Broadband By Land, Sea or Air

Richard Callahan

Chairman and CEO

Broadband Wireless Forum

San Francisco - February 19,2001

Broadband is on the verge of an explosion

• The internet is a key driver of broadband demand in the SME and Residential

market • Broadband Delivers what customers want - have rising expectations

– Speed, quality, quantity, customization • Promised technologies have left the drawing boards and moved into operation.• Regulators are driving alternative solutions and operators • Always-on, high bandwidth Internet connectivity has created a new, distributed

service environment• Applications constrained only by our imagination

Applications driving broadband needs

Remote HostLogin

Imaging

Visualization

Synthetic Environments

RemoteSensing

WWW,Multimedia

MailStreaming

Media

NetworkedMultimedia

GamingVideo

Conferencing

Client Server, Design

PacketVoice

Text-basedEmail

VOD

10

10

10

10

10

10

10

10

10

10

10

9

8

7

6

5

4

3

2

1

Steady Bursty

FileTransfer

AnalogVoice

Multiple network solutions

Technology

• DSL

• Fixed Wireless

• Cable

• Satellite

• Third Generation Mobile

• Fiber

Target Customers

• Res/SME

• SME

• Res/SME

• Large Business/Res Entertainment

• PIM/Messaging/Voice

• Large Business

The Challenges for Carriers

Continuing to deploy capital for upgrades and expansion

Driving higher margin traffic through the networks

Establishing a strong, differentiated competitive position

Re-engineering operational processes to enable the delivery of “next generation” application services/

Value Added Services

Broadband Value Chain

Access Applications Aggregator Portal/Vortal

Content

Cable Communications

Focus on three lines of Business

Broadband Wireless

Applications Infrastructure Services

Callahan Associates is one of the largest cable communications operators in Europe*

Spain and Portugal - ONO

France - Numéricâble

Germany - Baden-Württemberg North Rhine Westphalia

* Post closure of Baden Württemberg acquisition anticipated early 2001, subject to certain closing conditions.

Callahan Associates is one of the largest cable communications operators in Europe*

• Approximately 20 million franchise homes• Approximately 12 million homes passed• Approximately 7 million subscribers• Operations in 4 of western Europe’s top markets• Operational control in all ventures• Building or upgrading all networks for broadband

communications

* Post closure of Baden Württemberg acquisition anticipated early 2001, subject to certain closing conditions.

Our current environment

Multiple Broadband Access Alternatives…

Creates a new market need … customers seek product Creates a new market need … customers seek product packages to meet lifestyle needs and simplify choices packages to meet lifestyle needs and simplify choices … moving us to customer centred model … moving us to customer centred model

Public policy Stimulate competition and encourage multiple networks

Technology Interactive Networks with IP capabilities

Competition Multiple Broadband network providers

The Customer Centered Business Design

Value driven by focusing on the customerValue driven by focusing on the customer

Access Technology Determine network capabilities required… perform make/buy analysisDeploy rapidly to achieve time to market

Cost Approach Invest in capabilities to meet high value needs

Management Objective Maximise share of available cash in the market

Key Beliefs

• Broadband Access Demand Will Be Strong • Execution on operations is paramount• Geographic clusters of broadband access

properties will create additional value for individual properties

• Opportunities for expansion will come from consolidation and selective new licensing

• Partnerships with IDC/ASP’s to provide solutions to SME customers is critical

Three Market Segments

Developing Markets

Developed Medium markets – the city state

Developed large metro markets.

• Huge number of businesses unable to satisify their access demands

• High pricing for 64 kbps dedicated circuits• High Dial up penetration and high interest in

dedicated services at the right price• PLDT focused on increasing teledensity and

financial restructuring• Other landline providers less prevalent and have a

focus on meeting POTS build out obligations.

Phillipines market --- Developing Market

• Less than *2% of Swiss SME have a permanent high speed connection to the Internet

• Up to now:– Too few applications

for broadband– Prices were too high– No competition in the

local loop– Not actively marketed

by Swisscom– Market education

required

Swiss Market --- Develped Medium Market

• Chose Broadband Fixed Wireless Access (TDMA LMDS Point-to-Multipoint) equipment for our entry technology, focusing on the SME market.

• In the future, other wired broadband access solutions such as DSL or Fiber, or wireless solutions in other frequency domains will be added to our existing broadband access network.

We plan to be a Broadband Services Provider, not a WLL Access Company

onSpirix

Simplified ASP Revenue Sharing

ASP

PartnersUsage

CommissionIncl. Hosting fees

UsageCustomer

Carriers entering the applications market have to address a number of key issues:

Will I risk “losing relevance” in the business services value chain?

Do I want to be in the software distribution business?

Can my BSS/OSS support for service delivery of software applications?

Will I be able to hire and retain entrepreneurial, IP-aware staff?

What is my core business, anyway?

Carriers and “Higher Layer” Services

Broadband access carriers need to build, buy or lease applications management infrastructure

Physical NetworkPhysical Network

Data LinkData Link

NetworkNetworkCarrier Access

Networks

(OSI Layers 1-3)

TransportTransport

SessionSession

PresentationPresentation

ApplicationApplication

Application Management

Platform

(OSI Layers 4-7)

• Provisioning• Security• SLA Mgnt.• Billing• ASP Services

Moving up the OSI Stack

The Functionality of the Middleware

Network andApplication Fault

Management

Transformation Workflow

Reliable Messaging

Billing

SecurityServices

Dynamic Customer

Portal

Provisioningand ServiceActivation

CRMTrouble

Ticketing

Nupremis -- A next-generation Internet and IP

Infrastructure Provider• Providing infrastructure outsourcing (managed security,

storage and high-availability servers) along with application/content hosting for internal IT departments, ISVs/ASPs and Carriers

• Enabling turn-key solutions for broadband network service providers to capitalize on the telecoms industry shift in value from access and dial-tone related services to enabling the delivery of real-time applications, content and multi-media from the Internet and private sources to consumers and business

“Computers in the future may weigh no more the 1.5 tons”

Popular mechanics, 1949

“ “I think there is a world market for maybe five computers”

Thomas Watson, Chairman IBM – 1943

“But what is it good for?”

Engineer at the Advanced Computing Division of IBM regarding the Microchip – 1968

“ “ There is no reason anyone would want a computer in their home”

Ken Olson, president, chairman and founder of Digital Equipment –1977

“ This “telephone” has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us”

Western Union internal memo – 1876 

“”640k ought to be enough for anybody”

Bill Gates – CEO Microsoft - 1981