1. Analyzing Competitive Networks Broadband Networking Retreat San Diego, October 23-24, 2000 Michael Richarme, Vice President Decision Analyst, Inc.

2. 2©2000 Decision Analyst, Inc. Session Focus Evaluating competition End user perspective Distinctive competencies Identifying profitable areas Switching behavior Price sensitivity Research aided decision making

3. 3©2000 Decision Analyst, Inc. Decision Analyst overview 22 year old full service marketing research firm 65 position CATI telephone center 1.6 million member Internet panel 20,000 member High Tech business panel High volume mail center 250 employees in Arlington, Texas About 1/3 of our business in high tech Clients include a Whos Who of broadband providers (LEC, CLEC, CATV, ISP, etc.)

4. 4©2000 Decision Analyst, Inc. Broadband Definitions Two major categories of Broadband Cable Modem – shared bandwidth on 2-way CATV systems DSL – high bandwidth transmission on telco copper wire local loops Generally 200Kbps in at least one direction Exclude SDSL, T-1, Fiber from this discussion

5. 5©2000 Decision Analyst, Inc. Useful Secondary Data Sources FCC Report http://www.fcc.gov/Bureaus/Common_Carrier/ News_Releases/2000/nrcc0040.html Cable DataCom News http://www.cabledatacomnews.com/ Technology Board http://www.technologyboard.com

6. 6©2000 Decision Analyst, Inc. Market Size – end of 1999 Cable modems – 1.4 million consumers ADSL – 400,000 consumers Other includes commercial T-1, fiber connections, and other broadband

7. 7©2000 Decision Analyst, Inc. Market Size – mid-2000 Cable modems – 2.3 million consumers ADSL – 850,000 consumers Other – moderately slow growth

8. 8©2000 Decision Analyst, Inc. Market Penetration Cable modems Cable passes 94% of US households Networks 52% cable modem capable now Networks 84% capable in 5 years ADSL Doubling of US Internet households in 5 years from 33% to 67% About 80% of local loops within 18,000 foot distance from telco central office

9. 9©2000 Decision Analyst, Inc. Market Penetration - current Cable modems – about 4-5% of households that have compatible cable systems ADSL – about 3% of households with dial-up Internet connections

10. 10©2000 Decision Analyst, Inc. Growth Rates – near term Cable Modem – 150% unit growth last year DSL – 380% unit growth last year Approximately equal size markets at the end of 2004 Will each have about 15 million subscribers at the end of 2004

11. 11©2000 Decision Analyst, Inc. Key Competitors CATV AT&T/Media One, Time Warner, Cox, Charter Top 5 have about 60% of subscribers LEC SBC, Verizon, BellSouth, Qwest/US West about 80% of ADSL lines CLEC about 17% of ADSL lines Other – wireless, ISPs, IXCs

12. 12©2000 Decision Analyst, Inc. Some Consumer Issues Availability in my area Pricing Installation tasks Firewall/security Portability Inflated speed claims Multiple users

13. 13©2000 Decision Analyst, Inc. Measure Issue Importance How important or unimportant to you are each of the following factors when selecting a high speed Internet connection? Highly Highly Important Important Neither Unimportant Unimportant 5 4 3 2 1

14. 14©2000 Decision Analyst, Inc. Measure Provider Rating How would you rate your high speed service provider on each of the following factors? Very Very Good Good Neither Poor Poor 5 4 3 2 1

15. 15©2000 Decision Analyst, Inc. Performance Grid Importance Rating Very LowVery High Very Good Very Poor Below Expectations Over Spending TABLE STAKES FIX IT REAL FAST ! 42 2 4 FAMILY JEWELS

16. 16©2000 Decision Analyst, Inc. Differential Advantages What highly important things do you do extremely well that no other competitor does? These tend to cluster into areas of technology, service, price, comfort Use to build a value proposition to the customer

17. 17©2000 Decision Analyst, Inc. Evaluating User Profitability 80-20 rule Some segments are much more valuable than others Pipe or pipe-and-applications Is $39.95 per month the end goal?

18. 18©2000 Decision Analyst, Inc. Customer Value Analysis Typical broadband customer is worth $20,000 to $50,000 over their lifetime This is a function of time and dollars Some customers are more attractive than others

19. 19©2000 Decision Analyst, Inc. Customer Value Model Value = ƒ(Loyalty*Profit) This is impossible to measure directly Indirect measure of loyalty is propensity to switch Indirect measure of profit is revenue (even better is contribution margin)

20. 20©2000 Decision Analyst, Inc. Propensity to Switch Proxy measures (LD Service switching) Awareness of alternatives Competitive intensity

21. 21©2000 Decision Analyst, Inc. Revenue Projection Pull a reasonable price out of the air Price it at the same price as everyone else Price it to deliver certain returns Or, price it based on the consumer willingness to pay

22. 22©2000 Decision Analyst, Inc. Price Elasticity A methodology for gauging price What would be a reasonable price… What would be the highest price… What would be the lowest price, without worrying about the quality… If this was available at a price of $x.xx, how interested would you be in buying…

23. 23©2000 Decision Analyst, Inc. Simplifying the Research Stage Dont get too caught up in industry subscription numbers Understand key assumptions of your business model and test them Stay close to the customer and their (fickle) needs Stay current

24. 24©2000 Decision Analyst, Inc. Session Speaker

25. 25©2000 Decision Analyst, Inc. Company Summary Decision Analyst, Inc. is a leading national marketing research firm, serving a number of major U.S. corporations and advertising agencies. The firm is a recipient of the Advertising Research Foundations David Ogilvy Award for marketing research excellence, the top honor bestowed in the field of marketing research. The name, Decision Analyst, reflects the company's decision-oriented, analytical corporate philosophy. Decision Analyst, Inc. is a vertically integrated, full-service marketing research firm. Through its National Survey Center (with 65 interviewing positions presently), its National Field Department, and its American Consumer Opinion Online panel with over 1,600,000 members, and large mail-survey systems, the firm conducts national studies on an array of topics, spanning industries from packaged goods to high technology. The firm places great value on hard work, meeting deadlines, and staying within budgets. The focus of Decision Analysts energy is decision-oriented, action-oriented marketing research. Research must lead to decisions, to actions, to results. The education and training of our staff reinforce this decision-analytical emphasis. Decision Analyst, Inc. seeks the synergy inherent in combining qualitative and quantitative research techniques, as required by the objectives of each research project. Decision Analyst, Inc. is a corporation chartered in the State of Texas in 1978. The company is totally owned by employees, and most employees own stock in the company. Decision Analyst, Inc. is an active member of the Council of American Survey Research Organizations (CASRO) and subscribes fully to the Code of Quality Standards for Survey Research specified by CASRO. Also, Decision Analyst, Inc. fully subscribes to and supports the survey research quality standards set forth by the Advertising Research Foundation, the American Marketing Association, the Marketing Research Association, and ESOMAR (the European Society for Opinion and Marketing Research).

26. 26©2000 Decision Analyst, Inc. Questions and Discussion Decision Analyst, Inc. 604 Avenue H East Arlington, TX 76011 www.decisionanalyst.com 800-ANALYST Michael Richarme mrichar@decisionanalyst.com