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Broadband Access - beyond learning from the US

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Seminar to China cable and telecom operators about the evolution of broadband industry.

Seminar to China cable and telecom operators about the evolution of broadband industry.

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  • The loss of telecom after the bust is much more than the loss of Dot-com, in terms of company/industry market value Some major telecom’s network was built such that it is only 20-30% utilized today The regulation of unbundled loop and unrealistic of being able to re-build the access network heat up unrealistic competition.
  • But DBS has proven to be a formidable competitor Digital cable is behind, but is closing the gap The race to capture (and hold) digital subscribers is in full swing. (Could say something about getting to 100% digital to protect cable’s core video business. Is this a forecast? Do we want to say that?)
  • In fact, there are even more opportunities in the “Video” space than at first meet the eye Not only can MSOs capture share in the current space… But they can also expand the pie in areas such as: Non-TV Advertising market…for example: Shifting advertiser “Direct Marketing” dollars from catalog, direct mail, telemarketing, etc. to E-TV Shifting share from print and other media, etc. Getting paid to carry content: Something like the pay-me-up-front syndication business on TV Transactions Developing the applications to “close the sale” in real-time with TV advertising and getting paid a nice commission for doing it.
  • Advertising & Content are the drivers of growth To capture that value, Content owners & Advertisers must have access to subscribers Access is the leverage of Distribution players Land grab for 40 million narrowband subs now underway Cable is winning the land grab vs DSL
  • CMS: typically performs call administration and connection functions. It may use SIP to do that in pure IP environment. It is also the place that end-to-end QoS insurance would be performed, including QoS mapping between different segments of networks. It would interact with CMTS and also router in the IP cloud. In most cases, call feature will be supported here too, but some times they are in independent, so-called Application Server (not in the picture). MG: This is the place that IP network and PSTN network interact and conversion is performed, including negotiation of the use of codec, echo cancellation,etc MGC: The control function for MG. Sometimes it is part of the MG, most cases it is stand alone and control multiple MG, therefore realizing a distributed architecture. It talks to MG using H.248, H.323, or others. Packet Cable uses TGCP SG: this is the gateway that talk to SS7 network and perform signaling conversion between SS7 and IP network. In Europe, Sigtran is used. Packet Cable uses ISTP MS: usually include Announcement Server and controller. RKS is the Record Keeping Server. All these are function blocks. Generally speaking, IP connection (DHCP, DNS, etc), Call Administration and Connection, Voice Application (including announcement), Interconnection to PSTN and its control, and Back office are the main functions that support a call. In real implementation, this is done using either centralized or distributed methods, or the combination, by different vendors. They may also be functionally separated but physically collocated. To add more confusion, both CMS and MGC are called Softswitch, depends who we talk to. At very high-level, one could think they are the same: performing call administration and connection establishment (not physical switch, but signaling for terminal-to-terminal connection, including the procedure agreements), except that MGC is specifically for interacting with PSTN. Namely, without PSTN, one only need CMS, or vice versa, or just a single piece.
  • Cellular has already captured 50% of the value in a decade Cellular has blurred the traditional Residential – Business segmentation The residential wireline business is under significant pressure
  • CMS: typically performs call administration and connection functions. It may use SIP to do that in pure IP environment. It is also the place that end-to-end QoS insurance would be performed, including QoS mapping between different segments of networks. It would interact with CMTS and also router in the IP cloud. In most cases, call feature will be supported here too, but some times they are in independent, so-called Application Server (not in the picture). MG: This is the place that IP network and PSTN network interact and conversion is performed, including negotiation of the use of codec, echo cancellation,etc MGC: The control function for MG. Sometimes it is part of the MG, most cases it is stand alone and control multiple MG, therefore realizing a distributed architecture. It talks to MG using H.248, H.323, or others. Packet Cable uses TGCP SG: this is the gateway that talk to SS7 network and perform signaling conversion between SS7 and IP network. In Europe, Sigtran is used. Packet Cable uses ISTP MS: usually include Announcement Server and controller. RKS is the Record Keeping Server. All these are function blocks. Generally speaking, IP connection (DHCP, DNS, etc), Call Administration and Connection, Voice Application (including announcement), Interconnection to PSTN and its control, and Back office are the main functions that support a call. In real implementation, this is done using either centralized or distributed methods, or the combination, by different vendors. They may also be functionally separated but physically collocated. To add more confusion, both CMS and MGC are called Softswitch, depends who we talk to. At very high-level, one could think they are the same: performing call administration and connection establishment (not physical switch, but signaling for terminal-to-terminal connection, including the procedure agreements), except that MGC is specifically for interacting with PSTN. Namely, without PSTN, one only need CMS, or vice versa, or just a single piece.
  • Chicagoland 1 master and 1 backup headend 1 off-air receive site (Sears Tower) 8 primary hubs 2 distribution hubs 1 newly acquired headend (will become primary hub)
  • Most of US MSO complete its network upgrade Pressure from Wall street together with non-incentive to further upgrade network make it unlikely for cable industry to embrace any new “last-mile” technology (e.g., FTTH, etc) The next opportunity for network and optical technology is in the inter-networking, especially the one that can support multiple services and is also backward compatible.
  • Transcript

    • 1. Broadband Business beyond learning from the US Xiaolin Lu CEO Morning Forest, LLC xlu@morningforest.com February 26, 2004
    • 2. What is this all about? China Cable Industry is being “unleashed” from government but still a “spoiled” baby in the cradle. MBA does not help, but the street-smart might. What and where is the business, and does it have to repeat everything US did?
    • 3. AGENDA Business Environment: US Example Video Business High-speed Data Business Voice Business Networks Our Perspectives
    • 4. 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 500 0 30-Jul-82 11-Feb-83 26-Aug-83 09-Mar-84 21-Sep-84 05-Apr-85 18-Oct-85 02-May-86 14-Nov-86 29-May-87 11-Dec-87 24-Jun-88 Doubles in 8 years 06-Jan-89 21-Jul-89 02-Feb-90 17-Aug-90 01-Mar-91 13-Sep-91 27-Mar-92 09-Oct-92 23-Apr-93 05-Nov-93 1983 - 2001 20-May-94 02-Dec-94 Doubles in 4 years 16-Jun-95 29-Dec-95 12-Jul-96 Doubles in 2 years 24-Jan-97 08-Aug-97 20-Feb-98 Doubles in 1 year 04-Sep-98 19-Mar-99 01-Oct-99 14-Apr-00 27-Oct-00 Moore’s Law of Nasdaq 12-Mar-01Source: CSFB 20-Apr-01 31-May-01 11-Jul-2001
    • 5. The Present State of Telecom Telecom was more tightly linked to the dot-com industry than most people realized Unrealistic optimism set in everywhere  Disproportionate cost structure and revenue opportunity Abundant available capital along with major shift of regulatory policy resulted in:  Fierce competition  Over capacity “Innovative” practices fueled the fire:  Vendor financing, capacity swaps, round trips  Revenue = receivable + inventory
    • 6. Business Environment: US Example
    • 7. COMMUNICATION IN US Long-Haul Metro Access“Unregulated” “Unregulated” Regulated or Semi-Regulated  AT&T  MSO  Worldcom  ILEC  Spring  CLEC  Qwest
    • 8. REGULATION AND BUSINESS VOICE DATA VIDEO  Communication  Information  ContentRegulation Services Services Service  Title 2  Title 1  Title 6Requirement  Open Pipe  None  FranchisingBusiness  Selling Minutes  Flat rate  Flat rate + Usage
    • 9. THE RESIDENTIAL PIE - 2000Cable Dominates ILECs Dominates Cable LeadsVideo Market Voice Market High-Speed Data Market Video Voice Data Cable ILECs Other Source: Paul Kagan Associates
    • 10. Ten Year Performance Improvement WAN Bandwidth 2 2000 Processor Power 2 1000 Router Engine Performance/Price 1 1000 Internet Traffic 2 1000 Bandwidth to Homes 3 13Sources: 1. Business Communications Reviews, Sept. 1997 2. AT&T 3. Dataquest
    • 11. NETWORK TRAFFIC 1000 Voice 800 DataTraffic (Gb/s) 600 Total 400 200 0 1990 1995 2000 2005 2010 K.G. Coffman and A. Odlyzko AT&T Labs
    • 12. LOOKING FORWARD: TRIPLE PLAY 2002 Data $28B Cable Voice ILEC Video  SDV  VoIP $75B $128B  VDSL  Standard based equipment  IP Infrastructure  OSS/BSS  New Services
    • 13. OPPORTUNITIES: TRIPLE PLAY  Create a customer destination  Reduce churn  Create differentiation  Build a common platform for innovation and gain economy of scale  Increase ARPU (Average Revenue Per Unit)  Offensively and defensively change the nature of services and products
    • 14. BUSINESS COMPARISON Comcast x Cox x GehuaSubscriber (M) 21.0 2.3 6.1 0.7 9.0Revenue ($M) 8,079.0 169.0 5,038.6 105.4 47.8Operation Cost ($M) 3,511.0 131.7 2,130.9 80.0 26.7Gross Margin 57% 58% 44%EBITDA Margin 35% 35% 24%Revenue/Sub ($) 384.7 72.4 826.0 155.4 5.3EBITDA/Sub ($) 134.9 79.0 291.7 170.7 1.7
    • 15. OPPORTUNITIES AND ISSUES US China Telephony: $25 HSD: $52.95 VOD& DVR: $9.95 HDTV: extra $5 Digital Tier $50.44, $60.44, $68.44, $78.99, $93.99 Ext Basic: $40.49 HSD: $15 Basic: $13.44 Basic: $2.5 US China Network/HHP $175 $175 CMTS/Sub $8 $35 CM/Sub $40 $100
    • 16. BUSINESS VALUATION US x ChinaARPU/month 57.34 3.8 15.00Gross Margin 57% 44%EBITDA Margin 35% 1.5 24%Multiple 16 1.6 10 Value/Sub ($) 3,853.2 8.92 432.0EBITDA/Sub 150.00 88.2 1.70Debt/EBITDA 4 4 Debt/Sub 600.00 88.2 6.80
    • 17. KEY ISSUESBusiness Opportunities Operations Reality Regulatory Environment Cost Structure ( technology platform)
    • 18. VIDEO
    • 19. VIDEO: GOING DIGITAL! Total Households110 111 100 106100 90 Analog Only Houses 89 82 80 Total Digital Today 70 70 Digital Cable 60 59 50 45 40 36 Satellite Digital 30 30 25 22 20 Analog Only 10 5 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source = Kagan 2000 Databook
    • 20. DIGITAL CABLE SUBSCRIPTION 25 20 Cablevision CoxMillion 15 Adelphia Charter 10 Comcast AOL TW AT&T 5 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 Source: UBS Warburg
    • 21. US CABLE DIGITAL PENETRATION 40 35% of Basic Sub 30 25 20 15 10 5 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 02 Source: UBS Warburg
    • 22. VIDEO DISTRIBUTION SYSTEM Video Analog Terrestrial Analog Digital On Video Digital Video Video Services Services Services Services Demand Customer Server Premise Television Interactive Set-top Video Services Inband Gateway Conditional Access, Multiplexing, Modulation Internet Return Nodes Data Channel Application Servers Forward Interactive Data Hubs Back-Office Communication Channel Systems Servers Network Control Digital HFC Headend Network
    • 23. OPENCABLE ARCHITECTURE OCI-H1 Operations Security OCI-H2 Module(s) OCI-C2InternetContent OCI-N OCI-C1 Video Headend ConsumerContent Devices OtherContent Supporting Hardware and Software OpenCable Device
    • 24. STRATEGIES Increase Subscription Rev$ Expand Non-TV Ad Market “Video” Pie Get Paid To Carry Content Transaction Revenue “Video” GrowthStrategies Recapture DBS Subs Recapture Tape Rental Capture “Video” Share Get Ad Share From B’Cast Own The Content
    • 25. PRODUCT EVOLUTION ITVDigital Penetration HDTV Extended VOD/PVR VOD Digital Plus Digital Basic Time
    • 26. INTERACTIVE TV MARKET 40,000 35,000 30,000 Interenet TV 25,000 Direct Response$M Internet Portals 20,000 IPG 15,000 VOD 10,000 T-Comm 5,000 0 2001 2003 2005 2007 2009 2011 Source: Kagan
    • 27. WHAT’S CHANGED? Revenue Projections Profit Loss • Advertising • T-Commerce • Walled Garden Fees Services • Consumers Like • Consumers Will Pay for Costs • Integration • Maintenance 1999 View 2002 View Revenue Cost
    • 28. There Still is a Model, it’s Just Different Minimize Cost of Receiver • Small Footprint Implementations • Offload Processing to Proxy Servers for Low Cost Receivers • H2O for HTML / JavaScript on Very Low Cost Receivers • Minimize Code Size Network Solutions • Balance Traffic Between In-band Push and out-of-Band Pull • Monitor Traffic and Performance Maximize Integration with OSS and BSS • Minimum Infrastructure, Integration and Operation Costs • Evangelize Server Side Standardization • DVB, Cable Labs, BSS Vendors
    • 29. THE NEW FOCUS Focus on Services that Provide High Value to Consumer, but Low Cost to Provide: Information, Weather, Stocks, Sports Scores Enhanced TV, Player Stats, Multiple Camera Angles Shopping on Shopping Channels Games of Skill and Parlor Games Voting Communication ServicesFocus Must be Simple, Fast, and Remain TV Centric
    • 30. COMMUNICATIONS Multi-Platform Communications, Provides Interesting Opportunity:Messaging Voice Solutions- SMS- Unified Messaging - Voice Activated Dialing- Instant Messaging - Voice Controlled- Voice Mail Messaging
    • 31. SHORT MESSAGE SERVICE TV Based Messaging Sweden 75% of Mobile Users in Spain Europe Use SMS Italy Currently, Over 12b SMS Messages are Sent Each France Month Germany European Wireless Operators Generate 5%-15% of Their UK Revenues from SMS Services 0% 10% 20% 30% 40% 50% Current Likely Source: Forrester, January 2002
    • 32. FUTURE Television on Demand  VoD, SVoD, Network and Local PVR  Convergence of Voice, Data and Television Offering Beyond Digital TV Infrastructure • Roaming Between Digital TV and Other Networks (e.g. Cell Phone, Internet) • Universal Messaging, Single Sign-in, Digital Passport and Wallet • Extension to New Networks • Home Area Network, Car Information and Entertainment Systems Beyond Entertainment • In-house Health Care, Distance Learning
    • 33. CRITICAL ISSUES The ITV Model has Changed, but is Still Attractive • Revenue • Reduce Churn • Fits Well and can Promote Other Services • High Speed Data • Voice• Maintaining Simple, Fast, TV Centric Service is a Must• Cost Effective Hardware and Middleware is Required• Scale Platforms is Essential to Keep Costs Down and to Facilitate Application Development
    • 34. HIGH SPEED DATA
    • 35. Subscribers (M)Q 1- 19 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00Q 99 3- 19Q 99 1- 20Q 00 3- 20Q 00 1- 20Q 01 3- 20Q 01 1- 20Q 02 3- 20Q 02 1- 20Q 03 3- 20Q 03 1- 20Q 04 3- 20Q 04 1- 20Q 05 3- Global DOCSIS High Speed Data 20Q 05 1- 20Q 06 3- 20Q 06 1- 20Q 07 3- 20 07
    • 36. HIGH SPEED ACCESS North American 100 90 80 70HP (Millions) 60 56 50 51 48 44 40 40 36 30 30 20 22 13 10 7 0 00 01 02 03 04 05 06 07 08 09 Marketed Cable HSD HP Marketed DSL HP Other Subs Total HSD Subs Source: Kagan
    • 37. SPLIT THE PIE: 2001 US Only OtherDSL 2% 32% Cable 66% Source: Kinetic Strategies
    • 38. CABLE MODEM SUBSCRIBER 12 10 Adelphia 8 CablevisionMillion Charter 6 Cox Comcast 4 AT&T TW 2 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 Source: UBS Warburg
    • 39. Why is DOCSIS 2.0 Compelling Can Reduce Overall Capital Investment of Upgrade Even in Upgraded Plant, Larger Statistical Area is Superior Design Reduces CMTS Cost Burden on HSD and VoIP  Amortize router blade across more customers Plants are Achieving High Penetrations  How will they perform • Without filters • With Voice and other low latency services
    • 40. MARKET DYNAMICS OF DATA BUSINESS A Land Grab For 40 Million Existing Narrowband Subscribers 1994 2002 2007 $0.6 B $28 B $55 B AdvertisingContent 5.4 E-Commissions 15.4 0.24 7.9 0.6 15.7 0.32 13.9 19.8 4.1 $5.0B 57% Access 50% Cable 18% $9.9B 36% Cable 18%  Increasingly difficult to capture value merely with access fee  Key sources of future value in the data business  Advertising  Ability to close the transaction  Data business starts to look a lot like the video business
    • 41. IP INFRASTRUCTURE OSSServer Farm Managed HFC Network CMTS CM IP Network (DOCSIS) Many IP Technologies DOCSIS Standard  MPLS/VPN/BGP  Optical Networking  Advanced OSS/BSS Packet Cable Standard  Standard based end-to-end solution  Operation and scalability are the keys  New business model
    • 42. VOICE
    • 43. Voice Isn’t What It Used To Be… 1994 2002 2007 $93 B $149 B $170 BResidential Residential local LD 44.3 30.8 43.6 23.7 39.3 39.7 73.7 103 13.7 Total 15% 50% 60% Cellular  Cellular has already captured 50% of the value in a decade  Cellular has blurred the traditional residential-business segmentation  The residential wireline business is under significant pressure
    • 44. REDEFINE VOICE SERVICE Average Monthly Phone Bill: Constant $ Vertical Services CallerID, VoiceMail, Integration, etc.Price competition Access to voice Product Differentiation network (Local, Toll, LD, etc) Time VoIP  Low-cost bundled offering  Web based provisioning  Persistent voice Benefit to Consumer Benefit to Cable  Convenient  Differentiation  Lower cost  Customer retention  More service value  Additional revenue
    • 45. VoIP OVER CABLE NETWORK MTA CM CMS MS HFC Network CMTS (DOCSIS) Managed MGC IP Network MG PSTNMTA SS7 CM SG HFC Network CMTS (DOCSIS) OSS   TGS DHCP & DNS Server  TFTP or HTTP Farm  RKS  Provisioning CMS: Call Management server MGC: Media Gateway Controller MS: Media Server MG: Media Gateway SG: Signaling Gateway
    • 46. CABLE TELEPHONY SUBSCRIBER 2.5 2Million 1.5 Cablevision Cox 1 AT&T 0.5 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 Source: UBS Warburg
    • 47. Worldwide VoIP Forecast
    • 48. PacketCable 1.x Architecture
    • 49. PacketCable VoIP Solution CMS E-MTA DOCSIS 1.1 GATE HFC Ctrl Network E-MTA Announcement CMTS Server CMTS Managed IP Announcement Controller DOCSIS 1.1 Network Announcement HFC Network Player Media Gateway Controller GR-303 Media PSTN DNS RKS TFTP V5.2 Gateway GatewayOSS Functions: Gateway Signaling Provisioning, Gateway Security, SYSLOG DHCP TODRecord Keeping PSTN SNMP KDC LDS
    • 50. EVOLUTION Broadband Full Service Platform DOCSIS Open Cable Packet Cable High speed  Universal set  End-to- End-to-end IP cable modem top box platform UPGRADE DWDM  Capacity RF  Quality DSP  Reliability
    • 51. NETWORKS
    • 52. IN THE PAST ... Voice = Communication Video = Entertainment LEC Cable  Twist Pair Star  Coax Tree-and-Branch  Feature rich POTS  Broadcast video  $84B “toll collection”  $24B “$1 buffet” Monopoly Voice-oriented  DLC, ISDN  FTTH
    • 53. PERSPECTIVES Network  Connectivity Service  Communication  Resource Sharing  Entertainment  Convergence Media Topology Control Copper  Star  Central Mind-Set Coax  Bus  Distributed  Bell-Head Fiber  Ring  Self  Net-Head Radio  “Cable Guy”
    • 54. CHANGING PERSPECTIVESBell-Bell-Centric MosaicNetwork  RF Modem  Standard based “Proprietary”  DSP Performance  Capacity  Fiber Optics  Service enabler CircuitApplications  Bandwidth  Internet  Broadband Feature- Feature-rich  Multimedia  Service Package Voice Router performance   Network enabled or Connection  LAN extension independentBusiness  Telecom Reform  Market maturity &  Competition Monopoly growth
    • 55. OPTIONS LEC Narrowband Switched  DLC  Rebuild Wireless  Mobility FTTH  Broadband Cable  Network Upgrade Deep Fiber Broadband Broadcast  Cable modem Penetration
    • 56. CHALLENGES HE FN HE FN HE FN Analog Emerging TV Services 5 50 500 750 1G Bandwidth Capacity: 5-40MHz/1000s HHP upstream Transport Integrity: Ingress noise, dynamic range 103-to-1 Architecture: Centrally-mediated MAC
    • 57. SOLUTIONSBandwidth UPGRADE Capacity  Fiber Node Network Segmentation  DWDM Trunk Transport Integrity DOCSIS  High level modulation Modem  Centrally- 103-to-1 mediated MACArchitecture
    • 58. Fiber Node SegmentationHE FN 1,200 Homes Long cascade coax bus shared by many users (1000s)
    • 59. Fiber Node Segmentation 300 Homes 300 HomesHE FN 300 Homes 300 Homes  1,200 HHP/FN with 300 HHP/Bus
    • 60. DISTRIBUTED HEAD-END HEAD- HE FNPrimary Primary Hub HE Ring FN HE  Operation complexity  Cost of CMTS at lower take rate
    • 61. CMTS SCALABILITY ADC Arris Cisco Motorola Juniper Terayon 850 Minimum Medium Maximum  Chassis-based CMTS has 750 the most advanced 650 features & can simplify the metro routing architecture 550 $$/Mbps 450  Desired configuration favor centralized approach 350 250 150 2 LCs Chassis Rack 80-400Mbps 400-1600Mbps 1200-3840Mbps* Cost is calculated based on combined upstream and downstream capacity, and core-redundancy configuration
    • 62. DWDM TRUNK SH FNPrimary Primary Hub SH Ring FN SH  DWDM transport for end-to-end transparency  Route diversity for service protection  Consolidate high-end terminals (CMTS)
    • 63. DWDM TRUNKPrimary Hub Secondary Hub 1.3mmXTR Coarse WDMl 1 x 8 DWDM 1 x 8 DWDMll. . ... . Fiber Node 1.5mm RCVRCV l 1 x 8 DWDM 1 x 8 DWDMRCV lRCV . . . . . .
    • 64. TRADITIONAL HFC INTERCONNECTION 64 SYSTEM HEADENDS 4 PRIMARY HUBS 0 SECONDARY HUBS
    • 65. SECONDARY RING HFC INTERCONNECT 2 MASTER HEADENDS 9 PRIMARY HUBS 56 SECONDARY HUBS
    • 66. MODERN HFC NETWORK SH FNPrimary Primary Hub SH Ring SH FN DWDM Transport Segmentation End-to-end Transparency 4X capacity
    • 67. ARCHITECTURESTree-and-Branch Broadcast FN Cascaded ???Cell-Based Narrowcast RN Clustered
    • 68. FIBER OPTICS ?Node 2,000+HP 1,200HP 600HP 200HP 100HPSizeHOW Deep ?HOW To ?
    • 69. EVOLUTION DemandBandwidth per Customer Take Rate Applications User Behavior Push Fiber Deeper Split Nodes Higher RF Efficiency Time
    • 70. Fiber Optics for Cable 108 FTTH 107 FTTC (102 HP/node) 106Fiber termination 105 FSA (103 HP/node) 100 ch AM 104 103 102 40 ch AM 86 92 00 06 Broadcast Two-way Broadband
    • 71. mFN SH mFN mFN PH CMTS SH S mFN mFN SH mFNs replace all coax amplifiers XTR XTR XTR  Less active components  More bandwidth and flexibility WDM PON  Deep fiber penetration with cell structure Optical add/drop to daisy chain mFNs  Reduced fiber management & labor  Provisioning for growth Distributed processing at mFN
    • 72. ADVANTAGES Operation Savings  61% reduction in active components  Reduced power consumption  Simplification of maintenance Improved Performance  Reduced ingress noise funneling (10-48MHz operation)  Increased RF bandwidth  Improved reliability Future Proof  Flexibility between current track and future opportunities  Improved QoS and further cost reduction
    • 73. OPERATION SAVINGS  Current Network: 5.5 actives/mile
    • 74. OPERATION SAVINGS  61% reduction in active components  21+% improvement in reliability
    • 75. COST COMPARISONCategory Fiber Deep 860 Fiber Deep 600 HFCHeadend/Hub Optronics $3 $3 $3Field Optronics $6 $6 $6Pow er Supplies w ith Pow er Coax $1 $1 $2Actives $0 $0 $6Passives $7 $7 $7Coax $20 $20 $20Hardw are $0 $0 $0Splice & Activate Coax $2 $2 $2Turn up and Test $1 $1 $2Project Mgmt & Design Engineering $1 $1 $1Taxes & Freight $1 $1 $2Labor $23 $23 $25Material $19 $19 $26Cost Total $42 $42 $51Saving 17% 18%
    • 76. Network Comparison 20,000 Home ExampleItem Traditional mFN Network ReliabilityPower Supplies 60 19 100.000% 99.995%RF Amplifiers 905 0 99.990% 99.985%Optical Nodes 42 225 99.980% 99.975%Total Active Devices 1,007 244 99.970% Traditional mFNActive Per Mile >4 <1Cascaded RFAmplifiers 5 0 10 Year Operating Costs ($M) $6.00Network Reliability 99.98% 99.999% $5.00 $4.00Power Cost 10 Years $762,260 $244,680 $3.00Maintenance Cost 10 $2.00Years $4,693,333 $1,173,333 $1.00 $0.00 Traditional mFN
    • 77. Network Buildouts - Cable 30 25Homes (Millions) 20 15 10 5 0 AT&T AOL-TW Comcast Charter Cox Adel Cblvsn Rogers Mcom Insight Classic 2-Way Homes Homes Not Upgraded Source: Kagan  Majority cable networks complete upgrade by EOY 2003.  Next network frontier is to establish scalable interconnection.  Intelligent optical networking technology will play important role
    • 78. OURPERSPECTIVES
    • 79. GENERAL OBSERVATIONS UK leads Europe and World in Digital Penetration US is more Focused on VOD and SVOD Europe Leads on ITV applications  Interactive Voting, Gaming, Multiple Camera Angles, Theater Tickets
    • 80. TRIPLE PLAY 2010 Projections50%45%40%  Triple Play and Double35% Play is Predominant in30% Europe25%20%  UK is Projecting to be15% 90% Double or Triple10% Play by 2010 5% 0% UK Europe Triple Double Single
    • 81. OUR FOCUS Financial Focus  Can the operation generate enough cash to service the debt, cover ongoing capital needs and ultimately build equity Service Offering  We Believe in the Triple Play • However, service mix is extremely situation dependent – Capital structure – Regulatory – Competition – Demographics and income Critical Technology Investment Timing
    • 82. SERVICE APPROACH Digital Video  Favor an open approach  Precise investment that can be returned varies  Low level interactivity and gaming is interesting  SVOD also shows opportunity High Speed Data  Favor converged platform based upon DOCSIS  Huge Proponents of DOSCIS 2.0 capabilities • More Mbps per Line Card = Lower Cost Per Mbps and Lowe Cost Per line for VoIP
    • 83. SERVICE APPROACH - cont Voice  Favor a disruptive approach to voice  VoIP as a transport  Not a one for one match for ILEC  Feature rich, i.e., web based features, whisper alerts, persistent voice applications  Minimize powering exposure  Flat rate billing
    • 84. TECHNOLOGY TIMING Lead/manage Migrate to innovation next Capability Standardize Improve /De facto the scaleCOST  Technology platform is time dependent  Time to lead, time to push standards, time to extend E-o- Scale.
    • 85. Cardinal Consideration for Technology Investment Matching capital investment to market potential  150+ startups for cable @ $400M+/year burn-rate  CMTS revenue < 30% CMTS vendors R&D spending VCand technology communities need to understand service companies’ business and operations
    • 86. GLOBAL PESPECTIVES Communication Industry recovery relies on both the cost structure and revenue opportunities. We Strongly Believe in Cable Broadband Business  Think That Europe and Asia Offer Some Attractive Opportunities Changing the nature of services and the dynamics of service delivery is key to expand the market and achieve economy of scale The Triple Play is a Powerful Offering, But  Is situation dependent (e.g., infrastructure, legacy issues, etc)  Needs additional fine tuning (ITV strategy, Voice strategy, HSD strategy) Technology deployment is time-critical

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