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The Evolving Broadband Home – Coming Challenges for Service Providers

Sandy Teger and Dave Waks Co-Founders Broadband Home Central

May 19 – 21, 2003 Madrid, Spain

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.

About Us: Personally

Broadband Is Transforming the Home Broadband access is the foundation

changing in home technologies for much of what’s 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.

“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 Copyright © 2003, System Dynamics Inc.

The Emerging Broadband Home

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

Voice and video conferencing Telemedicine Work from home as easily as in the office 7

The Promise of Broadband

Big jukeboxes of music, movies, TV and games Share photos and videos with friends and family Control VCRs, AC, lights from anywhere

Broadband Tools and Toys for Work and Play

Foundation • Broadband modem • Structured wiring • Home gateway • Ethernet switches • Wi-Fi • HomePlug 8 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 Copyright © 2003, System Dynamics Inc.

Our Broadband Home Movie

Sandy and Dave’s Broadband Home

Application

Shutterfly Rhapsody Videowave Webcam Internet on TV DVR capabilities Broadband telephony

Applications Creating Broadband Usage

CE Device

Digital camera Multimedia PC Digital camcorder Webcam

User Benefits

Professional-looking photo projects Listen to lots of music you don’t own; burn CDs of songs you like

BB Capability Used

Upload many photos; view projects Always-on streaming downloads Create family videos; share with friends and family View house/garden when traveling Today, load clips onto Web site Continuous upstream Networked media player DVRs with big hard drives (e.g., TiVo , RePlay) IP telephones or MTAs Weather, sports scores, etc. on demand on TV TV programs you want, when you want them; set up when away from home Standard Web page access Always-on connectivity to DVR; download video to hard drive Inexpensive phone calls, later add video, better voice quality Symmetric; video will require more bandwidth 10 Copyright © 2003, System Dynamics Inc.

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.

Audio

1992

Players Video Players Still Cameras Camcorders Satellite TV Cable TV Broadcast TV Telephone New CE 12

Everything Is Going Digital

2002

2012

Increasing Demands on Broadband Access

Applications, content and services Gateways and client devices Home Networking Broadband Access

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.

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.

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.

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 Copyright © 2003, System Dynamics Inc.

18 For More Information:

www.BroadbandHomeCentral.com

dave @ bb-home.com

sandy @ bb-home.com

www.BroadbandGurus.com

18 Beaver Ridge Road, Morris Plains, NJ 07950 1901 (973) 644-4739 Fax (973) 538-6003