Introduction to IPTV Stoyan Kenderov Director of IPTV

Introduction to IPTV Stoyan Kenderov Director of IPTV Solutions stoyank@amdocs. com

Agenda § Overview § Technology § Market and Business Trends § Opportunities and Challenges § Key Success Factors § Integration of IPTV and Vo. IP § Summary & Q&A

The Relevance of IPTV Michael Powell, FCC Chairman, September 2004 …”Almost every major phone company I'm aware of has an initiative under way to begin to try to plug the hole with partnerships with satellitedelivered video, but what they're really working on is broadband-delivered IP television. That's a major component that's moving fast…”

What is IPTV § A consumer technology for delivery of broadcast TV, on- demand video and interactive entertainment services to consumer TV sets over IP networks § Fundamental part of the telco triple-play strategy (voice, data, video) § User experience will be better than advanced digital cable § Cheaper to scale, unlimited number of channels § On-demand entertainment schedule § Highly personalizable

What made IPTV possible § Evolution of BB access (“ADSL 2+”: 25 Mbps, “VDSL”: 50 Mbps) § Better video compression: H. 264, MPEG-4, WMV 9 § Hollywood’s increased acceptance of advanced DRM technology § Cost of IPTV per subscriber going down § Telco voice revenues eroding fast § Greatly increased competition for telcos from Vo. IP and cable o Decrease in # of access lines o Cable eating away customer base o Consumers and businesses switching to Vo. IP § Video is seen as the new opportunity to o Retain customers o Grow ARPU

Agenda § Overview § Technology § Market and Business Trends § Opportunities and Challenges § Key Success Factors § Integration of IPTV and Vo. IP § Summary & Q&A

Typical IPTV System Headend Transport Access Home Vo. IP Other Content Sources IGMP Router Apps Servers STB Video Servers STB Transport Network MPEG Encoders Digital and Analog Receivers DSLAM x. DSL CPE/ FTTH Computer Source: Kasenna Inc.

Technical facts § Standard Definition (SD) channel: 1 -4 Mbps per TV § High Definition (HD): 6 -8 Mbps per TV § Only one channel at a time is transmitted to STB/TV § In comparison: cable requires 6 MHz per channel. All channels transmitted even if only one watched § 24 Mbps link per household is enough for triple play (1 x HD, 3 x SD, Vo. IP & data) § IP multicast streaming for regular TV channels § IP unicast streaming for VOD and time-shifted TV § RTP streaming protocol, some add reliability on top § Deployments today usually over FTTH, ADSL 2+ or E. PON/G. PON

Customer IPTV Experience

Content Partners’ IPTV Experience

Agenda § Overview § Technology § Market and Business Trends § Key Success Factors § Integration of IPTV and Vo. IP § Opportunities and Risks § Summary & Q&A

IPTV Market - Global DSL Subscribers Forecast § DSL subscribers will be the first beneficiaries of IPTV services § DSL subscribers will grow from 91 M (2004) to 202 M (2008) (22% CAGR) Source: MRG Inc. August 2004

IPTV Market - Global IPTV Subscribers Forecast § IPTV subscribers will grow from 2. 1 M in 2004 to 27 M in 2008 (89% CAGR) – reaching 13% of DSL subscriber base Source: MRG Inc. August 2004

IPTV Market - Global IPTV Revenue Forecast Source: MRG Inc. August 2004 § IPTV revenues to grow from $685 M (2004) to $15. 4 B (2008) (118% CAGR) - ~2% of total Wireline revenues § IPTV ARPU is expected to reach $47 (including interactive services such as VOD and interactive games)

IPTV Market - Global Spending on IPTV System § IPTV system spending to grow from $472 M (2004) to $2. 0 B (2008) (44% CAGR) § 47% for STBs, 25% for better access systems § Middleware will account for 8% of total IPTV spending Source: MRG Inc. August 2004

IPTV Launches Around the World § Europe o o o o Fast. Web (Italy) TPSL (FT & TPS, France) Dream. TV (TF 1 & LDcom, France) Imagenio (Telefonica, Spain) Home. Choice (UK) Kingston Interactive (UK) B 2 (Sweden) France Telecom (FR) § Asia o o o § NA o o o PCCW (Hong Kong) Chunghwa Telecom (Taiwan) BB TV (of Yahoo BB, Japan) § Recent Trials announcements o o o Sasktel (Canada) > 100 s of small operators in the US SBC Communications o o Swiss. Com (Bluewin) Telecom Italia Bell Canada Reliance Infocom BT Telus Telstra

Example - PCCW (Hong Kong) § PCCW has > 500 K IPTV subscribers as of 2005 o Service launched August 2003 § IPTV offering contains: No charge for equipment & installation o 6 free and 34 pay channels o ($1 -3 each) 15 audio channels o A-la-carte payment model for VOD o § PCCW reports IPTV launch helped to: Reduce churn by half (now less than 1%) o Increase ARPU (IPTV ARPU - $20) o Higher market share (25% of IPTV subscribers are new DSL o subscribers)

Agenda § Overview § Technology § Market and Business Trends § Opportunities and Challenges § Key Success Factors § Integration of IPTV and Vo. IP § Summary & Q&A

IPTV Challenges § Business challenges o o o o o § Create a better user experience than cable or satellite Becoming entertainment provider - major shift for a telco The television market is an uphill battle - well established entities Uncertain regulation for new fiber builds and TV franchises Get premium content at lower prices than cable or satellite Build trust with studios and publishers Differentiate business model from cable (On demand? Anywhere access? ) Set Top Box price <$100 Accelerate FTTx/ADSL 2+/VDSL roll-outs Technological challenges o o o o Build better/cheaper silicon for STB Lower cost of DSLAM/FTTx deployments (Wi. MAX? ) Further improve video compression rates Content recording and distribution control (secure DRM) End-to-end Qo. S monitoring and service assurance Integrated customer care, billing, provisioning, activation, self-service Multi-services blending (Vo. IP, IPTV, apps) Higher density of VOD play-out farms

Opportunities § Multi-service blending o o Click-to-speak from within TV experience TV parental control from cell-phone Interactive voting or messaging applications Access to personal picture albums, videos, music library § Community applications o o o Greeting cards Video-conferencing Alerts and public announcements § Personalization o o Personalized advertising Personalization of on-demand TV experience Video content discovery Take content with you (drag and drop)

Agenda § Overview § Technology § Market and Business Trends § Opportunities and Challenges § Key Success Factors § Integration of IPTV and Vo. IP § Summary & Q&A

What Differentiates IPTV § Exceptional on-demand experience § Integrated Customer Management by operator across all touch points § Powerful self-service capabilities § Multi-services blending § Community applications + local directories § Unlimited content choice § Simplicity of service set-up and navigation

Agenda § Overview § Technology § Market and Business Trends § Opportunities and Challenges § Key Success Factors § Integration of IPTV and Vo. IP § Summary & Q&A

Multi-Services blending Jane is calling… Reject Take call

IPTV-Vo. IP Integration Points Headend Transport Access Home Vo. IP IPTV Apps Servers Vo. IP Soft switch/ Gatekeeper IGMP Router DSLAM DSL CPE/ FTTH STB

IPTV and Vo. IP § Possible integration points o IPTV middleware platform • • • o + full access to media, customer context, devices info, remote control + full synchronization with user activities + rich and deep application integration possible - tedious integration process (IPTV middleware owned by telco) + erects a higher barrier to entry for competition The residential gateway (x. DSL CPE) • - no significant integration possible o IPTV Set-Top-Box • • • presently leased to customer by telco decides what goes on STBs are authenticated and validated at boot-time, no DIY - integration only possible with consent of operator - high cost of R&D due to diversity of deployed STBs

IPTV in the Living Room § § Distribution in the home via Coax/Cat 5/PWL or Wi. Fi Multi screen distribution with multiple STBs Number of screens only limited by broadband link Control service from o o Remote control Web browser Cell phone Portable media player § Media centers will integrate with STB § For current market, IPTV is still more TV than PC § Indications are that our kids will want the above reversed

What Are the Needs That IPTV Fulfills § For Service Providers o o o Much stickier service combinations – lower churn Video conferencing, community messages, alerts Additional revenue from pay. TV, gaming, interactive advertising, tv-commerce Detailed service analytics Powerful customer self-service § For Carriers o Finally demand for the bandwidth glut in the network § For Manufacturers o o New home devices market Innovation potential around user interface, silicon, services § Customer managed Pay. TV service is a fantastic opportunity for telcos to run the money making machine on autopilot

Future of Video Entertainment § § § Community creative process Reality Shows Citizens journalism Participative entertainment – voting, videotelephony (B 2 C, P 2 P) Broadband link is a commodity Access to content over any available access tech. Anytime, any device and any location entertainment Seamless blending of entertainment and commerce End of the 30 sec ad spot TV economics Search and discovery of content Drag and drop services from one device to another

Summary § IPTV and triple play is happening § IPTV is not me-too-TV – it’s a differentiated user experience § Integrated customer management is key § Cable operators will probably adopt IPTV as a technology too § Key success factor is a quality customer experience § Differences between cable and telco companies are disappearing – it’s only a last-mile technology § User experience will decide success or failure § Content is king § Devices are converging in their capabilities – mobile, TV, PC § Advertising industry will have to adapt to new reality

Thank you! § Q&A IPT V