A FUNNY SOLUTIONA FUNNY SOLUTION

Xiaolin Lu

April 1, 2003

What is this all about?What is this all about?

Media companies (own or don’t own

distribution infrastructure) want to grown

business by directly connecting to users.

Challenges are to overcome limitations of

incumbents and embedded base (if own).

Over-the-top was the idea then and is now

widely adopted.

CHALLENGESCHALLENGES

Network Independent Content Distribution: good business model

but too early to materialize due to the limited control of suppliers and

customers Low switching cost

Low barrier for substitutes

Limited power of changing customer behavior

Network Independent Content Distribution: good business model

but too early to materialize due to the limited control of suppliers and

customers Low switching cost

Low barrier for substitutes

Limited power of changing customer behavior

Content E-Commerce Investment

Enablers

Customers

$ $

Networks

MIGRATION AND EXPANSION: MIGRATION AND EXPANSION:

THREETHREE--ARM GIANTARM GIANT

Control the customer presence and network access points

Aggregation = Consumption = Revenue

High cost for switching = High barrier fro substitutes

Power of influence buyers and suppliers’ behavior

Control the customer presence and network access points

Aggregation = Consumption = Revenue

High cost for switching = High barrier fro substitutes

Power of influence buyers and suppliers’ behavior

Content

E-commerce

Arm One Vertical integration

through owned network

Arm One Vertical integration

through owned network

Arm Two Network-inside-network,

utilizing channels (6MHz

with AT&T)

Arm Two Network-inside-network,

utilizing channels (6MHz

with AT&T)

Arm Three Control the demarcation

points while utilizing

others’ networks

Arm Three Control the demarcation

points while utilizing

others’ networks

Walled Garden End-to-end control, aggregation, and distribution

Walled Garden End-to-end control, aggregation, and distribution

POSITIONINGPOSITIONING

Sti

ck

ines

s

Cost

#1

#3

#2

Time

Sti

ck

ine

ss

Critical

Transition

Period

#1

#2

#3

THE CONTROLTHE CONTROL

Walled Garden Content & E-commerce

Aggregation for ASPs

ETE control

Walled Garden Content & E-commerce

Aggregation for ASPs

ETE control

Owned

Metro

BB

ATT

Others

HG

3rd

parties

POP

Strict SLA

& Co-Lo

Piggy-

back to

existing

equip +

owned

HG

Utilize owned & others infrastructure & equipment

Cost sharing

Control the “Presence”

Establish a logical network (yellow lines and dots)

Utilize owned & others infrastructure & equipment

Cost sharing

Control the “Presence”

Establish a logical network (yellow lines and dots)

ARM ONE:ARM ONE: OWNED CABLE NETWORKOWNED CABLE NETWORK

Already Upgraded

No Change

Home

Gateway

Digital Cable Simple, low-cost, more bandwidth capacity

More functions in customer primes equipment Gain more control of customers

Digital Cable Simple, low-cost, more bandwidth capacity

More functions in customer primes equipment Gain more control of customers

Common

Back-office

Operation

DOCSIS

MPEG

Ethernet

To Be Upgraded

Digital Cable

DOCSIS

MPEG

Ethernet

Current

STB

Low-cost

STB

Home

Network

DTV

Abandon

old upstream

FEATURES OF DIGITAL CABLEFEATURES OF DIGITAL CABLE

Home Gateway

with Single tuner

Less stringent EOL requirements Low-cost design & deployment

Low-cost equipment (amplifier, optics); Low power consumption

Simplify HE equipment Common digital RF for all services (eliminate analog equipments)

Move to wideband RF subcarrier Flexible and better bandwidth utilization (best statistic multiplexing)

Easy A/D: digital baseband over fiber link

Home networking for in-house distribution Create control and stickiness

Less stringent EOL requirements Low-cost design & deployment

Low-cost equipment (amplifier, optics); Low power consumption

Simplify HE equipment Common digital RF for all services (eliminate analog equipments)

Move to wideband RF subcarrier Flexible and better bandwidth utilization (best statistic multiplexing)

Easy A/D: digital baseband over fiber link

Home networking for in-house distribution Create control and stickiness

Current

6MHz QAM

Wideband

QAM

Digital

Cable

Multiple

Low-cost STBs

Home Gateway

with multiple tuners

STB

ARM TWO:ARM TWO: NETWORKNETWORK--INSIDEINSIDE--NETWORKNETWORK

Metro

BB

HG

Establish Content Distribution Infrastructure Co-location & SLA

Define solution for signal injection at cable headend

Establish Content Distribution Infrastructure Co-location & SLA

Define solution for signal injection at cable headend

M

U

X

QAM

QAM

QAM

Data

Stream

M

U

X

QAM

QAM

QAM

Dedicated

Port

6MHz

Common STB

Use EPG to link to

the 6MHz channel

Walled Garden

inside 6MHz

Common STB

Use EPG to link to

the 6MHz channel

Walled Garden

inside 6MHz

Common STB

Ethernet to HG

Coax & others for

home network

Common STB

Ethernet to HG

Coax & others for

home network

Stand alone HG

Fully controlled

home networking

Stand alone HG

Fully controlled

home networking

STB

STB

Headend

HG 6MHz

6MHz

ARM THREE:ARM THREE: COMMODATIZE THE PIPECOMMODATIZE THE PIPE

Walled Garden Content & E-commerce

Aggregation for ASPs

Control & management

Walled Garden Content & E-commerce

Aggregation for ASPs

Control & management

ACCESS Metro

BB

HG Content POP

Strict SLA

& Co-Lo

Build-in control

mechanisms

HE

Value

Commodity

ACCESS Metro

BB

HG POP HE

Network

Operation

System

Network

Operation

System

CM

DSL

COMPARISONSCOMPARISONS

OPTION 1 OPTION 2 OPTION 3

COST

Lowest

Utilizing existing

equipment

Medium

Utilizing existing tuner

High

New equipment

CONTROL

Low

Difficult to create

stickiness

Control 6MHz Fully control

Unbundled-loop

model

HOME

NETWORKING

Difficult Utilize HPNA & wireless

Maybe difficult to use

in-house coax

Can use all means

Can re-use in-house

coax

Legal Easy Medium Difficult

Time to Market Now Need development Work with home

network vendors

Issues

Current STB does not have the flexibility

Next generation STB (DCT5K) is not ready

Stand alone HG may make more sense

SUMMARYSUMMARY

Content

Aggregation

strategy

Network

Operation System

for ETE control

(work with HG)

Content

Aggregation

strategy

Network

Operation System

for ETE control

(work with HG)

ACCESS Metro

& BB

HG

Walled

Garden

+ NOS

POP HE

Collaborate with

carriers to

establish Content

Distribution

Platform

Co-location

Managed network

access (SLA)

Collaborate with

carriers to

establish Content

Distribution

Platform

Co-location

Managed network

access (SLA)

Owned network:

Digital Cable

Others: network-

inside-network

Owned network:

Digital Cable

Others: network-

inside-network

Work with home

network vendors

to enable the NOS

and establish in-

house distribution

and control

platform

Work with home

network vendors

to enable the NOS

and establish in-

house distribution

and control

platform

Home

Network

WORKING STRUCTUREWORKING STRUCTURE

Content

Network Solution

Owned Network-

In-network

Home

Network

E-Commerse

Content

Distribution

Platform