Welcome and Industry Perspective

“Fulfilling The Promise”Sandy Teger and Dave Waks

Copyright © 2001

System Dynamics Inc. brought to you by

pulver.com

Broadband Home Fall 2001

Slide 2

Welcome to BBH Fall 2001

•Thank you for coming!

Belgium

United StatesUnited Kingdom

Israel Italy

Germany

Sweden

Netherlands

Switzerland

France

Ireland

Canada

Slide 3

BBH Community Is Global

•Leadership comes from many countries–US: number of broadband households–Korea: percentage of broadband households–Sweden and Italy: bandwidth–Italy: migration to digital services–UK & France: interactive TV

•Broadband Home Report subscribers–90+ countries

thebroadbandhome.com/report

Slide 4

For Newcomers

•BBH conferences are –dedicated to speeding the reality of broadband TO and IN the home

–and the applications and content it makes possible

•Advocates working together to grow the pie

•Content and contact rich–All the pieces and how they fit–Networking and deal making

•Ask us for introductions!

Slide 5

About Us

•Sandy–18+ years with AT&T; strategy director for multimedia and video conferencing

•Dave–Founder of Prodigy Services Company; directed R&D 1984-1994

•Together as System Dynamics–Consulting to broadband service providers, vendors

–Technology, marketing, business analysis and planning

–Cable modem rollout, VOD, interactive TV, digital cable, HFC and IP telephony

Slide 6

“Broadband Home”

•Broadband access and in-home distribution

•Multiple broadband devices

•High speed–Megabits: Millions of bits per second–To the home, in the home and from the home

•“Always on” connection–Continuous connection–From the home to the outside world–To the home from the outside - can “see” the home from the outside

Slide 7

Doom and Gloom

•Dot.com and telecom fallout

•Excite@Home bankruptcy

•Ideas ahead of their time: broadband content

•US public policy for access competition hasn’t worked

•Economy: rough and getting rougher

•Funding hard to find

•9/11 tragedy added new uncertainties

Slide 8

So Why Are We Here?

•Residential broadband is inevitable – Will reach and then pass today’s PC and Internet penetration

•Profound impact on related businesses– Everyone from semiconductors to home developers

•Huge growth opportunity for some -- huge challenge for others

•Happening now, all over the world

Slide 9

Current US Situation

•>60% homes have PCs, more than 1/3 more than one

•>10% have broadband, more than half with multiple PCs

•New OSs from Apple and MS designed for broadband

•DOCSIS 1.1 products finally coming to market– Unlocks QoS application potential

•Lots of innovation and revenue – Cable and phone companies– Cable/DSL routers and home gateways– Home networking

Slide 10

Fulfilling The Promise: Themes

•Broadband provides the foundation for new products and services

•Much more than PCs and Web browsing

•A huge growth opportunity

•Needs coherent public policy to fulfill potential

Slide 11

The Promise of the Broadband Home

•Short term: All home PCs connected to broadband applications and content

•Longer term: Broadband for everything! –Communications–Information–Entertainment–Transactions–Security and control

Slide 12

The Promise of Broadband

Work from home as easily as in the office

Personal voice and video conferencing

Digital radio and TV everywhere in the home

Share photos and videos with friends and family

Untethered access

Big jukeboxes of music, movies, TV and games

Control VCRs, AC, lights from anywhere

Slide 13

Broadband Soap - BLOKKS

•It’s More Than PCs!

•See www.blokks.com

Slide 14

Broadband Provides Foundation

•Broadband to and in the home provides the foundation for new products and services

Home networking

Gateways and client devices

Applications, content and services

BroadbandAccess

Slide 15

Needs Strong Access Foundation

•Access foundation needs high bandwidth and quality to realize full potential of new applications and services

“The true benefits of broadband will require that a critical mass of users have high-

bandwidth broadband. Only then will we see the virtuous cycle of innovative applications,

followed closely by increased broadbanddemand.”

Intel filing before FCC, 9/25/2001

Slide 16

Strong Foundations In Europe

•E.Biscom /FastWeb doing it now in Milan– Running fiber to every building– All IP based : 100 Mbps to each apartment– High speed Internet at 10 Mbps– IP telephony: flat rate to all of Italy– IP television: full TV lineup, video on demand– CD pay per play

•Scandanavia too!– Bredbandsbolaget (“B2”) provides IP services over FTTH in Sweden, Norway, Denmark

– Started in 2000, now in over 46,000 homes – Recent new funding: US$ 230 million

•Competitors responding – Incumbents and new entrants

Slide 17

How About the US?

•Incumbents have huge investment in existing plant built for analog services– Digital is an “add-on”

•Cable and telcos behaving like cozy duopoly– Restricted bandwidth and services– Rates going up rather than down– Early US cellular experience - new entrants required for real competition

•US at risk of falling behind

•What’s the path to fulfilling the promise?– Economic incentives?– Stronger regulatory hand?

Slide 18

Open Issues For US Public Policy

•Should policy favor approaches that provide higher speed?

•How to make broadband available and affordable?– Rural– Economically disadvantaged

•Whether and how to encourage new entrants?

•How to rationalize the different regulatory regimes as “cable” and “telephone” services blur?

•Who speaks for the consumer?

Slide 19

What’s The Priority?

•Clearly lower than combatting terrorism

•Industries involved represent big chunk of the US (and world) economy– Telephone companies Cable companies– Movie industry Newspaper publishers

– Radio Television– Music Semiconductors– Consumer electronics Computers– Software Home security– MDU landlords Home builders– Education Shopping– Medicine

•All impacted by public policy decisions

Slide 20

So Where’s the Money?

•Voice and multimedia apps are key–People spend real money for communications, video rentals, home security, advertising, shopping, ...

–Most still physical or analog today

•Broadband enables massive shift to digital delivery–Likely to be disruptive –Changes old money flows, adds new ones

•Needs smarter business models–Not “free” telephony, music, ...

Slide 21

What’s the Investment Climate?

•Despite negatives, some companies getting funding–Bredband AB: $230 million–DragonWave Inc. $14 million –Metabyte Networks: 10 million –Bandspeed Inc.: $15 million –BroadJump: $22 million –Integral Access: $45 million –iVAST: $25 million

Slide 22

Not All Ideas Merit Investment

The Cadeau2000™ Ironphone--

The world’s only combination iron and fully-functional PCS mobile telephone.

Because nobody has everything yet. www.ironphone.com

Slide 23

What Can We All Do?

•Work together to grow the pie

•Help formulate coherent public policies for broadband– Organized effort to focus on opportunities and public impact

•Remember that this is about real people– What they want– What they can use– What they can afford

Slide 24

At BBH: Foundations

•Industry Perspectives– Bernd Lutz, CableLabs CableHome– Ron Willis, Cisco– Mike Toutonghi, Microsoft eHome– Radu Craioveanu, Narad Networks– Christine Sanborn, Pacific Bell/Nevada Bell– Donald Fowler, TechNet– Joe Crupi, Texas Instruments

•Sessions– “Broadband Access Evolution” (general session)– “Focus on Fiber to the Home”– “Foundations of the New TV”– “Futureproofing New Homes and Communities”– “Home Networking - Technical Needs for The Home”– “Whole Home Distribution Solutions”

Slide 25

At BBH: Applications

•Industry Perspectives– William Glasgow, @Security Broadband Corp.– Stephen Ste. Marie, Intertainer

•Sessions:– “Broadband TV - The New Entertainment Platform”– “Broadband Voice - New Applications and Devices”– “Home Automation and Control”– “Interactive Games”– “Sharing Your Audio and Video”– “Webpads and Web Tablets”

Slide 26

At BBH: Business Perspectives

•Industry Perspectives– Guy Kawasaki - Garage Technology Ventures– Gary Lauder - Lauder Partners

•Sessions– “Investor’s View - Is There Still Money for Broadband?”

– “Linking The Value Chain - Making Broadband Succeed”

– “Money and More - Consumer’s Money, Time and Attention Budgets”

– “Voice Over Broadband: Who Will Survive?” (general session)

Slide 27

Conference Logistics

•Schedule–Industry perspectives–Roundtable discussions–Speaker changes

•“Internet lounge” in Redwood Room–Email, Web access

•Wireless network - see Darwin

•Cellphones and pagers–Please set to off or vibrate

Slide 28

Conference Logistics (ctd)

•Conference presentations –Speakers: please provide them!–During conference: Local server, ask Darwin–After conference: slides.pulver.com–pulver.com staff can help you

•Community list

•Feedback Please!–Dave, Sandy, pulver.com staff–Questionnaires

Slide 29

Networking Opportunities

•Breakfast, lunch - Gold Room

•Breaks - Crystal Room

•Monday night: Reception–6:00 to 7:30–Empire room

•Tuesday night: All-conference party–Reception and dinner–6:30 to 10:00–Gold room

•Ask us for introductions!

Slide 30

Hope We’ll See You Again Soon!

•BBH Spring 2002–Seattle, Washington–April 8-11

•At VON Europe 2002–Helsinki, Finland–June 10-13

•For more details: www.theBroadbandHome.com

18 Beaver Ridge Road, Morris Plains, NJ 07950-1901

(973) 644-4739 Fax (973) 538-6003

dave @ bb-home.com

sandy @ bb-home.com

www.thebroadbandhome.com

www.system-dynamics.com

For More Information:

System Dynamics Inc.