1. Residential Broadband Group A John Chuang Tushar Dani Ilin Tsai Ilya Bagrak Alexandra Fedyukova

2. Residential Broadband Introduction Market and competition Technology Economics Policy and regulation Conclusion

3. What is Residential Broadband Technologies that provide a high-bandwidth connection to the Internet for residential consumers Replacement for the now fading residential dial-up technology Entirely new online experience  Watching a video stream,  Downloading music in seconds,  Video and voice chats  Real-time gaming  This presentation is limited to US residential Broadband market

4. Growth and Penetration Fast growth, 11% increase per year Reached more than 50% penetration already across internet households Several competing broadband service providers Telephone companies, wireless carriers, cable TV service providers and satellite providers

5. Players DSL SBC Verizon Bellsouth Quest Cable Comcast Time Warner Brothers Cox Charter Cablevision New technologies : Wi-Fi (Google cloud in San Francisco, hot spots) Satellite Signals Wi-Max BPL (broadband over power lines)

6. Market segments & Prices: 1 Competition for Broadband subscribers is bifurcating Low end emphasizing price High end emphasizing speed DSL companies primarily target low price segment Started penetrating into high end market, Verizon’s FiOS (15 mbps) Cable companies have elected to stay exclusively at the high end Bundling as a way to reduce churn rate & attract new customers Triple and even quadruple play

7. Market segments & Prices: 2

8. DSL Technology Limited distance to central office (CO) Dedicated line from CO to home Asymmetric flow Typical speeds up to 1.5Mbits/s downstream

9. Cable Technology Shared lines to the nearest splitter Generally higher speeds Reaches more households since distance limitation is removed Typical offering 4Mbits/s Last Mile advantage

10. Future Technology WiMax Metropolitan Area Networks (MANs) 3-5 miles range, no direct line of sight required 2Mbits/s practical limit Can use existing cell towers Broadband over Power Lines (BPL) More pervasive infrastructure, but requires extra equipment Up to 2.7Mbits/s Superimposing analog signal over AC Small deployments in operation (e.g. Manassas, Virginia 10MBits/s for $30.00 a month)

11. Broadband as a Commodity. Some people have 3 to 4 providers to buy from Tend to buy bundled services Switching costs are low, unless annual contracts Large number of equipment suppliers are available e.g. Nortel, Lucent, Cisco, Nokia etc. Limited companies actually own network lines, and heavily depend on network owners TV, Music Newspapers Telephone etc Broadband over power lines Wi-Fi free internet (Google) Municipal utility internet Wi-Max Cable and DSL Co. “cut-throat” competition Trend to provide a bundle of services Cable companies converging from video to telephony - Cox, Comcast Telecom companies converging from telephony to video - SBC, Bellsouth, AOL New entrants Suppliers Buyers Substitutes Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980) Porter's Five Forces Model

12. Policy and Regulation Existing situation US is 16th in the world in broadband penetration (ITU 2005 report) Why is US so far behind? “monopolistic structure, entrenched management, and political power of incumbents” failure of effective policy and regulation for broadband industry (e.g.,FCC regulation on spectrum allocation policy) Legislative tug-of-war Preserving Innovation in Telecom Act of 2005 Community Broadband Act of 2005

13. Policy and Regulation Need for national broadband strategy Continue to encourage highly successful open access model in Japan competitors may use existing residential telephone infrastructure for a modest fee competition and innovation  cheap, high-speed broadband access Regulations for emerging technologies FCC: better allocation of wireless spectrum Municipal WiFi usage Mixture of legislative, regulatory, and investment initiatives

14. Conclusion Market & Players Broadband will replace dial-up The Battle is still pretty much between Cable and DSL companies Technology New technologies such as BPL, Wi-Max, Satellite are emerging, but are not great threat to existing Cable & DSL Economics Bundling as a way to keep existing and attract new customers Segments based on Price and Speed Regulation Need for national broadband strategy, open access, economic incentives

15. Conclusion Cable companies have advantage due to their infrastructure and “quadruple play” They will be top player in coming years No winner take all conditions, Cable companies, DSL companies, and new technologies will co-exists

16. Thank you Clap & Questions