1. Delivering BT’s 21 st century network Welcome Presentations by Paul Reynolds CEO, BT Wholesale Matt Bross Chief Technology Officer, BT Group

2. Delivering BT’s 21 st century network Paul Reynolds CEO BT Wholesale

3. Forward-looking statements - caution advised Certain statements in this presentation are forward-looking and are made in reliance on the safe harbour provisions of the US Private Securities Litigation Reform Act of 1995. These statements include, without limitation, those concerning: transformation of BT's networks and cost base; benefits to customers of the 21CN programme; anticipated capital spend on 21CN transformation and expected cash savings; timescales for delivery of 21CN; and delivery of instantly available broadband dialtone Although BT believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements Factors that could cause differences between actual results and those implied by the forward-looking statements include, but are not limited to: material adverse changes in economic and financial markets conditions in the markets served by BT; future regulatory actions and conditions in BT’s operating areas; technological innovations; developments in the convergence of technologies; and the anticipated benefits and advantages of new technologies, products and services, including broadband, not being realised. BT undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise

4. Delivering BT’s 21 st century network Paul Reynolds CEO BT Wholesale

5. BT’s strategy is on track Traditional focus New wave focus 21CN transformation Long-term partnership with our customers –Improved service –Aggressive & creative marketing –Price innovation –Reduce costs –Broadband –Mobility –ICT –Global Solutions

6. A world where everyone has access to modern communications 0 20 40 60 80 100 April 2000 26% July 2002 66% November 2003 80% May 2004 90% Summer 2005 99.6% Coverage % Note: Percentage of homes and businesses connected to a broadband enabled exchange Broadband availability in the UK

7. OECD report Source: OECD May 2004 DSL Availability in G7 20012002200320042005 UK Canada France Germany Italy Japan USA 60 69 66 70 67.5 73.5 50 64 70 71 80 70 80 68 85 75.4 79 85 80 90 75 95 - 90 90 - 90 - 99 - 95 - - - -

8. This is good … but it’s not enough

9. The changing landscape Convergence is gaining momentum Convergence needs an underlying infrastructure to deliver and support it Customers want more choice, flexibility and control Simplicity is key

10. 21CN - three key points Speed to market Customer experience and empowerment Cost transformation We will empower the customer with control, choice and flexibility like never before and offer them communications from anywhere to any device We’ll make exciting new services available for customers faster than has been possible before We’re reducing our costs – we’ll make growing cash cost savings which are expected to amount to £1 billion per annum by 2008/9

11. 21CN – what it means for BT Moving from narrowband to broadband Moving from selling capacity to selling capability Moving from a product focus to customer focus

12. 21CN - the radical strategy Broadband everywhere… Replacing the PSTN PSTN transformation trial A world first for a telecoms company

13. Broadband dialtone By 2009, broadband dialtone will be instantly available to most BT customers in the UK Customers can switch lines to broadband use themselves No physical work is required at the exchange

14. 21CN – it’s big If that sounds big … it’s because it is Bigger annual investment than is spent on UK’s motorways and trunk roads

15. 21CN - aligning our investments MSAN Project Bluephone Flexible Bandwidth BT Rich Media BT Communicator Wholesale Web Call Connect PSTN/ Voice trial Fibre trial Converged core EDC Service creation Today Future 21CN - network architecture

16. First mover advantages Supplier product alignment Technology start-up funding Shared learning and risk management Low costs Best in class whole life costs

17. 21CN - a new partnership approach With all our customers With the global vendor community in IT and traditional telecoms This is unique in our industry Focus on whole life costs

18. IP ATM PSTN DSL KStream PSTN DPCN PDH Fibre Copper DWSS ASDH End User ~5k nodes ~2k nodes ~400 nodes ~100 nodes ~15 nodes MSH -SDH ~1k nodes Mesh -SDH Inter-node transmission provided by SDH/PDH platforms CWSS 21CN - our current network

19. IP-MPLS-WDM DSL Fibre & Copper Agg Box End User ~5k nodes ~100 nodes Class 5 Call Server Content WWW ISP 21CN - our simplified network PSTN MigrationConverged Core

20. 21CN - quality 21CN services delivered at the same or better quality as we do today 21CN will raise the quality threshold traditionally associated with IP to PSTN standards and better We are designing this level of quality into 21CN

21. 21CN - systems Concurrent systems transformation Designed to enhance the customer experience Empowering the customer with greater control

22. 21CN - common capability building blocks

23. 21CN - key milestones 2004 2005 2006 2007 2008 Broadband available to 99.6% Strategic vendors announced Broadband growth on MSAN/combo cards First new service launches based on re-usable capabilities Mass PSTN migration begins 17 new product launches/enhancements based on re-usable capabilities New operations & service management capability in place Broadband dialtone available to most customers Large scale non PSTN service migration begins 2009 Mass PSTN migration reaches more than 50% of customers PSTN transformation trial Deep fibre trial Converged network Service creation Experience development centre

24. Key messages We’re making broadband available everywhere But convergence is creating new opportunities and new customer expectations 21CN is a radical transformation for BT Narrowband to broadband; capacity to capabilities; product to customer focus Announcing important trials on PSTN and fibre today Timetable for large scale roll-out outlined You’ll hear much more over time

25. Implementing BT’s 21 st century network Matt Bross Chief Technology Officer BT Group

26. 21CN – activities 2004 PSTN trial Service creation Experience development centre Converged network Deep fibre trial

27. PSTN trial What and where? Seamless bypass of core PSTN network links between three major network nodes (Cambridge, Woolwich London and Faraday London ) Voice calls between enabled nodes diverted to IP/MPLS network End to end calls between enabled customers carried exclusively over IP Installation of new MSAN equipment at 18 exchanges in London, Kent and East Anglia Equipment includes softswitch, MSANs, media servers and media gateway cards

28. PSTN trial When? Next generation voice services to first 1,000 customers ‘live’ by end January 2005 Further 3,000 customers ‘live’ by June 2005 Major roll-out to all regions begins 2006 Broadband dialtone to most customers by 2009

29. PSTN trial Why? Allows us to monitor transition and robustness pre large scale migration of all PSTN services to 21CN from 2006 Helps test quality of services is as good as, or better than, PSTN First steps towards 21CN

30. Deep fibre trial What and where? Trials of deep fibre in access network – to the cabinet and to the premises Designed to test the investment, operational, technology and business case Providing telephone and broadband via fibre to 1,500 homes Trials in Suffolk, Milton Keynes and London Fibre Copper PCP

31. Deep fibre trial When? First trialists will have fibre lines installed and working by October 2004 Trials to run until September 2005 Exchanges Kesgrave exchange, Martlesham Heath Bradwell Abbey exchange, Milton Keynes Albert Dock exchange, London Docklands Why?

32. Converged network Reducing complexity of our infrastructure Eliminating 100,000 network components and significant cost Establishing a single platform that is multi-service and future proof on IP Optimised for reliability and performance Closely aligned to PSTN transformation Phased roll-out begins this year

33. Service creation framework Applying the development approach from IT software industry to telecoms Creating series of reusable, common capabilities First 9 components created 2004/5 17 new products or enhancements based on these components to be launched 2005/6 Increase automation and accelerate time to market for new services Help contribute to cost reduction

34. Experience development centre An environment where operations, portfolio, systems and networks are brought together Prototype new services, platforms and processes Increase speed to market Drives the delivery of the end to end customer experience

35. 21CN - key points 21CN is the enabling infrastructure for growth at BT and for its customers The most ambitious business transformation programme in communications worldwide Represents a major investment by BT Will put UK at the forefront of communications innovation We are delivering now Large scale vendor engagement starts today

36. & Q A Questions can only be taken from the BT Auditorium Delivering BT’s 21 st century network

37. Thank you