The German ISP Market - From Opportunism to Professionalism Frank Pauer Chief Sales & Marketing Officer Frank.Pau

1. The German ISP Market - From Opportunism to Professionalism Frank Pauer Chief Sales & Marketing Officer Frank.Pauer@sub10systems.com

2. Sub10 Systems - Wireless 1 Gbps + Privately held company based in the UK Focus on Ultra-High-Bandwidth Wireless Point-to-Point Developing, manufacturing and selling All-Out-Door Wireless Links with a capacity with more than 1000 Mbps Full-Duplex MMW Frequencies: 60, 70 & 80 GHz

3. Agenda The starting point of the Wireless ISP Market in Germany Rural Broadband as a Business Case Rural Broadband meets Politics OPEX become critical From Rural to City Centers Next Generation ISP

4. The German Rural ISP Market In 2002 & 2003 the increasing internet usage & bandwidth demand started to expand to rural areas Most of the rural areas only had less than 1 Mbps data-throughput if any Connecting these areas by traditional grid-solutions like DSL was in many cases not profitable Big Telcos/Operators didn’t show high interest in covering these Non-Broadband Areas

5. Rural Broadband as a Business Case In 2003 the first regional IT integrators & regional City Carriers start to become Wireless ISPs Most of these new ISPs start their business with ultra-low-cost wireless infrastructure Best-Effort broadband service was usually enough to attract rural private households & business customers High installation fees and monthly fees could be charged Typical network size was around 100 connected households per ISP divided into various villages

6. Rural Broadband meets Politics • In 2007 / 2008 the rural broadband topic becomes a political topic • The first National and EU Funding starts to support the rural broadband roll-outs • Up to €250.000 funding could be applied per covered village • As a consequence: • Wireless ISPs with a professional approach start to win funded projects and start to grow very fast • Less professional ISPs start to disappear from the market or grow only slowly • Remaining Wireless ISPs suddenly have to compete against grid-based offers from Telco`s and Operators • The price for a broadband connection decreases heavily while the expectation of data-speed is increasing

7. Case Study - Sewikom The founder of Sewikom was running a regional Telecom-Equipment Shop In 2008 Sewikom was founded with the goal to bring wireless broadband to the area of Beverungen First private households and business customers go live in 2009 In 2010 Sewikom wins rural broadband tender for the area of Höxter with €3,8 Million funding To full-fill the tender requirements, Sewikom starts to complement its wireless network with DSLAM technology

8. OPEX becomecritical • By end of 2012 most of the funded projects have been addressed • Over the last two years, the Wireless ISP networks grew to thousands of customers per network • The Revenue-per-Customer is further decreasing while service level expectations are increasing • The Ultra-Low-Cost network infrastructure gets to its limits and Service & Maintenance is driving the OPEX • As a consequence: • The major wireless ISPs are replacing the network infrastructure by professional wireless solutions • Only with low OPEX a long-term profitability can be ensured • Only with high service quality the customer base can be protected against new offerings like LTE

9. From Rural to City Centres Coverage of Rural Areas and Private Households is becoming a decreasing business with little margin At the same time high bandwidth demand is increasing heavily for B-2-B customers in city centres The fiber networks of operators can only be rolled-out slowly due to construction work restrictions & cost A new area of opportunity for Wireless ISPs using wireless Ultra-High-Bandwidth infrastructure!

10. Next Generation ISP Business case: "Wireless Fiber“ Service Offer: 1 GbpsFull-Duplex via the Sub10 wireless Point-to-Point Links Roll-Out Time: Business customerscangetthebandwidthfewweeks after contractsign-off Network Concept: The ISP rentsfiberfroma fiberoperator in thecity. Thefiberaccessgetsthendistributedvia the Sub10 wireless links to B2B and B2G customers. Customer Advantage:Fiber capacitiesatmuchlowercostandmuchshorterinstallationtime comparedtootheroperators.

11. Summary The rural broadband business is getting more challenging Professional wireless infrastructure helps to stay competitive Wireless ISPs should use their vast experience in technology to enter new markets Sub10 Management Team

12. info@sub10systems.com