The Impact of New Technology on the Public Switched Telephone Network Bob Calaff Director, Technology Policy T-Mobile USA

2 T-Mobile Overview Financials (1Q08) 30.8 Million customers $4.6 Billion in service revenues $690 Million in capex 41,000 cell sites (13,000 UMTS capable) Key Initiatives MyFaves Million subscribers as of 1Q08 FlexPay - Payment option offering postpaid benefits to credit challenged consumers without need for a deposit 3G Service - launched in NYC in May; in core markets by EOY - converged Cellular/Wi-Fi service

3 Impacts of New Technology An inexorable march of a number of interrelated factors Wireless displacement Broadband, including 3G Packet (esp. IP-based) Networks Fixed-Mobile Convergence Miniaturization & Personalization

4 Wireless Services Key components – Radiofrequency spectrum – Cell sites – Interconnection, backhaul, transport & termination – Numbering resources – Handsets Takeaway: Wireless service only wireless from handset to cell site Ce ll Sit e DS1s Tandem DS1s (and sometimes DS3s) DS3 MSC CO

5 Wireless Displacement Source: Goldman Sachs (May 2008) One perspective: According to Goldman Sachs, 1Q08 RBOC performance highlights the decreasing relevance of wireline voice for consumers.

6 Wireless Broadband 3G uptake in the US is accelerating, reflecting global trends Data revenues are an increasing part of the revenue mix for US wireless operators Source: Lehman Brothers, May 2008

7 Wireless Broadband (3G) HD video streaming Multi-view real time video streaming Interactive 3D graphics High-resolution video streaming Mobile Web 2.0 Virtual reality Context & Preference-Aware Advanced video display SMS, Internet Browsing GPRS/ EDGE UMTS/ TD-SCDMA HSPA LTE/ Wi-MAX IMT- Advanced ~ 200kbps ~ 300kbps to 14 Mbps ~ 10 to 100 Mbps ~ 100 Mbps to 1Gbps Show Time 7:30pm Song 1 Song 2 Purchase Why? Increased data rates mean richer services for consumers Source: Texas Instruments, 4G Mobile Forum (Oct 07)

8 Home Phone Broadband phone service for life at home Convergence brings GSM service richness and coverage benefits inside the home

9 Mobile solution launched last June Currently trialing home phone solution in Dallas & Seattle

10 What Can State Regulators Do? You are doing much already. Intermodal Porting Special Access Calls to intervene re new technology – considered judgment needed Why intervene? – Market failure – Essential service – Market working, but policymakers disapprove of some aspect How intervene? – Refrain, as market forces bringing value to consumers – Industry self regulation – Stakeholder agreement – Ex ante regulation

11 Thank you! Bob Calaff 425/