1. 1 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Networks Francisco Fuentes OPPORTUNITIES AND CHALLENGES ARISING FROM THE CONVERGENCE OF EMERGING TECHNOLOGIES CAIRO, JUNE 27th 2006 FRANCISCO FUENTES TECHNOLOGY STRATEGY CISCO SYSTEMS

2. 2 © 2005 Cisco Systems, Inc. All rights reserved. MARKET TRENDS 1

3. 3 © 2005 Cisco Systems, Inc. All rights reserved. We Are in a Historic Transition Innovation Mass Deployment Industrial Revolution Steam & Railways Steel, Electricity, & Heavy Engineering Information & Telecommunications Automobiles, Oil, & Mass Production Interstate / international highways IMF, World Bank Interstate / international highways IMF, World Bank Transcontinental rail & communication Gold standard, global finance Transcontinental rail & communication Gold standard, global finance Economies of scale Repeat of tariffs / free trade Economies of scale Repeat of tariffs / free trade Water-powered manufacturing & transportation networks Rise of public companies Water-powered manufacturing & transportation networks Rise of public companies Source: Carlota Perez, Technological Revolutions and Financial Capital, 2002 Historic Junctures Current period of adjustment Global Collapse 2001 Panic 1874 Panic 1797 Global Collapses of 1890s Great Crash of 1929 1982 1908 1875 1829 1771 Market Correction

4. 4 © 2005 Cisco Systems, Inc. All rights reserved. On One side… 1M Broadband Subscribers500M Broadband Subscribers $22B Spend in E-Commerce $800B Spend in E-Commerce From 1997… To 2010 70M Internet Users1.8 B Internet Users Sources: Ovum, Gartner, Jupiter, PWC, e-Marketer, JP Morgan, Cisco IBSG Analysis 200M Mobile Subscribers 2.3B Mobile Subscribers 50 PB/Month IP Traffic 8 EB/Month IP Traffic

5. 5 © 2005 Cisco Systems, Inc. All rights reserved. On the Other side…

6. 6 © 2005 Cisco Systems, Inc. All rights reserved. The Paradigm Shift taking Place SPs to offer differentiated services Rapid introduction of new VAS Personalized applications to reduce churn and enhance differentiation Multimedia and Combinational (e.g. Fixed- Mobile) Services SPs require close User and Network control Authentication, Charging, Policy Enforcement (QoS, Security, …) “Walled Garden” Service Concept for a wide variety of Services

7. 7 © 2005 Cisco Systems, Inc. All rights reserved. INFRASTRUCTURE (R)EVOLUTION 2

8. 8 © 2005 Cisco Systems, Inc. All rights reserved. It is a Multilayer Transformation Infrastructure Evolution It is a Multilayer Transformation Core Centric Definition networks that use IP allowing to achieve convergence in order to carry voice, video and data over the same infrastructure rather than separate networks It is not only a Core Transformation This transformation will reach out/impact many layers This transformation will follow an evolutionary approach toward support of “mass customised” services and beyond The starting driver may differ from one operator to another Existing Network obsolecense Costs Reduction Innovative Services Creation Faster Time to Market Competitive Pressures

9. 9 © 2005 Cisco Systems, Inc. All rights reserved. Reach and Scope Infrastructure Evolution Reach and Scope Next Generation Core is delivered by the means of changing the equipment for transmission and switching Driven by potential efficiencies in supplying the existing services When it is touching the access it is referenced as Next Generation Access Higher bandwidth, Greater symmetry, Lower contention, Supporting higher peaks Allowing for rich multimedia services provision Next Generation Service Platform is the platform managing the services Intelligence decoupled from Network Real Time provision, customisation and control of services The Implementation sequence varies in terms of rational, migration strategy, span, model, benefits and time period

10. 10 © 2005 Cisco Systems, Inc. All rights reserved. Characteristics and Features Infrastructure Evolution Characteristics and Features

11. 11 © 2005 Cisco Systems, Inc. All rights reserved. NEXT GENERATION NETWORK COMPONENTS 3

12. 12 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Core Next Generation Networks Next Generation Core CAPEX Reduction/elimination of network layers (e.g. SDH, ATM) Network consolidation Use of standards for NGN networking equipment Efficiency gain with IP OPEX Fewer Network Elements Fewer Interfaces Large savings in network maintenance. Other Operating Costs Property (Footprint reduction) Power costs, IT costs Influenced by the Transition Period

13. 13 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Core - Example Next Generation Networks Next Generation Core - Example Source: Cisco, Italtel Source: Ovum

14. 14 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Access Next Generation Networks Next Generation Access Source: ING, OECD, IBM

15. 15 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Access - Examples Next Generation Networks Next Generation Access - Examples T-Com, plans to provide Germany's 50 largest cities with high-speed broadband lines by 2007. The first cities connected mid-2006. Faster transmission speeds are key for giving consumers access to high-speed Internet for entertainment like video or games. DT plans to roll out VDSL2, therefore they put fiber into ground up to the street cabinet 10 cities shall be equipped till mid of next year, 50 cities till mid of 2007. Triple Play Services including live tv streaming

16. 16 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Service Control Next Generation Networks Next Generation Service Control Source: Goldman Sachs, 2005

17. 17 © 2005 Cisco Systems, Inc. All rights reserved. Next Generation Service Control - Example Next Generation Networks Next Generation Service Control - Example 17 © 2004 Cisco Systems, Inc. All rights reserved. SERVICE CONTROL SERVICE CONTROL HOW? WHERE? WHO? WHAT? IDENTITY MANAGEMENT User / Device ID Location / Presence Service Registration Audit / Logging Assured Authentication IDENTITY MANAGEMENT User / Device ID Location / Presence Service Registration Audit / Logging Assured Authentication MOBILITY MANAGEMENT Device Roaming Service Mobility User Mobility MOBILITY MANAGEMENT Device Roaming Service Mobility User Mobility DYNAMIC SESSION MANAGEMENT Session Initiation & Call Control Rich-Media Control Bandwidth & QoS per Session Accounting / Billing DYNAMIC SESSION MANAGEMENT Session Initiation & Call Control Rich-Media Control Bandwidth & QoS per Session Accounting / Billing POLICY MANAGEMENT Subscriber Policy Application Policy Per-Sub Service POLICY MANAGEMENT Subscriber Policy Application Policy Per-Sub Service

18. 18 © 2005 Cisco Systems, Inc. All rights reserved. HOME NETWORKING 4

19. 19 © 2005 Cisco Systems, Inc. All rights reserved. Home Networking Home Networking, Media Sharing Throughout the Home Home Networking, Media Sharing Throughout the Home Networked Entertainment Digital, DVR, High Definition Voice & Video End User Audio, Video, Interactive Content Content ADSL2+, FTTx, DOCSIS 3.0, WiFi ADSL2+, FTTx, DOCSIS 3.0, WiFi Broadband

20. 20 © 2005 Cisco Systems, Inc. All rights reserved. Home Media Gateway - Example Home Networking Home Media Gateway - Example Free Data offering mails and mail box Free TV offering: 70 TV channels – free Pay per channel: 0,49 euro/month ABSAT Bouquet: 5,99 & 12,99 Euro/month Free Voice offering Rich PSTN services for free Conferencing, voicemail, number filtering, ….. Free communication to National & Free subscribers Compelling pricing for Mobile and International comms

21. 21 © 2005 Cisco Systems, Inc. All rights reserved. BRINGING ALL TOGETHER 5

22. 22 © 2005 Cisco Systems, Inc. All rights reserved. Fixed Mobile Convergence Cisco Service Exchange “Triple Play on the Move” Cisco Service Exchange “Triple Play on the Move” Service Provider Broadband Home WiFi Public WiFi HotSpot Cellular Network Dual-Mode Handset Service Provider Benefits Build customer loyalty Increase ARPU Expand footprint/coverage Optimize wireless spectrum by offloading calls to WiFi Subscriber Benefits Single phone number— at home, road and work Save valuable mobile minutes Triple play services on the move

23. 23 © 2005 Cisco Systems, Inc. All rights reserved. ITV Services “Classic“ TV Broadcast as IP Multicast nVOD/PPV, VOD/SVOD Gaming (download Java) Messaging/Mail/Emerging Alert System Internet New TV Services Client/network PVR Timeshift/Delay TV (subject to content rights) Video Conferencing Home Security Home Content Sharing (local/metro) for Music & Video Converged Services like User Group Broadcast Messaging/Chatting

24. 24 © 2005 Cisco Systems, Inc. All rights reserved. CHALLENGES 6

25. 25 © 2005 Cisco Systems, Inc. All rights reserved. Implementation

26. 26 © 2005 Cisco Systems, Inc. All rights reserved. Economics What Business Models – operators are still experimenting Market place is changing very rapidly and in all directions New disrupters are emerging New Business Models are emerging Content Availability and Accessibbility The Market is moving away from transmission based interconnection models Content based, Service based

27. 27 © 2005 Cisco Systems, Inc. All rights reserved. Regulation Walled Gardens vs. Net Neutrality Interoperability Interconnection New Market Power Level Investment protection while fostering competitive landscape Treatment of Next Generation Access vs Net Generation Core Treatment of New Services (e.g. FMC) What will be the impact on Universal Service Obligations and Quality of Service? New Footprint Implications

28. 28 © 2005 Cisco Systems, Inc. All rights reserved. CONCLUSIONS 7

29. 29 © 2005 Cisco Systems, Inc. All rights reserved. Addressing the Profitability Equation Conclusions Addressing the Profitability Equation Source: Ovum Traditional Revenues p/min Costs p/min Time

30. 30 © 2005 Cisco Systems, Inc. All rights reserved. Paradigm Shift Conclusions Paradigm Shift Source: Prof Wolter Lenstra

31. 31 © 2005 Cisco Systems, Inc. All rights reserved. Service Layer Convergence Service Layer Convergence Eliminate network layers to increase OPEX/CAPEX efficiencies Network Layer Convergence Network Layer Convergence Application Layer Convergence Application Layer Convergence Integration of new billable services drives broadband revenues Plant/ Optics Network Infrastructure Applications Systems Devices NGN Addressing this Transformation Conclusions NGN Addressing this Transformation Amps, Nodes, Optical Repeaters, Coax Cable Amps, Nodes, Optical Repeaters, Coax Cable Core, Metro, Access, Premise, Servers, Cache, Gateway Core, Metro, Access, Premise, Servers, Cache, Gateway VoD, nPVR, Web, FMC, Gaming Email, Voice Mail, Local/LD VoD, nPVR, Web, FMC, Gaming Email, Voice Mail, Local/LD IMS, SEF, Directory, Policy, Identity, Proxy, Authentication IMS, SEF, Directory, Policy, Identity, Proxy, Authentication Operations Layer Service continuity across networks improves customer loyalty

32. 32 © 2005 Cisco Systems, Inc. All rights reserved. Challenges to overcome Conclusions Challenges to overcome Source: Prof Wolter Lenstra

33. 33 © 2005 Cisco Systems, Inc. All rights reserved.