Dramatic Disruptions

Sandy Teger and David WaksCo-Founders, BroadbandHomeCentral.com

& System Dynamics Inc.

FENG Teleconference

May 18, 2006

Copyright © 2006

Copyright © 2006 Slide 2

About Us: Professionally

• Sandy– 18+ years with AT&T; multimedia strategy director

• Dave– 13 years with Prodigy Services Company; founder and R&D director

• Together as System Dynamics Inc.– 10 years as specialists in residential broadband

– Consult for companies affected by residential broadband• Strategy, business economics, competitive analysis

– Operate www.BroadbandHomeCentral.com as industry resource• "100 BEST Undiscovered Web Sites" PC Magazine, 4/20/04

– Free monthly Report on the Broadband Home

• www.bbhreport.com

• Subscribers in ~100 countries

– Broadband Home Labs• Integrated in our lives

• Test new products

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Some Major Disruptions

• Context– Everything Digital– Widespread Broadband Penetration

• VoIP Makes Phone Calls Free

• Broadband Anywhere

• TV Being Transformed

• Convergence: A “Virtuous Circle”

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Everything Is Going Digital (2002 View)

AudioPlayers

VideoPlayers

StillCameras

Camcorders

SatelliteTV

CableTV

BroadcastTV

Telephone

New CE

1992 2002 2012

??

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US Digital TV Transition Poised In the Wings

• Original date for DTV transition: Yearend 2006– 1,500 TV stations were to cease analog broadcasts, continuing only

in digital– Widely believed it wouldn’t happen

• New deadline of February 17, 2009– Free up spectrum for services such as mobile broadband

• Likely to be real “end of analog TV”– DTV sales increasing rapidly– Warning labels on analog TVs

• Impact on owners of older TVs – Millions rely on Over the Air (OTA) analog broadcasts that go away– Forces them to make a decision

•Obtain a (subsidized) digital-to-analog set-top converter box •Buy new digital TV receiver•Subscribe to cable or satellite

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Broadband Way Past “Tipping Point”

• US Has Major Broadband Penetration ~ 44% HH (Source IGI, May 06)

– 48 million HH, was 20 million YE 2002

• Broadband is growing globally (Source: Point Topic)

– Measured by broadband lines per 100 households, US ranks 15th

•Leaders are in Asia (Korea, Hong Kong) and Europe (Denmark, Netherlands, Finland)

– Measured by total number of lines, US ranks first •China is second and catching up fast

• Broadband being deployed by more than telcos and cable companies– Satellite services – WildBlue– Municipal broadband – especially Muni Wi-Fi– Community fiber– Broadband over powerline (BPL) in many trials– Broadband wireless will be next big growth area

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Internet Telephony Makes Phone Calls “Free”

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Evolving Consumer Expectations: Broadband Available Any Time, Any Place

Fixed Nomadic Portable Full Mobility

Home or

Office

Coffee ShopHotel

Walking aroundtown

In a car

Train orplane

Increasing mobility

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All Applications & Content on Portable Devices• Telephony, PTT

• IM, SMS, MMS

• E-mail, Web

• PIM

• Location Based Svcs

• Media Player

• Camera

• Games

• Audio/Video– Radio, TV– Streamed– Conferencing

• Presence

• Service Integration• E911

• Wallet

• …

Source: Qualcomm

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LAN MAN WANPAN

Wi-Fi WiMAX3GUWB/

Zigbee/Bluetooth

A Spectrum of Wireless Technologies

Optimized for different distances & speeds

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Broadband Wireless

• Broadband wireless will be next big growth area– Muni Wi-Fi – examples: St. Cloud, Florida; Philadelphia– Cellular companies deploying early “broadband” services with 3G,

but limited in coverage and speed– Mobile WiMAX likely to trigger growth spurt

• Cable operators may play a role– Deal with Sprint for voice services: enable “quadruple play”– Sprint/Nextel running trials with several “pre-WiMAX”

technologies– Sprint & Nextel have strong 2.5 GHz spectrum holdings, FCC

requires them to “use it or lose it”

• FCC starting new auctions– 3G cellular– Broadband wireless – WiMAX or other technologies– McCaw (Clearwire) is key insurgent player– Will MSOs partner with Sprint for broadband wireless , or acquire

their own spectrum?

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TV Is Being Transformed

• “Any Content, Any Device, Any Place, Any Time”

• Time Shifting– Control over when to watch particular programming– Examples: TiVo, PVRs

• Place Shifting– Watch your TV programming from any place in the world– Example: Slingbox

• Device Shifting– Transporting content from one device to another – Examples: Mobi TV from Sprint, “Lost” at abc.com, TiVo To Go

• Content Shifting– Content created for one device, appears on different one– Example: Accuweather: personalized, interactive content with

local TV weather broadcast• ICTV blends interactive content with live video streams

• Impacts all stakeholders– Consumers, Service Providers, Content Providers, Advertisers

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Cable and Telcos Competing Directly

• Dueling video ads

“Cable Innovates”“TV Freedom”<cable-innovates.com/trailer_content.html><www.ustelecom.org/index.php?

urh=home.news.multimedia>

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Broadband -- A Self-Perpetuating Cycle

Broadband Growth

PC/CE growth /

proliferation

Home network growth

Content / services growth

More homes with broadband access

More devices capable of

sharing

More “eyeballs”

More reasons to get broadband

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New Technologies Reinforce Growth -- and Foster Disruption

Broadband Growth

PC/CE growth /

proliferation

Home network growth

Content / services growth

DSL, Cable, Wi-Fi, WiMAX, 4G

Viiv, Vista

802.11n, HomePlug A/V

Movielink, Vongo, ABC.com, VoIP

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Questions?

www.BroadbandHomeCentral.comsandy @ bb-home.com

dave @ bb-home.com

For More Information:

Copyright © 2006 Slide 18

For More Information

• Links to some articles we’ve written on these topics – "End-to-End IP" - How Will The Telcos Survive? Part 1 (

BBHR 9/26/2000) and Part 2 (BBHR 10/26/2000) -- “End-to-end IP" as a disruptive technology

– Broadband: Are We Reaching "The Tipping Point"? (BBHR 5/23/2002)

– IntelligentCities 2002 (BBHR 10/8/2002) -- the impact of Community Networks

– Disruptive Technology in Action (BBHR 5/14/2003) -- impact of IP communications on voice services and high-speed Internet

– Broadband Anywhere: The Extended Broadband Home (BBHR 8/21/2003) -- the spread of wireless broadband

– Convergence Is Back (BBHR 5/23/2005)

• Topical Index to our Website

• Magazine articles and conference presentations

• Subscribe to our free newsletter to stay up to date

Copyright © 2006 Slide 19

Broadband Penetration - Country Comparison

US

China

Japan

S. Korea

Germany

France

UK

Canada

Italy

Spain

BB Lines Per 100 Population Top 10 countries by lines