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Versatile TV: A Review Patrick Pfef fer September 26, 2007

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  1. Mobile Television: An OverviewPatrick PfefferSeptember 26, 2007

  2. Detecon at a glance Detecon – your international consulting partner As a global firm Detecon International, we leverage over 3,200 successful projects in more than 120 countries. Detecon at a glance Our Clients (Extract) • Established: • 1954 Diebold • 1977 DETECON • Reorganized: • 2002 Detecon International GmbH • Sales 2006: • € 160 million • 700 consultants Detecon Offices Our Offices Americas Europe Africa/MidEast Asia/ Australia Bonn Zurich Reston San Mateo Seattle Mexico City Abu Dhabi Cairo PPFEFFER_MOBILETV-SHORT.PPT Johannesburg Bangkok Beijing Note: Engagements are subject to confidentiality agreements. References are available on request.

  3. 1. 2. 3. 4. 5. Market Potential Regulatory Issues Technology Options Current Deployments Conclusions Content PPFEFFER_MOBILETV-SHORT.PPT

  4. 6 Number of DSL/cable line Number of 3G or video ready phones during the next +63% +16% Market Potential Mobile TV trend-scouting The RGU market for mobile TV is much larger than for fixed IPTV due to the large number of video capable mobile devices. • DSL & Cable • Subscriptions (in M) • 3G Subscriptions (in M) Bob’s Estimates PPFEFFER_MOBILETV-SHORT.PPT • 2006 • 2007 • 2008 • 2009 • 2010

  5. 4.580.000 Enterprise Mass market Market Potential Mobile TV value innovation Like for IPTV, customers are not asking for mobile TV. Operators must demonstrate value/price ratio to market. • Value Creation through content segmentation • Value Proposition through innovation Content Download Streaming • Core Requirements • The service must be available outdoor, indoor and in moving vehicle • Public channels and pay channels are a must, special channels desirable • Radio must be available • Wide coverage (urban, suburban and main roads) On-demand Carousel Non-live Live PPFEFFER_MOBILETV-SHORT.PPT Clips Push and store Video on-demand Pay TV program Subscription Free TV program

  6. Spectrum • Allocation and acquisition of scarce frequencies difficult in specific markets • Different regulatory bodies in geographical markets (even within same country e.g. Germany) • Some countries demand proprietary standards for broadcasting (e.g. China). Content • Regulatory issues concerning unicast content (e.g. VoD) vs. broadcast transmissions • Public vs. commercial broadcasting • Digital Rights Management issues regarding distribution, protection and royalties for copyrights • Protection of consumers Commercial • Free to air networks might prohibit charging for service (e.g. South Korea) • Coverage requirements might forbid profitable network rollout • Non discriminatory conditions between different distribution platforms Regulatory Issues The gray zone All regulatory bodies are playing catch up with technology and early entrants are fighting awkwardness of obsolete regulations. There are regional differences. • Pressure points PPFEFFER_MOBILETV-SHORT.PPT

  7. Technology Options Broadcasting technologies landscape – DVB-H standard gains momentum Out of the large range of cellular, terrestrial and satellite broadcasting technologies, some of them are emerging as standards in different regions. • Broadcasting technologies – key facts PPFEFFER_MOBILETV-SHORT.PPT

  8. Technology Options Mobile TV devices The challenge here is to find the balance between device cost, performance, form-factor and style depending on the target customer segment. • Outstanding issues Battery Technology and power management are two crucial aspects to determine the success of Mobile TV. Integration of new DVB-H, DAB or DMB tuners and channel decoders represents a significant challenge both in terms of energy consumption and components costs. Application processors, RAM memory, GPS chipsets, large and high resolution colour displays are vital for high quality of service and end-user acceptance. PPFEFFER_MOBILETV-SHORT.PPT Ease of use and large choice of different mobile TV ready handsets are essential for the momentum market take-up

  9. Current Deployments Status quo in early adopters markets Mobile TV market dynamics are heavily influenced by geographical characteristics and respective regulatory frameworks. • In a nutshell South Korea Germany • Struggle between paid service and free of charge scenario • Pricing and handset affordability is a concern for user acceptance • Wholesale approach with 25% revenue share for mobile carrier • Regulatory muddle due to federal system • Digital Right Management issues (GEMA) • European Commission initiative promoting DVB-H USA • Market split between Video on demand subscribers and Mobile TV services • MobiTV content aggregator approach is a success story • Mobile TV over WiMAX is talked about for 2008 Japan • Pitfalls of MBCo: no alliance with mobile operator, purpose built devices, distribution strategy • ISDB-T standard used for One Seg Service, no charging allowed by regulator Italy • DVB-H is predominant, take-up push by FIFA World Cup 2006 • High pricing with early adopters • Wholesale approach by Mediaset to serve mobile carrier PPFEFFER_MOBILETV-SHORT.PPT Source: DETECON Research and Analysis

  10. Current Deployments • Italy • With 600K Mobile TV subscribers Italy is the most developed European market. There are two mobile broadcast networks. Interactive services are in infancy. Product Description Interactive Services • Two players: H3G (vertically integrated) and Mediaset (wholeseale) • Mobile TV offering to pre- and post-paid customers • 20 channels available • Pricing options: daily (3€), weekly (10€) or monthly (10€) basis • Both Mobile TV platforms enable basic interactive services: Channel subscription, ring tone download, and voting logo Voting at Mediaset H3G Mobile TV w. channel subscription service Player Strategy • H3G acquired Channel 7 thus owning its own DVB-H license. H3G has been the first MNO offering Mobile TV and interactive services • TIM and VOD signed wholesale agreements with Mediaset. Mediasets’ channels can be viewed by both TIM and VOD UMTS/DVB-H subscribers • Intense marketing campaigns • MNOs want to merge IM-TV with existing UMTS based video services and further develop basic interactive services (e.g. betting, shopping, etc.) Technology Market Success PPFEFFER_MOBILETV-SHORT.PPT • Interactive platform is a proprietary solution, lack of standards • DVB-H/UMTS integration enables a seamless interactive services • Technology enables service subscription on handset • Both DVB-H MUX cover 75% of country (outdoor) • High penetration of 3G (EY 06): 21M • H3G Mobile TV subscriber (including sporadic users (Mid 07): 500K • TIM/VOD subscribers together (Mid 07): 100K

  11. Current Deployments • Germany • Watcha is the first broadcast based Mobile TV offering in the German market. It features only limited interactivity. Product Description Interactive Services • In 06 Mobiles Fernsehen Deutschland (MFD) has launched the first broadcast based Mobile TV service • Channels: ARD, ZDF, MTV, N24, a Pro7Sat.1 and a visual radio station • Limited interactivity: ESG, sent-in MMS as visual radio message, ring tone and music download (both BigFM), WAP based services (IFA show case) • Trial: Mobile soaps with SMS as reminder and content-elements Sent-in MMS as visual radio message Watcha Mobile TV offering Player Strategy • MFD signed content partnerships with ARD, ZDF, MTV and Pro7Sat.1 • Partnership with Mobile Service Provider: Debitel, Victor Vox, others. Together they amount 25% of all mobile subscribers in Germany • No partnering with MNOs (TMO, VOD, O2, EPL) • MFD is positioning itself as a technology independent Mobile TV platform operator • In competition to a consortium of TMO, VOD E-Plus and O2, MFD also pursues a DVB-H Mobile TV license Technology Market Success PPFEFFER_MOBILETV-SHORT.PPT • MFD uses DMB, broadcast technology based on DAB • Technology enables WAP based backchannel integration • MFD holds a nation wide L-Band license • Coverage only in large metropolitan areas; 16 Mio. potential users • Watcha Subscriber (Estimate): 7,800 (YE06) • Monthly flat rate differs between 5 € and 10 € • Revenue sources: Service subscription, advertisement and user interaction

  12. Current Deployments • South Korea • Satellite-based DMB is threatened by free accessible T-DMB. Combination with WiBRO for interactive services. Product Description Interactive Services • Pay-TV only (thus threatened by free T-DMB based Mobile TV) • Large variety of channels: Music, news, lifestyle, economy, traffic, local YTN, 1to1, U1 Media (channels), • Content: 75 % video, 25 % audio • One-time connection fee ($20) and usage-dependent content fee (ARPU $20). • KT telecom service using WiBro and DMB – users will be able to retrieve information through WiBro in the background and display it on the screen (e.g. with Samsung M8000 + extra receiver ) Player Strategy • TU Media (broadcast service company, SK Telecom owns 30%) operates the country’s S-DMB network • TU Media aggregates content and simulcast cable content • 25% to content owners and 25% to MNOs • Usage of Mobile TV popular in metropolitan areas for commuters, but limited to cell phones (larger variety at T-DMB possible) • Average viewing time/day 62min (average world: 15-20 min, average Europe: 2-3 min) Technology Market Success PPFEFFER_MOBILETV-SHORT.PPT • Geostationary satellite-based DMB, amplified via about 6000 repeaters in inaccessible areas • Operate in 2.6GHz • Repeaters work with Ku-Band at 12GHz • Launch in May 2006, 1 Mio customers in Nov 06, Forecast: 6,6 Mio user in 2012 • Still fast growing, but less than T-DMB, Total Revenue DMB 2007 forecast): € 240 Mio • High-priced handsets, questionable user exp.

  13. Current Deployments • South Korea • Fast growing terrestrial DMB Mobile TV with free access shows high growth rates. Some interactive services. Product Description Interactive Services • Service is free (Regulator) • Revenue to be gained via customer retention in other offerings • Service usage: automotive devices (50 %), USB-Devices (30 %), mobile phones (20 %) • Seven DMB-TV channels, 13 DMB-Radio channels, eight data services (JPEG Slide Show, Dynamic Labeling, Wireless Service, Traffic Service) Traffic information service on a PDA Traffic information service via DMB Player Strategy • Korea Telekom holds DMB license, runs network and defines channel portfolio (e.g. KBS, MBC, SBD, etc) • MNOs take advantage of free DMB service and sell handsets • Content providers (e.g. KBS, MBC) broadcast their channels free • Usage most popular while commuting or at work/school • Fast growth, but not profitable yet • Many type of devices available Technology Market Success PPFEFFER_MOBILETV-SHORT.PPT • Domestic technology based on the DMB standard used by DTT and satellite broadcasting throughout Europe and Asia • Runs at 12MHz (10 times more capacity than Germany’s MFD) • Launched in 2006, already 0,6 Mio users after four months • Forecast: 4 Mio users EY 06, 13,9 Mio in 2012 • Total Revenue DMB (2007 forecast): € 240 Mio

  14. Current Deployments • USA • Verizon markets Qualcomm’s MediaFLO broadcast Mobile TV service. It enables very limited interactivity. Product Description Interactive Services • V Cast is a 3G network created by Verizon, used for broadcasting Mobile TV channels, video clips and music (e.g. CBS Mobile, Comedy Central, Fox Mobile, MTV, NBC, NBC News, Nickelodeon, etc.) • Video content: Music, Showcase, Comedy, News, Weather, Entertainment, Sports, Net’s Best (e.g. You tube) • Features: Channel surf with no buffering, intuitive program guide, text reminders for favorite shows, call taking without interrupting program Entertainment and weather on VCast Player Strategy • Qualcomm owns the spectrum, runs the MediaFLO broadcast network and provides the service on a white-label basis • Verizon purchased the MediaFLO service and integrates it into its overarching “V Cast” mobile entertainment platform • Pull strategy: Offering of popular channels attracts customers to services • MediaFLO signed a Mobile TV wholesale agreement with Cingular • Available in 35 states Technology Market Success PPFEFFER_MOBILETV-SHORT.PPT • Verizon’s V Cast service integrates unicast and broadcast technology • Verizon Wireless’ Third Generation Wide Area 1XEvDo network • Data transmission at speeds of 400-700 Kbps and bursts of up to 2.0 megabits per second • Commercial launch: March 2007 • V Cast service costs $15/month (basic package) or $25/month (select package) with unlimited basic video clips, access to mobile Web 2.0, unlimited airtime and email); limited package $13

  15. Current Deployments • USA • MobiTV is a 3G Mobile TV service predominantly available through Sprint and AT&T. Many interactive features available. Product Description Interactive Services • Service offers both live streaming and on-demand video clips • Mobile TV available in English and in an English/Spanish version • Service offers more than 10 popular channels (e.g. MSNBC, ABC, CNN) • Several interactive features: Interactive advertising, Interactive M-Commerce (e.g. purchase ring-tone or ticket), Interactive Content Rating, Voting, Sharing & Community Sports and news on MobiTV Player Strategy • MobiTV owns the service, defines portfolio and delivers the app • MNOs (Sprint, Cingular, Midwest Wireless, nTelos, US Cellular, Cellular South) have signed wholesale agreements with MobiTV • Pull strategy: Offering of popular channels attracts customers to services • MobiTV is likely to sign agreements with further MNOs Technology Market Success PPFEFFER_MOBILETV-SHORT.PPT • MobiTV supports multiple 3G network technology and hardware systems • Compatibility includes several cell phones (Nokia, Motorola, Samsung Sony Ericsson etc.) and smart phones • More than 1 Mio subscribers • Fees vary depending on vendor

  16. Conclusions • Many technologies • Handset drag down • Various business models • Cannibalization of IPTV ? • Customer demand fallacy • Content might not be too complicated • Mobile TV + 2/3G services • Part of the bundle PPFEFFER_MOBILETV-SHORT.PPT

  17. 4% Contact Integrated management and technology consulting worldwide Patrick Pfeffer Detecon Inc.400 S. El Camino Real, Suite 500 San Mateo, CA 94402Phone +1 650 401 5222 Fax +1 650 401 5298 Mobile +1 707 971 0471 Patrick.pfeffer@detecon.com PPFEFFER_MOBILETV-SHORT.PPT