Director of IPTV Solutions Introduction to IPTV Stoyan Kenderov Director of IPTV Solutions stoyank@amdocs.com

Agenda Overview Technology Market and Business Trends Opportunities and Challenges Key Success Factors Integration of IPTV and VoIP Summary & Q&A

The Relevance of IPTV Michael Powell, FCC Chairman, September 2004 …”Almost every major phone company I'm aware of has an initiative under way to begin to try to plug the hole with partnerships with satellite-delivered video, but what they're really working on is broadband-delivered IP television. That's a major component that's moving fast…”

What is IPTV A consumer technology for delivery of broadcast TV, on-demand video and interactive entertainment services to consumer TV sets over IP networks Fundamental part of the telco triple-play strategy (voice, data, video) User experience will be better than advanced digital cable Cheaper to scale, unlimited number of channels On-demand entertainment schedule Highly personalizable

What made IPTV possible Evolution of BB access (“ADSL2+”:25Mbps, “VDSL”:50Mbps) Better video compression: H.264, MPEG-4, WMV9 Hollywood’s increased acceptance of advanced DRM technology Cost of IPTV per subscriber going down Telco voice revenues eroding fast Greatly increased competition for telcos from VoIP and cable Decrease in # of access lines Cable eating away customer base Consumers and businesses switching to VoIP Video is seen as the new opportunity to Retain customers Grow ARPU

Agenda Overview Technology Market and Business Trends Opportunities and Challenges Key Success Factors Integration of IPTV and VoIP Summary & Q&A

Typical IPTV System Headend Transport Access Home Source: Kasenna Inc. VoIP Other Content Sources IGMP Router Apps Servers STB Video Servers STB Transport Network xDSL CPE/ FTTH DSLAM MPEG Encoders Computer Digital and Analog Receivers Source: Kasenna Inc.

Technical facts Standard Definition (SD) channel: 1-4Mbps per TV High Definition (HD): 6-8 Mbps per TV Only one channel at a time is transmitted to STB/TV In comparison: cable requires 6MHz per channel. All channels transmitted even if only one watched 24Mbps link per household is enough for triple play (1x HD, 3x SD, VoIP & data) IP multicast streaming for regular TV channels IP unicast streaming for VOD and time-shifted TV RTP streaming protocol, some add reliability on top Deployments today usually over FTTH, ADSL2+ or E.PON/G.PON

Customer IPTV Experience

Content Partners’ IPTV Experience

Agenda Overview Technology Market and Business Trends Key Success Factors Integration of IPTV and VoIP Opportunities and Risks Summary & Q&A

IPTV Market - Global DSL Subscribers Forecast DSL subscribers will be the first beneficiaries of IPTV services DSL subscribers will grow from 91M (2004) to 202M (2008) (22% CAGR) Source: MRG Inc. August 2004

IPTV Market - Global IPTV Subscribers Forecast IPTV subscribers will grow from 2.1M in 2004 to 27M in 2008 (89% CAGR) – reaching 13% of DSL subscriber base Source: MRG Inc. August 2004

IPTV Market - Global IPTV Revenue Forecast IPTV revenues to grow from $685M (2004) to $15.4B (2008) (118% CAGR) - ~2% of total Wireline revenues IPTV ARPU is expected to reach $47 (including interactive services such as VOD and interactive games) Source: MRG Inc. August 2004

IPTV Market - Global Spending on IPTV System IPTV system spending to grow from $472M (2004) to $2.0B (2008) (44% CAGR) 47% for STBs, 25% for better access systems Middleware will account for 8% of total IPTV spending Source: MRG Inc. August 2004

IPTV Launches Around the World Europe FastWeb (Italy) TPSL (FT & TPS, France) DreamTV (TF1 & LDcom, France) Imagenio (Telefonica, Spain) HomeChoice (UK) Kingston Interactive (UK) B2 (Sweden) France Telecom (FR) Asia PCCW (Hong Kong) Chunghwa Telecom (Taiwan) BB TV (of Yahoo BB, Japan) NA Sasktel (Canada) > 100s of small operators in the US SBC Communications Recent Trials announcements SwissCom (Bluewin) Telecom Italia Bell Canada Reliance Infocom BT Telus Telstra

Example - PCCW (Hong Kong) PCCW has > 500K IPTV subscribers as of 2005 Service launched August 2003 IPTV offering contains: No charge for equipment & installation 6 free and 34 pay channels ($1-3 each) 15 audio channels A-la-carte payment model for VOD PCCW reports IPTV launch helped to: Reduce churn by half (now less than 1%) Increase ARPU (IPTV ARPU - $20) Higher market share (25% of IPTV subscribers are new DSL subscribers)

Agenda Overview Technology Market and Business Trends Opportunities and Challenges Key Success Factors Integration of IPTV and VoIP Summary & Q&A

IPTV Challenges Business challenges Technological challenges Create a better user experience than cable or satellite Becoming entertainment provider - major shift for a telco The television market is an uphill battle - well established entities Uncertain regulation for new fiber builds and TV franchises Get premium content at lower prices than cable or satellite Build trust with studios and publishers Differentiate business model from cable (On demand? Anywhere access?) Set Top Box price <$100 Accelerate FTTx/ADSL2+/VDSL roll-outs Technological challenges Build better/cheaper silicon for STB Lower cost of DSLAM/FTTx deployments (WiMAX?) Further improve video compression rates Content recording and distribution control (secure DRM) End-to-end QoS monitoring and service assurance Integrated customer care, billing, provisioning, activation, self-service Multi-services blending (VoIP, IPTV, apps) Higher density of VOD play-out farms

Opportunities Multi-service blending Community applications Click-to-speak from within TV experience TV parental control from cell-phone Interactive voting or messaging applications Access to personal picture albums, videos, music library Community applications Greeting cards Video-conferencing Alerts and public announcements Personalization Personalized advertising Personalization of on-demand TV experience Video content discovery Take content with you (drag and drop)

Agenda Overview Technology Market and Business Trends Opportunities and Challenges Key Success Factors Integration of IPTV and VoIP Summary & Q&A

What Differentiates IPTV Exceptional on-demand experience Integrated Customer Management by operator across all touch points Powerful self-service capabilities Multi-services blending Community applications + local directories Unlimited content choice Simplicity of service set-up and navigation

Agenda Overview Technology Market and Business Trends Opportunities and Challenges Key Success Factors Integration of IPTV and VoIP Summary & Q&A

Multi-Services blending Jane is calling… Reject Take call

IPTV-VoIP Integration Points Headend Transport Access Home VoIP IGMP Router DSLAM IPTV Apps Servers VoIP Soft switch/ Gatekeeper DSL CPE/ FTTH STB

IPTV and VoIP Possible integration points IPTV middleware platform + full access to media, customer context, devices info, remote control + full synchronization with user activities + rich and deep application integration possible - tedious integration process (IPTV middleware owned by telco) + erects a higher barrier to entry for competition The residential gateway (xDSL CPE) - no significant integration possible IPTV Set-Top-Box presently leased to customer by telco telco decides what goes on STB STBs are authenticated and validated at boot-time, no DIY - integration only possible with consent of operator - high cost of R&D due to diversity of deployed STBs

IPTV in the Living Room Distribution in the home via Coax/Cat5/PWL or WiFi Multi screen distribution with multiple STBs Number of screens only limited by broadband link Control service from Remote control Web browser Cell phone Portable media player Media centers will integrate with STB For current market, IPTV is still more TV than PC Indications are that our kids will want the above reversed

What Are the Needs That IPTV Fulfills For Service Providers Much stickier service combinations – lower churn Video conferencing, community messages, alerts Additional revenue from payTV, gaming, interactive advertising, tv-commerce Detailed service analytics Powerful customer self-service For Carriers Finally demand for the bandwidth glut in the network For Manufacturers New home devices market Innovation potential around user interface, silicon, services Customer managed PayTV service is a fantastic opportunity for telcos to run the money making machine on autopilot

Future of Video Entertainment Community creative process Reality Shows Citizens journalism Participative entertainment – voting, video-telephony (B2C, P2P) Broadband link is a commodity Access to content over any available access tech. Anytime, any device and any location entertainment Seamless blending of entertainment and commerce End of the 30sec ad spot TV economics Search and discovery of content Drag and drop services from one device to another

Summary IPTV and triple play is happening IPTV is not me-too-TV – it’s a differentiated user experience Integrated customer management is key Cable operators will probably adopt IPTV as a technology too Key success factor is a quality customer experience Differences between cable and telco companies are disappearing – it’s only a last-mile technology User experience will decide success or failure Content is king Devices are converging in their capabilities – mobile, TV, PC Advertising industry will have to adapt to new reality

Thank you! Q & A IPTV