3. UK’s DSL broadband market is growing rapidly % DSL Household Penetration adjusted for maturity of the respective markets Percentage increase in DSL lines in Q2 2003 Source: Informa FranceGermanyItalySpain UK 15% 7% 34% 13% 29% 0% 2% 4% 6% 8% 10% 12% Q1Q2Q3Q4Q5Q6Q7Q8Q9Q10Q11Q12 FranceGermanyItalySpainUK 64% 36% 374k 1,367k 48% 52% Source: Informa– BBC, Monday 9 June 2003 “BT now has over 100 service providers supplying broadband over phone lines and has around half of the UK's broadband market”

4. UK broadband coverage is strong Trigger levels for a further 2,300 exchanges were announced this week covering an additional two million homes UK coverage levels today comparable to France with goals set to achieve 100% coverage by 2005 0% 20% 40% 60% 80% 100% FranceGermanyItalySpainUK Today we have 1,708 active exchanges covering 80%  466 further exchanges are currently in build  Another 199 should reach trigger levels by end of March 2004  Pushing the boundary towards 85%

5. BT creating positives with broadband Community wins  Access to latest technology  Fast, constant, quality service  Tailored services  Market growth for local companies  Community ICT literate Creating a broadband society UK Plc Wins  Innovative supply & demand growth models  EU best practice and positioning Local stakeholders win  Sustainable investment  New services  Increased profile for Region  Partnership body for other activity  Innovation Content and service providers win  Better business opportunities  Helps smaller content providers reach a broader customer base BT wins  Improved customer satisfaction  Demand led approach to sustainable supply current non commercial areas Other telecom companies win  Advertising helps everyone  More exchanges enabled

6. Next phase of broadband adoption Source: BT analysis & Forrester Research, Aug 03 Broadband DSL pricing across Europe Average price of key broadband ISPs €/month 29.9 35.9 44.5 43.1 33.8 FranceGermanyItalySpainUK Current broadband pricing…  does not vary significantly across Europe  suits the ‘net-savvy’, early adopters who subscribe to a 2nd phone line and dial-up access for circa £27/month  however needs to be value-for-money for all including the less netcentric and the 45% non-PCs households Future pricing options... Either, lower the price - but current economics will not support this - or, increase the consumer value of broadband by delivering a compelling set of value-added services around the Home of Possibilities

7. Creating a home eco-system… Enabling compelling content and applications Content Music, Video, Gaming, Education, Sports Business Information Communications Email, Instant Messenger, Click2Call, VoIP, Call Management, SMS Platforms Payment Engine, Content Distribution/Management, Rights Management, Security, Authentication, Storage, QOS Enabling the networked home/office Computing Broadband enabled PCs Networking Intelligent Hubs, WiFi, Mobile to Fixed Monitoring Alarm Monitoring Digital Entertainment Streamed Music, Video, Pictures, Games Consoles Broadband access Complete service assurance

8. Technology is enabling change… Wireless  ‘No wire’ solutions emerging capable of distributing video Online micro-payments and digital rights management  New payment and rights management solutions encouraging content owners to publish more Flexible bandwidth  Technology becoming available to flex broadband to higher bandwidths Compression software  New codecs require much less bandwidth to distribute music/video Connectable devices  Broadband-enables home devices are becoming ‘plug and play’

9. BT is leveraging this technology… Content Users Software & Media Content Providers Digitisation Encoding Security Asset Management Distribution Monetisation Business Communities Entertainment BT Digital Content Platform “As broadband penetration increases future potential will depend on services for consumers of content, Internet, video, gaming and other services” Yankee Group Jan 2003

10. …while working with partners... MarketingService Products

11. ...and through multiple channels BT Highstreet  Partnering with the premiere high street specialist retailers BT Direct - multi-channel direct retail  Selling BT and third party products and services  Specialising in catalogue, kiosk and on-line channels

12. Customers want… Communications BT Communicator  A new service developed in partnership with Yahoo! that will manage all home communications from the PC  v0.1 live incorporating Instant Messenger, Video Chat  v1.0 April launch incorporating VoIP, Click2Call, Call Management, SMS, Central Personal Address Book BT Videotelephony  Major trials underway to extend BT’s video telephony  Strong videocam promotions in place for Xmas  Four-way video chat capability, telephone transfer to TV video calling, QOS guarantee and mobile integration all under development BT Broadband Traveller  A combination outdoor / indoor WiFi access offering which uses BT’s innovative Openzone access solution with BT’s Home Networking hub

13. Customers want… Entertainment (gaming) Broadband is revolutionising gaming, enabling console gamers to play opponents anywhere in the world in real time  In game speech  Down load new games and updates  Discussion forums BT has partnered with ‘XBox Live’ and Playstation Network Gaming  Router enables sharing of the broadband connection between PC and console - simultaneous surfing and gaming  Broadband element is £99 for combined router/modem with £29.99 rental and £30 cash back (till end March ‘04)

14. Customers want… Entertainment (music) BT - Philips - House of Frazer  Launch of a major digital music bundle of home networking and the Philips Streamium HiFi powered by BT Broadband BT Digital Media Player  Stream music from broadband enabled PC to any room in the house  Winner Best of Innovations award at the Consumer Electronics Show in Las Vegas BT Yahoo! Launchcast Radio  Learns what you like and plays you the music you like to listen to

15. Customers want… Education The BT Learning Centre  A unique online learning service using the best educational content suppliers and making available in one place - Channel 4, Granada Learning, Research Machines  Includes age specific interactive learning activities, revision tools and research from nursery to adult, covering the UK national curriculum Successful marketing through UK schools  Over 3500 schools are actively promoting BTLC through their schools  Includes age specific interactive learning activities, revision tools and research from nursery to adult, covering the UK national curriculum

16. Customers want… Information and Choice BT Broadband Landing Page  An exemplar site for Broadband content  Partnership model which:  highlights the best of broadband content  stimulates third-party broadband sales In excess of 3.4m hits in October reviewing over 110 partner sites:  Microsoft MSN 8, Yahoo Plus, BBC, MasterCard, Channel4, Real One, Lastminute, Fox Kids, Sky, Blockbuster, FT.com, Virgin

17. Customers want… Personalisation BT Yahoo! - partnering the leading portal supplier  The best of two powerful brands  A service that focuses on what each company does best  A highly integrated customer experience  Great value for money - a cheaper offering than buying access and Yahoo! Plus independently A highly personalised experience  Up to 10 members of the family can easily choose their favourite content to appear on their homepage  Customisable browser toolbar allows each individual to customise their browser to best suit their needs

18. Customers want… Security BT’s 24 hour Home Monitoring and Reporting System  Wire free, self-install internet based monitoring and alerts via text message, e-mail and phone BT NetBackup  Automated PC backup, two service levels, simple monthly pricing BT NetProtect  Anti-Virus, intrusion software, constantly updated

19. Future broadband market challenges? Value for money  Current tariffs do not reflect each customer’s true cost of supply and therefore the entry price is kept artificially high Broadcast content  The economics of broadcasted content over broadband is substantially worst than analogue, digital terrestrial and digital satellite distribution Higher speeds  Broadband offers a 512kb fixed bandwidth and therefore is not capable of delivering good quality video content

20. Future broadband solutions? Tiered pricing  Establish a tiered ‘pay-as-you-use’ pricing model which fairly charges each customer for the bandwidth used (Telenor model) Flexible bandwidth  Flex upwards the bandwidth to the home for the period of time that high bandwidth content is being delivered Complement broadcast  Enhance existing broadcasted channels with interactive and personalised content integrated in to existing programming

21. Broadband at the Heart of the Home BT has the vision, the resource and the commitment to revolutionise the home through broadband BT leads the market in taking broadband beyond just access The Home of Possibilities is at the heart of BT’s future New developments in technology are beginning to sign-post the extent of this opportunity The next three years will see the opportunity become a reality