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October, 2003 Michael Rouleau SVP – Business Development [email protected] Agenda • Time Warner Telecom • Key Strategies and Direction • Time Warner Telecom Product and Roadmap • Success [email protected] 2 Time Warner Telecom A Unique Set of Network Assets Greater than 17,000 local and regional fiber route miles across 44 markets Nearly 3,700 buildings lit with fiber based services National footprint interconnected with fiber and an IP backbone [email protected] 3 Time Warner Telecom’s Houston Network Houston • 853 Route Miles of Fiber • 179 Buildings On-Net • Hundreds of Buildings Passed [email protected] 4 Time Warner Telecom Channel and Operations • Channel Management • Direct Sales Executives – Major Account Executives • Carrier Focus – National Enterprise Account Executives • Fortune 1,000 – Account Executives • “Unfortunate” 5,000 – Associate Sales Executives • SME Customers • Data Overlay Group – Regional Data Specialists • Partner Channel Activities – Cisco Powered Network • Metro Ethernet Emphasis • Operations • Field Operations – Customer Service Support Employees, Field Technicians – Optical, Voice and Metro Ethernet Expertise • National Operations Center – Provisioning, Monitoring, Management • Tier 1, 2 & 3 – Internet Service NOC – Engineering • • • • VoIP IP Services Optical Metro Ethernet [email protected] 5 Time Warner Telecom Strong Financial Performance • 2003 YTD Financial Results: – $327.785 Million in Revenue – $98.823 Million in POSITIVE EBITDA • Financially Disciplined Our Revenue Mix Is Increasingly Enterprise Focused… 8% – Fiber facilities based provider – THE last mile solution into many buildings – 41 Class 5 switches – 12 Markets with Media Gateways and Softswitches Enterprise Carrier – 17 Consecutive Quarters of Positive EBIDTA – Manageable Debt Structure • Metro Focused 9% 45% 38% ISP Intercarrier Comp While Data & IP Revenue Grew 10% 2Q03 over 2Q02 Time Warner Telecom 2Q03 Results [email protected] 6 Current Communications Industry Trends • Enterprise customers are building an increasingly diverse provider base – More than 70% of customers use more than one provider for services • Customers are increasingly price conscious – 36% of customers are likely to switch local services – 75% of Verizon customers and 65% of Qwest customers would switch for better price • Data Services offer higher retention – Commoditization is occurring – Customers churn less for price, more for Customer satisfaction issues # of Communications Providers Used Four or More, 33% Three, 12% One, 29% Two, 26% Data Service Churn Very Likely Somewhat Likely Neither Somewhat Unlikely Very Unlikely 0% 20% 2002 40% 60% 2003 Morgan Stanley Telecommunications Services Survey, June, 2003 [email protected] 7 Current Customer Behaviors • Customers looking for high quality providers to augment/replace current providers – Must have fairly complete bundle – Multiple provider strategy gives customers options in meeting all of their communications needs – Robust data offer wins • Customers demanding better ROI/TCO – VoIP – Metro Ethernet • Customers demanding SLAs & QoS (with network tools, monitoring, management and visibility) as “ticket to play” – Managed Services [email protected] 8 Market Trends Implications For Time Warner Telecom • Metro Ethernet – Market Leadership with comprehensive portfolio strategy • 3 Services to meet customers’ applications and spending needs – Product Extensions underway – Long Haul, 10G • Target enterprise customers for Intranet • Layered services – Internet access and VoIP – Challenge – Reach more buildings “off-net” • Voice over IP – Calculated deployment strategy • Phase 1 – ISP Offload (3/01) • Phase 2 – Class 5 Replacement (1Q02) • Phase 3 – Next Gen Service Offerings (under dev) [email protected] 9 Native LAN Services Architecture 10/100 10/100 E/SW Switched NLAN E/SW DWDM Ethernet SW GE CDNLAN DWDM 10/100 GE Point-to-Point Implementation Unmanaged, Aggressively Priced Solution 10, 100 or 1,000 Mbps 10/100 Cisco 15454 SONET NLAN Cisco 15454 SONET NLAN Cisco 15454 E/SW Customer Direct NLAN FE/GE GE FE/GE DWDM GE Any-to-Any Connectivity Ideal Implementation for Internet Access Fully Managed Solution Protected Network 10, 100 or 1,000 Mbps Switched GE Ring NLAN Cisco 15454 10/100 Cisco 15327 10/100 10/100 Cisco 15327 Ethernet over SONET NLAN Premium Point-to-Point or Multipoint Implementation Protected Service Shared or Dedicated Ring Options Fully Managed Solution 10, 100, 622 or 1,000 Mbps [email protected] 10 Metro Ethernet Access Speeds Metro Ethernet Service Comparison Time Warner Telecom Bell South SBC Qwest Verizon ATT MCI XO Yipes Cogent On Fiber 44 Markets 22 States 9 States 14 States 14 States 3 States 69 Cities Internet in 10 Cities 5 Markets 40 Cities 10 Cities 21 Cities 12 Cities 10 Mpbs 50 Mbps (SONET) 100 Mbps 150 Mbps (SONET) 300 Mbps (SONET) 622 Mbps (SONET) 1 Gbps Markets Applications ESCON Fibre Channel Transpare nt LAN Internet Access Source: IDC May, 2003; Time Warner Telecom May, 2003 Available ICB Not Available [email protected] 11 Product Roadmap [email protected] 12 New Technology Influences Strategy and Direction • Voice over IP • Virtual Private Networking & Security • Wireless – WiFi – 802.11a/b/g, 802.16 • Storage Networking [email protected] 13 Time Warner Telecom Product Direction VoIP Value Add Apps IP Centrex, SIP Phone Support, SIP/H.323 Trunks, VoIP LD Security Services, VPN, etc. Extended NLAN (Ethernet over MPLS; any-to-any) IntraNet NLAN (Ethernet over SONET; PT-PT, MultiPoint) and IP Access Switched NLAN (Ethernet over Fiber; any-to-any) Customer Direct NLAN (PT-PT, 10/100/1,000 Mbps) Complete (or near) In Progress Planned (Future) [email protected] 14 Long Haul Native LAN Service Gig-E Ring TWTC NLAN MPLS Tunnel TWTC IP Backbone MPLS Tunnel Long Haul Native LAN Leverage Existing IP Backbone, MPLS Fully Meshed Network Between all 44 Markets Scalable – 2 Mbps to 1,000 Mbps Introduce New VoIP Bundles – Long Distance, Voice VPN Gig-E Ring TWTC NLAN SONET Ring * Under Development [email protected] 15 VoIP - Regional Network Oracle DB Server Element Management Server Application Notes TWTC IP Backbone City 2 Softswitch Call Control City 3 Softswitch Call Control Server 2 STP STP Region 1 Cities SS7 Gateway x 2 NFS/NTP x 2 Media Gateway x N STP Server 2 STP Region 2 Cities SS7 Gateway x 2 NFS/NTP x 2 Media Gateway x N Region 3 Cities STP Ethernet & IP Switch x 2 STP Server 2 SS7 Gateway x 2 NFS/NTP x 2 Media Gateway x N Ethernet & IP Switch x 2 City 1 Softswitch Call Control Ethernet & IP Switch x 2 Converged Network Infrastructure – Voice and Data Networking Distributed Media Gateways and SS7 Servers Regional Softswitch Call Control Centralized Feature Server Control Redundant Cap and Grow Class 5 Technologies Efficient Network Deployment Optimizes CapEx Spend 3 Phase Approach To Packet Telephony: - ISP Offload (3/01) - Class 5 Replacement (1/02) - Next Gen VoIP [email protected] 16 Future VoIP & NLAN Integration SIP & H.323 Trunking TWTC Central Office Gigabit Ethernet PSTN Native LAN/Metro Ethernet SONET Packet Telephony Switch SIP Phones 10/100 Mb NLAN IP PBX, Gatekeeper * Under Development Ethernet transport carries VoIP to the PBX, desktop Support for SIP & H.323 trunking services QoS over Switched and SONET based Ethernet services [email protected] 17 VoIP Long Distance Better Connections Between Company Sites! Application Notes TWTC IP Backbone MPLS Tunnel Leverage IP Backbone to carry long distance voice – market-tomarket No impact to customer operational network QoS via MPLS implementation Support for customer on-net traffic Support for Voice VPN PSTN San Diego PSTN ABC Company Packet Telephony Switch Corporate HQ & Branch Office Packet Telephony Switch Houston * Under Development [email protected] 18 Time Warner Telecom • Time Warner Telecom’s Track Record of Success Means… • Broad Fiber Optic Reach – Over 17,000 Route Miles of Fiber – Metro Ethernet available to Nearly 3,700 Buildings in 44 Markets • Financial Strength to Grow in Tumultuous Market • Product and Service Innovation – Industry Leading Data & IP Services • Metro Ethernet, IP Networks, VoIP Tomorrow’s Network…TODAY! [email protected] 19 Thank You