Your Service Edge Your Service Edge Broadband Voice Opportunities and

Provisioning

Broadband Voice Opportunities and

Provisioning

The Bundled Services Requirement

Steven ShawDirector, Market Development

Presentation OutlinePresentation Outline

1. Opportunity for Broadband Voice– MMDS Direct: Connect the small business/

residence– MTU/MDU Opportunity: LMDS hybrid

solutions to reach the small business/residential

2. The Requirement for Bundled Telephony Services

3. Provisioning: An operator’s view– Connecting the pipe– Managing the end points

Opportunity Overview

The Small Business OpportunityThe Small Business Opportunity

Residential103,590,000

Small Business(1-99)

7,900,000

Mid Business(100-499)846,683

LargeBusiness

15,302Yesterday

Today

Broadband marketplaceBroadband marketplace

• Worldwide demand is growing rapidly

• Consumer broadband cable and DSL lead pack

• High speed internet access is “addictive”

Broadband demand

Market

Broadband Subscribers

46.7

37.0

27.7

5.0

11.0

18.9

0

10

20

30

40

50

2000 2001 2002 2003 2004 2005

Bro

adb

and

Ho

use

hol

ds

(Mill

ions

)

Fiber Satellite Fixed Wireless DSL Cable

Source: Forrester - Consumer Broadband Hits Hypergrowht in 2001 (10/6/00)

Subscriber

ATM

T1/DS3/OC3

ATM

MMDS

Voice over Broadband:A MMDS focused solutionVoice over Broadband:A MMDS focused solution

Cell Site Regional

Switching Center

Jetstream CPX-1000

Class 5 Switch

ISP Facilities

PSTN

Internet

Regional Packet Access

NetworkIAD

ATM DS3/OC3

Capture SMB &

Residential

RegionalSwitching Center

JetstreamCPX-1000

ATMDS3/OC3 Class 5

Switch

ISP Facilities

Business customers (Tenants)

Analog voice

IAD

T1

Voice PBX

IAD LMDS, U-NII, DEMS, 38

GHz

n x T1 or DS3

Mini- DSLAM

BuildingBasemen

t

Regional Packet Access

Network

Broadband voice:An in-building -focused solution

Broadband voice:An in-building -focused solution

PSTN

Internet

MTU/MDU Total Available Market Voice & Data Services: $10.7 Billion

MTU/MDU Total Available Market Voice & Data Services: $10.7 Billion

Source: Jetstream Communications estimateNote: TAM Includes fraction of MTUs with 6-10 tenants, all MTUs >10 tenants and all MDUs >50 households

Service Revenue Segment

BroadbandVoice

BroadbandData

CommercialMTU

$6.8 Billion $2.8 Billion

ResidentialMDU

$472 Million $381 Million

Hotel/Hospitality

$0 $275 Million

Total: $7.272 Billion $3.406 Billion

Commercial MTU SegmentCommercial MTU Segment• While 2.8M businesses reside in 750,000

MTU buildings….

• 1.5M businesses in 150,000 buildings may justify an on-site capital investment

• The other 1.3M are better off being served by direct/MMDS solution

• Therefore: About 20% of SBs can be targeted with an MTU solution

MTU: The ‘Church’ of DSL(The Place Where All of DSL’s Sins are Forgiven!)

MTU: The ‘Church’ of DSL(The Place Where All of DSL’s Sins are Forgiven!)

DSL is the Preferred in-building technology:• Avoid the RBOC Bureaucracy

– No more CO collocation expenses; loop qualification uncertainties and provisioning delays

• Short, in-building copper lengths allow for full-speed DSL– 2.3 MBPS SDSL, Full speed ADSL, 6+ MBPS VDSL

• DSL Provides longer reach/distance than LAN technologies– 4000+ feet distance reaches almost 100% of tenants in all-sized

buildings

– Ethernet maxes out at 300 feet on a cable, requiring more switches

• Most buildings have Cat-1 or lower grade wires in place– DSL runs over Cat-1, 3, 5 or Cat “Junk”

– Ethernet requires Cat 3 or Cat 5

Residential Multi-Dwelling Unit (MDU) Market Segment

Residential Multi-Dwelling Unit (MDU) Market Segment

• 20% of U.S. households live in MDU• 2.75M MDU Buildings in US comprise

20.5M households• 75% renter-occupied, 25% owner-occupied

• 27.5% of all MDUs reside in CA and NY• Highest % in Northeast & CA• Strong new construction growth in TX,

FLA, CA and GA• Only 5% served today by a single MDU

service provider

Residential MDU: All About Focus2.2% of buildings=46% of MDU households

Residential MDU: All About Focus2.2% of buildings=46% of MDU households

# of Rental Units on Property

# of Properties

% of Total Properties

# of Apartments

% of Total Apartments

2 1,558,700 56.58% 3,093,200 15.03%

3 366,030 12.2% 1,025,900 4.98%

4 341,350 12.39% 1,436,800 6.98%

5-9 281,500 10.22% 1,897,700 9.22%

10-19 107,170 3.9% 1,462,540 7.12%

20-29 38,000 1.38% 916,750 4.45%

30-39 18,166 0.66% 604,240 2.94%

40-49 14,431 0.52% 702,790 3.41%

50-99 26,694 0.97% 2,009,400 9.76%

100-199 19,804 0.72% 2,952,300 14.34%

200-299 7,775 0.28% 1,948,400 9.47%

300-399 2,966 0.11% 1,058,800 5.14%

400-499 1,307 0.05% 605,130 2.94%

500-749 723 0.03% 431,360 2.10%

750+ 307 0.01% 437,670 2.13%

Total 2,754,923 100.00% 20,584,980 100.00%

2-4 Unit Buildings

2,236,080 81.17% 5,555,900 26.99%

50+ Unit Buildings

59,576 2.16% 9,443,060 45.87%Source: Nat’l Multihousing Council and The Yankee Group

Focus:46%

The Opportunity for Broadband Voice

“Free Internet is simply the cost of customer acquisition. In our model, if we can just sell tenants on our voice services and continue to give away free broadband Internet, we can still make a profit.”

Sean Doherty

President of Urban Media

Inter@ctive Week, May 22, 2000

The Strategic Imperative for Broadband VoiceThe Strategic Imperative for Broadband Voice

• Vanilla internet service will commoditize in the MTU market rapidly– No exclusive building access rights allowed under FCC

rulings

– Multiple BLECs per building

• REITs and PMs have growing leverage– May be able to play multiple BLECs off one another

• BLECs will need to diversify their service portfolio to win in a competitive market

• And voice is where the money is…

The Case for Broadband Voicein the Commercial MTUThe Case for Broadband Voicein the Commercial MTU

• Triple Your Subscriber Revenues

• Increase EBITDA 4-fold

• Lower your building breakeven point from 8 tenants to five

• Dramatically accelerate your time to profitability

Commercial MTU Data Only Voice and DataNumber of Tenants 20 20Percent Data Subscribers 50% 50%Percent Voice Subscribers 0% 25%Total Data Subscribers 10 10Total Voice Subscribers 0 10Avg. Monthly Data Revs $200 $200Avg. # of Voice Lines 8 Avg. Monthly Voice Revs 50 Total Monthly Data Revenues $2,000 $2,000Total Monthly Voice Revenues -$ 4,000$ Total Monthly Service Revs 2,000$ 6,000$

Revenue Sharing with PM 100$ 300$ Monthly n x T1 Service Costs $478 $956Voice MOU $0 $1,200ISP Expenses $500 $500Customer Service $60 $83Sales and Marketing $150 $250Operations, G&A $240 $720

EBITDA 472$ 1,991$

The Case for Broadband Voicein the Residential MDU The Case for Broadband Voicein the Residential MDU

• Triple Your Subscriber Revenues

• Increase EBITDA 6-fold

• Data-only residential model very difficult

• A voice revenue stream can become the difference between business success and failure

Residential MDUs Data Only Voice and DataNumber of Tenants 250 250Percent Data Subscribers 40% 40%Percent Voice Subscribers 0% 40%Total Data Subscribers 100 100Total Voice Subscribers 0 100Avg. Monthly Data Revs $40 $40Avg. # of Voice Lines $0 2.5 Avg. Monthly Voice Revs $0 30 Total Monthly Data Revenues $4,000 $4,000Total Monthly Voice Revenues -$ 7,500$ Total Monthly Service Revs 4,000$ 11,500$

Revenue Sharing with PM 200$ 575$ Monthly n x T1 Service Costs $1,434 $2,390Voice MOU $0 $3,750ISP Expenses/User $1,000 $1,000Customer Service $600 $830Sales and Marketing $400 $588Operations, G&A $480 $1,380

EBITDA (114)$ 988$

Option 1: Acquire Local Exchange Voice Switch Facilities

Option 1: Acquire Local Exchange Voice Switch Facilities

• PROs: Significantly improves service margins • CONs: Requires capex and in-house PSTN

expertise• Traditional workhorse Class 5 circuit

switches: Nortel DMS, Lucent 5E, Siemens EWSD

• Lower cost mini versions: Lucent VCDX, Nortel DMS10

• New breed of lower cost programmable Class 5’s: Taqua, Network Telco

• Long-term option: Soft switches as true Class 5 replacements– Requires functionality beyond current Class 4 tandem /

Internet offload applications

Option 2: Wholesale Voice ServicesOption 2: Wholesale Voice Services

• Focus on your role in the value chain– Tenacious sales and marketing – owning the customer– Competitive advantage in reduced customer

acquisition cost via building presence– Time-to-market advantage in DSL provisioning

• Leverage the expertise of a voice CLEC– Many have wholesale / CAP heritages– Many have existing installed base of Class 5s and

operational competency in major MSAs– Partner for a win-win

Industry PerspectiveIndustry Perspective

“XO’s customer take an average of 1.5 services today and will likely be taking 3+ services as part

of the bundle”

“Average monthly revenues for a 12 line customer could go from $600/month today to $1,200 with the

bundle”

“We believe that XO will realize a gross margin in the 65% range for SME customers…with a payback period of

6-7 months”

Source: Bear Stearns Equity Research, XO Communications, Oct 2000

“XOptions” Bundled Service OfferingFrom XO Communications

Product Plan of ActionProduct Plan of Action

Develop new “premium” bundled services offering

Includes local, LD, internet, web host to startBundled Services Provide:1. Change offering from

unit cost to bundle service price

2. Generate more revenue per subscriber

3. Entrench customers before competition

4. Reduce Churn

Provisioning

Why we care about provisioningWhy we care about provisioning

• Installation, Configuration, Turn up cause big problems, big headaches– 100,000 subs/year– 250 days/year to install – Requirement for 200 techs

• 2 installs per day

• How many technicians do you need to install a broadband solution?– One for telecom/wireless interfaces, demark line– One for data services, IP configurations

• Self install/config only way to get “hyper growth”– 46M connections by 2005 ?!?!?!

• Lower revenues/sub, must recoup costs quickly

Understanding Total Cost of OwnershipUnderstanding Total Cost of Ownership

Source: Ernst & Young and Yankee Group studies

33%

25%

42% Fixed Costs

Capital Equipment

Network Operations

For every $1 spent on Jetstream gear

Spend $1.68 on mgmt, net ops

Your Travel Support SystemsYour Travel Support Systems

Ticketing

BillingCustomer

Loyalty

Flight/Fleet

Allocation

Order

Management

System

Customer

Interface

(E-business)

Seat

Assignment

Flow Through ProvisioningSystem

Integration is key for provisioningIntegration is key for provisioning

STEP A:

Specify DSLAM port for Voice

PVC:

Broadband Network EMS

WLL EMS JetEMS/JetWaySTEP B:

Specify CPX-1000 Voice PVC for

IAD

Voice PVC:

VPI 0, VCI 39

Voice PVC:

VPI 100, VCI 1001

Voice PVC:

VPI 100, VCI 1001

Voice PVC:

VPI 100, VCI 1001

Voice PVC:

VPI 100, VCI 1001

Voice PVC:

VPI 0, VCI 39

Voice PVC:

VPI 100, VCI 1001Voice PVC:

VPI 100, VCI 1001

Voice PVC:

VPI 100, VCI 1001Voice PVC:

VPI 100, VCI 1001

Voice PVC:

VPI 100, VCI 1001

Data PVC:

VPI 0, VCI 38 Data PVC:

VPI 200, VCI 1012

Data PVC:

VPI 200, VCI 1012

Data PVC:

VPI 200, VCI 1012Data PVC:

VPI 200, VCI 1012

Data PVC:

VPI 200, VCI 1012

Data PVC:

VPI 200, VCI 1012

Data PVC:

VPI 200, VCI 1012

CoreSwitch

WLLEdge

SwitchEdge

Switch

CoreSwitch Core

SwitchCPX-1000

IAD

ISP Facilities

SyndesisCoManageCommTech

CPX-1000: Manageability CPX-1000: Manageability

B. SNMP Agent

Must be able to integrate with existing

systems

C. TL-1 Agent

A. CORBAUsed for Jetstream apps: JetCraft and JetVision

D. Command Line

1 PVC for data connection1 PVC for all voice connections

JetIAD

JetIAD

JetIAD

A Carrier’s View of ProvisioningA Carrier’s View of Provisioning

CPX-1000

Class 5 Switch

LDS OSS

Subscriber request

from Web or

Customer Service

NMS

Broadband Network EMS

WLL EMS JetEMS/JetWay

Packet Network

Aggregation Edge, Core

PSTN

Management Systems

CPE (voice & data) Network

Voice over BB NetworkData Traffic

to Internet POP

ATMDS3/OC-3

Voice TrafficATM

DS3/OC-3

TDM T1GR-303

Flow-through Provisioning Interfaces

BillingOSS GatewayCustomer Care

Workflow

JS Management Protocol

Mass Subscriber ManagementMass Subscriber Management• Bulk Provisioning

– Add or modify thousands of IADs at a time

• Bulk Monitoring– Monitor all IADs from a

single interface

• Bulk Administration– Control (lock/unlock)

selected IAD resources– Graceful firmware upgrade

of thousands of IADs at a time

JetVision Server

Packet Network

JetVisionClient

IAD/CPE ManagementIAD/CPE Management

Voice VC

SingleSingle VC for Voice & Management VC for Voice & Management

• Voice Traffic– ATM AAL2 – Separate channel per voice call– Dynamic bandwidth use

• Management Channel– Deterministic call control– Provisioning– Monitoring– Software download

VoiceVoice

DataData

ManagementManagement

Jetstream ProductJetstream Product

IADIAD

DSLAMDSLAM

CPX-1000CPX-1000

Data Network/Data Network/InternetInternet

RegionalRegionalPacketPacket

NetworkNetwork

VoBB Provisioning RequirementsVoBB Provisioning Requirements

• Time to Market is critical to generate revenues immediately

• Solutions must scale to meet growing demands

• Platforms (network elements, management systems, comm. networks) must be robust, reliable, and secure

• Overall lifecycle costs must be controlled• Systems must integrate cleanly/effectively

to support today’s services, growth for tomorrow

Summary

SummarySummary

1. MTU is the target SMB market– LMDS hybrid solutions to reach the small

business/residential– In building DSL distribution

2. Bundled Telephony Services1. Make subscribers more profitable2. Entrench your customers before competition

3. Provisioning: An operator’s view1. More than “connect the dots”2. Invest in flow through provisioning systems

Your Service Edge Your Service Edge

Leading the Way in Voice over Broadband

Leading the Way in Voice over Broadband