May 19 – 21, 2003 Madrid, Spain The Evolving Broadband Home – Coming Challenges for Service Providers Sandy Teger and Dave Waks Co-Founders Broadband Home Central

Copyright © 2003, System Dynamics Inc. 2 About Us: Professionally Sandy –18+ years with AT&T; multimedia strategy director Dave –Founder and R&D director, Prodigy Services Company Together as System Dynamics Inc. –Specialists in residential broadband –Consult for companies affected by residential broadband Projects included strategy, business economics, competitive analysis –Operate BroadbandHomeCentral.com as industry resource –Research and write Report on the Broadband Home Free monthly Internet newsletter 71 active readers in Spain – more than 50% service providers

Copyright © 2003, System Dynamics Inc. 3 About Us: Personally

Copyright © 2003, System Dynamics Inc. 4 Broadband Is Transforming the Home Broadband access is the foundation for much of what’s changing in home technologies Broadband access and PC networking are growing Everything is going digital The consumer electronics industry has a huge investment in driving sales of networked appliances The worlds of the PC, home entertainment and telephones are starting to overlap and merge People are spending their time and money on buying and using “this stuff” because it’s compelling Keeping up will be a challenge to broadband service providers

Copyright © 2003, System Dynamics Inc. 5 “Broadband Home” Broadband access and in-home distribution network –Any kind of access –Any kind of network Multiple broadband devices –PCs and emerging appliances 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, and to the home from the outside

The Emerging Broadband Home ISP Services DSL Cable Modem Wireless Fiber Satellite Powerline Broadband Access Home Gateway

Copyright © 2003, System Dynamics Inc. 7 The Promise of Broadband Work from home as easily as in the office 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 Telemedicine

Copyright © 2003, System Dynamics Inc. 8 Broadband Tools and Toys for Work and Play Connected Devices Multiple PCs – server, desktops, notebooks Digital camera and camcorder MP3 player and networked digital audio player Two PVRs Several IP phones Media Applications Photo and video software Audio software Music on demand and Internet radio Shutterfly Foundation Broadband modem Structured wiring Home gateway Ethernet switches Wi-Fi HomePlug

Copyright © 2003, System Dynamics Inc. 9 Our Broadband Home Movie Sandy and Dave’s Broadband Home

Copyright © 2003, System Dynamics Inc. 10 Applications Creating Broadband Usage ApplicationCE DeviceUser BenefitsBB Capability Used ShutterflyDigital cameraProfessional-looking photo projects Upload many photos; view projects RhapsodyMultimedia PCListen to lots of music you don’t own; burn CDs of songs you like Always-on streaming downloads VideowaveDigital camcorderCreate family videos; share with friends and family Today, load clips onto Web site Webcam View house/garden when travelingContinuous upstream Internet on TVNetworked media player Weather, sports scores, etc. on demand on TV Standard Web page access DVR capabilitiesDVRs with big hard drives (e.g., TiVo, RePlay) TV programs you want, when you want them; set up when away from home Always-on connectivity to DVR; download video to hard drive Broadband telephony IP telephones or MTAs Inexpensive phone calls, later add video, better voice quality Symmetric; video will require more bandwidth

Copyright © 2003, System Dynamics Inc. 11 Top Trends Networked Consumer Electronics –TVs, stereos, digital cameras, digital video recorders, game consoles, PDAs, etc. being built to connect and communicate Wireless Networking –802.11g is “over the bar” for home entertainment –QoS still an issue for broadcast video Home Gateways –From simple (cable/DSL router) on up (advanced set-top boxes, Microsoft “Media Center Edition”, Pioneer “Digital Library”) Increasing Consumer Expectations –Faster, better, cheaper –Cut across gender, age and class

Copyright © 2003, System Dynamics Inc. 12 Everything Is Going Digital Audio Players Video Players Still Cameras Camcorders Satellite TV Cable TV Broadcast TV Telephone New CE

Copyright © 2003, System Dynamics Inc. 13 Increasing Demands on Broadband Access New connected consumer devices and services demand more from the broadband access foundation Broadband Access Home Networking Gateways and client devices Applications, content and services

Copyright © 2003, System Dynamics Inc. 14 Home “bandwidth budget” growing “Bandwidth budget” is total pipe size needed to accommodate all the information being sent around the home –Includes bits from all the things that people want to interconnect Just like any budget, it keeps expanding! –People want to connect more devices Not just PCs, but digital camcorders, MP3 players, PVRs, games,.. –Each device is getting richer information Digital cameras going from 4 to 6 to 8 megapixels TV going from standard definition to high definition Computer files going from data to incorporate video, special effects Consumer interest in entertainment will keep driving bandwidth to and within the home

Copyright © 2003, System Dynamics Inc. 15 Challenges – Bandwidth and Symmetry Most broadband access designed for Web browsing –Relatively low speed both ways –Highly asymmetric, biased downstream Many new applications symmetric, some require high speed –Telephony –Video conferencing –Exchanging pictures and videos Optical fiber is good fit for new applications –Very high speed – typically at least 100 Mbps/home –Symmetric

Copyright © 2003, System Dynamics Inc. 16 Challenges – The “Triple Play” North American cable operators will all offer “full bundle”: –Video: broadcast and VOD –Data: high-speed Internet access –Voice: primary service, largely packet-switched (PacketCable™) New optical fiber providers add even more –FastWeb: Videoconferencing Will be challenge to incumbents –Lost customers are hard to win back –Hard to respond quickly with competitive video services

Copyright © 2003, System Dynamics Inc. 17 Summary Broadband will be taken for granted - like electricity Will extend to all media and consumer electronics— becoming integrated into consumers’ lives The specifics will vary by country and culture Customer expectations will drive bandwidth and symmetry Incumbents will face growing pressure from competitors, customers and communities to meet these expectations “Coming events cast their shadows before.” Thomas Campbell

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