1. Joe Aibinder Director, AT&T VoIP Business Services AT&T Business Services Internet Telephony Conference Enterprise Roundtable: State of the Industry February 6, 2003

2. 2 AT&T Proprietary 2 2 Arbitrage Int’l-Domestic 1999 Emerging Services and Applications 2003+ Convergence 2001+ 1999- –The most frequent use of VoIP has been international settlements arbitrage –As settlements and PSTN rates decrease these advantages decline 2001+ –True Convergence of bandwidth Voice and data are allocated dynamically on access and backbone facilities Added bandwidth becomes available due to convergence of voice and data 2003+ –Emerging applications provide customers with competitive advantages The value of VoIP is evolving from basic cost savings to leveraging convergence to enhanced value-added applications. VoIP Industry Background - Evolution

3. 3 AT&T Proprietary 3 3 U.S. Office CO or PBX Domestic Transport Network Interconnect settlements International Transport IP Transport IP Telephony Router/Gateway Local Termination IP Telephony Gateway CO or PBX International Office Arbitrage-VoIP Replacement Traditional VoIP Evolution: Arbitrage Savings International

4. 4 AT&T Proprietary 4 4 Voice Savings Opportunities Switched or Nodal Access Egress 1. Switched Access Cost Reduction How? Single Access 4. Operations Simplification How? Single Customer SPOC Single Network -Single NOC 3. Transport Cost Reduction How? Lower Converged Cost of VoIP 2.Switched Egress Cost Reduction How? Arbitrage On-Net Egress Network Convergence

5. 5 AT&T Proprietary 5 5  VoIP will be the key IP application that drives the innovation - friendly IP architectures that stimulate the creativity of developers  The core generation of new IP communications and collaborative applications will include:  IM / UM / Presence  E-Contact Centers, IP-based Call Centers  Virtual Meetings / Collaboration (NetMeeting)  Desktop Multimedia  IP Centrex in a Box  Multi-Point Videoconferencing, etc. But what’s the emerging killer application?? Emerging Applications

6. 6 AT&T Proprietary 6 6 Voice Over IP Marketplace Drivers Emergence of Native IP Environments –IP Centrex, IP PBX, IP Phones, Soft Phones, Multimedia on the LAN –3G Wireless, Broadband Networks Enterprises seeking to save money on intra-company telephone calls and faxes Companies want web-based call centers/web callback/e- commerce New IP Based Features and Services –Mobility –Unified Messaging, Multimedia Conferencing –Follow Me, Portals Technology Maturing with Open Standards for easier, faster innovation Converging Local, LD and Data services

7. 7 AT&T Proprietary 7 7 VoIP Services Development Building Common Infrastructures and Technologies Enterprise Offers Managed VoIP: EVPN, Local: IP Centrex/Virtual PBX Managed PBX Apps/E-Contact International Next Gen. Network Global Clearinghouse New Hop-Off Core Network IP Tandem Class 4/5 Local Broadband Offers PC Based Services Service Provider Wireless Broadband Wholesalers

8. 8 AT&T Proprietary 8 8 AT&T VoIP Offer Overview - Portfolio RoadMap For the Enterprise, AT&T’s VoIP Portfolio is based on providing a spectrum of services of increasing value…from basic voice services to enhanced applications. VoIP Portfolio Stack Advanced Enterprise Services (Switching and Routing) Managed Data and IP (Basic Voice Services) Value Enhanced Applications Connectivity Premises Equipment ServicesLocation Broadband MIS Frame Relay ATM Wireless SOHO Distribution Centers Headquarters Branches Satellite Sites Key Systems PBX IP Phones Soft Phones IP PBX ACD On/Off Net* International* Mgd. Voice* Intelligent Routing IP SDN IP Centrex Unified Msg. Instant Msg. Electronic Contact * Portals Conferencing *Available Today

9. 9 AT&T Proprietary 9 9 Ethernet 1 3 6 8 9 4 Source PBX Destination (PBX, Central Office, or LAN) Softswitch/Gatekeeper Source Voice/Fax Gateway Router Source Voice/Fax Gateway Router Destination Voice/Fax Gateway Router Router 1 2 3 5 Direction of call 4 7 6 PSTN IP Network Ethernet OSS and Ops Ctr VoIP is Packetized Voice Real Time Transmission of Voice as Data Packets vs. Analog streams IP packets, Frame packets, ATM packets IP packets can be sent over Public Internet, Carrier VPN over CBB, or Private Data Network Gateways compress the 64K analog channel into an electronic data packet stream. Softswitches/Gatekeepers provide call routing, call control and various management functions Source IP Phone Source MM PC Technology Overview - Advanced VoIP VoIP 201 VoIP call flow involves packetizing voice at the Gateway and routing the call via the Gatekeeper.

10. 10 AT&T Proprietary 10 Growth for IP Voice Services Industry analysts at IDC state, “IP Telephony service revenue will grow at an annual rate of 50 percent for the next five years, increasing from $3.5 billion in 2002 to $35 billion in 2007.” Source: IDC Worldwide Telecom Black Book, November 2002

11. 11 AT&T Proprietary 11 VoIP Service Options: AT&T’s Voice over IP Services Portfolio Enterprise Office PBX Domestic Transport International Transport IP Transport CO or PBX Enterprise Office or Hop-Off Router Domestic Transport Router Managed Frame Relay Public Switched Network Managed VPN Customers: Add voice to current VPN Network Managed Internet Services customers: Add voice to their Internet connection; Jan. 2001 Managed Router Services customers: Add voice to their Frame Relay services Managed Data Network Services Frame Relay Offer to 40 Countries; Sept. 2001 Added D-3 Speeds and extranet extensions to offers; Nov. 2001 US Can be US or Global

12. 12 AT&T Proprietary 12 Router PBX AT&T Managed IP AT&T Frame / ATM PSTN MRS & MDNS Managed Internet Services (MIS) with VoIP IP Transport with enhanced QoS plus: - 768kbps to T-3 access speeds -Global On Net, with MRS and MDNS VoIP Sites -Hop-Off to PSTN anywhere in the world Managed Data Network Services and Managed Router Services (MDNS and MRS) with VoIP Global Frame Transport with QoS enhanced with -ATM transport option -Domestic access speeds up to T-3 - Hop-Off to PSTN anywhere in the world AT&T’s VoIP Portfolio Enhancements: Spring 2002 VON Announcement AT&T interworks its VoIP services, leveraging its Managed IP, FR and ATM platforms On–Net and Off-Net VoIP services extended to all AT&T’s Global VoIP Sites MIS PBX Router

13. 13 AT&T Proprietary 13 So what is really happening in the market? IP telephony equipment vendors in pitched battle over the premises –Cisco started it: Traditional PBX vendors now heavily in the fray –Customers new risk, “don’t want to invest in obsolete PBX ” Customers want to minimize risk in migrating to new IP model –HQ ITS vs. Divisional ITS; ITS manager’s job is on the line –Object of trial: Define business case and prove in solution –ITS internal trials can be first experience –Remote/greenfield sites running internal traffic - safest starting point –International sites: best economics but support can be issue –Contact center traffic is mission critical and last to put at risk Carriers need to reach production scale for sustainability –Key: Demonstrate quality, provisioning and customer support –Pilot is opportunity to shine so plan for security, redundancy …..

14. 14 AT&T Proprietary 14 4E Network IP Network CBB Local PSTN Network PCs Existing Customer PBX Router Premises VoIP Gateway IP Card Router IP Phone Premises VoIP Gateway IP Phone PC Phone Client PC Phone Client LEGACY HYBRIDLEGACY HYBRID IP PBXIP PBX Current IP PBX Alternatives for Voice Services IP PBX vs. Legacy Hybrid Implementations Key IP PBX Issues: Connectivity to LEC Premises, LAN Support Proprietary PBX Implementations Service Interworking with Network IP PBX IP Phone Router Remote Location TDM Phones

15. 15 AT&T Proprietary 15 4E Network IP Network CBB Local PSTN Network VPN/Router or TA SIP Phone Premises VoIP Gateway PC Phone Client IP PBXIP PBX Next Evolutionary Phase:Network Based IP Telephony Virtual IP PBX Configuration IP Phone Router Remote Branch or Teleworker TDM Phones Adapter Key Virtual IP PBX focus: Application Consistency Premises, LAN Support Local, Inbound Services Network Hop-Off Gateway (Optional) IP PBX AT&T Hosting Center Cable or DSL

16. 16 AT&T Proprietary 16 4E Network IP Network CBB Local PSTN Network Router SIP Phone Premises VoIP Gateway PC Phone Client IP CentrexIP Centrex Current IP Centrex Standard Configuration Today IP Phone Router Remote Location TDM Phones Adapter Key IP Centrex Issues: Premises, LAN Support Local, Inbound Services Redundancy, failure points Call Controller with IP Centrex Network Hop-Off Gateway (Optional)

17. 17 AT&T Proprietary 17 PSTN VoIP Gateways AT&T IP Network VoIP Gateways Call Center Switched Access IVR Content Call Center VoIP SoftSwitch Legacy Call Centers NGN Legacy Call Centers New Gen Call Centers Callers 800 IVR / Call Center Integration Concept with SIP Based VoIP Services signaling path 800 call Switched Access VPN PSTN

18. 18 AT&T Proprietary 18 VoIP - What does it take to make it work well? VoIP works well, provided you:  Have a well-managed IP network  with low packet loss, latency and latency jitter  delivered through over-engineering and/or QoS  Have gateways that introduce minimal latency  packetization and jitter buffer delays < 100 ms  Address interoperability between  Gateways and routers  Softswitches/gatekeepers and gateways  Softswitches/gatekeepers (multi-domain calls)  PSTN Signaling and VoIP Signaling  Have good CODECs in the gateways  that delivers efficient encoding while maintaining good sound quality  Understand how to tune the gateways  automatic gain control settings, echo cancellation, etc.  Understand how to hook the gateways up into COs, PBXs and international switches.

19. 19 AT&T Proprietary 19 Voice Quality Monitoring & Rating VoIP QoS Monitoring for Network Averages (Watchdog) –This internal tool watches the network paths between customer sites for quality. –Voice must be sampled more frequently than data to capture quality issues. –Based on “R” factor thresholds, auto-tickets are created for possible network reroutes around congestions. VoIP QoS Monitoring for Individual Customer Calls (NPR) –Call rating is presented on a secure web site for customer review. –NPR customer reports will be the basis for future VoIP SLAs AT&T’s VoIP Service DMOQs –Latency, Jitter, Packet Loss, Call Completion, –Blocking, Availability, Post dial delay, –Time to restore and provision “R” factor (ITU G.107, May 2000) –Uses the ITU “R” Factor VoIP Standard –Rates calls based on latency, packet loss and jitter according to the ITU G.107 & G.114 standard. R-factor Quality of voice rating MOS 90 < R < 100Best4.34 – 4.5 80 < R < 90High4.03 – 4.34 70 < R < 80Medium3.60 – 4.03 60 < R < 70Low3.10 – 3.60 50 < R < 60Poor2.58 – 3.10

20. 20 AT&T Proprietary 20  Comprehensive, Global, IP portfolio that includes premises support  Security, Reliability and Redundancy are Critical  Transparent, seamless IP services delivery with efficient interworking among networks and technologies  IP and legacy data networks (FR,ATM)  Legacy and IP Telephony Premises Systems  IP and PSTN Networks  IP technology and protocols migration (H.323, SIP, etc.)  IP Applications (VoIP, IM, Video, UM, Conferencing etc.)  Attractive economic incentives for migration to IP technologies  Convergence of voice and data facilities with dynamic bandwidth  Simplified network management and improved network ROI  QoS and SLAs  Establishing clear, manageable, migration path from the customer’s starting point to the innovative IP applications of the future Critical Success Factors for the VoIP Services Model