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FTTH Market, Strategies and

Portfolio Update

Wireline Marketing
October 2009
Agenda

FTTx market

€ Alcatel Lucent GPON Portfolio

ECO Eco-sustainability in access networks

Next generation access

All Rights Reserved © Alcatel-Lucent 2009


Service evolution overview
Widespread 3D-TV
Entertainment Apps on TV
(Open STB APIs)
Growing Interactive Services
TV Content NPVR
Emerging Web Catch-Up E-Administration
on TV Advanced TV
Envisaged
EPG Remote
Web 2.0
All HD On TV Elderly
Exclusive Care
Integrated Content
Communication FMC User Wider-Economy
TV on PC
Services Shared-TV Home Services
Commercial Surveilance
TV FMC DVR
HD
Videophony
Terminal Rich
Free Nat’l VoD E-Education
Videophony Voice
Calls Home
Free Int’l IP IPTV Traffic Monitoring E-Health
Calls Telephony Information

Child Protection Wireless


Up to 50/20 HSI
Home Network Mg’t Up to 100/100 HSI QoS Guarantee LAN Router
Home Tech Support
Up to 1000/1000 HSI
Enabling Services
Source: Yankee Group 2009

All Rights Reserved © Alcatel-Lucent 2009


More bandwidth downstream, but also upstream

Tier 1 operator in Europe:


Next Generation 3D TV
“One of the main learning
HDTV VOD from fiber trial is that
Video Uploads/Downloads
customer shows strong
Large File Sharing
Premises Web Hosting interest for upload capacity
Multi Player Gaming, Interactive Distance Learning
(picture upload, home
Generates new
working, …)”
Network PVR

ARPU & File Sharing/Home Video Sharing/Streaming


Telecommuting
Differentiates Video Conferencing, Premises Surveillance
Service Offering Web Surfing

20 15 10 5 5 10 15 20 25
FTTP
VDSL
ADSL 2+
Cable
ADSL

Sources: FTTH Council; Operators; Alcatel-Lucent


Today’s downstream is tomorrow’s upstream

All Rights Reserved © Alcatel-Lucent 2009


Solving the bandwidth equation with FTT€
Strategy
Alcatel-Lucent’s strategy: “Fiber to the most economical point”
VDSL
~50 Mbps
ADSL
~12 Mbps

GPON
100 Mbps+

VDSL P2P/AE
~50 Mbps 100 Mbps+
VDSL
~100 Mbps

Drivers: up-front CAPEX, competition, and time-to-market

All Rights Reserved © Alcatel-Lucent 2009


Fiber Nations On the Move
FTTx has passed the Point-of-No-Return
100%
Mature
Hong Kong
South Korea Switzerland
80%
15M HH TAD
Japan
Belgium
FTTH 60%

FTTx HP [%]
FTTB Moving Ireland
Leapfrog Croatia
40% NL Austria
US Lithuania
FTTN VDSL2 Denmark Portugal
Slovakia
Sweden Germany
20% France
TBD Estonia
Russia
Finland
Norway
Italy Spain Czech
Latvia
0% UK Poland
Romania China
10% 100% 1000%

-20%

FTTx HP Growth [%] 2007-2008


Source: Alcate-Lucent analysis of industry blend: iDATE, Ovum, Point Topic

Today more than 40M BB users are connected via fiber

All Rights Reserved © Alcatel-Lucent 2009


Major operators have defined their FTTx strategy
Public announcements in Countries Incumbent Alternative Munis/util.
top BB countries Australia
Belgium Cable
China Cable
FTTAmplifier Denmark
FTTN
for HFC France
Germany
ePON / GPON P2P / AE Hong Kong
Iceland
Ireland
N/A or TBD Italy
Japan
Korea
70% top national New Zealand
carriers with GPON Norway
Singapore
50% countries with at least Spain
two operators with GPON Sweden
Switzerland Cable
The Netherlands Cable
GPON in volumes Cable
UK
initially in the USA USA and Canada Cable

Source: public announcements


All Rights Reserved © Alcatel-Lucent 2009
FTTx is translating into numbers,
PON and VDSL drives FTTx
CAGR 2004-2008

50 50% 100% 150%


FTTx Subs WW (M)

40 PON in Asia

30 PON outside
Asia
20
VDSL
10

0
P2P
As % of fixed CY2004 CY2005 CY2006 CY2007 CY2008
BB Source: Infonetics / Analyse Alcatel-Lucent
subscribers 3,4% 4,7% 6,5% 9,5% 13,6%

PON in North America and EMAI showing strong size and highest growth

All Rights Reserved © Alcatel-Lucent 2009


Fiber to the most economical point FTT€
Comes in different flavors

FTTN VDSL2

Factors:
Competition FTTH
AT&T
CAPEX/OPEX
Greenfield
Existing FTTH
infrastructure
Regulation
Incentives
Demand
Greenfield vs.
brownfield CO VDSL2 &
FTTH

FTTH/B

All Rights Reserved © Alcatel-Lucent 2009


High regional variances – different financial profile

Market Driven Risk Driven Policy Driven

Sharing Dark Fiber Joined re-use of Local community


in the Building ducts or dark fibre as IP Wholesaler

Wholesaler
Wholesaler SP1 SP2 SPx

CO CO CO CO CO
FFP

Fiber Flexibility
Point Building

Private Private
Building Ducts / Private Public
owners fiber

Fiber Nation = mosaic of Technology-agnostic sharing options

All Rights Reserved © Alcatel-Lucent 2009


Fiber is a “big” marketing event

Fios Reality Contests


Hummer

AT&T’s
“Ice Cream”
truck

You just got to have it!

Fiber “Tupperware” Parties &


neighborhood sales

Fios
Lounges
AT&T’s Experience
Stores

All Rights Reserved © Alcatel-Lucent 2009


FTTx comes with profound usage changes
Higher BB speeds lead to increased usage, in general
More capacity.... …leads to more usage
time spent online (h/week)

Countries included: Finland, Norway, UK, Gernany, Spain,


Belgium, Denmark, Switzerland, Netherlands, Austria, Ireland, Mexico

Average broadband speed (Mbps)


Source: Nielsen/Netrating Netview homes data only, June 2006

“When we upgraded our customers from 2Mbps to up to 8Mbps we saw an


average increase in usage of 15% per customer” - Neil Laycock (CEO PlusNet)

All Rights Reserved © Alcatel-Lucent 2009


78% of FTTH users are very satisfied

60%

50%

40%

I do not like it at all


Its below average
30% Its average
Its above average
I like it very much

20%

10%

0% Source:
Cable modem DSL Mobil Breband Optical fibre FTTH Council Europe
& Ovum, 2009

All Rights Reserved © Alcatel-Lucent 2009


FTTH users Spend More Time Online

70%

60%

50%

40% Less than 30 minutes


30 minutes to 1 hour
1 hour to 2 hours
2 hours to 3 hours
30% More than 3 hours

20%

10%

0% Source:
Cable modem DSL Mobil Breband Optical fibre Not sure FTTH Council Europe
& Ovum, 2009

14 | Presentation Title | Month 2008 All Rights Reserved © Alcatel-Lucent 2009


Alcatel-Lucent’s leadership in GPON
Alcatel-Lucent present in all major GPON deployments
GPON World-wide Port Shipments (OLT+ONT)worldwide – 80+ projects in total:
Alcatel-Lucent
Alcatel-Lucent 721K • #1 FTTx supplier in the US:
Huawei
Motorola
• AT&T, Verizon
520K
• Leading the largest GPON deployments in Europe:
Siemens
Calix 304K • France Telecom, SFR, Portugal Telecom…
E///
Huawei 240K • Developing a strong presence in APAC:
E/// 68K
• Hanaro, Singtel, TNZ, China Telecom, China,
ECI
Source: Dell’Oro, August 2009 Mobile…
• Leading supplier of GPON to utility companies and
municipalities around the world:
Ericsson • Utilities include NRGi Fibernet, Jönköping
Huawei 4% Energi, Bristol Virginia Utilities. Municipalities
12%
include Arvidsjaur, Tidaholm Sweden, Lincoln
Calix Country US, Asturias Spain…
Alcatel-Lucent
16%
37% • Developing references for point-to-point (P2P) fibre
solutions:
Motorola
• KPN (Netherlands), Sydfyns Intranet (Denmark)
27% EWZ (and Switzerland)...
• Winner of prestigious IEC InfoVision Award for GPON
Alcatel-Lucent shipped 37% of ONT (BBWF Paris, Sept. 9/09)
cumulative GPON ports up to 2Q09

Alcatel-Lucent, a leading supplier of GPON solutions worldwide

All Rights Reserved © Alcatel-Lucent 2009


Alcatel-Lucent – the GPON leader
Operator Vendor 2nd Vendor Deployment model Status
GPON FTTU 3M HP per year, target
18M HP in 2010
GPON FTTU Mass roll-out

GPON FTTU Roll-out started, 15K HC

Dasan FTTB/VDSL and FTTU Nation wide

None GPON/FTTU Massive roll-out

None GPON/FTTU Massive deployment

Tellabs GPON/FTTU Started 2008

None GPON/FTTU Started 2009

GPON/FTTU Since 2008, target 1M


HC
GPON/FTTU Massive roll-out

All Rights Reserved © Alcatel-Lucent 2009


Agenda

FTTx market

€ Alcatel Lucent GPON Portfolio

ECO Eco-sustainability in access networks

Next generation access

All Rights Reserved © Alcatel-Lucent 2009


€ 7342 ISAM FTTU – Solution in Brief
The Industry Leading GPON platform

• GPON standards based optical


broadband - part of the ISAM family
with shared technology, management
• 2.5 Gb/s downstream and 1.2 Gb/s
upstream over a single fiber.
I-Series ONT
• GPON encapsulation mode (GEM) for
most efficient transfer of IP/Ethernet
service traffic
• Up to 64 subscribers per PON (a single
O-Series ONT
fiber), 4 PONs per line card
• Variety of ONT options to match the
needs of residential or business
customers
B-Series ONT
Optical Line Terminal

FTTB ONT

All Rights Reserved © Alcatel-Lucent 2009


€ 7342 ISAM FTTU
Optical Network Terminations – Portfolio
Residential Business FTTB

Indoor
4xGigE, 4xE1s
24xVDSL2 (30a/17a)
2xFE, 2xGigE 4xGigE
2xPOTS, RF

4xGigE, 2xPOTS, optional RF


Outdoor
8xVDSL2 (30a/17a)
8xFE, RF

1xGigE, 2xGigE,
8xPOTS, 8xPOTS,
1xFE, 2xPOTS, RF 2xE1, RF
12xGigE, 24xPOTS, RF
2xFE, 4xPOTS, RF RF

The Most Comprehensive ONT family available


All Rights Reserved © Alcatel-Lucent 2009
€ 7342 ISAM FTTU
Next-gen family of GPON SFU ONTs
Key Features
New enclosure

–Indoor and outdoor versions


– Smart industrial design
– Small size
– Wall-mounting capable (w/o separate mounting bracket)

Lower power consumption


– Up to 30% lower

RSSI enabled

–For remote optical power metering

New System-On-Chip
– GE at wirespeed
– Multicast across all ports
– HW ready for advanced L2 and L3 features

All Rights Reserved © Alcatel-Lucent 2009


€ Towards true multivendor PON infrastructure

ONT
portfolio
3rd party
partners Plug’n’play
interop

<2009

Expanding Alcatel-
Lucent ONT portfolio 2009-2010
for all FTTx
deployments Alcatel-Lucent
•Home portfolio extension
•Building OMCI Interoperability
2010-2011
•Business Implementer’s Guide -
•Cellsite Version 1
Alcatel-Lucent ONT
full OMCI available to
portfolio
partners
Plug’n’ play interop
based on standardized
participation in OISG OMCI

All Rights Reserved © Alcatel-Lucent 2009


€ Alcatel-Lucent ISAM FTTU: Key Differentiators
Robust & field proven by more than 80 customers

1
 Tested and verified by more than 80 GPON customers
 Designed for the field: Only industrial temp components
 All in-house ALU technology, end-to-end (ONT, OLT, TPSDA)

ONT: Widest Portfolio, >20 ONTs for All Customers:

2  Residential Customer: New data only ONT with 4 GE links


 Business Customers: Up to 4GE, 4E1s, POTS
 Multi-dwelling units: VDSL2/GE with Virtual ONT concept

OLT: Highest Capacity & Best Scalability

3  Highest switch capacity on the market: 250Gbps per NT


 Highest uplink capacity: 22 Gbps per NT
 Unbeaten scalability: Most T-CONTs, GEMports and multicast streams

Most Resilient and Secure

4  Full load-sharing and NT redundancy


 Extensive GPON specific 802.1ag fault isolation and RSSI (OLT and ONT)
 Control plane protection (IGMP)

5
Unrivaled Service Support
 Full voice support: Class-5/SIP/H248 & widest SIP interop
 Business& legacy: Circuit Emulation, Mobile Backhaul, MEF E-Line
 Network synchronization: BITS, IEEE1588

All Rights Reserved © Alcatel-Lucent 2009


€ 5520 AMS Access Management System:
Most scalable & widely deployed management system ww

Tree-like network view Realistic equipment views

Real-time alarm and


Intuitive drill down
status reporting

Context-related alarm Activity states window

Proven access management solution


 Over 600 systems deployed worldwide
 More than 80 million lines managed
 20 deployments with more than 1 Million lines under management
 4 Million lines managed in a single system

All Rights Reserved © Alcatel-Lucent 2009


€ 5520 AMS: New Generation Techology Platform for flexible OSS
integration

Operation Support System

XML/SOAP
Provisioning, XML/SOAP XML/SOAP
All purpose XML/SOAP activation, Statistics, Line tests, diagnosis,
TL1 interface Alarms port inventories… performance Line classification

TL1 5529 5529 5529 5529 5530


GW 5520 OAD APC SDC IDM NA
AMS
(Core EML)
XML/SOAP
Platform integration DB Population

Hardware integration

All purpose SNMP SNMP, TFTP SNMP, TFTP


TL1 interface

Access Network

State of the art Web Services (XML/SOAP) - Reduce OSS integration time & cost

All Rights Reserved © Alcatel-Lucent 2009


€ 5529 Portfolio: Market-leading portfolio for provisioning and OSS
integration

5529 APC (Access Provisioning Center)  Hides complexity through resource


abstraction
Facilitate integration of service provisioning  Reduces integration cost and time
OSS to underlying access resources
 Support mass provisioning operations
 Stable and backwards compatible

5529 OAD (OSS Alarm Dispatcher)  XML/SOAP interface (MTOSI compliant)


Advanced interface for intelligent alarm  Intelligent alarm forwarding
forwarding to network wide alarm  Reduces integration cost and time
management OSS

5529 IDM (Inventory Data Manager)  Centralized database of all NEs


Specialized application for mass collection of  Synchronize inventory to OSS systems
inventory data in the access network.  Powerful GUI navigation
 Reduces integration cost and time

5529 SDC (Statistics and Data Collector)  Collect mass amount of data
Intelligent collection and dispatching of  Protect NE processing power
network data to performance and QoS  Reduces integration cost and time
applications

Unique portfolio of operational tools


Flexible OSS integration - Automate workflows – reduce OPEX
All Rights Reserved © Alcatel-Lucent 2009

5530 NA Network Analyzer (Now applications – Motive Product Unit)
Line Diagnostics
Wire Fault Configuration
Detection Fault Detection

Maximize Optimize
Performance Stability
 Line and Fiber Diagnostics
• Intelligent wire fault and configuration fault detection based on SELT and DELT
• Proactive detection and localization of optical degradation and failure
• No external test equipment required
Network Analysis
Network Analysis
• Network-wide line quality and performance indicators
Dynamic Line Management
• Automatic performance optimization, for maximum stability and bitrate
• Automated DSL transmission profile management (rate, spectrum, ANVN)

Market-leading line/network diagnostics & dynamic line management, >50 customers


Automate helpdesk and provisioning workflows – reduce OPEX
All Rights Reserved © Alcatel-Lucent 2009
Agenda

FTTx market

€ Alcatel Lucent GPON Portfolio

ECO Eco-sustainability in access networks

Next generation access

All Rights Reserved © Alcatel-Lucent 2009


ECO
Our challenge: Cut green house gas emission
ICT represents 2% emissions 2007. Not at par with
aviation!
1.4 GtCO2e
2% of GHG PCs, peripherals
57% and printers
Data centers
0.5 GtCO2e 49%
2020
2002
58%
14%
2007 14%
37%
18%

25% Telecom
28%
Fixed Broadband Fixed Broadband

1% 4%
Telecom
Devices
3%
Telecom
Mobile Mobile
Devices
Networks Networks
3%
12% 13%
Fixed
Narrow Fixed
Band Narrow
12% Band
5% Source: Alcatel-Lucent
analysis of Smart 2020 data

ICT challenge: x3 increase GtCO2e from 2002 to 2020

All Rights Reserved © Alcatel-Lucent 2009


ECO
Three impact areas in fixed access

Customer Premises: Outside


Outside Plant:
Plant: Network Equipment:
Customer Premises: Network Equipment:
Passive network, high-
Passively Cooled Remotes, Networkand
reliability deployment,
immunity of Green GPON, reduced
ONT, CPE, remotes.. digging, etc COpower
equipment, cooling…
consumption
Eco-efficient ONTs fiber, etc

CO

GPON positively affects all impacted areas

All Rights Reserved © Alcatel-Lucent 2009


ECO Breaking the OPEX trend with GPON
GPON provides more capacity at the lowest TCO

40

35
Life-time Energy OPEX /user [€]
30

25 Assumptions:
5 years cost of
20 ownership
0.1 Euros/kWh
15

10

0
ADSL VDSL P2P GPON

The Business Case is in favor of eco-sustainability

All Rights Reserved © Alcatel-Lucent 2009


Agenda

FTTx market

€ Alcatel Lucent GPON Portfolio

ECO Eco-sustainability in access networks

Next generation access

All Rights Reserved © Alcatel-Lucent 2009


Manage the technology cycle
Capacity, reach, split and optical troubleshooting

10
10 Gb/s PON Extended 10 Gb/s PON
Gb/s 1 2010-2011
Three target
applications
RE

1.FTTB
backhaul
2.5
2.Business Gb/s
Access RE

3.Fiber to the GPON B+ GPON C+ Extended GPON


base-station: Today 2 2009-2010 3 2009-2010
Reach 20km 30 km 60 km
LTE backhaul

Split 32 64 128

Less dense areas addressed and central office consolidation

32 | Next
Presentation
Generation
TitleAccess
| Month
| February
2008 2009 All Rights Reserved © Alcatel-Lucent 2009
Making 10 Gb/s PON backwards compatible
Industry converging on operationally acceptable standard

WDM to split Many GPON ONTs


GPON from today have WBF
No changes to
10 Gb/s GPON OSP, including
GPON
fiber and splitter

10 Gb/s
GPON 10 Gb/s on
different wavelengths
(up and down)

XGPON up GPON up GPON down CATV XGPON down

1260 1290 1480 1550 1575


λ
-1280 -1330 -1500 -1560 -1580
(in nm)

Wavelengths for XG-PON same as symmetric 10G EPON – cost efficiency

All Rights Reserved © Alcatel-Lucent 2009


Zoom in WDM PON
CAPEX and operational disadvantages

CAPEX Operations

TDM PON WDM PON


GPON 10G PON WDM PON
(10Gb on top of 2.5Gb) (Everyone Gets a Lamda) CAPEX Lowest cost FTTH x3-4 TDM PON

OPEX Low CO Power,


OLT CO floor space

Splitter Eco Lowest power High power


consumption consumption

ONT Standardized Yes Not started

Dynamic BW Yes Not possible

Based on a Video overlay Yes Not possible


1:32 split
Passive OSP Passive splitters Temp controlled or
GPON Today Over Time Today Long term temp extended AWG

System Design Straight forward Complex, many


dependencies
Reliability Excellent AWG needs to be
athermal & reliable

WDM PON (as P2P) solutions are subscriber density ‘challenged’

All Rights Reserved © Alcatel-Lucent 2009


Summary

FTTx market is a reality > 40M users

€ Alcatel Lucent #1 in GPON

ECO Eco-sustainability = eco-efficiency

Next Gen Access: backwards compatible,


no stranded investments

All Rights Reserved © Alcatel-Lucent 2009


www.alcatel-lucent.com
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36 | Presentation Title | Month 2009 All Rights Reserved © Alcatel-Lucent 2009