Parks Associates consumer intelligence market research market analysis industry trends industry forecasts Elizabeth

1. Parks Associates consumer intelligence market research market analysis industry trends industry forecasts Elizabeth Parks Director of Marketing & Communications Parks Associates eparks@parksassociates.com www.parksassociates.com A/E/C Systems June 4, 2002

2. Wide Area Networks • Telephony • Broadband • Video-to-the-Home • Energy Services • Security • Networks in the Home • Connectivity (PC-centric) • Communications • Entertainment-centric • Home Management • Telematics • The Residential Gateway • Data-centric • Entertainment-centric • Telemetry and Control • Whole-home A/E/C Systems June 4, 2002

3. Consumer Intelligence Installing Dealer ePanel • What: 711 U.S. households with Internet access/4Q 2001 • Survey Overview: • Ownership of products/subscription • to services; • Use of PCs and the Internet at home; • Demographics; • Interest in and likelihood of • purchasing a variety of Internet- • enabled solutions (PC networks, • digital entertainment components, • remote-capable home management • solutions; and • Characteristics of emerging • consumer markets • What: 2,500 U.S. households/3Q 2001 • Survey Overview: • Electronics ownership; • Subscription to services • Demographics; • Interest in new products and services • (home management • services, warranties, energy • management, etc.); and • Attitudes toward and likelihood of • subscribing to service bundles • at various pricing schemes • What: Nationwide survey of installing dealers, to be polled through 2002 • Survey Overview: • “Firmographics,” including • revenues, size of business, etc.; • Categories of products being • added; • Categories of products being • dropped;and • Opinions and insight into marketing, • distribution, and sales of products • and systems A/E/C Systems June 4, 2002

4. Key Consumer Categories • “The Digital Family” • Market Sizing: • ~ 9% of U.S. households are Digital Families • Opportunities Exist Because: • Significant multiple PC use; and • Interest in digital entertainment applications • “High-End Entertainment Households” • Market Sizing: • ~ 7% of U.S. households are considered high-end entertainment households (7% with broadband) • Opportunities Exist Because: • Interested in advanced home security features; • Likely to purchase new PC; and • Higher interest in pay-per-entertainment services • “Households on the Move” • Market Sizing: • ~ 9% of U.S. households have Internet access and indicate a likelihood of moving in the next 12 months • Opportunities Exist Because: • Interest in warranty services; • Interest in remote appliance diagnostics; and • General interest to purchase new technology • solutions for the new home. “Generation X/Y: The Emerging Digerati” Market Sizing: ~ 12% of all U.S. households One-third plan on moving in the next 12 months Opportunities Exist Because: Strong interest in leveraging PCs for new entertainment applications A/E/C Systems June 4, 2002

5. What Do We Know? • Home Management (Security, Controls and Automation) • Industry Push: Energy service companies; cost of technology; Internet connectivity • Consumer Pull: Energy management solutions; safety applications; monitoring increases; simple and pragmatic applications • Predictions (end of 2006): • Dealer-installed home security systems penetration grows from 19% • (end of 2002) to 31%. • Controller revenues reach $1.8 billion; security monitoring revenues exceed $8 billion • Home controller industry grows from $1.6 billion at the end of 2002 to $2.8 billion • Business models emerge around remote energy monitoring/control and • diagnostics (tied to warranties, for example) A/E/C Systems June 4, 2002

6. What Do We Know? • Data Networking (PCs) • Consumer Trends: • 60+ million U.S. households with at least one PC; 26+ million with two or more in • use (growing to approximately 40 million by the end of 2006) • 11+ million U.S. households with broadband Internet (growing to nearly 40 million • by the end of 2006) • Simultaneous Broadband Connection Wanted • Industry Trends: • Getting closer to plug-and-play home networking solutions • New distribution channels emerging • Predictions: • Data networks for PCs to penetrate 19% of U.S. households (end of 2006) • Data networking solutions to be bundled with broadband service; may include • additional value-added features • Structured wiring to be installed in as many as 48% of new home starts (end of 2004) A/E/C Systems June 4, 2002

7. What Do We Know? • Entertainment Networking • Consumer Trends: • Home PCs evolving into “digital jukeboxes” • Networking solutions that link PCs with consumer electronics (TVs and stereos) • Consumer electronics with advanced features (digital storage and home • networking) • Industry Trends • Home networking standards will address the requirements for distributed • entertainment (adequate bandwidth for multimedia streaming and quality-of-service) • Structured wiring solutions will drive new entertainment applications that enable the storage and streaming of multimedia content • Pay-per-services emerging (video/music-on-demand) • Predictions: • 125 million connected entertainment-centric products (end of 2006) • Cable companies play a strong role in the deployment of advanced set-top boxes • and new on-demand services A/E/C Systems June 4, 2002

8. Conclusions 1.Among key technology distribution channels, the new home market is among the most promising: a. Structured wiring b. Amortized payment schemes reduce sticker shock c. Industry push 2. Defining “Value” to the End User is Critical! a. Consumers seek validation that what they purchase provides clear benefits b. Consumers view the integration channel (professional installers) as trusted providers of technology solutions 3.What is Consumer “Value”? a. Continued study and understanding of true desires and demands among key segments b. Knowledge of consumers’ current ownership and use of technology provides a roadmap to understanding future usage models A/E/C Systems June 4, 2002