Multi-Platform Services: Increase Service Provisioning and Decrease Costs IPTV Forum London 26th of March 2009 Thomas Grota Head of Center of Excellence New Media Detecon International GmbH Think forward Designing Future Business

Two approaches how to face the financial downturn “ Invest in innovation” “ Despite the tough economy – I might even say because of the tough economy - our company will continue to invest more than US$9 billion a year in R&D, because we think it's that R&D spending that will cause us to remain strong,” Steve Ballmer during the U.S. House of Representatives Democratic Caucus Retreat - February 6, 2009 “ A Cruel Twist of Fate ” Seeks up to $16.6 billion in loans on top of $13.4 billion already granted, for a total of $30 billion. Plans to eliminate 47,000 jobs globally this year, about 19% of its workforce. Plans to reduce vehicle models to 36 from 48. Rick Wagoner at a press conference in Detroit – February 17, 2009, Antipodal opinions of experts Playing Safe Looking Forward

“ A Cruel Twist of Fate ”

Seeks up to $16.6 billion in loans on top of $13.4 billion already granted, for a total of $30 billion.

Plans to eliminate 47,000 jobs globally this year, about 19% of its workforce.

Plans to reduce vehicle models to 36 from 48.

Rick Wagoner at a press conference in Detroit – February 17, 2009,

Major Trends & Developments The (near) future is heading towards a converged TV platform Web enabled features are merging with traditional static TV world and bring along strong enrichment and variety of services. IPTV Web TV New TV TV 2.0 P2P-TV Arrows indicate convergence developments, i.e. IPTV, WebTV and P2P-TV will not be replace but rather evolve into converged forms of TV Development Scenario Adaptive user guidance Focus group recommended content Tailored interactivity for lean forward TV (Almost) unlimited access to content Non-linear, personalized user experience Advanced content search functionalities Lean-back environment optimized usability Platform independence Device independent browsing New TV Characteristics

Adaptive user guidance

Focus group recommended content

Tailored interactivity for lean forward TV

(Almost) unlimited access to content

Non-linear, personalized user experience

Advanced content search functionalities

Lean-back environment optimized usability

Platform independence

Device independent browsing

Market Enviroment and Trends of New TV 1.05 2009 1.62 2010 2.50 2011 3.37 2012 5.42 2013 Source: Detecon Forecast Analysis - January 2009 Time shift TV - pause / rewind / forward live TV events (TV Shows, Soccer Games, Skip Ads). Big TV – Additional channels and HD of current channels at all locations to expand free content portfolio. VOD – Movie rental from home with no hassle and planning in advance instead of DVDs. Integrated VCR – HD VCR integrated in the receiver / STB (Set Top Box) to eliminate devices. Additional remote controlled programming via web based EPG. Bundled Pay TV – long-term contracts are bundled with subsidized pay TV content such as Bundesliga and movies from VOD offering Internet on TV – Internet content (news feeds, Youtube, web radio) on TV via Widgets, etc. Community & Social services – Integration of communities and social networks while watching and to share content within peer groups. In Europe, Belgium and the Netherlands display one of the highest IPTV penetration levels among eight European operators tracked. The regional giants of Latin America , Argentina, Brazil and Mexico all have established regulatory restrictions on telcos' when attempting to enter the pay-TV market . IPTV Subscriber in Germany Current Market Outlooks European markets show sustainable growth but will need new features and interactive services to transform opportunities into subscribers and revenue streams. 6 Growth of IPTV Subscriber Trends and Drivers for New TV

Time shift TV - pause / rewind / forward live TV events (TV Shows, Soccer Games, Skip Ads).

Big TV – Additional channels and HD of current channels at all locations to expand free content portfolio.

VOD – Movie rental from home with no hassle and planning in advance instead of DVDs.

Integrated VCR – HD VCR integrated in the receiver / STB (Set Top Box) to eliminate devices. Additional remote controlled programming via web based EPG.

Bundled Pay TV – long-term contracts are bundled with subsidized pay TV content such as Bundesliga and movies from VOD offering

Internet on TV – Internet content (news feeds, Youtube, web radio) on TV via Widgets, etc.

Community & Social services – Integration of communities and social networks while watching and to share content within peer groups.

In Europe, Belgium and the Netherlands display one of the highest IPTV penetration levels among eight European operators tracked.

The regional giants of Latin America , Argentina, Brazil and Mexico all have established regulatory restrictions on telcos' when attempting to enter the pay-TV market .

Demands for new interactive Services in New TV Web Radio streaming – global channel list via TV sound system. Home Media activation – music and photos from home network media servers on TV User Generated Content – photos, videos, email on TV from the Internet with “Connected Life & Work” Free Player & tools – PC Client including Tools for access and Internet services. Developer Community working at freeplayer.org TV Perso – Save videos in a community and grant access to other members. Multiposte - Web TV client to stream selected TV stations to a PC. Integration Services Platform Services Social Services Own IPTV channels - multiple sports and business news Interactive services - sports betting, theater ticket booking, and online directory services User Generated Content - on IPTV network planed. Own developed DRM – no Set Top Box support necessary. 0,82+ Mio Subscribers 0,5+ Mio Subscribers 2,1+ Mio Subscribers Satisfy or create demand A service offering strategy depends on subscriber base and market maturity – yet IPTV providers have the economics of scale to drive Innovation & New Marketing Models. Started: 2007 Started: 2003 Started: 2005

Web Radio streaming – global channel list via TV sound system.

Home Media activation – music and photos from home network media servers on TV

User Generated Content – photos, videos, email on TV from the Internet with “Connected Life & Work”

Free Player & tools – PC Client including Tools for access and Internet services. Developer Community working at freeplayer.org

TV Perso – Save videos in a community and grant access to other members.

Multiposte - Web TV client to stream selected TV stations to a PC.

Own IPTV channels - multiple sports and business news

Interactive services - sports betting, theater ticket booking, and online directory services

User Generated Content - on IPTV network planed.

Own developed DRM – no Set Top Box support necessary.

Profitability Challenge of New TV Subscription Pay TV, VoD, HD Advertising Interactive Services Subsidization Core & Access IP Network Middleware with QoS Service Development Content Licensing Francising of UCG & Social Networks Revenue Streams Cost Drivers Without a viable business model subsidizing triple-play to defend from cable operators will not be sustainable in the long term. ++ +/- + ++ +/- +/- + + +/- + Profitability Gap Baseline Financial Perspective 2 Costs will be stable in current model due to scalability concerns. New costs will raise due to the need of social services Costs will increase due to new models for different channels Cost will increase by in-house activities. Cost per user will decrease but prove is to be made. Cost will be stable for subsidizing STB’s and Contracts Revenue will increase due to new services. Revenue will increase due to new advertising models. ARPU will increase due to “lean forward” trend. Pricing will decrease while numbers grow. +/- = Trend Indicative

Content is King …. But it comes at a Price ! Value of Content Ranking Value of Ownership of operator A B C Low High Live Nation Movie Studios Soccer Leagues NFL, MLB, NBA NY Times, WSJ Bloomberg Apple, et. all. Cable Operator Satellite Operator IPTV Provider (Telco) Amazon, et. all Google, et. all Customer Relation Struggle for leadership Licenses The Power of Ownership Selecting the Best Content Establishment of Platforms Content Creation Licensing Costs Content ranking and analysis of ownership is needed to master the struggle between content providers and platform operators regarding indecisiveness & leadership.

Current Cost Drivers of a New TV ecosystem IP Networks Costs Middleware Licenses Installation & Support Depending on Middleware architecture Depending on Application Development Strategy Depending on integrated Triple Play Approach Grows with subscribers Grows with subscribers Can scale with subscribers Sections Drivers Scalability Selecting network centric solutions and an integrated vendor management. Analyze bandwidth consumption based on customer demand for solutions. Drive in-house application development and focus on open architecture. Push for network centric applications rather than STB powered solutions. Watch for head end and encoding. Establish self service for all features and integrate in existing dual play processes. Initiate open standards for 3 rd generation IPTV and align you development with your peer group (Incumbents, Altnets). Counter Strategies 1. 2. 3. Platform-related Costs Scalability of networks, middleware, and processes is key to control costs within the IPTV ecosystem – however detailed planning and analysis is indispensable.

Selecting network centric solutions and an integrated vendor management.

Analyze bandwidth consumption based on customer demand for solutions.

Drive in-house application development and focus on open architecture.

Push for network centric applications rather than STB powered solutions.

Watch for head end and encoding.

Establish self service for all features and integrate in existing dual play processes.

Initiate open standards for 3 rd generation IPTV and align you development with your peer group (Incumbents, Altnets).

Short Term - Optimization of All IP Networks is Key Sufficient Efficiency within the Network Decrease Demand of IPTV Middleware Consider alternative Access Technologies 1. 2. 3. Diversify network usage by services and products at the core, access and at the edge. Does IPTV needs to be available on all lines such as xDSL or FTTx ? Some provider are offering IPTV on FTTx only Topology for IPTV networks are different from pure All IP Network approaches. Wide arrange of bandwidth demand for different IPTV middleware providers: SD: from 2 Mbit up to 4 Mbit HD: from 4 Mbit up to 8 Mbit Alternative delivery of free TV via DVBT, etc – is lost of control for those signals critical? Does QoS need dedicated lines? P2P networks for quality video streaming. PC clients based on P2P available as an additional product offering. What is the power of a STB? Software based versus network centric control of quality and features – IPTV in a Cloud Network-related Costs Before rolling out into a larger network scenario the product offering from a network centric perspective must be reviewed and customer expectation must be fulfilled.

Does IPTV needs to be available on all lines such as xDSL or FTTx ? Some provider are offering IPTV on FTTx only

Topology for IPTV networks are different from pure All IP Network approaches.

Wide arrange of bandwidth demand for different IPTV middleware providers: SD: from 2 Mbit up to 4 Mbit HD: from 4 Mbit up to 8 Mbit

Alternative delivery of free TV via DVBT, etc – is lost of control for those signals critical?

Does QoS need dedicated lines? P2P networks for quality video streaming. PC clients based on P2P available as an additional product offering.

What is the power of a STB? Software based versus network centric control of quality and features – IPTV in a Cloud

The future New TV platform: Smart, Efficient & Social Social Networks: Content, Status Feeds, Messages, Friends recommendations Core IP Network Wireline Access Network Mobile Network Common User Experience 3G / LTE WiFi WiMax xDSL xPON New TV Backend Interactivity: Widgets, Chats, Communications, Voting, Gaming Customer Devices: Adaptive Screens, Variable Resolution, Various Firmware /OS Nomadic Usage: Remote Device Management, Location Based Services, Head end & Encoding Media Management EPG & VAS CRM, Billing & Accounting Provisioning & OSS Platform Efficiency Ever-increasing user expectation will demand the integration of new processes, Web 3.0 content and require support for interactive applications across all devices and networks.

The Box makes the Difference Individuality Quality / experience Usage per status quo Individuality Quality / experience Usage per status quo Individuality Quality / experience Usage per status quo Classic and common device for high quality of experience including place & time shift Device for little snacks of content in between; “Fast food” among the reception devices Device for essential information and events on-the-move but at low cost Users see TV and PC as complementary - wish to transfer individuality of PC / Internet to TV Essential requirement: quality of content - currently no practical and simple solution available Platform Efficiency The viewing & technical capabilities of the device will drive the users decision which ‘box’ to purchase in order to satisfy specific demands for channel and content.

Individuality

Quality / experience

Usage per status quo

Individuality

Quality / experience

Usage per status quo

Individuality

Quality / experience

Usage per status quo

Users see TV and PC as complementary - wish to transfer individuality of PC / Internet to TV

Essential requirement: quality of content - currently no practical and simple solution available

Intelligence lives at the Edge of the Content Network Device centric Network centric Timeline of Technology Development Set Top Boxes (including HD VCRs) Low Cost Streaming Box (Linux, Flash based) Hybrid Content Feed (DVBT, IP, QoS) TV Sets (Home Network, UPnP, embedded IPTV Clients) HD VCRs (embedded, Smartcards) Media Center TVs (Software Plug-in) Media Management within the Cloud Wireless Broadband IPTV (WiMax, LTE) P2P enabled CDNs, SIP for IPTV Signaling, VoD via RTSP Roadmap of Device Development in the Future “ All in One” IPTV Devices Integrated IPTV Devices Cloud Based Services Future Development Fundamental changes will occur within the development of the ITPV premises. The IPTV termination will shift focus from a device driven to a network driven approach.

IPTV on IMS & SDP – “Doing more with less” Remote Device Management Embedded Devices Cloud Services SIP / RTSP P2P CDN Wireless Networks Interactive Advertising Voting Telephony and Chat Auctioning Red Button Service Content Tracking Process Architecture Service Architecture Application Architecture Technical Architecture SDP IMS Services Analysis Functional Components Map Target Architecture 1. 2. 3. Design Principles On all levels the costs must be lowered through the IPTV product lifecycle. Service allocation & distinguished planning is key for efficient development and roll-out. 1. Business Requirements 2. Service Assesment 3. IPTV Architecture

Planning New TV Services starts in the Middle(ware) IPTV Architecture Domain Model Interaction Domain Infrastructure Domain 3rd Party Interfaces Domain Identity Mgmt. Domain Service Control Domain Service Creation, Mgmt. and Execution Domain Content Provisioning Domain Business / Operations Subsystems Domain Service Impact Cluster on Domain Model Design Principles Analyzing the impact of interactive services on the IPTV domain model will identify weaknesses of current technologies and supports implementation of new technologies. Illustrative

Service Planning and Live deployment Service Assessment Service Roadmap Financial Evaluation In Out Service Definition Methodology Derive cost from service assesment and roll out scenarios to define service roadmap – Capex can be minimized by outsourcing operations to IPTV vendor – Start discussion. Illustrative Illustrative Illustrative

A predictive Outlook into the Future… Saturday, January 17, 2009 500 Million Downloads from Apple Application Store Apple Application Store hits for 500 million downloads by iPod and iPhone users only after 6 months of opening. Nearly 5 million downloads recorded a day, doubled from last December. Current Candidates are: Nokia Siemens / OVI Ericsson / OpenTV Forum Microsoft / 180squared Free / www.freeplayer.org Yahoo / Widgets / Open Source Underdogs: Deutsche Telekom / IPTV Award France Telekom / Soft@home Potential IPTV Marketplaces Mobility rules and leads the way A strategy for community-based IPTV application development is a main ingredient to drive innovation and integrate developers into the IPTV ecosystems in 2010+. Mobile Marketplaces & Stores

Current Candidates are:

Nokia Siemens / OVI

Ericsson / OpenTV Forum

Microsoft / 180squared

Free / www.freeplayer.org

Yahoo / Widgets / Open Source

Underdogs:

Deutsche Telekom / IPTV Award

France Telekom / Soft@home

Conclusion Next Steps Recommendations Address fragmenting market segments Be fast and innovative Think outside the box and take risks Develop strategies for the diverse usage scenarios of the IP-based NewTV world of tomorrow. Develop data-driven user profiles for targeted advertising and personalized offerings within your platform. Find the right partners to concentrate on core competencies. Invest in innovation to leverage the potential of new IP-based NewTV services and application development. Improve time to market to remain competitive in a fast changing market place. Develop capabilities and processes to improve business flexibility. Evaluate threats and opportunities of potentially disruptive technologies (e.g. P2P) and outsourced IPTV offerings in clouds and wholesale. Conduct ongoing market experiments to test market reactions and to understand user requirements Innovate with the Mobile Channel to establish Converged TV offerings.

Develop strategies for the diverse usage scenarios of the IP-based NewTV world of tomorrow.

Develop data-driven user profiles for targeted advertising and personalized offerings within your platform.

Find the right partners to concentrate on core competencies.

Invest in innovation to leverage the potential of new IP-based NewTV services and application development.

Improve time to market to remain competitive in a fast changing market place.

Develop capabilities and processes to improve business flexibility.

Evaluate threats and opportunities of potentially disruptive technologies (e.g. P2P) and outsourced IPTV offerings in clouds and wholesale.

Conduct ongoing market experiments to test market reactions and to understand user requirements

Innovate with the Mobile Channel to establish Converged TV offerings.

DETECON’s Clients in New TV projects around the globe Detecon’s Media Expertise In the dynamic media business, Detecon has proven expertise in leading edge business topics as well as deep knowledge in related state-of-the-art technologies. Selection of Important Media Projects Network Strategy IPTV-Strategy / Interactive Service Strategy IPTV Service Strategy Content 2.0 Android application strategy for major European incumbent Advertising / Media Strategy Assesment and Blueprint for IPTV and Media Unit All-IP NGN Service & Product Roadmap IPTV-Strategy Production Workflow Process Alignment Category Management IPTV-Innovations Interactive Advertisement PSN @ New TV and EPG Network Architecture Go-to-market strategy for international mobile software launch Strategy Mobile TV

Foundation: 1954 Diebold Management Consulting 1977 DETECON Rebranding: 2002 Detecon International GmbH Turnover 2008: EURO 165 million 800 consultants Shareholder: T-Systems Enterprise Services GmbH Deutsche Telekom AG Offices in Germany: Bonn (HQ), Dresden, Eschborn, Munich International locations: Abu Dhabi, Bangkok, Johannesburg, Beijing, Reston-Virginia, Silicon Valley, Singapore, Zurich Introduction Our global presence ensures the international success of our clients. Detecon

Foundation: 1954 Diebold Management Consulting 1977 DETECON

Rebranding: 2002 Detecon International GmbH

Turnover 2008: EURO 165 million 800 consultants

Shareholder: T-Systems Enterprise Services GmbH Deutsche Telekom AG

Offices in Germany:

Bonn (HQ), Dresden, Eschborn, Munich

International locations:

Abu Dhabi, Bangkok, Johannesburg,

Beijing, Reston-Virginia, Silicon Valley, Singapore, Zurich

Thomas Grota Head of CoE New Media DETECON Consulting Detecon International GmbH Oberkasseler Str. 2 53227 Bonn · Germany Phone (+49 228) 700-1943 Email:thomas.grota@detecon.com http://www.detecon.com Supervisory Board: Hans-Jürgen Wickenhöfer (Chair) Management Board: Dr. Klaus Hofmann (Chair) Registered at: Court of Bonn HRB 2093 Company location: Bonn The future‘s looking good Thank you for your Attention!