DSL Business Services ITU/BDT Arab Regional Workshop on “DSL Technologies and Services” Cairo - Egypt, 4-6 March 2003 ITU/BDT Arab Regional Workshop on “DSL Technologies and Services” Cairo - Egypt, 4-6 March 2003

All rights reserved © 2002, Alcatel DSL business - an incremental evolution Grow the market in 3 major waves > High Speed Internet access (HSI): increase ARPU from existing PC customer > Business access: start with underserved SoHo segment with same infrastructure > Residential entertainment: gaming/video/entertainment to everybody TIME Business Access Build on existing infrastructure High Speed Internet Access Broadband Entertainment Address new audiences $ PC Game console TV

Stream 2: Adressing SOHO/SME market with Business Access Solutions

All rights reserved © 2002, Alcatel TIME Business Access High Speed Internet Access $ STEP 2 Create Margins on Business Access Services > Business Access ADSL is ideal to address underserved SME market Incremental cost on residential ADSL installed base is small – Major revenue opportunity with limited investments Same footprint provides increased ARPU

All rights reserved © 2002, Alcatel SME and SOHO segmentation principles SMEand SOHO DSL market Size Sector Industry and Energy Construction Trade 10 to 49 : small 0 to 9 : micro 50 to 249 : medium … Needs Segmentation

All rights reserved © 2002, Alcatel 3 major service bundles have been identified to target SOHOs and SMEs Type 1 Networkers 30% A real service bundle around networking solutions: Home working, IP VPN and Internet/extranet Type 2 Full hosting seekers 45% A stronger interest than other types in turn-key solutions such as web hosting Type 3 Conservatives 25% Average needs with no real leading service One consensual VAS: Security/Firewall Source : TNS for Alcatel 2001, A..T. Kearney analysis

All rights reserved © 2002, Alcatel Build Profitable DSL Networks Cash Flow  Ensure a sound business model  Sell the infrastructure over and over Revenues  Differentiate services/margins  Keep focus: one step at a time Cost  Leverage investments: Universal DSLAM  Get provisioning/operations right Residential  Get the volume  Speed the activation  Helpdesk process  Make sure you will upsell CapEx  Stable footprint  “Blade” upgrades  Network convergence OpEx  Simple for volume  User provisioning  Targeted experts Business  Start with new services  Let others help you sell  Move legacy and bundle

All rights reserved © 2002, Alcatel Market Segments Business $ per month 10,000 1, Corporate Consumer Households 89% SOHO office 10% Small business 1% Medium business 0.2% 0.01% Business Teleworking DSL

All rights reserved © 2002, Alcatel France SME internet forecast (in ‘000 of SMEs) Source: Morgan Stanley Dean Witter, 06/2001

All rights reserved © 2002, Alcatel SDSL vs. Leased Line Prices

All rights reserved © 2002, Alcatel Service Migration Leased line ActivationOperational costSavingsStandard margin € per month Legacy services with G.SHDSL can generate significant cost savings G.SHDSL

All rights reserved © 2002, Alcatel Addressing the SME Market with xDSL: Address Complete Spectrum Corporate ME SE SOHO Service Provider Market Segmentation Packaging Service migration Service Segmentation Leased lines DSL NB dial “Off” line New customer segment Attractive packages New service categories Upsell existing customers “Option selling” Existing customer base Cost savings

All rights reserved © 2002, Alcatel Source: A.T. Kearney carrier interviews Carrier Feedback > Develop premium DSL offers security reliability differentiation activation > Keep the offer simple SOHOs and SMEs want “pay and use” services and predictable expenses > Develop a strong promotion and distribution strategy develop a multi-channel communication strategy licensed systems integrators and partners that act as an indirect communications channel > Achieve operational excellence (end-to-end provisioning) provide excellent customer service improve the provisioning and activation process

All rights reserved © 2002, Alcatel ME SE SOHO Finance Automotive Insurance Medical Systems integrators IT services Service providers X X X X Channels to Market: Indirect — Vertical Segment > 54 percent of SOHOs and SMEs use indirect channels to buy telecom/IT equipment and services > 62 percent of SOHOs and SMEs cite indirect channels as key influence

All rights reserved © 2002, Alcatel Retail service packages revenues Savings Wholesale market revenuesAccess package Teleworking Intranet/extranet package Hosting Security/firewall E2E provisioning Leased line replacement VoDSL  2 ADSL-based offers  2 G.shdsl-based offers Total value creation Business Model Structure Supported by:  Carrier interviews  SME survey  Market reports Market Challenges Value SolutionConclusion Overview

All rights reserved © 2002, Alcatel A Complete Solution Addressing All the Needs of the SMEs > Use a single network to offer on top of residential: business Internet access VAS: firewall, security, web hosting,... multiple voice lines: VoDSL multisite teleworking leased line replacement > Provide service assurance (SLAs) and QoS mechanisms for all these services

All rights reserved © 2002, Alcatel Business Internet Access Single Site VAS intranet, extranet DNS Data Center Firewall 7300 ASAM BAS CO ATM SLA pack  SLA monitoring tools  Self care Hosting pack  Internet hosting  hosting IP pack  Managed router  IP addressing  DNS service Security pack  Managed firewall  Firewall monitoring  Virus check ISP/Internet Business G.shdsl or ADSL Security pack Router Hosting pack Firewall NOC SLA pack Server

All rights reserved © 2002, Alcatel SME/SOHO: A Unique Opportunity to Increase Service Offering > Willingness to pay for broadband access and services (Customer survey in USA and Italy) Source: Alcatel survey: Italy/USA ARPU potential from additional services 85€ per month Broadband access IP VPN Intranet and Extranet Self provisioning Security Web hosting Home Working ARPU from basic access service 58€ per month

All rights reserved © 2002, Alcatel IP  Managed router  IP addressing  DNS service Security  VPN  Firewall  Virus check Business Access Components > Successful product offering is composed of different elements > J.P. Morgan suggests a rise in NPV for DSL business users from 14,000€ to 53,000€ based on these components: SLA  SLA monitoring and reporting tools  Self care Hosting  Internet hosting  hosting Connectivity  Bandwidth  (A)-symmetric  Back-up  Multiple PC

All rights reserved © 2002, Alcatel Example: Belgacom ADSL Source: Belgacom website dd

All rights reserved © 2002, Alcatel British Telecom (BT Openworld)

All rights reserved © 2002, Alcatel Success Stories in Europe : Unbundling

All rights reserved © 2002, Alcatel Example: COLT

All rights reserved © 2002, Alcatel Example: COLT G.shdsl Source: Data news and COLT website COLT and Alcatel deliver DSL broadband business access Joint press release dd