GLGi: U-Verse vs. FiOS

1. GLGi: U-Verse vs. FiOS Larry Hettick Vice President of Telecom Services and Infrastructure Current Analysis Inc.

2. Council Member Biography Larry Hettick is the Vice President of Telecom Services and Infrastructure at Current Analysis, a telecom market research company. He is responsible for custom analysis and consulting for service providers and suppliers. Mr. Hettick specializes in convergence and VoIP, and has also authored articles for Network World and trade publications. He was the Founder of Telecommunications Market Consulting Inc. Mr. Hettick has also served at various executive positions for Telechoice, Ascend, and Newbridge. Mr. Hettick is knowledgeable of convergence market strategy analysis product development for frame relay and ATM equipment. He has also held positions in systems planning, and data service product development for voice and data products at Pacific Bell. © 2008 Gerson Lehrman Group Inc., All Rights Reserved

3. Topics • AT&T U-verse update • Verizon FiOS update • AT&T vs. Verizon sample triple play bundles • Cable company progress, strike and counterstrike © 2008 Gerson Lehrman Group Inc., All Rights Reserved

4. About GLG Institute GLG Institute (GLGiSM) is a professional organization focused on educating business and investment professionals through in-person meetings. It is designed to revolutionize the professional education market by putting the power of programming into the hands of the GLG community. GLGi hosts hundreds of Seminars worldwide each year. GLGi clients receive two seats to all Seminars in all Practice Areas. GLGi’s website enables clients to: • Propose Seminar topics, agenda items and locations • View and RSVP to scheduled and proposed Seminars • Receive a daily briefing with new posts on your favorite tickers, subject areas and from trusted Council Members • Share Seminar details with colleagues or friends © 2008 Gerson Lehrman Group Inc., All Rights Reserved

5. Gerson Lehrman Group Contacts John Aronsohn Vice President and TMT Global Research Head Gerson Lehrman Group 850 Third Avenue, 9th Floor New York, NY 10022 212-984-3673 jaronsohn@glgroup.com Aaron Liberman Managing Director, Sales and Marketing Gerson Lehrman Group 850 Third Avenue, 9th Floor New York, NY 10022 212-984-3684 aliberman@glgroup.com Carly Pisarri Process Manager Gerson Lehrman Group 850 Third Avenue, 9th Floor New York, NY 10022 212-750-1435 cpisarri@glgroup.com © 2008 Gerson Lehrman Group Inc., All Rights Reserved

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7. Agenda • AT&T U-verse • Verizon FiOS • AT&T vs. Verizon Sample Triple Play Bundles • Cable Company Progress, Strike and Counterstrike • Rating the Competition • Other Considerations • Summary and Conclusions • Questions and Answers

8. AT&T U-verse Service DeliveryFTTN/FTTP, VDSL, IPTV/MPEG-4, HPNA Graphics courtesy of and used with permission from AT&T

9. U-verse Strengths & Weaknesses • Strengths • U-verse integral to AT&T’s “Three Screens” strategy • AT&T U-verse’s Microsoft platform provides superior services • AT&T offers more HD channels • AT&T offers additional technical support • Weaknesses • AT&T has reported only 126,000 U-verse customers (Q307) • Advanced features are not available • AT&T’s VDSL platform can reach speeds at a minimum of 25 Mbps, but much of the capacity is dedicated to deliver video

10. AT&T Triple Play Results • Residential Voice Lines • Broadband Access • Satellite Video (DIRECTV and DISH) • U-verse Video • Net Consumer Revenue Connections

11. AT&T U-verse: Announced Future Plans • 30 million living units with the U-verse fiber network by 2010, covering about 50 percent of living units and 33 percent of businesses. • AT&T expects U-verse services will represent a multibillion dollar revenue stream over the next several years. • AT&T projects it will have more than 1 million U-verse customers by the end of 2008. • In 2008, AT&T plans: Whole-Home DVR, 2 HD streams at the same time, a media sharing capability, and 10 Mbps using VDSL pair-bonding.

12. Super Headend Super Headend PSTN Circuit Switch Serving Office Hub Splitter Optical Line Terminal ONT Hub Office Serving Office Verizon FiOS Service DeliveryFTTP (B-PON, G-PON) MPEG-2, MOCA

13. FiOS Market Positioning • Strengths • FiOS Internet penetration 20% and FiOS TV penetration15.2% • Verizon’s FTTP architecture allows it to meet the bandwidth needs of consumers for the foreseeable future. • Verizon has the flexibility to offer IPTV and VoIP. • Verizon claims an industry-leading service rating for FiOS installations. • Weaknesses • Verizon still has a long way to go to achieve even 50% coverage. • Verizon is under pressure to reduce its capital spending. • Verizon has done little to match the full potential that a quadruple play can provide.

14. Verizon Triple Play Results • Residential Voice Lines • FiOS Internet and DSL Broadband Access • FiOS TV and Satellite Video (DIRECTV) • Net Consumer Revenue Generating Units

15. Verizon FiOS: Announced Future Plans • Verizon plans to pass approximately 18 million homes with FiOS by 2010. • Verizon will continue to upgrade its FiOS data and video network and offer converged services. • It has plans to increase its consumer portfolio of home networking services. • The company’s long-term video strategy beyond FiOS includes offering additional channels and moving IPTV over the FiOS network. • In 2007, Verizon began to deploy Gigabit PON (GPON) technology.

16. AT&T vs. Verizon: Sample Triple Play Features and Prices(Los Angeles Market 12-07)

17. Q307 MSO Triple Play Progress • Like Cox and Cablevision, other cable companies could achieve a 25-35% voice (VoIP) penetration rate within three years. • Broadband penetration rates have not peaked but have slowed. • Digital video penetration rates are good, but basic video customer growth is slowing or declining. • MSOs are more willing to take voice and data customers without requiring a video subscription.

18. MSO Strike and Counterstrike Against U-verse and FiOS • Switched Digital Video: Being Deployed • HD Channel Count Solution • DOCSIS 3.0: In trials, 2008-2009 deployments • Broadband Speed Solution • OCAP: Interesting Opportunity • Counterstrike to IPTV? • What about Quadruple Play ???

19. AT&T and Verizon vs. MSOs: Sample Triple Play Features and Prices(California Markets 12-07)

20. Rating the Competition • Scale 1 (low) to 5 (high) Based on Customer Criteria 12-24 Month Horizon

21. Other Considerations • Regulatory and Legislative Climate • Content and Applications Providers without a Network • Google, Microsoft, AOL, Wal-Mart, Vonage • The Effect of Wireless (Mobile) Integration • The Future of Satellite Providers • DIRECTV, DISH • Breaking-up the 200-channel video package

22. Summary and Conclusions • Customers with choice will churn & (maybe) churn again • FiOS and U-verse will reach their 2010 goal of 25-30% market share • Cable companies will continue to win voice customers • Triple-Play prices will not decline significantly • Value Added Services will drive ARPU • Satellite still relevant as AT&T and Verizon “Plan B”

23. Questions and Answers