Beyond The Demarc

1. Beyond The Demarc The Revenue Opportunities Inside the Digital Home

2. Evolution of the “Internet Service”

3. Historical Internet Use • Applications • Email, banking, print news, travel planning, file downloads… • Sporadic use of Internet connection • Service expectations • “Ends at the demarc” • “It just works”… on the computer • Highly oversubscribed • “All you can eat” data model Wasn’t that a simpler world?

4. Compass Software Business • Objectives • Complement Calix systems offering with software products that help our customers become successful market competitors focused on: • Being the enterprise IT service provider to their customers • Delivering outstanding customer service • Bring to market software applications that… • Identify new SERVICEopportunities • Optimize NETWORKresources • Increase SUBSCRIBERsatisfaction • Reduce COSTof delivering services • Product delivery • Business model: Software as a Service • Product delivery strategy: Cloud Hosting

5. Compass Flow Analyzer • Flow Analyzer • Collection of aggregated consumption data • Per Subscriber - Per Application - Over time • Presentation of consumption data • Standard, Open interfaces to Billing System • Independent of the access network equipment • Field proven solution • 80 CSPs monitoring more than 500,000 subscribers Calix Data Center Service Provider NOC AccessNetwork Billing System

6. Unconventional Wisdom… Insight #1 • The 20/2 rule of Internet usage • 20% of traffic from 2% of subscribers • Average data downloaded per month • Top 2%: More than 100 GB • “Bottom” 98%: Less than 10 GB > 100 GB per month <10 GB per month (*) Information is based on actual data collected using Compass Flow Analyzer in access networks from a variety of North American CSPs

7. Unconventional Wisdom… Insight #2 • The Video Dominance • Video streaming represents 45% of all downstream data • Less than 10% of subscribers use video streaming applications (*) Information is based on actual data collected using Compass Flow Analyzer in access networks from a variety of North American CSPs

8. What does this mean? • How much is 10 GB of data? • Emails: 500,000 • Songs: 4,000 • Pictures: 2,000 • Gaming hours: 850 • SD movies: 6 • HD Movies: 3

9. What does this mean? • If video adoption doubles… • Network capacity requirements DOUBLE • Equivalent to 3 HD movies per month • That’s still less than 20% of subscribers We are only a few movies away from doubling network capacity!!

10. Today’s Internet Use • Applications • Video streaming, conferencing, telecommuting, gaming… • Sustained use of Internet connection

11. Today’s Internet Use • Applications • Video streaming, conferencing, telecommuting, gaming… • Sustained use of Internet connection • Service expectations • “Starts on the device” • “It just works”…on all devices • Computers, tablets, smart phones, game consoles, TVs… • App quality of experience • Gaming, VPN, streaming… • … Oh, yes, and download speed “All you can eat” service models do not meet subscribers’ expectations

12. The Service Provider Opportunity

13. The Service Provider Opportunity • Change nothing… • Unsustainable network costs • Inability to serve subscribers needs • Inability to compete • Enhance your standing by • Understanding what your subscribers need • Designing services with tight market fit • Targeting the right services to the right subscribers • Delivering outstanding customer service Doing this right will require understanding your subscribers behaviors

14. The Service Provider Opportunity

15. Market Need: Internet Access • Understand drivers of Internet usage • Most popular applications • How many subscribers use each application? • Application requirements • Speed (bits per second) • Usage (bytes) Most popular applications (*) Most active users (*) Traffic pattern (*) (*) Graphics generated using Compass Flow Analyzer in access networks from a variety of North American CSPs

16. The Service Provider Opportunity

17. Service Definition: Internet Access (I) • Develop acceptable use policies • Prevent use of the network for illegal purposes • Rationalize unintended (but abusive) bandwidth consumption behaviors • Examples • Meter data usage for all subscribers • Benchmark “acceptable” data usage thresholds • Define “all you can eat” data caps • Well above the average user • Define fee structure for data overages

18. Service Definition: Internet Access (I) • Develop acceptable use policies • Prevent use of the network for illegal purposes • Rationalize unintended (but abusive) bandwidth consumption behaviors • Examples: • Meter data usage for all subscribers • Benchmark “acceptable” data usage thresholds • Define “all you can eat” data caps • Well above the average user • Define fee structure for data overages

19. Service Definition: Internet Access (I) • Develop acceptable use policies • Prevent use of the network for illegal purposes • Rationalize unintended (but abusive) bandwidth consumption behaviors • Examples: • Meter data usage for all subscribers • Benchmark “acceptable” data usage thresholds • Define “all you can eat” data caps • Well above the average user • Define fee structure for data overages …More than 98 percent of high speed Internet users will not experience any changes… …You will be charged $10 for every incremental 50 GB of usage beyond your plan…

20. Service Definition: Internet Access (2) • Application aware service attributes • Favor specific application types • No content discrimination!! • Recognizable marketing attributes • And, of course, speed • Consider data usage caps in service definition • Examples • Telecommuter • High data usage caps • High upstream speeds, low contention • Scheduled high speed backup off loads • Video streamer • High download speeds, low contention • High data usage caps • Gamer • Moderate usage caps • Low latency

21. Some more data… Overall Network Data - Conventional Wisdom • High speed service = High data consumption • Majority of top consumers also have higher speed services

22. Some more data… Overall Network Data – Unconventional Wisdom • Same data consumption regardless of speed • Overall DS GB consumption does not vary with DS speed • So what drives data consumption?

23. Subscriber Behavior Patterns • OTT Video Subscriber Behavior • Subscriber 1 • Max rate: ~ 5 Mbps • Dominant use: OTT Video • Data consumption: ~ 120GB • Subscriber 2 • Max rate: ~ 1.4 Mbps • Dominant use: OTT Video • Data consumption: ~ 120GB • Are they having the same quality of experience?

24. Subscriber Behavior Patterns • Telecommuter Behavior • Subscriber 1 • Dominant use: VPN • Sustained US rate • Subscriber 2 • Dominant use: VPN • Sustained US rate • Daily uploads at midnight • Are they having the right quality of experience?

25. Behavior Based Services • Address Subscribers Needs • Video Streamer service • Higher DS speed service • No data cap • Additional monthly charge • Telecommuter service • Higher US speed service • Live view into bandwdithw consumption • Access to premier support system • Additional monthly charge

26. Behavior Based Services • Harness The Power of the Access Network • Know your customer • Develop real time subscriber 360-dashboard • Account information • Monthly data consumption – (hourly breakdown) • DS/US weekly rate charts (hourly breakdown) • Dominant application use • Relation of devices in the home • Make dashboard readily available • Use every engagement to sell the right service to each customer • Drive customer loyalty • Offer services that meet their needs • Make all relevant information available to subscriber • Use live and historical data to quickly troubleshoot service issues

27. Focused Marketing • Increase ARPU based on tight service market fit • Correlate behavior with actual service package • Speed – Application – Data Consumption • Identify customers with poor service experience • Reach limits multiple times a month • Market and sell right services to right customers

28. The Service Provider Opportunity

29. Deliver Outstanding Customer Service • Software tools: Flow Analyzer • Comprehensive views of network utilization • Endpoints, services, ports, interfaces • Non-intrusive: no hardware/software probes • Live data analysis and DVR capabilities • Automatic profiling of “normal” network activity • Advanced report generation • Subscriber facing network monitoring • Independent of the access network equipment

30. Deliver Outstanding Customer Service • Instant visibility into subscriber activity • Comprehensive view of application activity on the network • Real-time visibility… to the second • Removes guesswork from problem solving • See the problems when they are occurring • Real time or scheduled recordings File Sharing (*) Email Spammer (*) Unsecured WiFi (*) Multiple video streaming Constant email activity Bit Torrent (*) Graphics generated using Compass Flow Analyzer in access networks from a variety of North American CSPs

31. Summary

32. Summary • Subscribers’ use of the Internet is very sophisticated • Many applications and devices • Video is the dominant application • Unprecedented stress on network capacity • “All you can eat” services do not meet subscribers’ needs • High quality of experience is expected for specific applications • Speed is no longer the only important attribute • You must know your customers • Software applications harness all data from the access network • Collect, analyze, present • Develop behavior based services • Address subscribers needs • OTT video consumers - Remote workers - Online gamers • Deliver outstanding customer service • Leverage software applications