1. Video’s Hi-Tech Future: TV and More David Waks and Sandy Teger Co-Founders, System Dynamics Inc. Shaping New Jersey’s Telecommunications Future Princeton University May 20, 2005 Copyright © 2005 System Dynamics Inc.

2. Copyright © 2005 Slide 2 About Us: Professionally Dave –Founder and R&D director, Prodigy Services Company Sandy –18+ years with AT&T; multimedia strategy director Together as System Dynamics Inc. –Specialists in residential broadband –Consult for companies affected by residential broadband Strategy, business economics, competitive analysis –Operate www.BroadbandHomeCentral.com as industry resourcewww.BroadbandHomeCentral.com "100 BEST Undiscovered Web Sites" PC Magazine, 4/20/04 –Free monthly Report on the Broadband Home Subscribers in ~100 countries –Broadband Home Labs Integrated in our lives Test new products

3. Copyright © 2005 Slide 3 What We Mean by “Video” Broadcast TV Comes To Mind… But we mean  Moving pictures…  Delivered by broadcast or over a broadband connection…  One-way or two-way (on-demand or interactive)…  Real-time or store-and-forward…  To the home or to the person…  To TVs, PCs, phones and more!

4. Copyright © 2005 Slide 4 Video at Home… …on the PC …on a home videophone …and at the doctor’s office …networked from PC to TV Akimbo Player Packet8 VideoPhone uLead Video Editor

5. Copyright © 2005 Slide 5 …and Video Away From Home Video to the person, not the place Mobile phone Digital camera Personal media player iRiver PMC-120 Kodak Easyshare 1 V CAST

6. Copyright © 2005 Slide 6 Trends Affecting Tomorrow’s “Video” Increasing broadband penetration –“Fat pipe” for digital data, voice and video “Everything Digital” and Networked “Everything over IP” – VoIP  Video over IP Video will be dominant broadband application –Takes LOTS of sustained bandwidth Broadband everywhere – to the person, not just to the home Demarcation of traditional industries disappearing

7. Copyright © 2005 Slide 7 Increasing Broadband Penetration US has >33 million broadband connections –#1 globally in numbers, but lagging in percent penetration Cable and DSL predominate now –Fiber, wireless, satellite, BPL coming on strong Nearly 60% of US Internet home users now use broadband –Broadband overtook dial-up in July, 2004 US broadband Internet use almost tripled over the past two years New Jersey is #3 in US broadband penetration (behind Hawaii and Massachusetts) (Sources: Leichtman Research Group, Inc., Nielsen//NetRatings, Gartner, Inc.)

8. Copyright © 2005 Slide 8 “Digital Everything” Transition to digital is powering growth of consumer electronics –Video and audio players –Cameras and camcorders –Television –Telephone –Other new consumer electronics U.S. household penetration of digital electronic products –DVD players overtaking VCR penetration –HDTVs 13% –Flat-panel TVs 10% –DVRs 10% Source: Consumer Electronics Association, May 2005

9. Copyright © 2005 Slide 9 Everything Digital – Video Players Digital Analog

10. Copyright © 2005 Slide 10 Everything Digital – Still Cameras Digital Analog

11. Copyright © 2005 Slide 11 Everything Digital – Camcorders Digital Analog

12. Copyright © 2005 Slide 12 Everything Digital – Cable Television Digital Analog

13. Copyright © 2005 Slide 13 Everything Digital – Broadcast Television Digital Analog

14. Copyright © 2005 Slide 14 Everything Digital – New Consumer Electronics Digital Analog

15. Copyright © 2005 Slide 15 Everything Digital – Summary Audio Players Video Players Still Cameras Camcorders Satellite TV Cable TV Broadcast TV Telephone New CE 2005

16. Copyright © 2005 Slide 16 Growth of VoIP: Voice  Video “Voice over IP”: digital voice over broadband Offered by many companies –Cable companies: Cablevision, Comcast, Cox, Time Warner, … –ILECs/Carriers: Verizon, SBC, Qwest, AT&T, MCI, … –Others: Vonage, AOL, Broadvoice, Net2Phone, Skype, Broadvox, Packet8, VoicePulse, … Growing rapidly –Vonage has >600,000 VoIP lines; “on track to reach 1 million by year end” –Cablevision projects 15% VoIP penetration by end of 2005 Video + voice over IP tomorrow –Early applications already underway, e.g., Packet8, AIM, Apple iChat, Comcast Video Mail, …

17. Copyright © 2005 Slide 17 Industry Structure Changing Fast Voice services Broadband services –Now: cable (Comcast), telco (Verizon), independents (Covad) –Tomorrow: add satellite (WildBlue), power companies with BPL, wireless (ClearWire, municipal Wi-Fi and WiMAX) Video services –Now: cable (Comcast, Cablevision), satellite (DirecTV, Echostar), independents (MovieLink) –Tomorrow: add telcos (Verizon), more independents (such as Google and “DaveTV”!)

18. Copyright © 2005 Slide 18 Video Everywhere FixedNomadicPortableRange of Mobility Home Coffee Shop Hotel Walking around town In a car Train or plane

19. Copyright © 2005 Slide 19 Video: Improving the Way We Live, Work, Play and Learn Telemedicine sonogram Distance education News on the move Family TV

20. dave @ bb-home.com sandy @ bb-home.com www.BroadbandHomeCentral.com 18 Beaver Ridge Road, Morris Plains, NJ 07950-1901 (973) 644-4739 Fax (973) 538-6003 For More Information: System Dynamics Inc.

21. Copyright © 2005 Slide 21 Video Past, Video Future Analog video  digital video TV  PC, cellphones and other mobile devices One-way  interactive One place in the home  networked throughout the home Video in the home  untethered video everywhere Limited sources of video  lots of commercial and personal sources Limited number of players  constantly increasing: everybody creates video Highly regulated  lightly regulated