1. What’s Happening in DA
Tipping Points and
Momentum
Gibilisco
Pelorus Spring Conference

2. Agenda Points
 Trends
– Listing Erosion and Number Proliferation
– Improvement in Quality
– Re-education of DA callers
 Discussion on Broader Industry Approach for
Service Providers
Gibilisco
Pelorus Spring Conference

3. Listing Erosion and Number Proliferation are
two key trends that threaten the DA business.
 National DA data base declined by 13% 1
– 150M listings in 2000 compared to 130M listings EOY 2004
 Working phone numbers has increased by 40%2
– 381M in 2000 compared to 531M EOY 2004
 Hit Rate (odds of a number being included in the DA
database) declined from 34% to 24%
 Success rate has fallen from 85% to 80%1
1 LSSi internal estimates
2 FCC report on local telephone competition
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

4. Increased quality and “educated customers” arguable
account for the fact that the DA Success Rate has not
fallen farther and faster.
2000 2004 Change
Telephone Numbers 1 380M 531M +40%
DA Listings 2 150M 130M -13%
Coverage 39% 24% -38%
Accuracy (LSSi’s) 87% 99% +14%
DA Success Rate 1 85% 80% -6%
Hit Rate 34% 24% -30%
1 LSSi internal estimates
2 FCC report on local telephone competition
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

5. CLEC, Cellular and Unreported VOIP drive the
lowered hit rate
2000 2004 Change
ILEC 1 287M 308M 7%
CLEC 1 13M 44M 230%
Cellular 1 52M 170M 223%
VOIP (Not in CLEC / ILEC) ? ? ?
Total 380M 531M +40%
1 LSSi internal estimates
2 FCC report on local telephone competition
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

6. Cellular Impact: The market shows strong
signs of slowing.
Relationship between Price per Minute and Minutes Per
Customer
0
0.5
1
1.5
2
1998 1999 2000 2001 2002 2003 2004
Year
Volume/PriceRatio
Vol/Price Ratio
Average price falls to below $0.10 per minute
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
1998 1999 2000 2001 2002 2003 2004
Year
Volume/PriceRatio
Revenue Per Minute
Growth in Cell Phone Numbers Indicates Slower
Growth
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Year over year change
Insights from other industries
LD - Inelastic below $0.10/Minute
50% Rule – Cellular pegged at 62%
Int’l – Inelastic < $0.50 per minute
All Sourced from FCC Report on Local Competition
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

7. CLECs growing and turning to VOIP..
Other Insights
4.4M Cable Telephony Subs as of 2Q05
LSSi estimates approximately eight
million VOIP subscribers
Sourced from FCC reports on local competition and broadband
deployment
Total High Speed Lines
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
Dec
1999
Jun
2000
Dec
2000
Jun
2001
Dec
2001
Jun
2002
Dec
2002
Jun
2003
Dec
2003
Jun
2004
Dec
2004
Total Lines Coaxial Cable ADSL
CLECs Reporting
0
20
40
60
80
100
120
140
160
Dec 1999 Dec 2000 Dec 2001
CLEC's Repor ting
Access Lines using Coaxial Cable
0
1,000
2,000
3,000
4,000
D-99 J-00 D-00 J-01 D-01 J-02 D-02 J-03 D-03 J-04 D-04
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

8. Increased quality and “educated customers” arguable
account for the fact that the DA Success Rate has not
fallen farther and faster.
 Industry focus on insuring frequently requested
numbers are in data
 Education of customers that wireless phone
numbers are not available
 Heavy preponderance of business listing requests
mitigates impact on the Success Rate
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

9. Why are VOIP listings becoming increasing
important?
 Today, the impact of not having VOIP listings is minimized by
the fact:
– Majority of VOIP subscribers are consumer
– More business oriented CLEC listing are reflected in current
process
 Competitive intensity of VOIP will rival what happened in the
long distance market
– High margin, low barriers to entry and exit
– Churn may reach 4 to 5 million lines per month
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

10. VOIP Listing – Handling the many flavors
 Large VOIP Providers
– Flow listing through originating RBOCs
– CLEC rules apply
 Medium size providers
– Not focused on DA
– Establishing arrangements is only the first hurdle
– Updates become critical issue
 Small providers
– DA?
– Need to develop process to hand off a data feed
– Churn
 How do we handle increasing disconnect between area code and
geography?
– Taking the IAD with you when you travel
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

11. What can traditional Operator Service / DA
providers do to stop the erosion?
1 Expand Wholesale business to serve growing
markets.
2 Re-define DA to be more than name and listing.
3 Augment “re-education” happening in wireless DA
with wire line approach
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

12. Re-define DA to be more than name and
listing
 Services and capabilities available on wireless side today:
– Business Category
– Movie Listings
– Driving Directions
– Weather and Traffic
– SMS, Fax and Email
 Services and capabilities for tomorrow
– Listing specific information
– Advertising based services
– eCommerce
– MMS to the home and cell
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

13. Augment “re-education” happening in wireless DA
with wire line approach
 Solution: Provide an “alternate access to DA” Migrate traffic off 411
– Offer enhanced services and IDA in addition to traditional DA
– “Not Found / Not Charged “ Policy (?)
– Better access to live operator
 Marketing approach: “Slow Growth”
– Efficient (low key) marketing with price incentives
 Re-direct existing PR and Advertising to include AATDA
 Bill inserts to current DA users
– Increase volume from enhanced services, VOIP and Cellular lines
– Re-train the customer
– Efficient (low key) marketing with price incentives
– Re-launch 411 when regulations are lifted
 FCC mandated “alternate access to Operator Services” provides insight
– Calling card / Operator Services declined because of substitution to wireless not
because customers could not be convinced to dial differently
– Broadband / internet plays a similar role relative to DA
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

14. First of two possible scenarios
 DA success falls below 70%
 Market pressures result in “Not Found / Not Charged” Policy
 Price increases 50% to cover revenue loss
– Repression from price increase causing a upward spiral of price increases
and cost reductions
 DA goes the way of other Operator Services
– BLV/BLI
– QUOTE
– B23
– Collect
– Person To Person
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference

15. Second scenario
 OS providers
– Serving wireless markets through wholesale
– Offering enhanced DA to Wireline markets
– Market EDA to VOIP and cellular
Trends Broader Industry Approach Gibilisco
Pelorus Spring Conference