1. © 2016 AT&T Intellectual Property. All rights reserved. AT&T, Globe logo, Mobilizing Your World and DIRECTV are registered trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks are the property of their respective owners. Regulatory challenges of dealing with QoS/QoE for multimedia services in Latin America Antonio Amendola antonio.amendola@intl.att.com @antonioamendola May, 2016

2. AGENDA DIRECTV now part of the AT&T family Latin America multimedia services landscape 6 key challenges of regulating QoS/QoE for multimedia services in LatAm Final considerations 2

3. DIRECTV now part of the AT&T family DIRECTV, a subsidiary of AT&T since July/2014, is a leading satellite pay-TV provider Presence in Latin America. Over 19 million subs in 10 LatAm countries 16.5% CAGR in number of subscribers DIRECTV Play, online platform for sub in LatAm AT&T to launch 3 new ways to access and stream DIRECTV content in the U.S. this year: Over a wired or wireless Internet connection, From any provider, and From any device (smartphone, tablet, Smart TV, streaming media hardware or PC) 3 ~2,2M ~5.7M ~3M ~190K ~250K ~1.3M ~660K ~570K Subs. as of Nov., 2015 Mexico, Puerto Rico and Caribbean not included Over 19M Pay-TV Subs in LatAm

4. DIRECTV now part of the AT&T family 4

5. AGENDA DIRECTV now part of the AT&T family Latin America multimedia services landscape 6 key challenges of regulating QoS/QoE for multimedia services in LatAm Final considerations 5

6. Latam fierce appetite for online content Users in Brazil and Uruguay spend more time connected to the Internet than European users and world average. The number of LatAm social network users as a % of Internet users is the highest in the world. 84.5% of LatAm HHs with fixed broadband access films/series online (Business Bureau 2015) At least 10% of LatAm HHs have cut the cord with Pay-TV services (Business Bureau, 2015) 6 Data as of 2013 Source: El Ecosistema y la Economía Digital en América Latina. Fundación Telefónica. 2015 LatAm Social Network Users as % of Internet Users

7. Unprecedented growth of OTT platforms 7 Netflix’s steep growth in LatAm LatAm Pay-TV curve begins to stagnate Main OTTs with presence in LatAm Source: El Ecosistema y la Economía Digital en América Latina. Fundación Telefónica. 2015Source: Business Bureau and ABTA, NETFLIX, Digital TV Research. 2015

8. AGENDA DIRECTV now part of the AT&T family Latin America multimedia services landscape 6 key challenges of regulating QoS/QoE for multimedia services in LatAm Final considerations 8

9. 9 1. Structural competition barriers thwart the effectiveness of QoS/QoE regulation QoS/QoE regulation is unlikely to increase consumers’ welfare where dominant providers are shielded from competition Some pay-TV markets in LatAm have barriers that impede healthy competition and reduce consumer choices: Regulatory restrains for pay-TV providers to provide telecom services Regulatory asymmetries between platforms used to provide multimedia services Anticompetitive use of exclusive “must-have” programming (e.g. sports, local content) Anticompetitive bundled services Protection of local operators or state-owned providers Anticompetitive vertical integrations

10. 10 1. Structural competition barriers thwart the effectiveness of QoS/QoE regulation (Cont.) ARGENTINA: DTH providers banned from providing telecom services Telephony providers banned from entering into the Pay- TV market until 2018 COLOMBIA: Pay-TV providers subject to higher regulatory fees than telecom providers Risk of potential anticompetitive bundling and cross-subsidization highlighted by OECD Source: Subscriber figures as of September, 2015. Business Bureau PERU: Market challengers with small shares

11. 11 2. Some well- intentioned QoS/QoE regulations stifle investment and harm consumers Unreasonable QoS/QoE regulation reduce operating margins required to invest in innovative services and deployment of networks Some unreasonable QoS/QoE requirements imposed on pay-TV providers in LatAm are: Prohibition on advanced billing Prohibition to have separate online interfaces for subscribers and potential clients Impediment to offer subscribers a retention offer before they decide to cancel the service subscription Obligation to continue providing the service to delinquent subs for a certain period of time (1-2 months) Prior cost-benefit assessments are necessary to assure that benefits outweigh regulatory costs

12. 12 3. Rigid QoS/QoE regulation hinders the innovative pace of IP-based services Skyrocketing consumption of mobile broadband services, applications, and content impose network management challenges to service providers Since 2007, the traffic of mobile data in AT&T’s network has increased 100.000% Flexible regulation is key for network providers to provide high-quality service to customers Net Neutrality regulation should not impair providers ability to manage network traffic Regulation should not impede subs from getting the type of services and quality that meets their needs Prior approval for the development of new solutions or service offerings stifles innovation and investment

13. 13 4. Regulatory asymmetries between traditional services and video apps A fair balance is required between allowing the free development of new multimedia services and assuring a leveled playing field to compete DIRECTV pay-TV bill (With all information required by regulation) NETFLIX bill (Unregulated)

14. 14 5. Duplication of requirements in the presence of multiple regulators and control agencies Complex regulatory structures give rise to duplication and inconsistencies in the definition of QoS/QoE standards applicable to each service LatAm pay-TV service providers are subject to the monitoring and control powers of at least 4 different authorities Some countries like Colombia, for example, maintain 3 different regulators (CRC, ANTV, ANE) which regulatory and control competencies have not yet been clearly defined In 2014, the OECD recommended Colombia to merge CRC and ANTV into one convergent regulator

15. 15 6. Pay-TV pirate services elude all forms of regulation and provide low quality services 29% of pay-TV HHs in LatAm are being served by pirate providers In addition, 110 million unique users of the ~222 million Internet users in LatAm, use pirate sites to access IP infringing content Source: Business Bureau and ALIANZA, 2015. Source: NetNames, 2015.

16. AGENDA DIRECTV now part of the AT&T family Latin America multimedia services landscape 5 key challenges of regulating QoS/QoE for multimedia services in LatAm Final considerations 16