Mobile and Broadband Contents and IPTV IP Transformation

1. Mobile and Broadband Contentsand IPTVIP Transformation Eshwar Pittampalli, Ph.D., P.E. July 15, 2008

2. Outline • Introduction • Service and Business Drivers • IP Transformation Considerations • Raising the Top Line • What Makes the Difference? • Conclusion

3. Transformation:Beyond business as usual “IP transformation” = “IP”+ “Transformation”

4. Transformation:Beyond business as usual “IP transformation” = “IP”+ “Transformation”

5. 2 Service and Business Drivers

6. Service drivers: Anywhere, any device, any service, • Single IP network for all access methods and applications • Wide variety of linkages between services and terminals • VoD on mobile devices • Video telephony via computers • Internet access, telephony and IM via TV sets • Gaming on everything Value of linkage between services and network infrastructure remains • End-to-end QoS per service type • Close coupling between service delivery and content storage

7. Technology enablers • IP everywhere • Small, low-cost consumer devices support advanced IP functions • Switches and routers in access and aggregation network support session-based QoS — under control of policy management • Access nodes are becoming (and must be) increasingly intelligent • Wireline access nodes support intelligent video handling for IPTV • Wireless base stations support radio scheduling, encryption, header compression and IP QoS awareness • Application nodes are becoming (and must be) increasingly access independent • IMS for fixed and mobile • Multi-rate live and VoD video coding

8. Service drivers and technology enablers lead to IP networks Any where, any service on any device IP-aware access nodes Application nodes becoming access independent IP networks will have: • Aggregation network supporting multiple access technology - both user and access aware • Minimized number of nodes to improve latency (VoIP, gaming…) • Policy-driven QoS enforcement, activated based on user location, or device choice

9. All-IP requires a considerable investment to ensure long term business sustainability — without all-IP carriers business is at substantial risk Example — top line Revenue and spend: baseline vs. all-IP • The target architecture of the fixed network operator is composed of a common service layer and a core network connected via broadband access to the client site • Revenue increase is mainly driven by broadband subscriptions and value-added services (e.g. IPTV) • All-IP OPEX increases due to the higher efforts for broadband services — all-IP OPEX per revenue decrease compared to the baseline • All-IP CAPEX substantiates over 7 years — then it is assumed to fall back to baseline CAPEX • Revenue and spend: baseline vs. all-IP • Higher revenues All-IP revenue • Slightly • higherOPEX Baseline rev. All-IP OPEX Baseline OPEX • Heavy initial investment All-IP CAPEX Baseline CAPEX

10. All-IP requires a considerable investment to ensure long term business sustainability — without all-IP carriers business is at substantial risk Example — top line Resulting cash flow analysis • The baseline will drop on zero or lower cash flow putting carriers at substantial risk • The all-IP cash flow becomes largely positive due to highly favourable revenue – cost relation • The all-IP investment is significant and has to be aggressively put through which represents the basic business risk Resulting Cash Flow CLIENT EXAMPLE ILLUSTRATIVE All-IP Baseline Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14

11. 3 IP Transformation Considerations

12. IP transformation occurs at multiple layers of the technology system Focus for wireless operators Technology system Focus for wireline operators Application layer Applications Voice Content services PSTN Data Video Call/session control Session control layer Internet IP/MPLS core Media and endpoint layer IP multiservice edge Optical transport DWDM SONET/SDH ULH 3G mobile Access networks Data center CMTS Access layer CMTS Enterprise DSLAM OLT DSLAM OLT Consumer

13. Transformation program models: Examples of big bang vs. incremental vs. mobile Carrier 1 – Big bang Carrier 2 – Incremental Carrier 3 – Mobile

14. 4 Raising the Top Line

15. Unlock the value of your intangible assetsBlending the best attributes of all domains Telephony domain • QoS • Trust • Reliability • Mobility IT domain • Simplicity • Reuse • Operations agility • m-Commerce Cross-domain services Web domain • Advertising • Fulfillment • UGC (social networking) Content management • High-bandwidth content • Brokering IP transformation business models

16. Tactical moves and long-term strategyAT&T is implementing a common architecture for real-time services (CARTS) North American example — top line Source: AT&T website Jan 2008 AT&T is pursuing a “true” three-screen strategy Stock performance has seen a 57% increase since 2004 when U-Verse was first announced

17. Success at several service providers confirms level of improvement possible Integration of networks to allow cost synergies Optimization of the network and operations Streamlining processes and IT systems AT&T KPN Telstra Number of OSS/BSS systems Cost synergies from integration and transformation Cumulative OPEX savings €850M 1252 >$5B >$3B €450M $1.1B ~50 €150M 2006 2005 2007 2009 2006 2007 2008 2011 Simplifying the product portfolio andthe ‘customer experience’ Focus on investing in growth services Bell Canada Telefonica Products in portfolio Broadband share in CAPEX mix ~100 64% ~50 27% 2005 2000 2006 2005 Source: service providers reports and analyst presentations

18. 5 What Makes the Difference? Experience, Experienceand Experience

19. Field-proven experience in holistically managing cross-domain interdependencies Program management IP transformation methodology detailing the end-to-end process Ability to optimize cost structures for legacy and NGN networks with network support and operations practices Business transformation 1 3 Services transformation Network transformation Stakeholder engagement Service delivery environment expertise — applying network expertise to the IT domain Designing and implementing flexible IP networks 2 4 Managing external expectations and relationships …the most experience, proven methods, cross-domain expertise

20. IPTCs offer enhanced expertiseMultivendor integration and transformation projects worldwide KPN - Juniper, Cisco, Cramer, Remedy, Siemens, Ericsson, Broadsoft, … Wind - Cisco, Microsoft, Convedia, Sylantro, Harmonics, Thomson, Syndesis, … BT - Motorola, Ericsson, Inventel, Colubris, Microsoft, … Murray Hill, New Jersey & Plano, Texas Antwerp, Belgium AT&T – Microsoft, 2wire, ScientificAtlanta, HP, IBM, Cisco, Amdocs, … Alcatel-Lucent IPTC Singapore IC Brazil Partnering for change TNZ - Juniper, Broadsoft, AXIOM, Micromuse, Motive, Cramer, Genesys, … Telstra – Tellabs, Juniper, Convedia, ACME, Cisco, Cramer, MicroMuse, Clarify, …

21. 6 Conclusion

22. Key messages • Service providers are moving from telephony domain to cross-domains based on IP (SP to FSP)* • IP transformation results in converged service delivery environment that separates network access from services access • Service providers have to move into content partner management, security and context aware service environment • Short-term complexity versus long-term simplicity • Maintain both legacy and IP networks • Adopt third party innovations • Reposition as content and solution provider instead of telephony carrier * Service providers to full service providers

23. Thank you!