Enron Broadband Services

AC_00_Communications-1 Today’s Message The Broadband Explosion Is Real, It Is Here Now and It Will Fundamentally Change the Existing Internet Delivery Platform The Enron Business Model, Which Emphasizes Open, Robust Networks and Markets, Will Enable Enron to Develop the Most Efficient Broadband Delivery Network in the World Enron Broadband Has Already Established the Superior Broadband Delivery Network

AC_00_Communications-2 Key Metrics Fiber Route Miles ,000 18,000 12, E 2000E 5,538 1, Pooling Points E 2000E Servers E 2000E 1,500 3, Total Headcount E 2000E 1,

AC_00_Communications-3 Enron’s Target Market Bandwidth Market High Bandwidth Applications –Video –Large File Transfer Illustrative Low Bandwidth Applications –Voice –Text 1999 Today Volume

AC_00_Communications-4 The Internet Open Ubiquitous Flexible Designed for Text World –Slow Speed –Limited Data Interchange AdvantagesDisadvantages A B

AC_00_Communications-5 A Proposed Solution A B A B Add Intelligence to the System Bypass Internet With Point-to- Point Connection B

AC_00_Communications-6 A Add Intelligence to the System Players Caching –Inktomi Route Selection –Akamai Router Upgrade –RSVP Protocol Issues Big Improvement for Lower Bandwidth Applications Does Not Solve Problem for High Bandwidth Applications B

AC_00_Communications-7 A B Bypass Internet with Point-to-Point Connection Players MCI Worldcom Qwest AT&T Williams Level 3 Issues Lack of Ubiquity, Flexibility High Capital Intensity

AC_00_Communications-8 A B Enron’s Approach MCI WorldCom Qwest AT&T Williams

AC_00_Communications-9 Enron’s Approach Advantages Extremely High Quality of Service (QoS) Extremely High Capacity; Ability to Handle the Highest Bandwidth Applications Ubiquitous Flexible - Ability to Provision Bandwidth Real-Time Absolutely Lowest Cost Other Features Ability to Differentiate QoS Ability to Forward Reserve Bandwidth Ability to Provide Full Range of Financial Products and Services Along-Side Physical Capacity –Forward Price Contracts –Derivatives and Hedges –Financing

AC_00_Communications-10 Enron Broadband Services Enron Intelligent Network Deploy the Most Open, Efficient Network with Broad Connectivity Fiber Servers Pooling Points Software

AC_00_Communications-11 Enron Broadband Services Bandwidth Intermediation Enron Intelligent Network Deploy the Most Open, Efficient Network with Broad Connectivity Fiber Servers Pooling Points Software Be the World’s Largest Buyer and Seller of Bandwidth Bandwidth Management Trading Finance

AC_00_Communications-12 Enron Broadband Services Enron Intelligent Network Deploy the Most Open, Efficient Network with Broad Connectivity Fiber Servers Pooling Points Software Streaming Broadband Services Data Asset Management Services Content Services Be the World’s Largest Provider of Premium Broadband Delivery Services Be the World’s Largest Buyer and Seller of Bandwidth Bandwidth Intermediation Bandwidth Management Trading Finance CD Track 3CD Track 1

AC_00_Communications-13 Today’s Discussion Enron Intelligent Network Business Centers Intermediation Content Services Financials BOS

AC_00_Communications-14 Enron Intelligent Network (EIN) Enron Intelligent Network Deploy the Most Open, Efficient Network with Broad Connectivity Fiber Servers Pooling Points Software Content Services Bandwidth Intermediation Be the World’s Largest Buyer and Seller of Bandwidth Be the World’s Largest Provider of Premium Broadband Delivery Services Bandwidth Management Trading Finance Streaming Broadband Services Data Asset Management Services

AC_00_Communications E2001E 5,538 12,325 15,000 18,000 1,755 EIN Route Miles Fiber Owned and Contracted Dallas London Paris Copenhagen Munich Amsterdam Rome Omaha San Francisco San Jose Los Angeles San Diego Tokyo Phoenix Albuquerque Las Vegas Houston San Antonio Orlando Miami New Orleans Seattle Portland Sacramento Boise Denver Chicago Minneapolis Kansas City Washington D.C. Philadelphia Charlotte Jackson Atlanta Boston Detroit Albany Salt Lake City Cleveland St. Louis Toronto New York CD Track 3CD Track 2

AC_00_Communications-16 Fiber State of the Art Fiber Optic Network –Pure Internet Protocol (IP) –12 Fibers, Each Upgradable to OC-192 –Low Capital and Operating Costs Low Cost Scalability Provides Guaranteed Backstop for Enron’s Firm Delivery Commitments

AC_00_Communications-17 Servers Dallas London Paris Copenhagen Munich Amsterdam Rome Omaha San Francisco San Jose Los Angeles San Diego Tokyo Phoenix Albuquerque Las Vegas Houston San Antonio Orlando Miami New Orleans Seattle Portland Sacramento Boise Denver Chicago Minneapolis Kansas City Washington D.C. Philadelphia Charlotte Jackson Atlanta Boston Detroit Albany Salt Lake City Cleveland St. Louis Toronto New York E2001E ,500 3,000 CD Track 3

AC_00_Communications-18 Servers 18 GB Storage and 500-1,000 Broadband Stream Capacity Automated, Flexible Market Interconnects Co-Located With Distribution Partners High-Capacity Broadband Servers “One Hop” From End Users Enron’s Distributed Server Architecture Capable of Serving 2-3 Million Broadband Streams Simultaneously by 2001

AC_00_Communications-19 Pooling Points Los Angeles Public London New York

AC_00_Communications-20 This Slide is Not in Your Book

AC_00_Communications-21 Pooling Points Large-Scale Electronic Bandwidth “Switches” that Enable Real-Time Circuit Provisioning Off the Shelf, Proven Lucent Equipment Proprietary Enron Software Highly Scalable Connects Multiple Carriers and Multiple Circuits Enron’s Pooling Points Provide Real-Time Access to Bandwidth and Ability to Dynamically Scale Network

AC_00_Communications-22 Network Connectivity Dallas London Paris Copenhagen Munich Amsterdam Rome Omaha San Francisco San Jose Los Angeles San Diego Tokyo Phoenix Albuquerque Las Vegas Houston San Antonio Orlando Miami New Orleans Seattle Portland Sacramento Boise Chicago Minneapolis Kansas City Washington D.C. Charlotte Jackson Atlanta Boston Detroit Albany Salt Lake City Cleveland St. Louis Toronto New York Denver Philadelphia Fiber Network Servers Public Pooling Points

AC_00_Communications-23 Network Control Software Routing – Network Element Control Bandwidth Reservation Quality of Service Metering Applications Management

AC_00_Communications-24 Content Provider ISP Poor Quality Video Stream The EIN: Unparalleled Content Delivery, Quality and Reliability CD Track 3CD Track 6 Dallas London Paris Copenhagen Munich Amsterdam Rome Omaha San Francisco San Jose Los Angeles San Diego Tokyo Phoenix Albuquerque Las Vegas Houston San Antonio Orlando Miami New Orleans Seattle Portland Sacramento Boise Chicago Minneapolis Kansas CityWashington D.C. Charlotte Jackson Atlanta Boston Detroit Albany Salt Lake City Cleveland St. Louis Toronto New York Denver Philadelphia EIN Internet High Quality Low Quality

AC_00_Communications-25 SupplierFunctionality The EIN Major Industry Participants DWDM Equipment Maximizes Broadband Transmission Capacity Over the EIN Network Routers Control Physical Flow of Data Software Provides Data Storage and Retrieval Servers Interconnect Network and Physically Store Data “One Hop” From End Users Lucent Bandwidth Manager Enables Real Time Switching of Circuits DWDM and Optical Switching Caching Software Distributes Data Among Servers Closest to End Users

AC_00_Communications-26 The EIN Comments by Leading Industry Participants Business ModelTechnology Jonathan Schwartz Vice President, Venture and Strategic Investments Graeme Fraser V.P. of Engineering, Optical Networking David PeterschmidtDr. Adam Beguelin Chief Executive OfficerSenior Scientist CD Track 3CD Track 7

AC_00_Communications-27 Today’s Discussion Enron Intelligent Network Business Centers Intermediation Content Services Financials BOS

AC_00_Communications-28 Intermediation Outsourcing of Bandwidth Customized Bandwidth Solutions Bandwidth Optimization Pricing and Structuring Risk Management Physical Services TradingFinance Structured Financial Solutions Investments Bandwidth Management

AC_00_Communications-29 Ease of Creating a Commodity Intermediation Business Attitude of Participants Favorable Unfavorable Natural Gas 1980’s Electricity 1990’s Bandwidth 2000’s MotivatedMonopoly Massive Take or Pay Mostly Tied to Monopoly MonopolyMotivated Sellers Interconnection BuyersSellers

AC_00_Communications-30 Ease of Creating a Commodity Intermediation Business Number of Players Favorable Unfavorable Sellers Interconnection Buyers Natural Gas 1980’s Electricity 1990’s Bandwidth 2000’s ManyFew Many Few Many Sellers

AC_00_Communications-31 Bandwidth Management Aggregate Discrete Bandwidth Obligations Reconfigure & Optimize Portfolios Build Large Market & Supply Portfolios Deliver New Products & Contract Structures

AC_00_Communications-32 Bandwidth Management – Typical Capacity Utilization Profile 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1/2/20001/3/20001/4/20001/5/20001/6/20001/7/20001/8/20001/9/20001/10/2000 Peak Utilization Average 25%

AC_00_Communications-33 Aggregate Discrete Bundles of Bandwidth Into Diversified Portfolios Allows More Efficient Allocation of Bandwidth Creates Incremental Bandwidth “Headroom” Provides Framework for Tiered QoS Bandwidth Allocation One Week Financia l Media Enron Retail % % % % Composite One Week

AC_00_Communications-34 Reconfigure and Optimize Portfolios Avg. QoS Sensitive Applications QoS Insensitive Applications Incremental Firm Capacity

AC_00_Communications-35 By Identifying Non-QoS or Time Sensitive Applications and Routing Them Over Alternate Routes or in “Time Troughs”, Enron Can Create More Firm “Headroom” New Product and Contract Structures QoS Sensitive Applications QoS Insensitive Applications 3rd Party QoS Insensitive Applications Capacity Available for Resale

AC_00_Communications-36 Outsourcing of Bandwidth Management Enables Enron to Accelerate Creation of Portfolios Businesses, ISP’s, Media Companies and Telecom Resellers Will Increasingly Outsource Bandwidth Requirements as Broadband Becomes More Predominant Outsourcing is a Direct Application of Enron Energy Services Outsourcing Skill Set

AC_00_Communications-37 Replace With One Term Enron Broadband Contract –Flexible and Reliable –Price Certainty –Expandable Replace With One Term Enron Broadband Contract –Flexible and Reliable –Price Certainty –Expandable Global Corporate Customer –20 Offices Globally –35 Circuits –$10 Million per Year Global Corporate Customer –20 Offices Globally –35 Circuits –$10 Million per Year Enron Solution Outsourcing of Bandwidth Management Today Enron

AC_00_Communications-38 Trading Trading of Bandwidth Enables Reconfiguration of Portfolios Establishment of Benchmark and Market Pricing for Outsourcing and Portfolio Management Foundation for Risk Management Services and New Product Development Enron Has Been the Primary Architect of Market Structures in Most Major Markets in Which It Participates

AC_00_Communications-39 Trading Creating Cash and Forward Markets for Bandwidth Standardized Benchmark and Emerging Liquidity Become Foundation for Reliable Market - SegmentCity Pair: NY to LA - Bandwidth UnitTDM DS-3 (44.7 Mbps) - Term1 Month Increments - QoS Errored Seconds: Not More Than 400 Errored Seconds Per Day Severely Errored Seconds: Not More Than 4 Severely Errored Seconds Per Day Unavailable Seconds: Not More Than 26 Unavailable Seconds Per Month With Emergence of Liquidity, Price Discovery and Standardization, Risk Management Products Evolve Alternative Routes and QoS Will Trade At a Discount or Premium to Benchmark

AC_00_Communications-40 Finance Apply Enron Finance Expertise as Tool to Aggregate Portfolios Lever Structured Finance, Investments and Risk Management Skills into Opportunities that Enhance the Performance and Content of the Network Enron Has Been the Leader in Creating New Finance Alternatives in Markets in Which It Participates

AC_00_Communications-41 Structured Finance Investments Providing Capital Access Solutions for Customers and Suppliers Leading Edge Network Technologies and Enron’s Broadband Content Equipment Funding Pools Bandwidth Monetization Structures DSL Implementation Fund Network Technology Equinix Avici Sycamore Networks Broadband Content DEN Salus Media M.Show.com Finance

AC_00_Communications-42 Trading Risk Management Pooling Point Research Logistics Structuring Finance Risk Assessment Interface Intermediation Services Organization Business Development Rich DiMichele (6) Joint Ventures M & A Technology Content Portfolio Management Bandwidth Origination Bandwidth Outsourcing Bandwidth Restructures Ventures Kevin Garland (9) Global Finance Kevin Howard (12) Global Trading & Risk Management Tom Gros (20) Bandwidth Management Ted Seitz (10)

AC_00_Communications-43 Content Services Enron Intelligent Network Deploy the Most Open, Efficient Network with Broad Connectivity Fiber Servers Pooling Points Software Content Services Bandwidth Intermediation Be the World’s Largest Buyer and Seller of Bandwidth Be the World’s Largest Provider of Premium Broadband Delivery Services Bandwidth Management Trading Finance Streaming Broadband Services Data Asset Management Services

AC_00_Communications-44 Content Services High Quality Streaming Video Usage-Based Business Model Other Broadband Applications Video File Transfer Engineered CAD/CAM Data Management Storing/Archiving Data Digital Asset Management Services Streaming Broadband Services

AC_00_Communications-45 Demand for Streaming Video The Internet is Inadequate for Premium Broadband Content Delivery Red Herring December 1999 In 1998, 9% of U.S. Organizations Were Using Streaming Video on Their Web Sites….This Percentage is Expected to Grow to % in the Next Two Years - Gartner/Dataquest Today, Rich Media Ads Account For 1% of Internet Ads….by 2002, 60% of All Internet Banner Ads Will Be Rich Media - Jupiter Communications An Estimated 45 Million Users Actually Stream Media Each Month - Vision Consultancy

AC_00_Communications-46 Enron’s Solution Provide EIN Solutions to Enable Enron’s Customers to Effortlessly Utilize Streaming Media to Access Their Customers - Access Large, Diverse Customer Base - Encoding Content - Scheduling and Reserving Bandwidth - Distribute Content to Servers at the Edge of Network - High Quality and Reliable Serving of Streams - Accurate, Quality of Service and Appropriate Billing Enable Customers to Tailor the Quality of Service That Is Appropriate for the Content Initial Target Market: Early Adopters - Financial Services - Media and Entertainment - Technology

AC_00_Communications-47 Content Services Customer Base Financial Services –Major Financial Institutions –Major Consulting Firms –Financial News Services Media and Entertainment –Traditional Broadcast Networks –Emerging Internet-Based Production Companies –Professional Sports –Movie Production Companies Technology Sample of DEN Content CD Track 3CD Track 8

AC_00_Communications-48 This Slide is Not in Your Book

AC_00_Communications-49 Content Services Organization Business Development Media Services Financial Services Sales Engineering North American Distribution European Distribution Media Transport Media Cast Video Conferencing QA & Testing Marketing Communication Corporate Communication Strategic Alliances Jim Crowder (4) Sales David Cox (90) Project Development John Bloomer (39) Marketing Claudia Johnson (6)

AC_00_Communications-50 Digital Entertainment Network Content Services Customer Comments Jim Ritts Chief Executive Officer Greg Carpenter Chief Technology Officer CD Track 3CD Track 9

AC_00_Communications-51 Today’s Discussion Enron Intelligent Network Business Centers Intermediation Content Services Financials BOS

AC_00_Communications-52 Internet Services 2 Telecommunications Services 1 U.S. Network Industry Growing Rapidly ( Billions) 1Includes Long Distance Voice and Data, Wireless, Local Voice, Access Charges, and Managed Data Services (Source: Dataquest; Enron Analysis) 2Includes Basic Internet Access, Premium Broadband Delivery Services, and Web/Application Hosting (Source: Morgan Stanley Dean Witter; IDC; JP Morgan; Forrester; Enron Analysis) CAGR = 8% CAGR = 35% $255 $ $35 $117

AC_00_Communications-53 Internet ServicesTelecommunications Services Long-Haul Bandwidth Transport Enron Is Targeting Two Segments Of The Network Industry Content Services - Be the World’s Largest Provider of Premium Broadband Delivery Services Bandwidth Intermediation - Be the World’s Largest Buyer and Seller of Bandwidth Premium Broadband Delivery Services

AC_00_Communications-54 Bandwidth Capacity in Use (Voice and Data)* Index (2000 = 1.0) Long-Haul Bandwidth Transport – Rapid Growth Despite Price Declines Price Index (2000 = 1.0) Long-Haul Bandwidth Transport Market (Billions) CAGR = 57% CAGR = -15% *Includes Bandwidth Transport for Internet Infrastructure Services and Traditional Carrier Revenues; Midpoint of Lehman Brothers Bandwidth Capacity Forecast; Excludes Dark Fiber CAGR = 34% Source: FCC; Lehman Brothers; Enron Analysis

AC_00_Communications-55 Growth Of Bandwidth Capacity In Use Index 1 1Indexed Against Year 2000 Total Estimate of 16,347 E15 Bits 2Lehman Brothers October 1998 Forecast; Alternative Estimates: Pioneer Projects Internet Backbone Use to Grow at 76% From ; Mutooni Projects Data Traffic to Grow at 130% From Data Includes Private Line; Residential and Business Internet; Traditional Data Services Such As Frame Relay, ATM, SMDS, and X.25 4Lehman 2004 Value Estimated by Extrapolating Expected Growth Rates to 2004 Voice Data 2,3 Total Service Lehman Pioneer Mutooni Lehman Source % 70% 76% 130% 57% CAGR

AC_00_Communications-56 Enron Intermediation Operating Income (Millions) Bandwidth Intermediation Opportunity (U.S. Only) Bandwidth Transport Market (Billions) Bandwidth Intermediation Market (Billions) Share Intermediated (Percent) Transaction Velocity (Ratio) Enron Market Share (Percent) Enron Operating Income Margin (Percent) Source:Dataquest; Lehman Brothers; Enron Analysis $9$40 $115 $260 $545

AC_00_Communications-57 International Operating Income Bandwidth Intermediation Value (Millions) *Assumes Discount Rate of 11% **Global Telecom Long Distance Market Approximately 3x U.S. Market in 2000; Assumes Worldwide Opportunity Reaches 2x U.S. Opportunity for Bandwidth Intermediation in Operating Income$1,090 million 2004 Value at 20X Multiple$22 billion Value as of January 2000* 2004 Operating Income$1,090 million 2004 Value at 20X Multiple$22 billion Value as of January 2000* U.S Operating Income ** Global Operating Income $9 $2 $ $40 $15 $ $115 $70 $ $260 $210 $ $545 $1, Source: Enron Analysis $14 billion

AC_00_Communications-58 U.S. Internet Services Market CAGR 35% (Billions) *Defined As Delivery of Primarily High Bandwidth Content and Applications Requiring Guaranteed/Tiered QoS; J. P. Morgan Forecasts U.S. Market Size for “Intelligent Delivery Network Service” of $24.7 Billion in 2004; Morgan Stanley Dean Witter Projects a $44 Billion U.S. Market for “Intelligent Content and Application Distribution” in 2004 **Defined As Colocated and Shared/Dedicated Web Hosting and Application Hosting (Source: IDC; J.P. Morgan; Forrester; Morgan Stanley Dean Witter) ***Defined As Business and Consumer Narrowband (Dial-up) and Broadband (Cable, DSL, T1/OC3/DS3, Internet Access, (Source: Morgan Stanley Dean Witter) CAGR 151% Hosting** Basic Access*** CAGR 64% CAGR 18% Enron Focus $117 $87 $60 $45 $35 2 Premium Broadband Delivery Services* 1

AC_00_Communications-59 Enron Content Services Revenues (Millions) Content Services Opportunity (U.S. Only) X X X *Estimated by Morgan Stanley Dean Witter, Broadband Users Defined As Those With Greater Than 100 Kbps Access; Business Users 250 Days/Year, Consumer 365 Days/Year **Enron Analysis X U.S. Broadband Internet Users* (Millions) Premium Delivery (Primarily Streaming)** (Minutes/day) Average Access Speed* (Kbps) Premium Delivery Service Charge** (¢/MB) Premium Broadband Delivery Services Revenues (Billions) Enron Market Share (Percent) Source: Enron Estimates; Morgan Stanley Dean Witter; Enron Analysis $45 $240 $690 $1,280 $2,400 $5,870

AC_00_Communications Revenues $11,740 Million 2008 Operating 30% Margin $3,520 Million 2008 Value at 20X Multiple $70 Billion Value As of January 2000* 2008 Revenues $11,740 Million 2008 Operating 30% Margin $3,520 Million 2008 Value at 20X Multiple $70 Billion Value As of January 2000* $18 Billion Content Services Value *Assumes Discount Rate of 17% **Global Broadband Internet Users 3x U.S. in 2000 and 5x U.S. In 2004; Assumes Worldwide Opportunity for Premium Delivery Services Reaches 2x U.S. Opportunity in 2008 (Millions) U.S Revenues International Revenues** $2,400 $1,200 $3, $5,870 $11, Global Revenues $45 $9 $ $240 $70 $ Source: Enron Analysis $690 $280 $ $1,280 $580 $1,

AC_00_Communications-61 Bandwidth Intermediation Content Services Enron Broadband Services Potential Value Source:Enron Analysis (Billions) Total G & A* $14 $18 $3 $29 * Excluding Depreciation; $125 Million in 2000 Escalated at 12% until 2008 and 5% thereafter; Discount 11%

AC_00_Communications-62 Enron’s Intermediation Metric Volumes (DS-3* Months Delivered) ,740, , ,000 41,000 5,000 * DS-3 Equals Approximately 45 Mbps

AC_00_Communications-63 Terabytes Delivered Enron’s Content Services Metric Total Contract Value (Millions) $5,390 $3,720 $1,940 $920 $ Source: Morgan Stanley Dean Witter; Enron Analysis

AC_00_Communications-64 Financial Targets Capital Expenditures $650 Million IBIT ($60) Million Financials Metrics Bandwidth Intermediation 5,000 DS-3 Months Content Services $160 Million TCV

AC_00_Communications-65 Today’s Discussion Enron Intelligent Network Business Centers Intermediation Content Services Financials BOS

AC_00_Communications-66 Broadband Operating System (BOS) Proposed Standard Protocol for Accessing Real-Time Bandwidth –Routing - Network Element Control –Bandwidth Reservation –Metering –Verification of User Authorization –Data Transmission Encryption –Quality of Service Definition; Confirmation Single OS Paradigm for All Network Resources: Switches, Routers, Servers and Applications Direct Software Link Between Applications and the Network Resources Protocol Consistent With EIN and Enron’s Bandwidth Provisioning Architecture To Be Made Available to All Software Developers Through Published Application Programming Interface (API)

AC_00_Communications-67 Central Role of BOS Dallas London Paris Copenhagen Munich Amsterdam Rome Omaha San Francisco San Jose Los Angeles San Diego Tokyo Phoenix Albuquerque Las Vegas Houston San Antonio Orlando Miami New Orleans Seattle Portland Sacramento Boise Chicago Minneapolis Kansas CityWashington D.C. Charlotte Jackson Atlanta Boston Detroit Albany Salt Lake City Cleveland St. Louis Toronto New York Denver Philadelphia Third Party Software BOS API

AC_00_Communications-68 This Slide is Not in Your Book

AC_00_Communications-69 Our Goal: Be the Broadband Platform Enron Intelligent Network Deploy the Most Open, Efficient Network with Broad Connectivity Fiber Servers Pooling Points Software Content Services Bandwidth Intermediation Be the World’s Largest Buyer and Seller of Bandwidth Be the World’s Largest Provider of Premium Broadband Delivery Services Bandwidth Management Trading Finance Streaming Broadband Services Data Asset Management Services

AC_00_Communications-70 Market Opportunity - U.S. (Revenues in Billions) 2000E2001E2002E2003E2004E $30 $38 $50 $68 $95 34% CAGR 2000E2001E2002E2003E2004E2008E $1 $2 $7 $13 $24 $54 Long Haul Bandwidth TransportPremium Broadband Delivery Services Source: Dataquest; J.P. Morgan; Lehman Brothers; Morgan Stanley Dean Witter; Enron Analysis 84% CAGR