Understanding Best Practices for Convergence in Broadband

1. Understanding Best Practices for Convergence in Broadband Anish Madan1 & Ravi Sharma2 A presentation for the 10th ATIE, Taiwan 7 April 2005 2 1

2. Outline • Overview of Convergence • Case Study of a Next-Generation Service Provider • Industry Best Practices • Concluding Remarks • Questions and Answers

3. Blurring of boundaries between voice, data and video delivery and applications Overview of Convergence – Definition • Convergence of • Networks and Technologies (Mobile, Fixed, Wi-Fi, IP, PSDN, VPN) • Terminals/Devices (Handphones, PCs) • Services (Voice, Data, Multimedia) • Regulated Markets (Telcos, Broadcasters, Media Cos)

4. Voice • VoIP • Enhanced VoIP (IP Centrex, IP Conferencing etc.) • Data • WAN: IP VPN • Internet Access: xDSL, Ethernet • Applications: Broadband and Mobility (including video applications, gaming etc) • Enterprise Specific • IP PBX / IP Contact Center, Network Security • Networking Overview of Convergence – Essentials

5. Overview of Convergence – Broadband vs. Narrowband

6. Overview of Convergence – Revenue Composition Source : Frost & Sullivan Data includes Australia. China, Japan, Singapore, South Korea and Taiwan revenues in 2003 • Domestic long distance VoIP calls dominate in revenue terms • IP Centrex, IP video conferencing and other IP enhanced services revenue only nominal in 2003

7. Overview of Convergence – Market Impact • Significant impact on service providers and customers • Service Providers • New business model • New opportunity • Reduce OPEX • Train & retain employees • Next Generation Network and Services • Customers • Increased Options • Possible paradigm shift in service adoption • Sophisticated Customer Service Management

8. Overview of Convergence – The New Ecosystem Services can be in-house, outsourced and hosted Content/Services CriticalMassofDemand Content Aggregator Content & Application Provider Content / ApplicationMassandDemandMass Infrastructure Provider HighInvestment EffectiveValueProposition End User RevenuesOutflow

9. Case Study – FastWeb Triple Play • FastWeb is a leading Broadband SP in Italy (www.fastweb.it) ARPU per year € 780… Data Voice Video

10. FastWeb – Service Offerings • Fastweb’s Marketing strategy based upon Triple Play service bundles • Voice • Internet • Video • No single killer application: the real killer application is the Service Mix • Combination of Flat Rate and Pay Per Use tariff plans to match specific customer needs

11. FastWeb’s Innovative Services: Fastweb’s TV FastWeb TV • Unified interface for content in all formats: • Terrestrial broadcast: RAI, Mediaset, ... • Satellite broadcast : CNN, Bloomberg, ... • Pay-TV/Pay-per-View: Stream & TELE+ • Video-on-Demand • Integrated with VideoREC and Electronic Program Guide Video on Demand offer • First VoD licensing agreements with US major film studios: • 20th Century Fox • Universal Studios • DreamWorks • Over 3,000 titles (up over 30% from the end of the second quarter)

12. FastWeb’s Innovative Services:Business and Personal Video Communication Non-FastWeb clients (ISDN) • FastWeb’s Video Communication allows business and residential customers to video conference: • Between different locations • With other external parties using FastWeb’s services • With traditional ISDN videoconferencing systems and through the Internet with PC-based web-cameras FastWeb clients FastWeb residential customers Party 1 TV + TV Cam PC + Webcam Party 2 Internet

13. FastWeb’s innovative services: VideoREC • Virtual VCR service: allows clients to record favorite free-to-air TV programs (RAI, Mediaset, ...) with no need for a VCR or tape • Easy and convenient programming: just click on the desired show, directly on your TV or on any PC with an Internet connection

14. FastWeb’s innovative services: Wireless-Fidelity (“Wi-Fi”) • Fast Internet at up to 10 Mb/s from any point of the house • No need for wires or cables • Fastest wireless offer on the market • Access kit on sale at only 250 EUR FastWeb’s network Access base

15. FastWeb’s innovative services: IP VPNs and B2E • Installed IP VPNs grew 85 (from 255 to 340) in 3Q 2002, confirming FastWeb’s unique accelerated pace in this market segment • 10 Mb/s (scalable) bi-directional connection among different branches and from employees’ premises to the corporate LAN, on FastWeb network • Service quality and security guaranteed through MPLS technology and IPSec protocol Branch 2 IP VPNs FastWeb’s server farm Business-to-Employee (B2E) services Branch 1 Big Internet Branch 3 Other networks

16. Industry Best Practices – Drivers of Convergence Both residential and enterprise users find IP an attractive value proposition Source: Frost & Sullivan

17. Industry Best Practices – Industry Structure Emerging Structure Traditional Structure • Supply demand match • Point to point connectivity • Distance & bandwidth sensitivity • Individual services/rigid • Services abundance • Any to Any connectivity • Distance insensitive • Service suites/total solutions/flexible Technology Push Market Pull Regulatory Arbitration

18. Regulatory Framework – A Tale of Four Countries • Sharing infrastructure and facilities • Stimulating supply of content, applications & services • Encouraging SMEs to e-biz • Creating a secondary market for radio spectrum • Unified regulatory regime (Multimedia & Telecommunications Regulatory Commission) • Promotion of multimedia super-corridor and flagship projects • Possible competition between incumbent, competitive 3G carriers and CATV operator • No national broadband (triple play) policy • Light touch • USO metric: homes passed rather than uptake • Build-up of national facilities encouraged • Technology neutral • Broadband vision (E Korea 2005, Cyber Korea 21) • Policies for competition in voice, data & mobile • Hands off internet services regulation • Competition of facilities-based SPs • Promotion of broadband network building (loans, KII, Internet usage, public/education sectors)

19. Regulatory Best Practices – Issues • Licensing of all existing and new services as they emerge, under the ambit of convergence • Licensing fee – Auction, beauty contest or free for all? • Service area – Universal Service or roll-out Obligations • Setting an appropriate Universal Service incentive • Creating a level playing field for incumbent or competitive, standalone or full service operators • Interconnectivity and tariff agreements • Numbering and addressing issues, directory and look-up services • Regulation of shared facilities, example infrastructure and OSS

20. Industry Strategies for Growth • Stabilize voice revenues • Velocity and shelf-life of Next-Gen services • Open platforms and business models • One-touch for the customer • Increase data revenues • Grow an Internet based economy • New Generation networks • Applications • Critical mass of subscriber services • Allow SPs the opportunity to “lock-in” • customers • Recognize that access and services are • evolving separately

21. Consumer Markets Regulatory Policy Concluding Remarks – Moving Up the Value Chain • Facilitateenvironment for high adoption of new technologies; • Availability of latest services with service quality; • Competitive Cost for these services; • Skilled IT workforce Technology • Strengthen regulatory framework; • Consumer advocacy • Enable Growth of innovation drivers • Availability of workforce with specific skill sets at competitive costs • Knowledgeable and sophisticated user communities • Drivers for sustainable growth • Support for open competition

22. Concluding Remarks – The Convergence effect • Benefits predominantly for end user • Service providers • Core competency based • Advantage Competition: Leap-frogging with Cost and Scale • Content/Application Developers/Providers also benefit • Create green-field applications and opportunities • Customers will not pay; unless … • They can’t do without it (the utility of convergence)

23. Thank You