Marketing Vesbridge Partners: The Quest For Fund VII

1
The Future Of Network Intelligence IN 2.0
Roderick K. Randall Senior Managing
Director Vesbridge Partners
2
Why Start or Invest in a Telecom Company?

• Why do you rob banks, Willy?
• Cause thats where the money is
• Willy Sutton
• Bank Robber

3
Where are the New Opportunities?

• Answer
• The Second Derivative

4
Second Derivative Plays

• The Base
• Internet infrastructure
• Starting with narrowband and moving to
  broadband.
• The First Derivative opportunities
• Internet based companies such as AOL, Amazon,
  Yahoo, Google, eBay, and others
• The Second Derivative Plays
• Skype - 4 Billion!
• Moogle, MeBay, Mamazon, Metc.
• Mass Personalization and Citizen Media
• MediaCos (not Telcos or CableCos, but Network TV
  without the Network)
• Voogle Video Search Based TV Ad Delivery

5
Web 2.0

• Blogs (Weblogs)
• Augment if not replace traditional news sources
• RSS (Really Simple Syndication)
• Automated personalized assembly of web info of
  interest
• Online Advertising
• CPM (Cost Per Mil), PPA (Pay Per Action), PPC
  (Pay Per Call)
• Peer-To-Peer
• From free Napster to Bit Torrent and e-Donkey
• Digital Media
• From DRMed i-Tunes to Movielink
• Consumer Generated Media
• YouTube, My Space, We Media, Flickr, Face Book
• Podcasts
• Professional and Consumer Generated
• Vodcasts
• Podcasts with video

6
A Network CarolNot by Charles Dickens

• The Ghost of Network Past
• The Ghost of Network Present
• The Ghost of Network Future

7
The Ghost of Network Past

• Telecom was the most valuable and profitable
  industry in the world
• When I joined ATT Bell Labs in 1981 it was the
  worlds largest company and its most valuable
• Weve since seen Divestiture and Trivestiture,
  (and now reassembly!) along with a tremendous
  growth in the competitive environments
• Along with a dramatic surge in capacity and
  capability in the following 25 years..
• Spurring in turn a tremendous surge in
  innovations, not the least of which included the
  internet and the web

8
Worldwide Telecom Service Revenues1.4 Trillion
in 2005
1.0 Trillion
Source IDC
9
The Ghost of Network Present

• Strong demand for higher and higher bandwidth
• Increasingly Pervasive always on Broadband
• Enabling the 1st derivative business models to
  enormously prosper such as those of Amazon,
  Yahoo, eBay, and Google
• Google is now worth over 100 Billion, which is
  more than any telecom operator in the world,
  except for Vodafone Group, which has grown by
  acquiring over 26 operators
• Skype was already acquired for 4 Billion by eBay
• P2P traffic from a small percentage of
  subscribers dominates the internet backbone
• All telcos are planning some form of IPTV in a
  triple play with 10s of Mbps of BB BW

10
The Ghost of Network Future

• A number of potential futures
• One is where telcos ride the new wave of
  opportunity by radically transforming their
  business models to meet the new challenge
• Another is where telcos are ridden by the new 2nd
  derivative players, some of which are the 1st
  derivative players, who have evolved, and are now
  gear-shifting into overdrive
• Lets look at the second one first, because
  thats what Dickens would do

11
Key Catalysts

• Plentiful Consumer Broadband in capacities
  un-dreamed of 10 years ago
• Driven by the MAD Winner-Take-All competitive
  threat of The Triple Play
• Driven by the push to mix Entertainment Delivery
  with Telecom
• Digitally using IP
• At low costs
• Even free
• Or apparently free to the consumer
• Using a new advertiser supported business model
• Which is no longer broadcast based
• And everything is stored on increasingly abundant
  cheap storage, and instantly retrievable by
  anyone anywhere

12
Magnetic Disk Storage CostDeclining at a Rate
of 45 Annually
1,000.00 100.00 10.00
1.00 0.10
1,000.00
Cost of 1GigaByte of Hard Disk Storage
Cost of 1G Byte of Capacity
303.00
92.00
28.00
8.37
2.53
0.77
0.23
0.07
Source Berghell Associates, 2001
13
What Do You Call 1,024 Petabytes?

• And the answer is
• An Exabyte
• Terabytes of Storage will become common place in
  the average broadband consumer home within 5
  years
• As the tendency to keep rather than discard data
  increases, along with more sources
• What is a Googabyte?
• 1 with 100 Zeroes of bytes

14
A New 1 Trillion Industry

• It will be made up from the convergence and
  collision of three different industries
• Entertainment 72 Billion
• 12 Billion Music
• 60 Billion Movies
• Advertising 600 Billion
• Telecom Services1.4 Trillion
• The Tail may be wagging the Dog
• Net Net 2 Trillion ? 1 Trillion
• But, there will be a different set of winners and
  losers
• Key Catalysts Read on

15
Enter Googlezon

• EPIC 2014, a short film by Matt Thompson and
  Robin Sloan
• Ads move from broadcast TV, newspapers, print,
  billboards, other, to Online
• NY Times shuts down, unable to support its
  printing costs
• Mass personalization makes advertising much more
  compelling both to advertisers and potential
  customers
• Google buys Amazon to create Googlezon
• Everything thats bought begins with a search
• With personalized, search driven, real-time
  inserted, online Ads
• People get ads that they actually want to watch,
• Related to something they are interested in
  purchasing,
• Rather than are annoyed by and seek to skip

16
Which Becomes Googlezonage

• TV is offered for free, again, this time
  Pointcast over IP, not broadcast
• All supported by a real-time hyperlinked Mass
  Personalized Ad model
• NBC, ABC, CBS shut down, replaced by Bloggers
• MTV, Fox, and Craigs List survive as the new Ad
  Aggregators (a la Overture)
• Telephony rides for free on IP, leading to
  financial crisis in network operators
• All telcos learn to operate within bankruptcy,
  like the airline industry
• Google buys ATT (out of bankruptcy) and Vonage
  to keep the broadband pipes flowing
• Wireless is the only surviving stand alone
  network business
• But its threatened by Googlezonages new Global
  WiFiMAX FreeNet
• Enter Googlezonage Mobile

17
Its a MAD MAD World

• M.A.D. Mutually Assured Destruction for telcos
  and cable operators

18
But, Theres An Alternative Future

• Telcos and Cablecos not only offer IPTV, but get
  involved in Internet TV
• They add intelligence in their networks to make
  sure they are paid for the value of connection in
  order to keep the pipes alive
• Nobody unsustainably gives valuable network
  connections away for free without someone paying
  the operators
• The new business models that are created involve
  a true payment methodology for QoS that reflects
  value, and that could be paid by sponsors such as
  advertisers
• New applications are spawned, which further
  institutionalize the network providers into the
  value chain, rather than Skype them out
• Connection will continue to be valued and paid for

19
The Stupid Network is a Stupid Idea

• Stupid Networks lead to stupid and unsustainable
  Business Models
• Stupid Networks would ultimately only have
  price/bit as differentiation
• Leading to rapid commoditization
• Which drives profitability out of all
  competitors
• Which makes the business un attractive
• Which makes it un-finance-able
• Which makes it un-staff-able with top talent
• Which leads to collapse

20
Intelligent Network 2.0
Signaling and Control
Control

• AIN Services
• 800/900, Caller ID/Name
• Voice Mail, IVR
• Mobility
• SMS
• SIP
• Fixed/Mobile Convergence

IP Enhanced
3-D Intelligence
PSTN
Management
Management

• DNHR
• Self Healing Networks
• Flow Through Provisioning
• MPLS

21
Fixed-Mobile Convergence Architectural Environment
Pre- Paid
SS7
SMSC
HLR
VLR
RAN
GSM CDMA WCDMA 1x-RTT/EV-DO HSDPA
PSTN
A-Interface
MSC
MSC
22
Fixed-Mobile Convergence Architectural Environment
23
Intelligent Content DistributionEvery Song,
Artist, Video, or Film Ever Recorded On Demand
Guest Room
Master Bedroom
Home Media Server
DSL
Network Edge
Cable
Network Core
Home Theatre
Fiber
DSL/Cable Modem
Ethernet Switch
24
Intelligent Content DistributionContent
Replication and Pre-Caching
Guest Room
Master Bedroom
Home Media Server
DSL
Network Edge
Cable
Network Core
Home Theatre
Fiber
DSL/Cable Modem
Ethernet Switch

• Local DVRs
• Store most recent tv shows
• Favorites

• Home Media Server
• Store all purchased and downloaded content
• Movies
• TV shows
• Pictures
• MP3s
• Etc.

• Network Edge DVR
• Store the most popular content
• Most downloaded movies
• New releases
• Most popular MP3s

• Network Core DVR
• Store all content
• All movies available for download
• All Music available for download
• All Video...

25
Intelligent Content DistributionPolicy Control
Servers Control Network Enforcement
Guest Room
Master Bedroom
Home Media Server
DSL
Network Edge
Cable
Network Core
Home Theatre
Fiber
DSL/Cable Modem
Ethernet Switch
Policy Enforcement Point

• Local DVRs
• Store most recent tv shows
• Favorites

• Home Media Server
• Store all purchased and downloaded content
• Movies
• TV shows
• Pictures
• MP3s
• Etc.

• Network Edge DVR
• Store the most popular content
• Most downloaded movies
• New releases
• Most popular MP3s

• Network Core DVR
• Store all content
• All movies available for download
• All Music available for download
• All Video...

26
Intelligent Content DistributionSearch Based
Personalized Real Time Ad Insertion
PCS
PCS
Ad Server Network
Guest Room
Master Bedroom
Home Media Server
DSL
Network Edge
Cable
Network Core
Home Theatre
Fiber
DSL/Cable Modem
Ethernet Switch
Policy Enforcement Point

• Local DVRs
• Store most recent tv shows
• Favorites

• Home Media Server
• Store all purchased and downloaded content
• Movies
• TV shows
• Pictures
• MP3s
• Etc.

• Network Edge DVR
• Store the most popular content
• Most downloaded movies
• New releases
• Most popular MP3s

• Network Core DVR
• Store all content
• All movies available for download
• All Music available for download
• All Video...

27
Intelligent Content DistributionControlled
Peer-To-Peer Swarmcasting
Search based Personalization
Entitlement DRM
Real Time Ad Insertion
P2P Swarm Controller
PCS
PCS
PCS
PCS
Ad Server Network
Guest Room
Master Bedroom
Home Media Server
DSL
Network Edge
Cable
Network Core
Home Theatre
Fiber
DSL/Cable Modem
Ethernet Switch
Policy Enforcement Point

• Local DVRs
• Store most recent tv shows
• Favorites

• Home Media Server
• Store all purchased and downloaded content
• Movies
• TV shows
• Pictures
• MP3s
• Etc.

• Network Edge DVR
• Store the most popular content
• Most downloaded movies
• New releases
• Most popular MP3s

• Network Core DVR
• Store all content
• All movies available for download
• All Music available for download
• All Video...

28
Intelligent Content DistributionControlled
Peer-To-Peer Swarmcasting
Search based Personalization
Entitlement DRM
Real Time Ad Insertion
P2P Swarm Controller
PCS
PCS
PCS
PCS
Ad Server Network
Network Edge
Network Core
Policy Enforcement Point
29
Intelligent Access ControlIP TV will
Dramatically Increase Network Capacity Demand
Search based Personalization
Entitlement DRM
Real Time Ad Insertion
P2P Swarm Controller
PCS
PCS
PCS
PCS
Ad Server Network
Network Edge
Network Core
Policy Enforcement Point
30
Intelligent Content Distribution 2.0Controlled
Subscriber Side Peer-To-Peer Swarmcasting
Search based Personalization
Entitlement DRM
Real Time Ad Insertion
P2P Swarm Controller
PCS
PCS
PCS
PCS
Ad Server Network
Policy Enforcement Point
Network Edge
Network Core
Policy Enforcement Point
31
Summary IN 2.0 Involves

• Content and Context Aware Networks with
  Intelligent Policy Enforcement
• Mobile Intelligence Converged with Fixed
• Intelligent Content Distribution as well as
  Connection
• Rich Media Experience including Advertiser
  Support
• Dynamic Mass Personalized Intelligent Ad
  Insertion
• Dynamic pricing by a Real Time Online Auction
  Market
• Distributed Storage with Intelligent SwarmCast
  Replication
• Content Value adds to Connection Value, rather
  than replaces it

32
1 Trillion Market Grows to 3 Trillion

• Oops, whats that ringing sound?
• Was that the alarm clock waking me up from this
  dream, or is it a nightmare???
• You be the judge

33
Thank You! www.vesbridge.com