The Rural Customer Speaks A Rural Broadband & Video Study by Cronin Communications

Research Objectives Evaluate rural video and broadband markets from the urban trends Identify growth opportunities for linear video (IPTV) and over-the-top (OTT) Determine customer shifts and expectations Track customer satisfaction, loyalty and churn Measure market-share and the impact of competition

Key Points to Consider about this Survey Independently conducted - Only rural telecom consumers (ILECs) North American sampling Approximately 400 rural residential video consumers Strictly a phone survey Survey conducted & compiled Dec. ‘15 – Feb. ‘16 Strictly a rural survey. A lot of these surveys are conducted online which are going to be more inaccurate. Very small % subscribed to large cable providers. Survey was conducted and compiled by Cronin Communications who have a long standing reputation for their survey work in the rural telecom space. Looking to run another study this year with a larger sampling.

Methodology Box Scoring Customers responding within the same box will behave approximately the same way Concentrate on the Top Box Bottom Box Middle Box Top Box 1 2 3 4 5 6 7 8 9 10 32% 46% 22%

Recent Trends Customer pay 26% more over last 3 years $304/month including wireless Subscription video declined 10% over last decade, not due to streaming 1% homes are OTT cord cutters, 13% antennae-only, 4% no TV Broadband take rate increased 75% in ILEC markets, while declining in urban areas to 70% Mainly from wireless competition

Recent Trends Overall customer satisfaction across all telecom services is declining Internet satisfaction is declining, Why provide 10 Mbps when 100 Mbps is available Customers want streaming video packages and managed Wi-Fi Streaming TV $30, Managed Wi-Fi $10-25 per month Customers do not know Internet speeds or price

Service Penetration Rates

Customer Satisfaction (Percent in the Top Box)

Average Spending (Based on Customer Recollection)

Rural ILEC Study Video Outlook

How Video is Received

Market-share (For video) Average account tenure: 11.83 years Average number of TVs: 2.63

Video Drivers Cost of TVs The Drivers today is the market for TV. For less than a $1000, a customer can purchase a 65” UHD Smart TV. This means high quality video is available everyone in the house. The number of TVs over the past 10 years have gone from 1.7 TV in 2008 to 2.8 today and still increasing.

Time-Shifted video - DVR Rural ILEC Study Time-Shifted video - DVR

Total TV DVR Viewing Time Rural Consumers spend nearly twice as much time viewing their DVRs Compared to the Nielson National Average! Mean is 28.51% The mean is 28.51%, almost double the national average of 15% Nielsen. Why: Older populations –less streaming More overall television viewing - fewer entertainment options in rural areas. Narrower programming interests Recording of local community events

DVR Penetration 28% of subscription content is viewed by DVR An additional 12% plan to add DVR within the next year

16% 12% Top Box: Yes or Will do Middle Box: Satisfied or Plan to do Bottom Box: No or Not likely The top box is the percentage of customers who will take action within the next 24 months. Cloud DVR could tease the 72% who is not using DVR by giving them a taste of its features

Rural ILEC Study Streaming tv – Ott

Rural Customers Currently Using a Streaming Service Average of 7.59 hours per week

Bottom Box Middle Box Top Box 9% 6% Bottom Box Middle Box Top Box This would be a motivating factor to have a local broadcast package for those seeking to downgrade. This could also be something to consider in a StreamingTV offering that could be configured to stay exclusively on your data connection and also an additional revenue source for those outside of your cable or iptv network. 70 % are not looking at an OTT solution to replace their linear TV.

Reasons for Cancelling or Changing Video Service

Taking control Managed wi-fi Rural ILEC Study Taking control Managed wi-fi

31% 8% The top box of 62% mirrors the overall satisfaction score for the ISPs (63%). Wi-Fi very much affects overall satisfaction. 8% are strongly dissatisfied (bottom box) with their Wi-FI signal.

Interest in a Service Providing Unlimited Home Network Support 58% 19% 23% of customers (top box) would subscribe to unlimited Wi-Fi technical support (also known as managed Wi-Fi) given the right price, terms and conditions. Of those interested, customers expect to pay $24.33 per month for unlimited Wi-Fi technical support. 44% of those interested don’t know how much to expect to pay.

Conclusion Customers want time-shifted viewing Restart TV, DVR, cDVR, VOD & OTT Simulate Hulu / Netflixs – Provide an option OTT is a complement not a replacement Must have local channel – OTT They want you to manage their Wi-Fi Take control of the customer Rural consumers have very different needs than their big city cousins! Only 1% of the rural consumers are exclusively OTT DVR Viewing is Double the national Neilson average Local news weather and sports very important to 85% of rural users home networking should be a priority for new service revenue- High margin low maintenance

Would You Like a Copy of the Survey? Drop Off Your business card jerryw@innovsys.com

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