kpmg BFWACG(00)31 Radiocommunications Agency Industry Consultative Group 9 June 2000 Broadband Fixed Wireless Access 40GHz

kpmg Contents Objectives of phase 1 Progress of industry consultation Key findings Next steps

kpmg Phase One Study Objectives The objective of the first phase of the study has been to assess whether there is likely to be a market for 40GHz. This has been carried out through: consultation with operators, vendors and other interested parties estimating potential revenues at a high level for both the business and residential markets

kpmg Contents Objectives of phase 1 Progress of industry consultation Key findings Next steps

kpmg 40GHz Interview Programme survey covers detailed questions on the target markets and services, competing technologies and market shares, costs and network architectures c. 50 organisations contacted Status of interviews as at 9 June Status Respondent type Number of questionnaires sent Received response Considering responseNo responseDeclined Operator Vendor Industry (incl. IEE, DTI etc)82123 Total

kpmg Contents Objectives of phase 1 Progress of industry consultation Key findings Next steps

kpmg Key points from questionnaires 1 Homeworkers are considered a target market by half of respondents Networks will be rolled out to urban and suburban areas, plus some network rolled out to larger rural towns Operators appear to prefer regional licences to national. There is no consensus from the vendors 40GHz is considered to be a complement to 28GHz - only one operator said the two were substitutes. Two operators commented that the 2 technologies were both complements and substitutes The majority of respondents considered backhaul should be permitted using 40GHz There is little information about network costs available, from either operators or vendors. Only one vendor provided cost information by network equipment item

kpmg Key points from questionnaires 2 The majority of respondents considered broadband Internet services would be a key revenue stream for both business and residential. There was less certainty on what the other key revenue services would be Operators consider broadcast revenues will important. Fewer vendors envisage broadcast as a key revenue stream. One vendor did not consider broadcast over BFWA to be worth while There is little consensus on whether business or residential services will be of more importance to the 40GHz market or timing of rollout

kpmg Summary results - key revenue streams Target markets BusinessResidential Broadband Internet54 Telephony11 Broadcast/VOD02 Other (ASP, VPN)30 Vendor responses Both the vendors and operators considered broadband Internet to be the most likely key revenue stream Telephony revenue was considered more likely than broadcast services. It should be noted that all the vendors stated that broadcast services would be offered by 40GHz Operators expect interactive shopping will be a further key revenue stream not foreseen by the vendors The operators stated that business data services will also be a key revenue stream for 40GHz services Operator responses Target markets BusinessResidential Voice11 Data33 Broadband Internet64 Telephony1 Broadcast/VoD4 Interactive Home Shopping1 Other (ASP, VPN)3 LAN access

kpmg 40 GHz in the business and residential markets Most respondents considered the business and residential markets separately Only four respondents provide an answer to the percentage split between business and residential for the overall market. These are shown in the table above The splits between the business and residential markets differ substantially BusinessResidential Operator 180%20% Operator 233%67% Operator 3 20%80% Vendor 1 90%10% Share of business and residential services

kpmg Advantages of BFWA over other broadcast technologies 40GHz BFWA is considered to have advantage over the competing technologies in certain areas Compared to Digital Satellite (DST), 40GHz offers more capacity and a better service quality Cable can offer either a greater or similar capacity to BFWA, but is bettered in speed of rollout BFWA is considered to offer better capacity and a slightly better service rollout than its terrestrial competitors Advantage of BFWA over other broadcast technologies BetterSameBetterSameBetterSameBetterSame DST Cable Terrestrial CapacityCostSpeed of rolloutService quality

kpmg Advantages of BFWA over other telecoms technologies BFWA exceeds DSL in terms of both capacity and speed of rollout Cable for telephony is considered to be more expensive and slower to roll out than BFWA Fibre is considered to be the most expensive and slowest competitive access technology to roll out Advantage of BFWA over other telecoms technologies BetterSameBetterSameBetterSameBetterSame DSL Cable Fibre CapacityCostSpeed of rolloutService quality

kpmg Service launch There is little consensus with regard to the timing of the service launch This may reflect considerations such as: –the availability of equipment –the speed of rollout –timing of the licensing Timing of service launch BusinessResidential 1Q Q Q Q Q Q Q Q Q Q 20031

kpmg Initial conclusions there is interest in the market no respondent suggested delaying the licensing the 40GHz market appears to be broader than 28GHz with both business and residential segments and telecoms and broadcast services Internet is expected to be a key revenue driver by most respondents and broadcast revenues also expected to be important But the overall service composition appears uncertain there is still uncertainty about timing, equipment costs and when economies of scale will be achieved

kpmg Contents Objectives of phase 1 Progress of industry consultation Key findings Next steps

kpmg Next steps Detailed market assessment required; KPMG to: –develop models (market, costs, economic) –populate models –generate market estimates Thereafter proceed as for 28GHz