Presentation IA Press Cannes 2004

Video Captures All of Communication> An image says more than 1000 words• Gives the opportunity to hear and see• Gives much more emotional value• Can give complementary accurate info making life more efficient> Broaden Your Life• Communication services• Content delivery servicesVideo enables the complete communication experience— users can more effectively share emotions, showthings or exchange information.Alcatel – Enabling SuccessfulMultimedia Services — 2All rights reserved © 2004, Alcatel

Drivers behind Mobile Video> Emotional Benefits• Sharing emotions– search of partners and new friends, creating a community• Sharing a passion– The favourite football player/singer/models– The favourite movie trailer– Photos and video to remember best events of the life and send themto friends (video-messaging)> Making life more efficient• Having more accurate info– Video web-Cams• Connecting mobile videophones to wireline broadband videoservices– Mobility Move Freely !Alcatel – Enabling SuccessfulMultimedia Services — 3All rights reserved © 2004, Alcatel

Alcatel StrategyProducthardwareProductsoftwareBasicservices+Applications MiddlewareIntegration Capability=Applications and Services SolutionsFor fixedand mobile carriersFor enterprisesand institutional marketsAlcatel – Enabling SuccessfulMultimedia Services — 5All rights reserved © 2004, Alcatel

Theme 1: Video Communication Services

Video communication is based on three core servicesVideo Telephony (1-to-1)(3G)Video conferencing(n-to-n) (3G)Video Messaging(2.5 G / 3G)Several additional use cases,beyond P2P mobile-to-mobile video telephonyAlcatel – Enabling SuccessfulMultimedia Services — 7All rights reserved © 2004, Alcatel

Some 3G launch examples around the worldAsiaFirst commercial launches…NTT DoCoMo (Japan) “FOMA”SKT (Korea) “June”… have focused on different aspectsMail (video), games, sound clipsdownloadJune most successful service is TVContent ( broadcast and VOD) usedby 1,3 mi subscribersEuropeHutchison 3G (UK, Italy, Sweden)Vodafone Europe (6 countries)‘3’ has focused on low price voiceofferVodafone is first focusing on MobiledataSource SK TelecomFinding:Video-telephony has not been the core offer so farAlcatel – Enabling SuccessfulMultimedia Services — 8All rights reserved © 2004, Alcatel

Japan shows the way to video communication servicesExample of DoCoMo’s FOMA> Send i-motion mail• Email short video clips & recordings to PCand mobiles• Send a short movie or an i-motion clip> Video Conference• For max 8 people, 4 displayed in parallel> Download Software/Games/Video Clips for enjoying later• Downloaded Games (tennis, horse racing, etc.)• Multiplayer games• MusicBox, Ring tones, Screensavers, Stand by ImagesFixed screen mode4 screen modeScreen Switch mode> Short audio/video content transmitted via Packet Switched Network• Hollywood Channel (Tomb Raider, Charlie’s Angels…)• Princess Collection, Tsutaya Online (Japanese Movie Clip, Game preview …)Alcatel – Enabling SuccessfulMultimedia Services — 9All rights reserved © 2004, Alcatel

Video messaging has been the clear success driver forvideo communication in JapanVideo messaging is the most successfulserviceUsers of video messaging services generatemore ARPUTop 3 applications• Movie mail• Game, Horoscope• „Chaku-uta“ song clip download„Chaku-movie“• User numbers??ARPU(¥)12,00010,0008,0006,000J-Phone’s ARPU per type of user¥11,500¥8,400¥5,500Source : FOMA, DoCoMo4,0002,0000Source : J-PhoneNon ShaMailsubscribersPhoto ShaMailsubscribersVideo ShaMailsubscribersVideo mails application have the potential to double the ARPUAlcatel – Enabling SuccessfulMultimedia Services — 10All rights reserved © 2004, Alcatel

Mobile-to-mobile video telephony market is limited bythe penetration of compatible handsets…Number ofsubscribers(millions)300Cellular subscribers by handset generationin Western Europe20010002003 2004 2005 2006 2007 20082G2.5G3GSource : Analysys, 2003By 2005, 3G terminals will still bea limited proportion of the marketAlcatel – Enabling SuccessfulMultimedia Services — 11All rights reserved © 2004, Alcatel

…and must be complemented with mobile-to-fixservicesIncreasing penetration of key enablers havebeen boosting fix video potential…• Permanent and broadband residential Internet• Web-Cams• Instant Messaging services (Yahoo!, MSN, AOL)– including video features– spreading the use of PC as an interpersonalcommunication device…making it a major opportunity for videotelephonyPotential market:100 million PC (*)Penetration(%)Penetration of fix video enablers inWestern Europe100%80%60%40%20%0%2003 2004 2005PCWebcamsIMSource : Forrester Research, 2003: Alcatel estimates(*) in Western EuropePotential market:30 million webcamequippedPC (*)Expand addressable market byLeverage on existing huge installed hardware base,Leverage on adoption of applications in fixed marketAlcatel – Enabling SuccessfulMultimedia Services — 12All rights reserved © 2004, Alcatel

Various emerging uses will also supportdevelopment of video communication servicesUsually identified service……will be completed quickly by new usesVideo messaging, Video MMS“See what I see”Video conferencingVideo telephonyDomestic application of video conferencing• Distant relatives n-to-nDeaf people 1-to1Healthcare video-telephony• Care of the elderly, children …Remote video surveillance, maintenance …Premium services (chatting, dating, etc.)Source : Analysys, 2003Expand service offerAlcatel – Enabling SuccessfulMultimedia Services — 13All rights reserved © 2004, Alcatel

Operators must adapt their strategies to consumersissues1Possible Consumers’ issuesTariff perception• Video telephony is perceived as anexpensive extension of voicepossible strategyPricing model must be fine tuned• Primarily based on airtime• Reasonable extra-cost compared tovoice2Privacy• P2P Video telephony is perceived as veryintrusiveCommunicate on unidirectional videocommunication services• “See what I See” services• Video-MMSAllowing easy and full control of video• e.g. Avatar systemsAlcatel – Enabling SuccessfulMultimedia Services — 14All rights reserved © 2004, Alcatel

Strategy to overcome privacy issuesExamples“See what I see”(video unidirectional)Hi, see whereI amP2P Video messagingHi, I send youlive video from…AvatarsvideovoiceWow!!callVideoMailboxVideoMMSDisclose emotion &videosabout somethingAlcatel – Enabling SuccessfulMultimedia Services — 15Send video messageabout somethingAll rights reserved © 2004, AlcatelIn the videophone call,replace yourvideo with a cartooncharacter animation

ConclusionFinding> P2P video communications services have a real potential,through• Sharing information about something or somebody else• Sharing emotional information> Operators must build on existing services and movesmoothly to video communication• Launch 2 services at firstTwo services must be launched in priority:•Video messaging (build on MMS)•“See what I see” (fun and emotion sharing)•Mobile-to-fixed convergenceAlcatel – Enabling SuccessfulMultimedia Services — 16All rights reserved © 2004, Alcatel

Theme 2: Video content delivery

What is Video Content Delivery ?> Delivery of pre-recorded video clips and any live contents• Streamed (in real-time) or downloaded (not-real time)Examples of content> Own shot clips> High-end sports• Tournaments, leaguematches etc.> Music• CD releases - clips• Live concerts> Movies• New releases, trailers• Cannes Film FestivalExamples of applications> Push/alerts> Voting/community• TV movies> Live cams• Traffic, Weather,Events, Clubs, Bars,Restaurants> Instant replays> Archived footage> See what I saw: usergenerated contentAlcatel – Enabling SuccessfulMultimedia Services — 18All rights reserved © 2004, Alcatel

This service is already available on 2,5 G…todayAlready 150 millions GPRS phones areinstalled todayCellular subscribers by handset generationNumber ofin Western Europesubscribers(millions)4003503002502001501005002003 2004 2005 2006 2007 20082G2.5A growing % of handsets has media playersShare ofsmartphones(%)15%10%5%Penetration of smartphones0%2003 2004 2005Source : Analysys, 2003 Source : Alcatel estimates, 2004Penetration of 2.5G or 3G video compatible handsets is sufficient forlaunching video servicesAlcatel – Enabling SuccessfulMultimedia Services — 19All rights reserved © 2004, Alcatel

Mobile Video Challenges Video Challenges• Need for compression to achieve manageable bitrates + storage• Need for significant video processing, real-time adaptations to variousconditions and types of screens• Mass market terminals with embedded media players correspondingwith selected video server Network Challenges• Enough bandwidth• Real-Time Quality Of Service• Coverage, jitter, … Content Challenges• Mobile video isn’t like watching TV at home• Appealing content with a mobile character, adapted to mobileterminals & usageAlcatel – Enabling SuccessfulMultimedia Services — 20All rights reserved © 2004, Alcatel

How different are they in the Wireless Network?Advanced encoding & compression standards• MPEG-1, MPEG-2, MPEG-4 : industry standards• Real, MS Mediaplayer, Quicktime : proprietaryMobile Radio TechnologyTechnologyGSMGPRSEDGEUMTSTransmissionSpeed10 kbit/s20 kbit/s100 kbit/s384 kbit/sImagesVideoCommunicationShifting Value Chain in Mobile content deliveryVideo ContentDelivery3 GPPDefines formobileMPEG-4+IETFprotocolsAlcatel – Enabling SuccessfulMultimedia Services — 21All rights reserved © 2004, Alcatel

Key success factors of Wireless Mobile Video> Mass availability and diffusion of Camera enabled Terminals– Today 5% of the MMS terminals in the market are camera-enabled– Today 25% of the MMS terminals sales are camera enabled.> Ergonomics– Intuitive and easy navigation– Rapid access> Usefulness– Addressing end user values: Information, Entertainment & “Infotainment”– Personal Profiling and Terminal Personalization> Quality of Service - Interoperability– Fluent and smooth picture– Compatible with various devices– Connection stability> Economics– End-user Value for priceAlcatel – Enabling SuccessfulMultimedia Services — 22All rights reserved © 2004, Alcatel

Service usage will mainly be driven by a richand often renewed content TV- like …O2 Mobile data from Mobile SurveySKT data from June ServiceTypical TV content (Live broadcast, Trailers, news etc.)is consistently the most popular serviceAlcatel – Enabling SuccessfulMultimedia Services — 23All rights reserved © 2004, Alcatel

A lesson from Korea: SK TelecomEvolution of services with increasing bandwidthMain Service•Text Based ServiceOriented•Provide downloadablelow-volume contentsin consideration oflow-tier network-News / Weather-Travel / Humor-GVM-2, 4 Gray ScreenSaver- 1, 4, 16 Poly BellText BasedInformationScreenSaverM-Trade (GVM)Main Service•Text Based Service +Low Quality MultimediaService•More invigoratedMagician (GVM, SK-VM)Services / Wavelet &VOD launch- NATE Air-NATE Photo- GAME (GVM / SK-VM)- 4 Gray, 256 / 65,000Color Screen Saver NATE Air(Wavelet)NATE - 16, 32, 40 Poly Bell1996 / 9,6kbps (2G): Text based content2000 / 144 kbps (2,5G): pictures / animations2003 / 384 kbps+ (3G): Video, VOD, TVScreenSaverGAME (GVM)A clear evolutionAlcatel – Enabling SuccessfulMultimedia Services — 24All rights reserved © 2004, Alcatel

A lesson from Korea: SK TelecomA very rich video content offer> Very rich content with exclusivityagreement with pop stars and with TVchannels. Shorter films versions andDirector‘s cut versionsExample of TV content1,3 m subscribers of June©services, end 2003A strong penetration of services for June(10% in one year)Alcatel – Enabling SuccessfulMultimedia Services — 25All rights reserved © 2004, Alcatel

The Fourth Screenafter Cinema, TV Set, PC; now mobile phone> Ovum Research suggests strong interest at the high end> Consistent ‘wow!’ factor• one study reports 94% of triallists showed friends & family> Music & news content draw most interest• But we all know that is really soccer and sex…> Willingness to pay for news low in UK - but more willing topay for sports & music• one UK operator tested GPRS streaming video pricing• bundle at £5.00 per month, or pay-per-view at 35p per clip• 40% ‘very likely’ to adopt“There’s a market for video - if the price is right”Ovum Mobile Video 2003Alcatel – Enabling SuccessfulMultimedia Services — 26All rights reserved © 2004, Alcatel

Video content delivery value chain goes fromcontent sourcing to content deliveryValue ChainSourcingSelectionofcataloguePromotionDistributionDeliveryDescriptionProvideoriginalcontentNote :Is usuallydone byentertainmentcompanies,owning themusic andvideo rightsSelect contentFormatcontentUpdatecontentAdvertise• Press• Radio• TV• Internet• …Create eventsaroundexclusivecontentDistributeclips throughmobileentertainmentportalNote:Preconfiguresterminals &portals arekey forserviceadoptionDelivercontent toend-userstreamingNote :Operatorshave a keyposition forensuring QoSPlayersoperatorEntertainmentAggregatorsPartnerships are key !Facilitate access to content with integrated promotion, handsets and billingAlcatel – Enabling SuccessfulMultimedia Services — 27All rights reserved © 2004, Alcatel

Main drivers for adoption of video contentEnd-user benefits …Emotional Benefits - Sharing a passionFavorite football player/singer/modelsFavorite movie trailerPhotos and video to remember best events of life andsend them to friends (video-messaging)Sharing emotionsSearch of partners and new friendsCreating a communityRational benefit - Making life more efficientHaving more accurate info: Video web-Cams …… and purchase driverEasy access to servicesSMS initiated subscriptionHype – New – Feature RichnessHave FUNBrandNew handsets, PDAs, CameraChatting, sharing emotions with video,…Brand related mobile contentMaking Life Easy:Advanced Voice Servicesvoice / video mails, personal assistant,Traffic info via web cam,Making Life more efficient / secureAlcatel – Enabling SuccessfulMultimedia Services — 28All rights reserved © 2004, Alcatel

ConclusionFinding> TV content is obviously key for success> 2.5G network and terminals are good enough for goodquality video content servicesRecommendation> Launch video content services with 2.5G terminals now> Concentrate on TV like content firstTV content services like news clips, live TV or VOD delivered ona 2.5G terminal secure success and fix the path for 3G servicesAlcatel – Enabling SuccessfulMultimedia Services — 29All rights reserved © 2004, Alcatel

Alcatel’s Video offeringDownload & storeReal-Time / StreamedVideoCommunication(person to person)Video MessagingVideo TelephonyVideo ContentDelivery(machine to person)2.5 G3 GVideo Content Delivery2.5 G 3 GSource: OVUM - modifiedAlcatel – Enabling SuccessfulMultimedia Services — 30All rights reserved © 2004, Alcatel

Alcatel’s Video offering=> a comprehensive portfolio of 6 video servicesVideo CommunicationVideo Content DeliveryVideoTelephonyP2PVideoConfP2PVideoMail BoxP2PVideoMMSP2PVideoStreaming & DownloadM2PCircuitswitchedPacketswitchedVideoMMSpush/pullAlcatelApplicationsSoftswitch MMICInstant MessagingMM PhoneVideoMailboxMMS ProxyRelay/ServerControl &PaymentChainControl &PaymentChainMMS ProxyRelay/ServerApplicationPartnersContentPartnersAlcatel – Enabling SuccessfulMultimedia Services — 31All rights reserved © 2004, Alcatel

Role of Alcatel in the Technical Delivery Chain forVideo Content DeliveryContentCreation &BroadcastApplicationHardwareMobileStreaming&DownloadSoftwareAdditionalEnablers &ApplicationsSystemIntegrationAggregation,Syndication& TransportTerminals&ClientsTime WarnerVivendi Univ.Warner Bros.SonyDisneySky BroadcastMTVVirginM6, TF1ServerPlatformsIntelSUNHPIBMServerSoftwarePaymentSolutions,SubscriberManagement,.AmdocsConvergysPortalAggregatestreamingmediacontent in awirelessportal anddeliver to enduserDoCoMoSKTH3GVodafoneOrangeT-Mobile+ fix: iTunes,AOL,RealONE,MSNAlcatel – Enabling SuccessfulMultimedia Services — 32All rights reserved © 2004, Alcatel

Worldwide Network of 3G Reality CentresA worldwidebusinessenvironment> Live end-to-endenvironment> Alcatel networks,terminals andapplicationsBusiness SupportInteroperabilityService innovationAlcatel – Enabling SuccessfulMultimedia Services — 33All rights reserved © 2004, Alcatel

Orange/Alcatel PartnershipEnabling the 3G Value ChainOrange 3G Developer Centres> Building upon Alcatel’s 3G Reality Centres worldwide Program> Part of Sep ‘03 agreement making Alcatel a supplier of choice forOrange’s 3G/UMTS deployment in Europe> Objectives of Orange’s 3G Developer Centres:• Educate and evangelise Orange developer partners about the benefitsof working with Orange, and developing 3G services• Enable applications testing on a range of Orange handsets• Showcase innovative 3G servicesAlready open… …Mid 2004Maidenhead, UKVélizy, FranceRisjwijk,NetherlandsDallas, USAShanghai, ChinaYokosuka, JapanAlcatel – Enabling SuccessfulMultimedia Services — 34All rights reserved © 2004, Alcatel

Alcatel Video Solution for 3Video Services> Fixed/mobile video calls> Videoconferencing> Video streaming+Payment Solution> Real Time Charging for voice, SMS,WAP, video, MMS, download,...> Prepaid and postpaid convergence=Deployedin 7 countriesincludingHong Kong/AustraliaInnovativeand BillableServicesAlcatel – Enabling SuccessfulMultimedia Services — 35All rights reserved © 2004, Alcatel

Music on Mobile: The Magic Equation> Music is part of everyone’s daily life and mobile phones are ineveryone’s pocket> Reach of mobile phones is much larger than that of any other player> Ringtones represent today 10% of the global music market> Ringtones and wallpapers with music artists already represent70% of the global mobile content market2.5G and 3G are enabling enrichedmusic and videoend-user experienceAlcatel – Enabling SuccessfulMultimedia Services — 36All rights reserved © 2004, Alcatel

Enhanced Personalisation of Mobile Serviceswith Audio and Video ContentAlcatel> Applications andPlatforms> Leadership in video> E2E solution integrationUniversal Mobile> 1st class content> Service design expertiseMobileContentKioskAttractive Services> Voice/video mailbox> Music/video ringtonesand ring-back tonesEnhanced User Experience> Attractive content> Richer expression ofindividuality> User-friendlyAlcatel – Universal Mobile:a unique combination to bridge the mobile and music worldsAlcatel – Enabling SuccessfulMultimedia Services — 37All rights reserved © 2004, Alcatel

A World Premiere: Video Mailbox GreetingCreated by Universal MobilePowered by AlcatelHave your favourite stargreet your video-callers !Alcatel – Enabling SuccessfulMultimedia Services — 38All rights reserved © 2004, Alcatel

www.alcatel.comAlcatel – Enabling SuccessfulMultimedia Services — 39All rights reserved © 2004, Alcatel