Overview presentation I gave back in Nov '03 summarizing some key broadband technologies and related investment strategies. Reflects much of my activity from 2001-2005 that generated 6 venture investment exits and 50%+ IRR.

1. Investing in the
Next-Generation
Internet
Kyle Enright
November 2003

2. Overview of the Session
Objective for Today:
Review today’s cutting-edge broadband
– What’s possible & how it works
– What’s being deployed & where
– Investment Implications
Format:
PPT presentation with Q&A as we go along
60-70 mins presentation
20-30 mins discussion

3. Agenda
Overview of the Broadband Market
BB Technology Fundamentals
Today’s Cutting Edge Broadband:
– Copper
– Fiber
– Powerline
– Fixed Wireless
Other Key Aspects of deploying Broadband
Investment Opportunities

4. Overview of the
Broadband
Market

5. The Digital Home Vision

6. Why is Broadband so important?
Intel Confidential
The Convergence of Four “Waves”
Broadband becomes
mainstream
Home
Content Digital Home
Networking
explosion Opportunity
Digital device
proliferation
High-rate broadband critical both to the home
and in-home

7. Substantial Broadband Growth
WW Broadband Connections by Tech. 2002-2007(M) WW Broadband Connections by Region 2002-2007 (M)
250.0 250.0
200.0 200.0
FWA Rest of World
150.0 150.0
Metro ethernet Asia/Pacific
Cable modem Western Europe
100.0 100.0
DSL United States
50.0 50.0
- -
2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007
• 210M+ broadband subs WW by YE’07 (25%+ CAGR)
• Broadband IC revs of $1B+/yr ; Broadband Eqpt revs of $3.5B+/ yr
• Broadband services rev >$25B in ’03; >$100B by ’07 (40%+ CAGR)
Source: IDC, Dell Oro - 2003

8. Digital Home Content Trends
Download time is significant barrier
Est. movie download time (2Hr movie, 500kb/s bb BW)
# Hrs
90
80
80 MPEG2
WMV or MPEG4, Pt 2
70
H.264 (MPEG4, Pt. 10)
60 HD movie
download reqmt:
50
40 ADSL or cable
40 modem: > 5hrs
28
30 20 VDSL: <20 mins
20 FTTH: <5 mins
14 11
10
10 4
3
0
Broadcast (NTSC) DVD (480p) HDTV (1080i)
Resolution
High-rate BB critical to make Digital Home a reality

9. Broadband Market Vision
More broadband in more places … sooner
– More users
– More geos
– More ways to access BB (work, home, hotspots, mobile…)
Higher-rate broadband
– 100Mbps+ symmetrical is Japan publicly stated goal!
More useful broadband
– Richer applications
– Easier to use
– More reliable; more secure
Today’s ADSL & cable modem services are inadequate

10. BB Technology
Fundamentals

11. BB Access Network Evolution
Central
Curb
Subscriber Cabinet
Office
Current ADSL
DSLAM
Network ATM/IP
Future
Likely Geos
APAC
ADSL++
Short-loop DSLAM Japan
ADSL
ATM/IP
Fiber
ADSL++
FTTC w/
EMEA
NG-DLC
xDSL or VDSL
NAMO
OLT
Fiber Japan & APAC
ATM/IP
FTTP NAMO, EMEA
ATM/IP
APAC
ADSL
Fixed DSLAM Japan
Wireless or EMEA
NAMO
Fiber
The network must change significantly in order to support new services

12. BB Basics
Key design parameters for BB networks:
– # of users & density
– Planned services (Mbps; QoS)
– Existing infrastructure
– Can I ever make money?

13. BB Technology Basics
Shannon’s Law: C = B*log2 (1+S/N)
– Capacity (“C”) is function of:
– bandwidth (B), Rx signal strength (SNR)
Providing more Mbps requires:
– More RF spectrum/ more bandwidth (more MHz)
– More efficient modulation (more bits/Hz)
– Improved SNR (extend range; increase bits/Hz)

14. Modulation Techniques
Multi-carrier
Single Carrier
(Spread Spectrum: OFDM, DMT)
(QAM)
‘N’ parallel sub-carriers; each @ 1/n data rate
Power
Power
Frequency
Frequency
Multi-carrier: several narrow-band bursts with long duration
– Overlapping carriers spread over wide frequency
Single-carrier: single wideband burst with short duration

15. Adaptive Modulation
Principle: Vary bits per Hz according to signal strength

16. High-rate BB
over Cu
(ADSL2+; VDSL)

17. DSL Basics Digital
Loop Carrier
Telco Short
Central Office Copper
ISP1 Loop
Twisted Pair Copper < 24kft
T1/T3
Internet
DSL Modem
DSLAM
ISP2
DSL Connection
ATM Connection
IP Connection
DSL uses high frequencies (>25kHz) of telephone line for data Tx
– POTS and DSL peacefully co-exist
– Support for multiple services (voice, data, video) using ATM
ADSL = Asymmetric Digital Subscriber Line
– More bandwidth down than up

18. VDSL vs. ADSL Spectrum
ADSL uses Discrete Multitone (DMT) modulation
– Spread spectrum (256 carriers @ 4.3125 kHz) + QAM
U D
ADSL – ADSL (ITU G.992.1): 8 Mbps down/ 0.8 Mbps up
– New ADSL versions (ADSL 2, 2++): 26Mbps+
138K 1.1M ADSL evolving towards VDSL
– Driven by bandwidth demand & technology
ADSL++ in draft standard status
U DOWN
ADSL2+ – Spectrum uses up to 3.75M as in VDSL
Optional
138K 2.2M Band
VDSL U DOWN UP DOWN UP DOWN
12M
138K 3.75M 5.2M 8.5M 30M

19. DSL Data Rates vs. Loop Length
Length & quality of loop determines DSL
availability & service level (Mbps)
Loop lengths by region
100%
90%
Italy &
80%
% Customers Reached
France
70%
UK
60%
50%
Germany
40%
India
30%
20%
USA
10%
Japan
0%
Source: IEEE
EFM (VDSL) 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0
km
ADSL reach limit
in APAC VDSL
(Korea, Japan)
ADSL2 extends DSL reach
ADSL
ADSL 2++
ADSL 2++ and VDSL extend the rate and reach of DSL

20. Improving DSL Performance
Techniques: multi-user coordination; mitigate non-linearity; alt.
modulation methods; improved FEC (Trellis Coding); auto line diagnostics
100
Enhanced DSL
52
Mb/s
VDSL
Video
10
8 Ethernet
T1 Rate
3 Internet Broadband
ADSL
G.shdsl
1 6 12 18 24 30
Distance K ft

21. High-rate Cu Market Segments
Residences
• ADSL-DMT
Businesses Residences
• DS3 Extension • VDSL-DMT
Residences
• VDSL-DMT
22/3 Mbps
• VDSL-DMT
50/30 Mbps
CO/RT
Fiber
ONU 70/40 Mbps
Ring
FTTP
MxU Extension
• VDSL-DMT
100/100 Mbps APPLICATIONS:
- 19 Mbps – HDTV
- 15 Mbps – 3 Digital TVs
Un-lit
- 10 Mbps – VPN
Buildings
MFE - 5 Mbps – High-Speed Internet Access
- 400 kbps – Multiple Voice Channels

22. High-rate BB over Cu Today
KT’s Megapass for
Hanaro Telecom’s
50 Mbps VDSL
50 Mbps VDSL

23. FTTx
(Fiber-to-the-X … Home, basement, curb)

24. FTTH: The Ultimate Network?
Best for dense areas w/ high bandwidth demand
• “Future-proof” infra. w/ highest capacity, lowest attenuation
– Only way to reliably offer 100 Mbps+ to simultaneous users

25. Fiber Access Alternatives
1. Point-to-Point
2. Point-to-Multipt (Active)
3. Pt-to-Multipt (Passive)- PON
All three topologies being deployed today. No clear technology winner.

26. Overview of Optical Tx
3 key elements of FTTH Transmission system:
Fiber cabling (transmission medium)
– Light signals travel through the inner “core” of the fiber due to total internal
reflection
Light source (transmitter)
– either an LED (light emitting diode) or a semiconductor laser diode
Photodiode and ICs for Optical-Electrical conversion
– Performs intermediary conversion that allows digital data to be transmitted
as photons
Optical Fiber
Light Source Light Detector
(Transmission Medium)
(Transmitter) (Receiver)
• Laser • Photodiode
• Driver • PMD
• PMD • PMA
Electrical
• PMA
Electrical
Signal Output
Signal Input Converts Signal
Converts Signal
from electrical
from optical to
to optical
electrical

27. BPON ONU Design
Processing
CDR PON
Fast
Mapper/ Network
Ethernet
Ethernet
Framer/ Processor
ENET
PHY
switch
TDMA/
TDM DSP
Driver
Triplexer
Client side:
Voice
PHY's POTS Video
POTs
Ethernet
SLIC + CODEC
Intel Component SLIC + CODEC
or IP
Video
Not Core ICG
CATV
Power
Video
Technology CATV
Amp
Conversion
Power
Control
PON ONU Battery
2003 2007
ASP % Total BOM ASP % Total BOM
Optics $125 45% $45 36%
Electronics $55 20% $30 24%
Total BOM $280 100% $125 100%

28. FTTx Component Evolution
Triplexer (Optical Front-end)
Today: Micro Optics Next-gen: PLC + SiOB
• Wafer scale fabrication
• Complex BOM with micro- • Improved yield & reliability
optic assemblies • Lower cost & components
• Limited cost reduction
Dream Triplexer
Dream Triplexer
(Minimum Configuration)
(Maximum Configuration)
PLC SiOB
TIA
TIA Post AMP
DATA PIN
Video AMP
DATA PIN
CDR
Planar Waveguides
1490
1490
1490
TIA
Fiber Bragg
1490
TIA 0.5quot;
Fiber Bragg
Filter Video PIN
0.5quot;
1310 1555
Connector Filter Video PIN
1310 1555
Connector Planar Waveguides
1310
1310
Laser
Laser
Driver
Laser
Monitor
Monitor
0.5quot;
0.5quot;
Drawing directly from Alcatel

29. BPL
(Broadband Powerline)

30. Broadband over Powerline
Utilize power lines to deliver “last mile” access
– Alternative to DSL, cable modem, fixed wireless
– Powerline in-home networking not addressed here
Services Enabled: Data, VoIP (Video possible)
Advantages
– Low infrastructure costs: no “new wires”
– Low-cost equipment and easy install (plug & play CPE)
– Ubiquitous coverage of homes and businesses
– Utilities have: rights-of-way, experience in operating networks,
relatively healthy balance sheets
Most applicable for emerging market geos

31. Typical Electric Power Network
(Aerial)
Tree-and-branch topology: substation -> MV feeder branches -> Txformers
Utility substation
(5-20k homes served)
Medium Voltage Feeder Line
(2-15 feeders per substation; ½-5 mile each)
Neighborhood Transformer
(US: 1-10 HHs; EMEA: 200-400 HHs)

32. BPL Network
• Install powerline router at utility substation
• PLC aggregation/ repeater devices every ½ mile along MV lines
• Simple CPE: low-cost PLC modem, self-install possible
Powerline-fiber interface at substation Fiber backhauls to a carrier
Router/PMTS location Point of Presence (POP)
PLC eqpt installed along powerlines
Customer plugs Powerline modem into any
outlet: broadband instantly enabled

33. BPL Technology Overview
Powerline is a Very Challenging Tx medium
– Noisy environment that is largely uncharacterized
– Discontinuous environment with unstable multipath
– Significant signal attenuation
– Lacks “flat” frequency response profile
– Significant safety issues (30k volts on MV lines)
• Other Issues: FCC restrictions on EMI (Part 15)
US
RF AM band HomePlug 1.0
Spectrum Extended PLC
.5 –1.6 MHz (4-21 MHz)
Planning (contemplated)
0 MHz 2 MHz 30 MHz 45-50MHz
FCC limits: 30uV/meter Lower FCC limits on emitted power
measured at 30 meters (100uV/ meter @3 meters)

34. Emerging Solutions for BPL
Inductive coupling provides safe, easy install for
equipment on power lines
Several techniques for handling MV- LV junction at the
transformer
– Drive signal through transformer
– Physical bypass of transformer (separate cabling)
– Use wireless for last 100’ to avoid LV plant entirely

35. Powerline Market in Infancy
US Trials:
Florida P&L, PEPCO, Cinergy, AEP, Hawaiian Elec
EMEA:
Endesa – Spain
Several in Portugal, France, Germany
Developing geos:
Chile – Enersis
Russia – Electrocom
But several countries have regulations that limit BPL
or have past bad experiences with BPL
UK, Japan, others

36. Fixed Wireless BB

37. BWA Market Segments
3
2
RESIDENTIAL & SoHo DSL
FRACTIONAL T1 for
4
SMALL BUSINESS BACKHAUL for
HOTSPOTS
DEVELOPING COUNTRIES
(e.g., Eastern Europe)
T1+ LEVEL SERVICE
ENTERPRISE
BACKHAUL GREEN FIELD DEPLOYMENTS
1
5
ALWAYS BEST CONNECTED
802.16
802.11
INTERNET Telco Core
BACKBONE Network or Private 802.11
(Fiber) Network
802.11

38. Wired vs. Wireless Channels
SIGNAL THROUGH A WIRE
• Relatively Static Channel
• Spatially Confined
• Efficient Use of Transmitted Energy
• Relatively Predictable Interference to other Signals
SIGNAL THROUGH SPACE (WIRELESS) Wall
• Dynamic Channel
• Signal Spreads Out Over Space
• Significant Multi-path Energy
• Significant (unpredictable) Interference to Other Users
Wireless Improvements rely upon air interface Moving Object
Antenna systems
Radio chains
Antenna
Physical layer
Media Access Control layer (MAC)
PHY MAC
RF

39. Evolution of Broadband Wireless
Point to Multi-Point Wireless Access Equipment Timeline
’00 ’01 ’02 ’03 ’04 ’05
Proprietary
Off-the-Shelf Standards-based
802.11 & (70+ OEMs) 802.16a
Proprietary
• Spectrum: < 11 GHz
• License exempt (2.4 GHz)
• Licensed MMDS • Data rate: Up to 75 Mbps
• Licensed LMDS • OFDM based (20MHz)
• Use 802.11 or proprietary PHY • Volume silicon suppliers
• Interoperable, scalable
• New Technologies:
•Data rate: 2-11 Mbps • Data rate: 6-54 Mbps beamforming, MIMO;
mesh network topologies
• Air interface:
• OFDM & S-CDMA

40. Methods to Improve Wireless 5 to 10 year strategies
Tech Strategy #1: Move the Channel Capacity Curve “Up” (use more of avail freq)
• Smart Antenna Systems (MIMO) via cheap integrated radios & cheap DSP gates
8 bps/Hz
7 bps/Hz
Channel Capacity
5 bps/Hz
Tech Strategy #2:
Actual Performance -> Max Capacity
• Advanced OFDM, Advanced FEC via cheap DSP gates
Technology Strategy #3: Reduce Channel Idle Time
TIME • Advanced MAC via re-configurable building blocks

41. Improving BB
Services

42. Going Beyond “the Pipe”
Rich Content
Deploying the BB infrastructure (the pipe) is
only the first step Media Formats
Service Delivery
Need content, services, delivery models that: Media Transports
– Attract users Device Discovery
& Control
– Entice users to pay Network Protocol
– Allow network operators and xSPs to earn ROI
Physical Network
Critical areas for consideration:
– Service Creation & Delivery (provisioning)
– In-home networking
– Devices in the home
– Premium content for the network

43. Managed Broadband Services
User’s Perspective:
xSP’s Perspective:
• Increase ARPU • Easy-to-use
• Decrease Churn • Increases value of BB connection
• Increase Penetration • Increases value of digital devices
… Remotely managed and provisioned
by the service provider

44. Home Network Adoption
Home Network Adoption (Millions HH) Home Network Connections by Type
100
70
90
Media Network
60
80 Connections
50 70
ROW Residential Gateways
60
40 Asia
50
Europe Infrastructure (net of
30 40
NICs)
North America 30
20
NICs
20
10
10
0 0
03 04 05 06 07
03 04 05 06 07
Source: In-stat/MDR ‘03

45. Home Network Challenges

46. Investment
Opportunities

47. Investment Strategy
Invest in breakthrough technologies:
– 10x+ improvement in transmission rates
– 5x+ reduction in costs
– Radical improvement in deployment rates
Invest in key areas of Broadband ecosystem
– BB service creation & provisioning
– S/w, services to increase the value of BB
Accelerate deployment of Broadband
Networks

48. Broadband Investment Plan
st t $
Stage of
t
en
ve e
Investment
al t
I n arg
m
De rge
s
Cycle
T
Ta
Deal Type
Target Investment Area Maturity
• FTTx Deployment (FTTx networks; • Early • Mkt Development 1-2 $2-6M
technology to reduce FTTx costs) • Eyes and Ears
• 1-2
• Early/
• BB service provisioning s/w • Ecosystem
Medium • 0-1
• Compelling apps for high-rate BB
L $2-6M
investment
• Early/
IA
• 0-1
• Complimentary products to IXP for
Medium
T
FTTx, VDSL (triplexer, etc.)
EN
• Support new BB technologies
(ecosystem or E&E)
ID N/A
F
• Access / front-end Si gaps (tuner, • Late • Acquisition / N/A
N
DSL, demodulator, cable, etc.) investment / license
O
- Mike Buckley ICap lead
C
• Home Networking Technologies • Early/
1-2 $ 2-4M
Medium • Investment/ License