Carrier Video Services: Trends and Opportunities

Video Timeline ’50s-’90s ’60-’70s ’80s ’90s PSTN Video phone (built by Marconi) went on sale in ‘92. ISDN Video conferencing starts BT Relate 2000 shown. First Picturephone system after CCITT H.120 standard built in ’56 by AT&T. By ‘64 created in early ’80s. ISDN 2B the \"Mod 1\" was tested between Disneyland and the videophones start to appear by New York World's Fair. the end of the ’80s Our greatest glory is not in never falling, but in rising every Soon after in ’93 BT started trialing Video on Demand. 3 time we fall. -- Confucius © 2008 Alan Quayle

Users Pay for Video, Advertising Expands Consumption • Despite success of free services like Hulu & BBC iPlayer, customers remain willing to pay if they perceive value – E.g., Apple iTunes video store, Disney online, Verizon FiOS, Sony Store (PS3), etc. In the limit the customer will decide the mix of subscription (Sports/Premium), ad-supported (VoD), and download-to-own 6 © 2008 Alan Quayle

Where’s the Money? • In ’07, 900m streams/downloads of premium and niche online TV were consumed in the UK – Driven by free video from the BBC • In ’07 market value was estimated at £34m (excluding subscriptions) – Average rev per stream/download of 4 pence – US average per stream/download is 8 pence • Only 40% of UK revenue comes from advertising – US is roughly 55% 12 © 2008 Alan Quayle

The Internet has gone Video: Mobile Impact • Mobile Broadband (MBB) is growing faster than voice (based on customers)! – In Sweden, Berg Insight estimates 500K mobile broadband terminals (USB/PC cards) in ‘07 generated more traffic than all 10M handsets in market • Internet no longer ‘hides’ at home and in the office – Usage model of fixed broadband has gone mobile – Video streaming quality is becoming a critical yardstick – hence interest in H.324 (3G- 324M) as it uses the circuit switched quality of service provided by 3G networks 13 © 2008 Alan Quayle

YET: Why hasn’t that been reflected in mobile video telephony? • Networking effects are powerful both in a positive and negative sense Worldwide M obile Video Phone Unit Shipments However, total phone sales in ‘07 >1.1B. Most people do not have 2,000 a videophone! 1,500 Units (M) 1,662 1,305 1,000 963 135 243 682 500 417 0 CY05 CY06 CY07 CY08 CY09 CY10 CY11 Calendar Year Source Infonetics Same problem as SMS unless most people can use it, no one uses it 14 © 2008 Alan Quayle

YET: Why hasn’t that been reflected in mobile TV? • Trials have demonstrated four main use cases for mobile TV. – Commuting: large, urban areas. – Large Periods of Downtime: waiting. – Home: private, personal time. – Secret Uses: Semi-quick breaks during the day for young consumers at school and adults at work. • Technology diversity: There are now at least 15 separate Mobile TV technologies – complexity stifles the market • Japan has now shipped more than 20 million ISDB-T (Integrated Services Digital Broadcasting-Terrestrial) mobile handsets, and Korea has 8 million T- DMB (Terrestrial Digital Multimedia Broadcasting) devices, many of which are not handsets. – Focus is free-to-air services, which are driving the transition to Mobile TV, but it does not improve ARPU for cellular operators. • Verizon and AT&T view free-to-air Mobile TV as a threat to be countered rather than a service to be offered. – They prefer streamed cellular video services, which at least improve ARPU, even if it is for a minor percentage of their total customer base. • ARCchart estimated 301 million handset devices, that can receive one or other format of Mobile TV, will be sold by 2012 – Its happening whether operators like it or not – Advertising model is proving challenging for operators Is it yet again argument of closed versus open? 15 © 2008 Alan Quayle

What’s the Benefit to Operators? Opening up the Long Tail Total ARPU uplift 12%-36% Operator Branded: Cooler operator services, extract greater value from segments within the customer base, lower internal costs and time to market for new features – making it more economic to address the segments. ARPU uplift 4-10% No. of users Co-Branded: Access cool web communities or tailored services for brands, e.g. a Disney, BBC or Playboy widget. ARPU uplift 3-8%. Long Tail Enabled: extends reach of services to segments operators can not economically reach, e.g. SMB Endorsed: extends operators ability to execute on its product roadmap, test out the 80% of the roadmap never implemented. Internet: Co-opt Google’s success to the Telco API. ARPU uplift 5-18% Services 17 © 2008 Alan Quayle

Operator Activities in Opening the Network • Telenor Content Provider Access (CPA) – Generate within Norway roughly $100m a year in revenue, that is 6% of Telenor’s total subscription revenues. • O2 Litmus (www.O2litmus.co.uk) – Recently announced by O2, to be launched in late 2008, extensively leveraging web 2.0 principles. • Telecom Italia NexTIM – Telecom Italia’s web 2.0 site exposing new services to its early adopting ‘360 degree innovators.’ Letting the market decide what services to launch, rather than solely internal product management processes. • SingTel Partners Program – Leverage external 3rd party developers to tap into their potential of unlimited innovation to drive new revenues. Promote access to limited network resources and capabilities; reduce time-to-market for launching new services and provide mechanisms for 3rd parties to be paid. • ProgrammableWeb – An aggregator of APIs across operators and the internet, including Orange Partners and BT’s 21C APIs. • Orange Partner – As a simple case study, it took only seven months from Orange’s first meeting with a developer called mob-it (www.mob-it.com) to launch a public beta of that service integrated into Orange’s picture service Pikeo, using its open APIs. • And many others including: – Verizon’s ODI (Open Developers Initiative, Sprint’s Business Mobility Framework, and AT&T’s devCentral 18 © 2008 Alan Quayle

Potential Telco API capabilities (from App Vendor Survey) • Authentication & Single Sign-on • Home Network Enabler • Presence (device, application, call state) • Content Delivery and Availability • Policy (Quality of Service) • Mobile Video • IPTV enablers • Device Capabilities / Software • Location (accuracies and freshness), • IPTV STB enablers Proximity, Heading, Speed • Content Enablers • Preferences (policies or rules) • Collaboration Enablers • Context – a combination of presence, • VoIP / SIP call control including invoking location, device status, application status, supplementary services meeting status (calendar), etc. • Fulfilment and other BOSS capabilities • Customer data (business intelligence) • Call Control • Digital Rights Management • Messaging • Device Management • Network address book • Local dial in number provisioning • Group List Server (buddy lists) • Ringtone purchase integration • Enterprise Mobilization • Video-ringtone platform • VoIP / SIP: tone insertion • Subscription status • Call Flow: ACD, IVR, CRM, Helpdesk • Message Store • Charging / Billing • CDR number frequency search • Call Log / Call events • Calling Name dip • Directory 19 And the list goes on, much further on….. © 2008 Alan Quayle

Use Case • Jim’s recently hired a nanny to look after his two young sons • When he’s on the road he can also check-in from his mobile phone, just to make sure everything is OK. He also shares access with his parents so they can check in from their IPTV STB – Single Sign On and IPTV video streaming API to ensure quality delivery of video • While at work using a bookmark in his PC browser Jim goes to the HomeCamera site, logs on, gets a message to his mobile to confirm its him, and can view his home cameras – Messaging API for additional security • While at work he can schedule an event at 2PM to see they’re getting their mid- afternoon nap from his PC – Messaging API for deliver of video clip • From his mobile, he either uses the browser to the Home Camera service, or uses an ODP (integrated family services) to check on his kids location, and then views the home camera to make sure they’re behaving themselves • While on holiday (house is empty) the system is set so that should there be movement a video clip is sent to his phone – Messaging API 23 © 2008 Alan Quayle

Conclusions • Operators are finally starting to listen – Get in there and tell them what you need! – For example, sign up to O2 Litmus, www.o2litmus.co.uk – Its now up to the application developer to innovate, the operator enables, developers lead! • The Internet is no longer hiding – Its pervasive at pricing points most consumers can afford: prepaid 10GBP for 1 month – iPhone, laptop, feature-phones/PDAs with open access • Barriers to entry are being removed, cost of failure lowering – Opportunities for a myriad of profitable niches: Cougars, Sex-Ratio Singles, Commuter Couples, Interracial families, Sun-haters, New old Dads…. – Many emerging unmet needs and people now expect video 24 © 2008 Alan Quayle