar advertising statements emphasize our commitment to mutually beneficial relationships over a specific technology or short-term acquisition strategy. The exact verbiage and final marketing copy of any discrete piece or program will depend on the specific audience to which it is directed, according to our messaging architecture. However, the essence of our position is already a driving force in the hearts and minds of the leadership at Elevate. The general components of the Elevate market position are: Unique Value Proposition Elevate operates a nationwide network through which it can: Deliver technology-agnostic digital services in Stacks that are custom configured, managed and supported by a Certifiable Genius on a one-to-one basis. Brand Promise The Elevate brand promise is the single, primary benefit that each one of our customers believes he will receive every time he interacts with our company. It is the sum of what we promise and the core of what we deliver. It is the test that our customers put us to every day. It is best expressed as a hypothetical statement made by the customer: Elevate understands my specific needs, and does not rest until they are met. Competitive Messaging Elevate is different than any other provider, and is organized to be able to deliver a customer experience that other providers are simply unable to provide. Our competitive message is very clear and concise: When you need something, and you will, do you want to call a service center in another part of the world, or do you want to call your friend across the street. Additional messaging will, of course, be forthcoming as marketing content is honed and polished. Messaging Architecture Elevate has identified each of its audiences, from retail single product customers, to shareholders, to prospective employees. The fundamental brand position remains clear and constant in each message tailored for each audience. Elevate has developed an architecture, or matrix, delineating the exact message, channel and demographic break down for every permutation within the matrix. © 2013 Elevate, Inc. All Rights Reserved 19
  • 20. Marketing Plan Marketing Communications Elevate has developed a tactical plan to communicate to each of the audiences identified in its messaging architecture, a summary of which is herein disclosed. Prospective Customers Outside of the direct contact that a Certifiable Genius will initiate with each customer, the public facing Web site is the primary channel for general product and service information dissemination among the residential and small business markets. For the first stage of operations, Elevate expects the public facing Web site will serve as a confirmation of legitimacy after a customer has been exposed to the brand through another channel - most like a face to face one. However, as Elevate gains a larger customer base and greater exposure in the national market, the Web site will become a prospective customer’s first contact with the brand, and consequently a substantial lead generation center. Elevate is deploying the public facing Web site over a content management system, allowing for rapid change of content, design and functionality to meet the evolving requirements of the site. As a major lead generation center the public facing Web site will necessarily integrate with other major marketing initiatives, including SEO (search engine optimization), Google Places optimization, online referral programs, pay per click advertising, and limited traditional advertising (described below). The visibility of both the Elevate and Certifiable Genius brands in a local market is crucial for widespread adoption. Consequently, Elevate will develop and execute a mass-media advertising strategy for each geography it opens. Strategies will vary by market, according to demographics, size, population, etc., but may include one or more of the following: Outdoor, broadcast, print, sponsorship, and direct mail. The strength of the Elevate model is its ability to reach local markets effectively without massive advertising expenditures. Therefore, when advertising is used, it will be used to supplement Certifiable Genius sales activities, and not to replace them. Elevate understands it is imperative to strictly manage both the Elevate and Certifiable Genius brands, especially when leveraging an independent sales and support network. Elevate has developed, and will continue to develop, all the necessary customer-facing marketing material and programs for use the Certifiable Genius network. Elevate channel marketing tools, currently include sales brochures, mobile sales and informational applications, mobile customer on-boarding applications, traditional paper-based leave behind collateral, and customer contracts. Elevate has developed a Certifiable Genius replicated Web site strategy that will allow local Geniuses to create, maintain, and leverage a personalized, branded Web site. Current Customers Elevate will leverage its current enterprise-level customer relationship management (CRM) system to maintain customer communications. Elevate communication programs will be heavily supplemented by that of the local Genius, who will utilized integrated systems to effectively manage their ‘book of business’. Elevate has yet to determine whether it will extend the functionality of its core CRM system to its independent sales and support force, or if it will implement a different system altogether. Cost to benefit analysis are being conducted at the time of the creation of this document. Elevate will sponsor and manage a social media based public relations program on behalf of the Certifiable Genius network, as detailed in the public relations section of the plan. © 2013 Elevate, Inc. All Rights Reserved 20
  • 21. Prospective Employees Elevate will leverage social media trends and technologies to effectively communicate to prospective employees. See the Public Relations section of the plan. Current Employees Elevate will communicate to both corporate employees and independent Geniuses through a corporate intranet. Prospective and Current Shareholders Elevate expects that, due to its SEO and other marketing activities, shareholders will visit the public facing Web site for information. Elevate will maintain a separate information repository and direct traffic to it from the public facing Web site. See the Public Relations section of the plan. Public Relations Elevate will supplement its marketing communications plan with a social media strategy that leverages popular and highly respected communications outlets to manage its public relations, general brand messaging and recruiting activities. According to the SM strategy, Elevate must focus on four general areas: 1. 2. 3. 4. Executive communications and reputation management Industry and investor relations Retail (business and residential) relations Recruiting Elevate has opted to implement a public relations strategy that leverages existing and heavily used information channels in order to expedite the efficacy of our messaging platform and to ensure widespread reach. In some cases, Elevate will not establish traditional communications platforms, i.e. a corporate or recruiting website, and instead focus on optimizing existing social communications platforms. Different social media channels will be used for each area of focus, according to the demographics and information consumption habits of the audience. Although the strategy defines the audience, objectives, publishing schedule and message for each area, and then recommends the appropriate social media applications or ‘sites’, the specific channels utilized may change as new applications or sites are developed and deployed across the Web. Following is a brief overview of the public relations plan: Executive Communications Executive communications are directed specifically at potential investors, employment prospects, customer prospects and acquaintances of CEO Wright Thurston who are contemplating involvement with the company and wish to understand the executive personality and the philosophical underpinnings of the Elevate movement. Executive Communications will be published bimonthly through a personal CEO blog and then periodically updated via a personal Twitter ID. Articles published through this channel will alternate between discussions on the principles behind the Elevate movement and practical applications of those principles, at Elevate, in business and occasionally in life. The Executive Communications channel will be the chief initial sounding board for the philanthropic message of the Company, positioning the CEO as the driving force for Elevate charitable activities and community involvement. © 2013 Elevate, Inc. All Rights Reserved 21
  • 22. Industry and Investor Relations The Elevate public facing website will be heavily supplemented by additional communications directed specifically at industry analysts, investors, employees and similar shareholders. Industry and investor communications will be published trimonthly through a corporate blog and then periodically updated via a corporate twitter ID. Articles published through this channel will provide official Elevate commentary on Industry trends, Investor news, technology reviews, competitive messaging and the like. Essentially this is where interested parties can go to get the Elevate take on things. In addition to periodic content, all official press releases will be archived and indexed by date and key phrase for easy reference. The industry and investor communications channel replaces a corporate, investor facing website. Retail (business and residential) Relations The Elevate public facing web site will be supplemented by additional public relations communications and special promotions communications directed specifically at retail audiences in each of the segments identified in the Target Market section of this plan. Elevate will establish an Elevate branded Facebook corporate fan page that will be used to communicate special offers, customer appreciation messaging and generally ‘lighter’ customer interactions. The Elevate Facebook page will exemplify and demonstrate the Elevate brand promise and value proposition by serving as the primary relationship development platform of the brand. In other words, Elevate will us Facebook to create relationships and not to sell product. Facebook communication will be updated twice weekly (no more) and will work in concert with limited official Twitter activity. Recruiting Elevate has established online properties including a public Web site and customer portal as well as a Certifiable Genius-branded Facebook fan page to communicate to its prospective employee base. Elevate sales managers and executives will use the features and applications of the Certifiable Genius Facebook page, as well as an official Twitter ID, to motivate and train, and recognize excellence within, the Elevate reseller base. Prospective employees will be invited to follow the fan page, allowing them to observe firsthand the lifestyle, benefits and challenges of the Certifiable Genius community. The exact publishing schedule for the recruiting communication channel has yet to be determined, as it will work in concert with the executive communications channel to provide new prospects and existing resellers alike the opportunity to hear from, and react directly to, the CEO. Special attention will be given to recruiting by the CEO through the executive channel, to demonstrate the commitment of Elevate, and the CEO in particular, to the development and success of its Certifiable Geniuses. © 2013 Elevate, Inc. All Rights Reserved 22
  • 23. Elevate Market Situation Analysis Everyone wants better technology AND better customer service! Elevate wins new business by offering upgraded digital services and personal one-to-one consulting through a network of locally owned independent small businesses. The residential market for Elevate subscribers consists of three segments: Current Broadband and Digital Services Subscribers Current Broadband and Digital Services Subscribers who report unsatisfactory service Households yet to adopt broadband due to price, availability or poor service. Total US Broadband Subscribers 83,344,927 DSL 10.9% CABLE WIRELESS DSL 14.6% CABLE 1.7% These are the customers we win with a totally new way of looking at a digital services provider. WIRELESS Total Subscribers Currently Reporting Dissatisfied with Customer Service DSL 56.7% DSL CABLE 45.2% WIRELESS CABLE 38.7% WIRELESS Current subscribers who report total quality dissatisfaction. Total US Broadband Market 150,000,000 Includes the “yet to adopt” segment (Every American Household) © 2013 Elevate, Inc. All Rights Reserved 23 This segment recognizes the Elevate difference immediately. These are the low hanging fruit.
  • 24. Elevate Stack Customer Experience TM A powerful competitive advantage We create lasting relationships with every customer, one living room at a time. The Elevate Difference Archaic Providers Locked In vs Loyal Traditional Providers The Elevate Way Locked in to one network technology Cloud based services for voice, video, data mobile and security through the Elevate Integration Panel. Locked in to one pricing model Locked in to limited products Offers DSL, FTTH and Wireless Solutions Locked in to legacy billing systems One touch button to access customer care and technical support. Instant access to a dedicated account manager. Locked in to facilities based infrastructure Customers Experience Customers Experience 67% of customers view bundled services as a way to “lock me in.” Customers have instant access to thier own account manager. 57% of customers report dissatisfaction with customer service. Customers have instant access to desktop support for all their applications. Customers do not care about technology. They care about experience, functionality and content. 24/7 support on the web, the phone, the desktop and in person. Customers want their technology to work, and when it doesn’t, they want somebody to fix it. One integrated solution. One device, many technologies. 84% of customers who switch providers report doing so because of poor customer service. Connecting customers to the right network. Funding Plan Elevate is seeking $5 million growth capital. Elevate will employ this capital to support ongoing market expansion and continue product development. Elevate is committed to capital efficiency. We operate our business on a specific set of core values. Governance is provided by a Board of Directors who collectively author corporate policy, and supervise the execution of the business plan. Day-to-day management of the business is conducted by the Executive management team, who reports to the Board on a monthly basis. Additional oversight is provided by an Advisory Board comprised of industry veterans, highly experienced business executives and talented innovators. The Advisory Board’s function is to contribute to long-term strategic planning. Elevate has developed an action plan which allocates specific financial and personnel resources toward achieving six primary objectives. Capital assets will be allocated as follows to meet these objectives: © 2013 Elevate, Inc. All Rights Reserved 24
  • 25. Use of Funds Sources Equity Raise Uses $5,000,000 Inventory Customer Acquisition Operations Product Development $800,000 $2,000,000 $400,000 $1,200,000 Recruiting & Training Online Marketing Network Total $5,000,000 $400,000 $200,000 Total $5,000,000 Funding Objectives Inventory ($800,000) We will invest in inventory and fulfillment to support new account creation. Customer Acquisition ($2,000,000) We will invest in new account creation. We estimate sales to exceed 25,000 new accounts in 2014. Operations + Staffing ($400,000) Elevate expects that it will be necessary to continually expand core operations staff and improve operational systems in order to support growth through new customer acquisitions. New Product Development ($1,200,000) Security + Automation Product Development Elevate will continue the development of a proprietary integrated security and home automation control device. Research and development efforts are under-way and we anticipate the commercial release of Elevate’s own security control panel early in fiscal Q1 2015. IPTV Product Development Elevate engineers and strategic partners are in the final development phase of an exclusive IPTV platform. We have allocated funds to complete a commercial launch in fiscal Q3 2015. The expansion of our digital entertainment offering allows us to capture increased margins and reduce costs of goods sold, adding to per subscriber profitability. Software Product Development Elevate engineers are developing a suite of software applications for residential and business customers. Certifiable Genius Network Recruiting ($400,000) Elevate will expand it’s network of “Certifiable Geniuses” to 1,500 independent business owners. We have allocated budget to marketing, recruiting, and training initiatives. Certifiable Genius Network Operations ($200,000) Elevate is the creator of an advanced cloud software system which efficiently manages customer engagements, automatically tracks sales commissions and incentives and provides marketing and sales tools for our independent sales representatives. This software supports customer service and provides for automatic paperless billing. We have allocated funds to expand the Elevate Digital Desktop by expanding © 2013 Elevate, Inc. All Rights Reserved 25
  • 26. its capabilities for online sales and marketing. Initiatives include the addition of expanded e-commerce and fulfillment capabilities, search engine optimization and improved analytic tools. We will also expand the direct selling capabilities of the system by deploying a site replication system to support individual sales efforts by independent sales representatives. Corporate Mission Elevate will deliver astonishing products and services through a unique and remarkable customer journey and unmatched customer engagement process. We deliver the very best service and products and services which help our customers transform their digital life. We help our customers save money, make money and make life easier. We will create financial opportunities for every individual who is capable and willing to work hard. We work with individuals who are relentless in their personal pursuits and are willing to dedicate themselves fully to making every customer engagement a remarkable and memorable journey. Corporate Mantra STACK The Elevate Stack is designed to deliver the very best digital services. SAVE Elevate saves its customers money through low cost products and value added services. We save customers sanity by delivering our products through a direct engagement network. We save shareholders value by limiting the attrition of our customer base. SERVE The Elevate Greater Good Foundation is committed to corporate responsibility and philanthropic initiatives SOAR Elevate provides an opportunity for driven individuals to become professionally fulfilled. © 2013 Elevate, Inc. All Rights Reserved 26
  • 27. Elevate The Concept is Born Elevate Communications and Elevate Marketing Group was formed. Operational + Sales Test Conducted Raising Funds Operations + Sales Tests Continue Operational team hired Recruiting begins from existing databases Summer 2008 Jul - Dec 08 Jan - Feb 09 Jan - Mar 09 Prelaunch Sales Test Relocated to California Installs over 5,000 units in the first 45 days of prelaunch sales test. Operations + Sales Testing Sales Launch Full Bundle Integrated 50 Sales Reps Launches Nerd Alert and nationwide tech footprint Over 50 Reps Smart Home product line launched Apr - Aug 09 Aug - Dec 10 Spring 2011 Summer 2011 Over 50 reps Vault asset acquisition Opened sales markets in Florida and California Dallas Market Opened Partnered with Sprint and Clear wire networks for 4G Worked on Certifiable Genius Program Monotronics – national alarm provider Sales Reps in FL, CA full time testing the Stack platform Platform Integration and Development Summer 2011 Spring 2012 Summer 2012 Winter 2012 Expanded digital marketing position to target online initiatives and social media Expanded distributor coverage in FL, TX, CA Strategic partnerships ERS, Syntrol, Satic Stack ready for market Spring 2013 Summer 2013 Fall 2013 2014 © 2013 Elevate, Inc. All Rights Reserved 27 2,000 reps for 2013-14
  • 28. Corporate Leadership Elevate has assembled a world-class executive team. We have been very lucky to get highly qualified professionals to lead each operational division of the company. Together we have made great strides in executing the vision and operational strategies for the company. Wright W. Thurston, CEO Wright Wesley Thurston, has served as our Chief Executive Officer, President, Treasurer and a Chairman of the Board since February 22, 2011. Mr. Thurston is a successful, serial entrepreneur who began his career in 1996 with the formation of Future Phones, an independent direct sales company in the emerging cellular phone industry. Future Phones achieved acclaim as one of the fastest growing and largest independent direct sales organization in the cellular phone industry. Beginning in 1997 through 2001 the company recruited, trained and deployed more than 2000 independent sales representatives throughout the United States. The company was one of the first to offer an e-commerce Web site focused on direct sales of wireless phones during the transformational period from analog to digital phones. Mr. Thurston sold Future Phones in 2001 to OmniServe Wireless when he was just 24 years of age. In just a few short years Future Phones transformed the industry by introducing a direct to consumer business model and selling more than 20,000 subscriber accounts. Mr. Thurston has developed a proprietary recruiting and training methodology, which made a lasting impact on the entire mobile industry. In 2002 Mr. Thurston recognized an emerging opportunity the subscription-based monitored home security industry. A technology transformation was beginning to happen, as security systems connected to a central station through a traditional land line would be replaced by cellular communications. Mr. Thurston seized the opportunity to make monitored home security available to a previously underserved market by devising a new go-to-market strategy combined with innovative pricing and provisioning options which would make monitored home security accessible for middle-income and lowincome families. As CEO of Firstline Security, Inc., Mr. Thurston directed its expansion to more than 200,000 subscribers and more than $100MM in revenue. The company was recognized as the fifth largest homes security company by SDM magazine and was listed on the Inc. 500 in 2006. In the fall of that year, Mr. Thurston was recognized as a finalist for the Ernst & Young Entrepreneur of the Year award. During his tenure at Firstline, Mr. Thurston began to perceive a shift in technology, which would have impact on virtually every digital service, from voice and data to security and automation. In 2007 he stepped aside as CEO at Firstline to form Elevate. Mr. Thurston has recruited, trained and deployed more than 20,000 independent reps over the past decade. His visionary approach to sales training and keen insights into market behavior has led to more than 300,000 subscriber activations for digital services. Mr. Thurston is the author of the proprietary compensation plan at Elevate,which compensates sales representatives for both new customer acquisitions as well as long-term loyalty, a concept that is revolutionizing the customer experience with digital service providers. Mr. Thurston has consistently established, organized and deployed loyal sales teams who have set new standards for customer loyalty and satisfaction. His pioneering spirit and attitude is a source for inspiration and motivation throughout the enterprise. Mr. Thurston is a hands on leader who often is found in the field and on the streets as he engages with Elevate sales representatives, vendors and partners and Elevate subscribers. © 2013 Elevate, Inc. All Rights Reserved 28
  • 29. Danielle Paletz, Vice President of Operations Ms. Paletz is a highly motivated entrepreneur who began her career at the age of 15 in 1996 with Oasis Security. In 1999 She became the Vice President of ISI Alarms out of Phoenix, Arizona. Sticking with the theme of serial entrepreneurship Ms. Paletz seized the opportunity to build her own company in 2004 and served as the President and CEO of American Alarm, Inc. with the goal to provide superior service to both company representatives and customers alike. Over the course of her career, Danielle has managed and directed over 500+ employees, been responsible for the sale and installation of over 100,000 alarm systems and has been recognized and awarded for being the most productive and largest growing dealer for five years in a row. Subscribing to the idea that a company can provide superior service to both distributors and customers along with saving the consumer money, Ms Paletz joined Elevate in April of 2012 as the VP of Operations. Vince McLain, President of Elevate Digital Marketing Vince McLain joined the Elevate team in 2013 as President of EDM with 20 years of operations, inside/outside sales leadership, and call center experience. Mr. McLain has specialized in building and growing companies, either from start up, or taking small companies to the next level. Most recently he was Vice President of Sales at Computer Prep where he reengineered existing products and sales processes in order to take the company back to profitability. Prior to Computer Prep, Mr. McLain managed at Critical Path, the largest technology IPO in 1999 where he built the inside sales solutions teams. Mr. McLain also held management and senior management positions with Mastering Computers, Platinum Technologies, Insight, and Discover Card. Jenny Coplin, Vice President of Marketing Prior to joining the Elevate team in 2013, Ms. Coplin served for 5 years as Chief Marketing Officer and a member of the management board at Ivy Capital, one of the largest online marketing companies in the business opportunity industry. From 2010- 13, she served as CMO of Savanna Health where she spearheaded all marketing areas including: marketing strategy, tactics, messaging and branding, press/community relations, events, eMarketing campaigns, and all internal and external marketing communications. Prior to her work with Ivy Capital, Ms. Coplin held management positions with TSI, Inc., LuxuryChair.com, and Bennett Capital. Ms. Coplin brings with her a wealth of direct selling and both traditional and online marketing expertise. © 2013 Elevate, Inc. All Rights Reserved 29
  • 30. Jordan Folsom, EVP Genius Development Throughout his ten-year career in the residential security industry, Jordan Folsom has consistently set records for volume, both in personal and team sales. By 24, Mr. Folsom’s aggregate personal and managed sales had generated over a million dollars in personal income, a benchmark that remains unparalleled to this day. Mr. Folsom has applied his unique talents to the development of Elevate’s field sales strategies, including the creation and delivery of the Genius sales training program and related materials. Mr. Folsom take the lead on new recruit training and development as Elevate expands nationwide. Jennifer Miller, Controller Jennifer Miller possesses a deep understanding of the workings of successful direct sales financial models. While at Firstline, Mrs. Miller provided the expense forecasting, sales reporting and cash management that took the company to the Inc 500 in 2007. In 2008 Mrs. Miller joined Elevate, and has been the architect of the company’s pro forma and financial modeling in her capacity as Financial Controller. Board of Directors Wright W. Thurston, Chairman Wright Thurston sold his first company to OmniServe wireless when he was just 24 years old. Soon after, in 2000, Mr. Thurston founded Future Phones, and within 2 years became the largest independent dealer for VoiceStream Wireless (now T-mobile) in the country, selling over 20,000 phones. Always eager to catch the next market trend, Mr. Thurston founded Firstline Security in 2002. Over the next 5 years, he grew the company to become one of the largest security alarm dealers in the country, winning numerous awards and accolades along the way. Mr. Wright left Firstline in 2008 to found Elevate, and has served as its Chief Executive Officer and guiding force from the very beginning. Kathy Roberts Prior to founding the Santa Fe Trust, Ms. Roberts held key executive positions at Discover Card, including General Manager of Discover Card’s Recovery Division and Vice President/General Manager of its Salt Lake Operations. In 2000, Ms. Roberts was appointed President and COO of Discover Bank, in which capacity she served as the head of the Delaware Banker’s Association, and a member of the Morgan Stanley Bank Loan Committee and the ABA council on Banking. Ms. Roberts has provided philanthropic leadership in her local and national communities through her membership of the Delaware Board of Junior Achievement, the Delaware Board of the YWCA, and the Board of Directors of the Morgan Stanley Charitable Trust. Jordan Folsom With over 10 years experience in direct sales and record breaking numbers in both personal and team sales. Jordan’s unique experience and talents make him invaluable to the Elevate Board. © 2013 Elevate, Inc. All Rights Reserved 30
  • 31. Advisory Board As Elevate, Inc. grows and develops, so does the Advisory Board. Listed below are some of the innovative individuals who have served most recently in that capacity: John Norton Norton Enterprises was a key supplier to Ready Pac Produce and other major distributors when the packaged salad alternative for fresh vegetables became mainstream.. Mr. Norton later applied his business and management acumen to a number of successful developmental projects both in private equity investments, and real estate. In 2001 Mr. Norton provided the first angel funding for Rent.com, and played an instrumental role in the enterprise’s early capitalization, overall management and its eventual sale to eBay. Peter Ford As the Head of International Device Strategy at the Orange Group, Mr. Ford was responsible for developing the highly successful Orange Signature strategy, a mobile business division device strategy that contributed to massive market domination for the European telecom giant. The strategy was later adopted by Orange owner, France Telecom and later applied to the fixed business. As Marketing Director of Toshiba’s European Consumer and Business Mobile Communications Division, Mr. Ford pioneered specialized and segmented marketing strategies that delivered a dramatically expanded sales footprint and significantly improved financial performance. Since 2007, Mr. Ford has consulted with international telecom providers, equipment vendors and VAS providers from around the world, providing market insight and strategic advice. Peter Cannistra For over a decade, Mr. Cannistra has been a driving force behind the introduction of true wireless broadband for consumers and businesses, and the adoption of 4G technology. As VP of Embedded Devices and Business Development at Clearwire, Mr. Cannistra managed the strategic relationships with Intel, Best Buy, and other world-class retail and OEM partners, that led directly to hundreds of thousands retail and wholesale customer activations. As VP of Strategic Partnerships and Business Development at Sprint, Mr. Cannistra managed the highly strategic relationships with Google, Sony, Dell, Intel, HP, NBC, ABC/ESPN, Fox Interactive, Viacom, Disney and other content producers, equipment manufacturers, and consumer electronics resellers. He was also a key player in the successful execution of Sprint’s 4G initiatives. Mr. Cannistra’s work provided the basis for Google’s $500MM investment in Clearwire. © 2013 Elevate, Inc. All Rights Reserved 31
  • 32. Market Research Demographic, Cultural & Social The macro-environment for digital services indicates a sharp rise in adoption among virtually every demographic. Socioeconomic and cultural boundaries reveal small variations in adoption rates. The result is a large and addressable market that is ready to make the switch to more cost effective, higher-performance services. A careful analysis of adoption trends reveals slight advantages among Hispanic communities and sharp advances in the education mix among college graduates. Elevate will focus marketing efforts among the largest segments by geotargeting specific groups in key markets throughout the U.S. We will deploy specific tactics to reach consumers including social media, direct sales and awareness across the digital spectrum. Political The government continues to play a significant role in telecommunications. Policies and regulations which govern the industry continue to evolve to meet the rapid changes in technology, distribution and service level agreements. Although policy initiatives often lag behind the evolutionary nature of the industry, the ongoing efforts by government officials to level the playing field and prevent predatory practices among legacy service providers ensure a strong environment for Elevate to compete. The U.S. adoption rate for broadband services is increasing. Technology advancements are making new services such as television over Internet protocol (IPTV) an emerging reality. While challenged by the rapid changes in the market, policy makers are working to modernize regulations and consumer protections. Economic Financial factors such as lower price, promotional discounts, better services, and the convenience of a single point of contact each are playing a significant role in the increasing demand for “bundled” services. Economic conditions cause very slight variations in demand and adoption rates for bundled services. During economic slow-downs demand increases because people tend to spend more time at home. In contrast, favorable economic conditions also result in increasing demand, possibly a result of the rise in consumer hardware sales. Economic conditions have little effect of the purchase of digital services. Market Readiness Fast-paced lifestyles and a growing intolerance for complex systems which operate in isolation are among the most influential forces creating the demand for integrated digital services. Difficult user interfaces, maintenance of multiple devices, and cost of ownership for equipment also play a role in influencing demand. Carriers and service providers alike have recognized the challenge to keep up with changing demands. Addressable Market Bundled services represents a large and addressable market. More than 150M households in the U.S. market meet the minimum requirements of a typical Elevate customer. The typical American household has more than three Internet enabled devices and at least one computer. As devices become more interconnected the need for stable broadband access becomes more critical. Data devices are just the beginning. Today the whole house is utilizing “smart” technologies to reduce energy consumption, automate mundane maintenance activities and optimize use cases for everyday appliances, HVAC systems and whole house lighting control systems. The inter-connectivity of the modern home will result in increased demands for more bandwidth, stable connections and affordable prices. Independent research conducted by Frost & Sullivan indicates total market penetration of so called “double play” services from a single provider is significant in the United States. It is estimated that nearly 47.7% percent of households have purchased at least two services from a single service provider. The survey also indicates 0.9% subscribers have opted for a bundle of four services. © 2013 Elevate, Inc. All Rights Reserved 32
  • 33. Traditional cable television operators, CLECs and other communications service providers began offering “bundled” services as early as 2007. Early adopters saw an immediate benefit. Early “bundlers” experienced difficulties in hardware compatibility as well as intermittent outages and “spotty” service levels. Improvements in technology during the last seven years have resulted in better services and the word is spreading. Some analysts predict a 60% - 80% increase in adoption by 2014. Year Household Bundling 2 Services Household Bundling 3 Services Household Bundling 4 Services 2003 26.1% 6.1% 0.2% 2004 40.2% 8.7% 0.4% 2005 43.9% 9.9% 0.7% 2006 47.7% 11.1% 0.9% 2007 52.9% 13.7% 1.3% 2008 58.0% 17.2% 2.1% 2009 63.2% 22.2% 3.5% 2010 68.1% 27.4% 5.8% 2011 72.8% 32.6% 9.2% 2012 71.1% 37.7% 13.7% 2013 81.0% 43.0% 16.9% Frost & Sullivan predicts the proportion of households subscribing to bundled services with at least two services will reach 81% by the end of 2013. The corresponding penetration rate for a three-service bundle is projected to rise to 43% while four-service bundling will be adopted by 16.9% of households by the end of 2013. © 2013 Elevate, Inc. All Rights Reserved 33
  • 34. Residential Bundled Services Market: Breakdown of Bundling Revenue “Double-Play”, “Triple-Play” and “Quad-Play” Subscriber Revenue (U.S.), 2003-2013 Year Double-Play Rev. ($Billions) Triple-Play Rev. ($Billions) Quad-Play Rev. ($Billions) 2003 16.46 7.36 .33 2004 26.61 10.65 .68 2005 29.43 12.25 1.15 2006 32.49 13.93 1.65 2007 35.50 17.50 2.47 2008 37.58 23.06 3.82 2009 39.05 28.83 6.09 2010 40.06 34.25 9.42 2011 40.43 38.05 14.06 2012 39.20 42.02 20.08 2013 36.17 46.59 26.63 Compound Annual Growth Rate (2006-2013): Double Play 1.5%; Triple Play: 18.8%; Quad-Play: 48.7% Note: All figures are rounded; the base year is 2006. Source Frost & Sullivan According to Frost & Sullivan, average revenues earned on duo-play services totaled $68.95, triple-play services $103.43, and quad-play services $139.26 in 2006/07. Price of the services is expected to rise annually in the range of 2% to 3% over the next 5-7 years as service providers package more service features. ARPU from dual play subscribers is expected to reach $80.76, triple-play subscribers to $121.14 and quad-play subscribers to $167.96 by 2013 end. The following table from Frost and Sullivan depicts the revenue pattern in each of the bundle plays. © 2013 Elevate, Inc. All Rights Reserved 34
  • 35. Trends in Internet Broadband Adoption All Adult Americans Race/Ethnicity Hispanic (English Speaking) Black (Not Hispanic) White (Not Hispanic) 65+ Age 50 - 64 30 - 49 18 - 29 College + Education Some College High School Grad Less than High School % of Broadband at home © 2013 Elevate, Inc. All Rights Reserved 0% 20% 40% 35 60% 80%
  • 36. Competition Brief AT&T | Telecommunications Operator AT&T is the largest communications company in the world, offering a complete suite of communication services including wireless, high-speed Internet access, Wi-Fi, VoIP, local and long distance voice, IPTV, satellite TV, directory publishing and advertising services. The Company offers its service primarily to the residential and small and medium business enterprises. Post merger with Bell South, the company has integrated different services it already markets as bundles. The service bundles that AT&T actively promotes are based on its traditional land line phone service, DSL broadband access and Echostar’s DISH satellite TV. Verizon - Telecommunications Operator Formed in 1983, Verizon is a leading telecommunications operator in the US offering wire line and wireless services in more than 29 states. The Company’s wire line segment provides voice, Internet access, broadband video and data, next generation Internet protocol (IP) network services, network access, and long distance services to consumers, carriers, businesses, and government customers. The wireless segment provides wireless voice and data products, and other value-added services. The Company also offers bundled services that include broadband, wireless, video, and voice services. Verizon has utilized bundling to get a foothold in the video services market and had 91.2 million subscribers at the end of 2009. Qwest - Telecommunications Operator Qwest Communications provides data, Internet, video, and voice services in the United States and internationally. The Company provides various data and Internet services, including private line, multiprotocol label switching, broadband, VoIP, and data integration services, as well as Web hosting and related services The company sells its products and services through its sales and call centers, Web site, telemarketing, retail stores, and kiosks, as well as relationships and arrangements with third-party sales agents. It has strategic partnerships with DirecTV and Verizon Wireless. CenturyTel - Telecommunications Operator Formed by the merger of CenturyTel and EMBARQ, CenturyLink offers high-quality voice, broadband IPTV services and wireless data services in 33 states of the US. Serving both the consumer and businesses, CenturyLink is positioned as the fourth largest local exchange telephone company in United States based on access lines. The Company offers triple packs bundled services but has not rolled out quad pay service on a full scale basis. SureWest Communications - Telecommunications operator SureWest Communication is a telecommunication provider. The Company, through its FTTP (Fiber to the Premise) and copper networks, offers high bandwidth services such as IPTV and ultra-high speed Internet access. Bundled services include phone, digital TV and broadband Internet. Management strongly recommends triple play bundled packages and allows users to customize bundles. Most recently, management deployed the company’s fixed wireless Internet assets to Yonder Media to focus on core Broadband segment. The Company plans to launch advanced digital TV service on Microsoft’s Mediaroom IP software platform in January 2010. Comcast Cable - Multiple Service Operator Comcast is a cable company engaged in developing, managing, and operating broadband cable networks. The company acquired Fandango in 2007 and has recently entered into a joint venture with GE to increase entertainment options for its customers. Comcast has the largest base of bundled services subscribers among the U.S. cable MSOs. Management is strongly promoting the company triple bundled package, which includes digital cable, broadband Internet and home phone service subscribers. The Company also offers a quadruple package. © 2013 Elevate, Inc. All Rights Reserved 36
  • 37. Time Warner Cable - Cable Television Operator Time Warner Cable disposed off its cable systems to MI-Connection Communications systems in December 2007 for approximately $51 million and is regarded as one of the largest providers of cable TV, high-speed Internet and Video-on-Demand (VOD) services in 27 states of the US. Bundling is a key component of Time Warner Cable’s consumer market strategy. The Company differentiates itself from competition by providing unique content from its sister concerns to its wireless subscribers. Subscribers can access key features of the quad-play services such as remote launch of DVR and other video applications, accessing programming guide and e-mail directly from their cell phones. Cox Communications - Video service provider Cox Communications offers cable TV, digital video, telephone and high-speed Internet services in 23 states. The Company owns and operates cable systems. In December 2006, the company announced a roll out of phone tools and applications that converges Cox’s telephone and Internet technologies. Cox also plans to converge telephone and video services. Bundling is a fundamental business strategy for Cox. The Company has been offering triple play bundle of phone, Internet and cable television services for over a decade. Management’s long term growth strategy involves leveraging the capacity and capability of its broadband network to deliver multiple services to consumers and businesses while creating multiple revenue streams. Charter Communications - Multiple Service Operator Charter Communications is a cable operator, offering cable TV, high-speed Internet access, telephony and video-on-demand services in 40 state. In July 2007, the Company launched an enhanced home page, allowing customers to view entertainment snippets as well as complete programs from channels such as IFC, SHOWTIME and MTV, via the Internet. Three months later, management announced the launch of highspeed Internet, digital cable and telephone services in over 700 Wal-Mart stores nationally. Cablevision - Multiple Service Operator Cablevision is among the leading bundled services providers in the U.S. The Company provides cable TV, cable Internet, digital video and cable telephony services in the New York metropolitan area. In 2008, the Company acquired 97% stake in Newsday Media Group and the Sundance Channel. These acquisitions will strengthen Cablevision’s presence in both new geographies and existing customer base. © 2013 Elevate, Inc. All Rights Reserved 37
  • 38. Company Residential AT&T YES Small and Medium Business Clients NO Offers complete suite of products including wireless, high-speed Internet access, Wi-Fi, VOIP, local and long distance voice, IPTV, Dish satellite TV Double -$65.00 - $76.99 Triple - $94.94 - $99.99 Quad - $134.97 Cable Vision YES YES NO Digital home phone, broadband, cable TV NO Century Link YES YES YES Fast Internet, unlimited calling, digital TV, and security monitoring, IPTV services and wireless data services in 33 states. Double -$54.95 Triple -$74.95 Charter Comm. YES YES NO Digital home phone, broadband, cable TV Double -$69.95/mth Triple- $99.98 / mth for 1 yr Comcast YES YES NO Digital home phone, broadband, cable TV Double & Triple- $99/mth to $159.99 for 1 yr Qwest YES Small Business NO Digital home phone, broadband, cable TV NO Surewest Comm. YES YES YES Offers local telephone, long distance, Internet, wireless, digital cable television, directory and commercial high-speed data services Triple play bundles$79 to $145 per mth for 1 yr Time Warner Cable YES YES NO Digital home phone, broadband, cable TV Double - $69.99 Triple - $99.99 Verizon YES YES NO Offers services such as satellite TV, digital voice, wireless, IPTV, high-speed internet access Double - $64.99 Triple- $89.99 - $94.99 Quad - $129.99 - $169.99 Cox Comm. - - - Digital home phone, broadband, cable TV Triple - $109.95 © 2013 Elevate, Inc. All Rights Reserved Business Wholesale 38 Services Bundled Cost/Mo.
  • 39. Market Trends The number of digital content sources in U.S. households are multiplying with the rapid penetration of several consumer electronic (CE) including, portable media players, digital cameras, game consoles, smart phones, media adapters, PCs, flat-screen TVs, and DVRs. The average U.S. household now owns 26 consumer electronic (CE) products. It is estimated that the average teen household owns 35 non-discreet CE products while households with six or more members, on average, own approximately 42 non-discreet CE products. The average single household owns 14 CE products. The number of bandwidth consuming devices per household is growing rapidly due to changing consumer media consumption habits. The change is being catalyzed by new trends in passive viewing and recording, Internet video and on-demand viewing, multitasking with more than one device, and the growing availability of high-definition programming. This increase in video consumption is driving the increase in bandwidth usage and more than 44% of U.S. households are defined as high-bandwidth users. It was estimated that by 2011, these households would require a minimum 40 Mbps of bandwidth, with many needing as much as 80 Mbps. Since 2011, these numbers have drastically increased, with some areas of the US reporting over 40% growth in the past two years alone. Forecast: USA HH Technology Adoption 2006-2011 140 Households (Millions) 120 100 80 60 40 20 0 2005 2006 2007 2008 2009 Total USA Households HDTV Camera Phones 2012 DVR Internet 2011 Broadband Mobile Phones 2010 Video Game Console Source: Forrester Research 2006 Changes in data demand growth, and the rapid pace of technology adoption is bringing about a paradigm shift in the telecommunications and cable industries. The telecommunication industry was a $1.2 trillion market in 2009. The International Telecommunication Union (ITU) estimates 158.4 million landlines at the end of 2008, down from 182.9 million in 2003. This is a negative 3.5% annual growth rate which has increased over the past 3 years. © 2013 Elevate, Inc. All Rights Reserved 39
  • 40. Trends in Home Internet Access: Broadband v. Dial Up 70% 60% 50% 40% 30% 20% 10% 0% JUN 2001 JUN 2002 JUN 2003 Broadband at Home JUN 2004 JUN 2005 JUN 2006 JUN 2007 JUN 2008 JUN 2009 JUN 2010 JUN 2011 JUN 2012 Dial Up Source: http://pewresearch.org/pubs/1254/home-broadband-adoption-2009 The major factors catalyzing the change include; budgetary pressures and slower growth due to the global recession; a shift in residential and personal use from wired services to wireless; intense competition between cable and wired services providers; and rapid advances in Internet and wireless technologies, including wider availability of 3G services. Blurring the traditional product line, cable companies now offer local exchange service and high-speed Internet access while telecoms also provide TV via IP (Internet protocol) services. The merging lines have brought about duplication of services and the industries are now deeply intertwined, providing entertainment of all types. Large incumbent telephone companies are experiencing lower demand for only voice services due to IP substitution and competition from wireless service providers. At the same time, cable operators have reached saturation in their service market as the consumers are now looking for wider options. The changing dynamics in the ongoing competition between cable and telecom providers, is giving way to bundled services. According to eMarketer, the US broadband household subscribers are estimated to grow 13.4% between 2010 and 2015, a good percentage of which are likely to be subscribing to a bundle of services including voice-over Internet protocol (VoIP) and Internet protocol TV (IPTV). © 2013 Elevate, Inc. All Rights Reserved 40
  • 41. Residential IPTV and VoIP Subscribers and Broadband Households in the US and Worldwide 2007 & 2012 (Millions) 2007 2013 IPTV 1.2 12.7 VoIP 17.5 33.8 Broadband 66.4 94.3 IPTV 12.5 61.1 VoIP 69.6 196.3 312.5 533.6 US Worldwide Broadband Note: IPTV includes all subscribers to an IPTV service whether they pay additional fees for it or not; VoIP includes paid subscribers only; broadband includes ADSL, cable, satellite, fixed wireless, fiber, powerline, WiMAX and emerging broadband technologies accessed at home. Source: eMarketer, April 2008 © 2013 Elevate, Inc. All Rights Reserved 41
  • 42. Bundled services are fast gaining popularity. According to a survey by Park Associates, more than 70% of cable broadband households subscribe to a bundle, with two-thirds subscribing to a broadband and video bundle and 25% subscribing to a triple play that includes home phone service. DSL providers have only 58% bundle penetration, with 25% for broadband and video and 17% for triple play; and Fiber broadband providers have 78% bundle penetration, with 64% broadband and video bundles and 49% triple-play penetration. Percentage of Broadband Households with Bundles (Percentage of US Broadband Households) 100% 0% All broadband households (n=2,063, +/-2%) Cable Broadband (n=1,022, +/-3%) DSL Broadband (n=865, +/-3%) Fiber Broadband (n=123, +/-9%) Source: Customer Support in the Digital Home Sample: 2,063 U.S. broadband households: +/- 2% Copyright 2009 Parks Associates Cable broadband providers continue to be successful at delivering a bundle of voice, video, and data services in one package. Based on a survey by Park Associates, data indicates that consumers were most satisfied with quad-play bundle services. The survey also pointed out that the satisfaction level was lowest among consumers with no bundles. © 2013 Elevate, Inc. All Rights Reserved 42
  • 43. Satisfaction with Broadband Services (Percentage respondents indicating very high satisfaction with broadband services - rating 6-7 on a 7 point scale where “7” means “Extremely Satisfied”) Percentage of Highly Satisfied (%) 80% 50% All broadband households (n=2,063, +/-2%) No Bundle (n=712, +/-4%) Any Service (n=1,299, +/-3%) Video + Broadband (n=932, +/-3%) Triple Play (n=573, +/-4%) QuadPlay (n=83, +/-11%) Source: Customer Support in the Digital Home Sample: 2,063 U.S. broadband households: +/- 2% Copyright 2009 Parks Associates According to a survey from Park Associates, customers were most interested in premium technical support services, followed by broadband security services, home monitoring services, premium entertainment services, etc. Connectivity is becoming more and more important to people in their everyday lives. Rising popularity of social networks and the decreasing cost of mobile data have further fueled demand for ubiquity and on-demand services. Both business and consumer users are now eager to keep in contact with others and have information readily available to them when required. Traditional broadband with its limitations of place restriction is giving way for mobile broadband/wireless services. Wireless technologies such as Wimax are gaining steady popularity. The “connected home” is becoming a more real concept for service providers and consumers. The core services (communications, broadband, and video) are being complemented with value-added services along with managing the delivery and quality of services. Residential Demographic The demographic market for bundled services can be segmented into five broad categories. These include Mid-life Success; Young Accumulators; Mainstream Families; Affluent Empty Nesters; and Mainstream Singles. © 2013 Elevate, Inc. All Rights Reserved 43
  • 44. 1. Mid-life success – The mid-life success individual are singles, or childless couples. These individuals age between 30 to 45 years and comprise the highest percent of the total household segment in the US. They are most tech savvy and keep themselves updated with the latest technology. The primary use of the Internet is for transactional purposes. 2. Young Accumulators – Large families with children are likely to demand more for technological products. Given the cost savings and convenience associated with bundling of the product, demand is high. According to a survey conducted by Diamond Consultants, this segment was the only one, where one-third of the respondents opted for quadruple play. 3. Mainstream Families - Families with at least 1 child under 18 comprise this segment. As this group has at least one child, demand for electronic goods such as video games, electronic toys, etc. is more. As the younger population tends to read more blogs and engage in interactive activities such as social networking, etc, they likely demand high speed Internet with video and voice services. 4. Affluent Empty Nesters – Families whose children have left their households come under the category of affluent empty nesters. The segment comprises older population, more than 45 years in age. They are the highest income generators and in order to maintain their lifestyle they opt for bundled services. 5. Mainstream Singles – This comprises the youngest population. Teenagers and young adults, who have embraced blogging, podcasting, IM and online gaming and should see the value of integrating voice communications with these activities. Internet Useage Statistics The Internet Big Pictures World Internet Users and Population Statistics World Regions Population (2009 Est) Africa 991,002,342 Asia Internet Users Dec 31, 2000 Internet Users Latest Data 4,514,000 67,371,700 Penetration % of Population Growth 200-2009 Users % of Table 6.8% 1,392.4% 3.9% 3,808,070,503 114,304,000 738,257,230 19.4% 545.9% 42.6% Europe 803,850,856 105,096,093 418,029,796 52.0% 297.8% 24.1% Middle East 202,687,005 3,284,800 57,425,046 28.3% 1,648.2% 3.3% North America 340,831,831 108,096,800 252,908,000 74.2% 134.0% 14.6% Latin America/Caribbean 586,662,466 18,068,919 179,031,479 30.5% 890.8% 10.3% 34,700,201 7,620,480 1,733,993,741 60.4% 175.2% 1.2% 6,767,805,208 360,985,492 6,767,805,208 25.6% 380.3% 100% Oceania/Australia World Total The Internet penetration rate was highest in the United States at 74.2%. This is followed by Australia (60.4%), Europe (52.0%), Latin America (30.5%) and the rest of the world. As low-speed DSL services are priced at about the same level as dial-up in many areas, households and business corporations have increased usage of high speed broadband connection rather than dial-up connection. High speed Internet has encouraged users to stay online for a longer period of time and make full use of interactive technologies. The increased demand for bandwidth-intense activities like video streaming and peer to peer sharing activities, have also made broadband a viable option. The Internet is becoming increasingly used for attracting and acquiring new talent as well as building brand awareness and engaging users through several social networking sites, blogging, etc. © 2013 Elevate, Inc. All Rights Reserved 44
  • 45. Internet broadband penetration in the United States is significant and continues to trend upwards. According to survey by Pew Research Center, nearly 79% of the American Internet users have a broadband connection. Dial-up users’ penetration has consequently declined from more than 40% in 2001 to less than 10% in April 2009. The usage in the rural area was also strong, growing 16% from Q2 2007 to Q2 2009. Broadband penetration is expected to increase to a significant 96.6% by 2014. Broadband connection is fast turning the basic delivery platform to support a wide array of current and new IP-based services including voice, video and data services. These broadband households form the primary target segment for service bundles. The primary targets for the company are households with teenager that tends to have large technology consumption. The table below describes the broad segments and characteristics of the targeted groups. Market Segment Demographics Characteristics Mid-life success (comprises 12.5% of the households in the US) * Age - 30- 45 years * Income - $60,000 Young Accumulators (comprises 7.8% of the households in the US) * Age - 20- 35 years * Income - $59,000 Mainstream Families (12.0% of the households in the US) * Age - 25- 54 years * Income - $46,000 Affluent Empty Nesters (7.2% of the households in the US) * Age - >45 years * Income - $69,000 Mainstream Singles (10.7% households in the US) * Age - 20-35 years * Income - $45,000 Childless singles and couples Suburban and exurban Consumption: Latest technology, financial products and travel Large families with children Suburban and exurban Consumption: Adult toys like campers, powerboats and motorcycles Families with at least 1 child under 18 Suburban and exurban Consumption: Lots of sports, electronic toys, groceries in-bulk and televised media Upscale couples whose children have left HH, Urban to small town Consumption: travel, exercise, arts, business media Young, hip singles Metro neighborhoods Consumption: Alternative music and lively nightlife Industry Structure + Growth Forecast The telecom industry in United States is matured and on a declining phase. Players are diversifying their offerings and formats in order to meet the changing consumer demand. A variety of companies have designed new business models to capitalize on changing socioeconomic trends. The company functions in the telecom as well as cable industry. Both these industries are undergoing a paradigm shift with a merged structure evolving with a broader product range. The triple play services (cable VoIP, TV and broadband) gathered momentum in 2008 and are now moving towards a quad-play with the delivery platform moving to Internet. The industry is characterized with the presence of few large primary players in both telecommunication and cable markets who are forming alliances to provide triple play or quad-play services. While most of the triple play services are still bundles rather than fully converged services, technological developments are increasingly allowing true convergence of triple play services on IP networks. © 2013 Elevate, Inc. All Rights Reserved 45
  • 46. The addition of wireless broadband services, such as via WiMAX networks, is also ushering the growth of fully converged IP-based quadruple play services. The industry is moving towards integration of telecom, cable and wireless industries. We divide the industry into four broad segments, telecom providers, cable providers, wireless providers and security providers. The service penetration of the services provide by these segments is shown in the graphic belowService Penetration Rate Wired Local 93% Wired Long Distance 84% Wireless 75% Cable TV 58% Satellite TV 25% Telecom Providers The telecommunication providers include large regional bell operating companies, incumbent local exchange providers, competitive local exchange providers, and Internet exchange carriers. The basic service provided by these includes radio, television, voice communications, and broadband services. The growth and the innovations in the industry have compelled service providers to offer broad array of products to sustain growth. As a result, several major players in the industry have merged together to offer end-to-end solutions to the customers while ramping up their network infrastructure. The Bell South acquisition by AT&T is an example on those lines. Other notable mergers include Sprint and Nextel, Alcatel and Lucent, Qwest and US West, Worldcom and MCI, SBC and AT&T, and Verizon and Alltel. Major players in the sector include AT&T, Sprint, Verizon, Qwest, etc. Of which, AT&T and Verizon are the largest players holding 56% of the total residential market share. These service providers offer a plethora of service bundles that package different types and grades of services. Some of them allow their customers to pick and choose the features and versions for different services. As of now, they have been mainly focusing on triple play bundled services. However, with growing broadband penetration and consumer electronic product, these players are focusing on converging additional products in their bundled package. Verizon recently announced to introduce Quadruple bundle, first among all the other market participants. © 2013 Elevate, Inc. All Rights Reserved 46
  • 47. Residential Marketshare Verizon Qwest Sprint ATT Other 0 Carrier Verizon 5 10 15 20 Double Play 25 Triple Play 30 35 40 Quad Play High Speed Internet up to 7.1 mbps + voice services +DITRCTV (+DVR) High Speed Internet up to 7.1 mbps + voice services +DITRCTV (+DVR) + wireless nationwide basic FiOS Internet 15/5 Mbps and freedom essentials or digital voice AT+T High Speed Internet up to 7.1 mbps and voice services FiOS Internet 15/5 Mbps and freedom essentials or digital voice + FiOS TV Prime HD FiOS Internet 15/5 Mbps and freedom essentials or digital voice + FiOS TV Prime + wireless nationwide basic Home Phone service with 100% Digital TV Home Phone service, 100% Digital TV, and Internet Home Phone service, Internet, and wireless Qwest Internet + DIRECTV + Home Phone Package Cable Providers Telecom operators have been losing a significant percentage of consumers to VoIP services from cable operators and mobile services from wireless operators. Cable providers offer video services and high-speed Internet connections using a hybrid fiber coax (HFC) network. These companies have created strong presence in the voice market using VoIP with over 50% residential VoIP subscribers compared to less than 15% unit held by the telcos (according to data by Frost & Sullivan). As a result, major telephone companies are entering the video space through partnerships with satellite TV companies as well as IPTV launch strategies. © 2013 Elevate, Inc. All Rights Reserved 47
  • 48. Cable Operators Residential Marketshare 2006 Comcast Charter Time Warner Cox Other 0 5 10 15 20 25 30 35 40 The cable providers include multiple service operators. In the television space, these companies mainly compete with satellite TV provider, which cannot provide voice and interactive broadband due to geosynchronous satellite that does not support voice and Internet. The cable operators mainly compete with telephone companies for voice and Internet access. As a result most large telephone companies are entering into strategic relationships with satellite TV providers for to sell television, telephone, and Internet access services through a satellite link. Most cable companies do not own wireless networks and face limitations in providing bundled services. Therefore, they are entering into relationships with telephone companies for providing bundled services through wireless networks. Bundled services offered by the cable providers: Carrier Time Warner Cable Double Play Triple Play HD Digital cable + high speed Internet HD Digital cable + high speed Internet + digital phone Digital phone + high speed Internet Comcast Digital cable + high speed Internet high speed Internet + unlimited nationwide calling Digital cable + unlimited nationwide calling © 2013 Elevate, Inc. All Rights Reserved 48 Digital cable + high speed Internet + unlimited nationwide calling Quad Play
  • 49. US Market Potential for Various Service Providers (In terms of Number of Bundled Service Subscribers for Interactive Services) (Among TV Households, n-=872) 12.8M Cable Provider 4.08M Telecom Provider 1.5M Satellite Provider Source: Profiles of PC Useage + Global Digital Living Copyright Parks + Associates Wireless Service Providers The rising penetration of broadband service is the primary growth contributor in the telecommunications industry. There are many different technologies that enable broadband connection speeds. Some of these include fiber, cable, DSL, mobile broadband, WiMax, and satellite. Residential High Speed Lines by Technology as of June 2007 Fiber Cable Wireline ADSL Other 0 20 30 40 50 60 70 80 100 Local telephone exchange carriers (LEC) offer triple play service using a combination of optical fiber and digital subscriber line (DSL) technologies. Cable television operators use a similar architecture called hybrid fiber coaxial (HFC) to provide subscriber homes with broadband. On an HFC network, a television provider can offer a combination of analog and digital television signals. Optical fibers, although are more expensive, are still used by the service providers as they can deliver high speed over long distances. According to Parks Associates, the number of US households subscribing to FTTx (fiber connections) will increase from 3 million in 2007 to 18 million by the end of 2013. SDSL and ADSL are the less expensive technologies used by the service providers in the US. Overtime, there has been a spur in demand for WiMax and other wireless technologies. WiMax is primarily used to propel penetration. © 2013 Elevate, Inc. All Rights Reserved 49
  • 50. © 2013 Elevate, Inc. All Rights Reserved 50