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Your Service Edge 

Your Service Edge . Broadband Voice Opportunities and Provisioning. The Bundled Services Requirement Steven Shaw Director, Market Development. Presentation Outline. Opportunity for Broadband Voice MMDS Direct: Connect the small business/ residence

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Your Service Edge 

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  1. Your Service Edge Broadband Voice Opportunities and Provisioning The Bundled Services Requirement Steven Shaw Director, Market Development

  2. Presentation Outline • Opportunity for Broadband Voice • MMDS Direct: Connect the small business/ residence • MTU/MDU Opportunity: LMDS hybrid solutions to reach the small business/residential • The Requirement for Bundled Telephony Services • Provisioning: An operator’s view • Connecting the pipe • Managing the end points

  3. Opportunity Overview

  4. Large Business 15,302 Small Business (1-99) 7,900,000 Mid Business (100-499) 846,683 Residential 103,590,000 The Small Business Opportunity Yesterday Today

  5. Broadband marketplace Market • Worldwide demand is growing rapidly • Consumer broadband cable and DSL lead pack • High speed internet access is “addictive” Broadband demand Source: Forrester - Consumer Broadband Hits Hypergrowht in 2001 (10/6/00)

  6. Voice over Broadband:A MMDS focused solution Subscriber Jetstream CPX-1000 PSTN ATM DS3/OC3 Class 5 Switch ATM MMDS Regional Packet Access Network ATM T1/DS3/OC3 Internet ISP Facilities IAD Cell Site Regional Switching Center Capture SMB & Residential

  7. Broadband voice:An in-building -focused solution Business customers (Tenants) IAD LMDS, U-NII, DEMS, 38 GHz PSTN Analog voice JetstreamCPX-1000 IAD ATM DS3/OC3 Class 5 Switch Regional Packet Access Network T1 Voice PBX Internet ISP Facilities Building Basement n x T1 or DS3 Regional Switching Center Mini- DSLAM

  8. MTU/MDU Total Available Market Voice & Data Services: $10.7 Billion Source: Jetstream Communications estimate Note: TAM Includes fraction of MTUs with 6-10 tenants, all MTUs >10 tenants and all MDUs >50 households

  9. Commercial 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

  10. 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 forfull-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

  11. 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

  12. Residential MDU: All About Focus2.2% of buildings=46% of MDU households Focus: 46% Source: Nat’l Multihousing Council and The Yankee Group

  13. The Opportunity for Broadband Voice

  14. “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

  15. The 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…

  16. The 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

  17. 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

  18. 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

  19. Option 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

  20. “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” “XO’s customer take an average of 1.5 services today and will likely be taking 3+ services as part of the bundle” Industry Perspective “XOptions” Bundled Service Offering From XO Communications Source: Bear Stearns Equity Research, XO Communications, Oct 2000

  21. Product Plan of Action Develop new “premium” bundled services offering Includes local, LD, internet, web host to start • Bundled Services Provide: • Change offering from unit cost to bundle service price • Generate more revenue per subscriber • Entrench customers before competition • Reduce Churn

  22. Provisioning

  23. Why 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

  24. Understanding Total Cost of Ownership For every $1 spent on Jetstream gear Spend $1.68 on mgmt, net ops Source: Ernst & Young and Yankee Group studies

  25. Customer Interface (E-business) Ticketing Order Management System Seat Assignment Flight/Fleet Allocation Billing Customer Loyalty Your Travel Support Systems

  26. Flow Through Provisioning System WLL EMS Broadband Network EMS JetEMS/JetWay STEP B: Specify CPX-1000 Voice PVC for IAD STEP A: Specify DSLAM port for Voice PVC: Voice PVC: VPI 100, VCI 1001 Voice PVC: VPI 100, VCI 1001 Voice PVC: VPI 0, VCI 39 Voice PVC: VPI 100, VCI 1001 Voice PVC: VPI 100, VCI 1001 Voice PVC: VPI 100, VCI 1001 Core Switch IAD Edge Switch Edge Switch Core Switch CPX-1000 WLL 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 Core Switch ISP Facilities Integration is key for provisioning Syndesis CoManage CommTech Data PVC: VPI 200, VCI 1012 Data PVC: VPI 200, VCI 1012 Data PVC: VPI 200, VCI 1012 Data PVC: VPI 0, VCI 38 Data PVC: VPI 200, VCI 1012 Data PVC: VPI 200, VCI 1012 Data PVC: VPI 200, VCI 1012 Data PVC: VPI 200, VCI 1012

  27. A. CORBA Used for Jetstream apps: JetCraft and JetVision B. SNMP Agent C. TL-1 Agent D. Command Line CPX-1000: Manageability Must be able to integrate with existing systems

  28. Customer Care OSS Gateway Workflow Billing LDS OSS Packet Network Aggregation Edge, Core PSTN Class 5 Switch JS Management Protocol A Carrier’s View of Provisioning Management Systems Flow-through Provisioning Interfaces Subscriber request from Web or Customer Service NMS WLL EMS Broadband Network EMS JetEMS/JetWay CPE Network (voice & data) CPX-1000 JetIAD TDM T1 GR-303 Voice Traffic ATM DS3/OC-3 ATM DS3/OC-3 JetIAD JetIAD Data Traffic to Internet POP 1 PVC for data connection 1 PVC for all voice connections Voice over BB Network

  29. Mass 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 JetVision Client Packet Network

  30. Voice VC CPX-1000 Regional PacketNetwork Data Network/ Internet IAD IAD/CPE Management Single 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 DSLAM Voice Data Management Jetstream Product

  31. VoBB 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

  32. Summary

  33. Summary • MTU is the target SMB market • LMDS hybrid solutions to reach the small business/residential • In building DSL distribution • Bundled Telephony Services • Make subscribers more profitable • Entrench your customers before competition • Provisioning: An operator’s view • More than “connect the dots” • Invest in flow through provisioning systems

  34. Your Service Edge Leading the Way in Voice over Broadband

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