FTTH's Second Decade Begins: Where We Are, Where We Are Going North American FTTH: 10 Year Report Card Presented by: Michael C. Render 1

Has FTTH Had An Impact? Economy Quality of User Experience New Technology

Has FTTH Become A Household Name? Consumer Recognition

Have We Overcome Challenges? Political Funding

Has FTTH Deployment Grown? Will It Continue? Greenfield Construction Existing Overbuilds

“Has FTTH Had An Impact?”…. ….Economy (Grade: A)

How would you best describe the organization you work for? Select one: RBOC ILEC CLEC MSO Municipal government State or regional government Real Estate Developer/Integrator End-user business Consultant Equipment vendor Contractor

Billions In Home Based Business Impact Average revenue from home- based businesses in FTTH homes is $59,780 Revenue for FTTH home-based businesses is $46.7 Billion Revenue estimated to be related to FTTH performance is $11.1 Billion * * 11% said their business would not be possible without FTTH, and 64% said it is more efficient FTTH Enhanced Home - Based Business Reported

Billions In Traditional Economic Development/GDP Growth

Billions In Environmental Savings Days worked from home increased 1 day per month on average: 1 day per month average (Nearly 12% work more from home directly because of FTTH – an average of 9 days more) US Carbon Emissions reduced by .06% (5.5% of citizens * 3% * 40%) FTTH also lowers energy use, road maintenance, accidents, unproductive hours… Extra Days From Home Reported

“Has FTTH Had An Impact?”… …Quality of User Experience (Grade: A+)

Much Higher Satisfaction With Internet Aspects FTTH Versus Cable Modem Reliability – service uptime Broadband speed Installation process Consistency of speed Provider’s customer service 12

Much Higher Satisfaction With Television Aspects FTTH Versus Cable Quality of HD picture Standard television Number of HD channels VOD 13

Much Higher Tested Download Performance Median Mbps By Year 14 14

Much Higher Tested Upload Performance Median Mbps By Year 15 15

Far Fewer Modem Reboots Reported Per Month FTTH DSL FTTN Cable modem Wireless 16

Users Clearly Understand Key Advantages Of FTTH Open End Responses Speed/ faster/ better Internet/ bandwidth Picture clarity/ video clarity Reliability/ consistency/ no hassles Bundle of several services on one bill Cost Fewer weather disruptions Quality Number of channels/ entertainment choice Better customer service General positives - pleased to have it DVR Convenience Better than previous cable company Video-on-demand/ movie downloads No satellite dish Better technology/ up-to-date Lines are buried/ No overhead Can run two computers at once Easy installation Other 17

“Has FTTH Had An Impact?”… …New Technology (Grade: C)

Some Increased Use Of Advanced Internet Applications Among FTTH Users Under Age 40 By Year Shop online Play single player games Upload large files Download or stream video to computer Play multi player games Upload video content to Internet Use VOIP for audio Use two-way video conferencing Transfer files for remote offsite storage Download or stream video to television set Use remote software / “cloud computing” Use remote monitoring camera video Participate in a virtual world 19

There Is Interest In Futuristic Services Current FTTH Users Under Age 40 Business video conferencing Very large HDD with super resolution Advanced websites/ full video Remote home and pet monitoring Online face-to-face healthcare Advanced online shopping One device for TV, Internet, & phone Two-way video calling Advanced online college 3D TV 20

There Is Interest In Futuristic Services Current FTTH Users Age 55+ Online face-to-face healthcare Very large HDD with super resolution One device for TV, Internet, & phone Advanced online shopping Two-way video calling Remote home and pet monitoring Advanced websites/ full video Business video conferencing 3D TV Advanced online college 21

FTTH Upload Performance Will Become A Competitive Advantage Median Mbps By Year 22 22

“Has FTTH Become A Household Name?”… …Consumer Recognition (Grade: C)

General Public Awareness Of FTTH Is Still Low By Year 2009 2010 24

Yet When Described, Users Understand The Importance Of FTTH In New Home Development Non FTTH Users: Internet from a direct fiber optic line Green space / walking, jogging 24 hour neighborhood patrol Community pool / park Fitness center / Clubhouse Current FTTH Users: 25

“Have We Overcome Challenges?”… …Political (Grade: A)

“Have We Overcome Challenges?”… …Funding (Grade: B-)

Nearly $40 Billion In Investment To Date

Total U.S. Telco & Cable Capital Expenditures Are Stable Total North American Telco & Cable Capital Expenditures Are Stable

But There Is Competition For Telecom Capex Wireline Wireless DSL broadband speeds are falling far behind the competition. Telcos are starting to lose subscribers and need an FTTH update. This is reaching severe levels in some areas, such as eastern Canada. Smartphone penetration is expected to increase from 15% to 70% in just three years with the increasing use of higher bandwidth applications. Some see this as an impending crisis.

Other Investment Offers Opportunities National public investment Municipal public investment Private investment

“Has FTTH Deployment Grown?”… …Greenfield Construction (Grade: B-) …Existing Overbuilds (Grade: A-)

FTTH Homes Passed Have Grown Cumulative – North America 100 x Growth since 2001

FTTH Homes Connected Have Grown Cumulative – North America

FTTH Penetration Has Grown Cumulative – United States 35

But FTTH Penetration Is Not Uniform Percent Of Households Connected +

FTTH Internet Use Has Steadily Grown Broadband Type Primarily Used At Home USA By Year

There Has Been Some Short Term Slowing Of Growth

Annual Change – North America FTTH Homes Passed Annual Change – North America

Annual Change – North America FTTH Homes Connected Annual Change – North America

Greenfield FTTH Homes Connected Will Increase Annual – North America

Greenfield Will Finally Take Off As Older Copper-Based Developments Are Filled

Likelihood Of Overbuilds Still Look Good In Many Sectors Adding FTTH: Current Non RBOC FTTH Providers Very unlikely Somewhat unlikely Somewhat likely Very likely All customers have FTTH 43

Telecom Video Was An Early Driver FTTH Video Homes Connected Cumulative – North America

Broadband Line Loss Will Become A Driver Net Broadband Adds 2009 MSO’s (Docsis2, Docsis 3) Verizon (DSL, FTTH) Other RBOC (DSL, FTTN) Source: Leichtman Research 45

Broadband Line Loss Will Become A Driver Net Broadband Adds First Half 2010 MSO’s (Docsis2, Docsis 3) Verizon (DSL, FTTH) Other RBOC (DSL, FTTN) Source: Leichtman Market Research 46

How many additional North American homes do you expect to be passed by FTTH or FTTB in next 5 years (by the end of 2015)? Select one: 3 million or less 6 million 9 million 12 million 15 million or more

Key: North American FTTH Will Begin A New Mild Increase - With More Explosive Growth Possible Key: Yellow – stable Light green – moderate growth Dark green – strong growth Note: Much of the RBOC decline has already occurred.

Overall… The FTTH Picture Looks Positive!

Q&A

Broadband Properties Magazine homepage: www.bbpmag.com For a replay of this Webinar, and for upcoming webinar events, don’t forget to check out our municipal broadband webinar site at www.Muniwebinar.com Broadband Properties Magazine homepage: www.bbpmag.com Also at Broadband Properties Magazine: www.munibroadband.com For the complete report of FTTH deployment in our October issue, featuring Mike Render’s data: www.bbpmag.com/2010mags/oct10/BBP_Oct10_FTTHMarketReport.pdf Contact Mike Render at mrender@rvallc.com Or visit www.RVALLC.com