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					                                     Telco TV Drives (Arial Bold 18
                                 Report Title: Subtitle Resurgence in
                                   Broadband Equipment Revenues  pt)
                                                                             Wired Communications
                                                             Practice Area (Verdana, 10 pt regular)
                                Report Type - Timeframe and Year (Verdana, 10 pt regular)
                                                                 Topical Report – Q3 2008




Copyright © 2000-2006 iSuppli Corporation _ All Worldwide Rights Reserved _ Confidential |    Patents Pending
   Copyright © 2000-2008 iSuppli Corporation _ All Worldwide Rights Reserved _ Confidential   |   Patents Pending
                                                                                                                            September 2008

                  Telco TV Drives Resurgence in Broadband Equipment Revenues
By Steve Rago, Principal Analyst                                                                     Wired Communications — Q3 2008




      Executive Summary ...................................................................................... 1
      Significant Findings and Recommendations ....................................................... 3
      Market Environment ...................................................................................... 5
         Drivers of Very High-speed Broadband Access ................................................ 5
         Technology Choices .................................................................................. 16
      Factory Revenues and Unit Forecasts ............................................................. 20
         Forecasts Assumptions ............................................................................. 21
         FTTH Unit Shipments and Factory Revenues Forecasts .................................. 22
         Optical Network Terminations ................................................................... 23
         VDSL 2 Unit Shipments and Factory Revenues Forecasts ............................... 25
      Component Cost ......................................................................................... 28
         FTTH: Component TAMs and BOMs ............................................................. 28
         VDSL 2 Silicon TAM and BOM ..................................................................... 37
         BOM-VDSL 2 Line Card ............................................................................. 38
         VDSL 2 Silicon TAM .................................................................................. 39
      Regional Forecasts ...................................................................................... 42
         Asia ....................................................................................................... 43
         Japan ..................................................................................................... 44
         China ..................................................................................................... 45
         Rest of Asia ............................................................................................. 46
         Europe ................................................................................................... 47
         North America ......................................................................................... 49
         Latin America .......................................................................................... 50
         Middle East and Africa .............................................................................. 51
      Players, Products (silicon) and Market Share .................................................. 52
         Players in the Very High-Speed Broadband Market ........................................ 52
      Products and Market Share              ......................................................................... 58
         VDSL 2 ................................................................................................... 58
         FTTH-ONT ............................................................................................... 61
      Summary .................................................................................................. 63
      Appendix A: PON Overview .......................................................................... 65
         The Technology Standards for PON ............................................................. 66
      Appendix B: Active Ethernet or point to point Ethernet Overview ....................... 68
      Appendix C: VDSL Technology ...................................................................... 68
      About iSuppli Corporation ............................................................................ 35




Wired Communications    – Q3 2008                                                                                           September 2008

Copyright © 2000-2008 iSuppli Corporation           |   All Worldwide Rights Reserved       |   Confidential     |   Patents Pending
                                                                                                                      September 2008

                 Telco TV Drives Resurgence in Broadband Equipment Revenues
By Steve Rago, Principal Analyst                                                                Wired Communications — Q3 2008




      List of Figures
      Figure 1: Telco TV Growths by Region, 2006-2013 ............................................. 7
      Figure 2: File Transfer Times (Video, Music, and Misc.) by Channel Rate................ 9
      Figure 3: Subscriber Growth VDSL and FTTH, 2006-2013 .................................. 13
      Figure 4: Japan Dominates VDSL and FTTH Subscriber Base, 2006-2013 ............. 14
      Figure 5: Very High-Speed Broadband Subscriber Growth by Region, 2006-2013.. 15
      Figure 6: Bandwidth Potential: Loop Technology vs. Loop Length ....................... 17
      Figure 7: Relative Cost of Deployment by Topology .......................................... 18
      Figure 8: Telco Broadband Deployment Topologies-Single Family Homes ............. 19
      Figure 9: Telco Broadband Deployment Topologies for MDU ............................... 19
      Figure 10: Revenue Growth VDSL and FTTH, 2006-2013 ................................... 20
      Figure 11: Factory Revenues VDSL and VDSL CPE and Infrastructure, 2006-2013. 21
      Figure 12: VDSL Port Ships vs. New VDSL Subscribers ...................................... 26
      Figure 13: DSLAM Price Per Port ADSL and VDSL, 2006-2013 ............................ 26
      Figure 14: Generic E-PON ONT Block Diagram ................................................. 29
      Figure 15: Generic G-PON ONT Block Diagram ................................................. 30
      Figure 16: ONT TAM Composition, 2006-2013.................................................. 34
      Figure 17: VDSL Chipset Silicon TAM CPE and Infrastructure, 2006-2013 ............ 40
      Figure 18: FTTH Subscribers by Region, 2006-2013.......................................... 42
      Figure 19: VDSL Subscribers by Region, 2006-2013 ......................................... 42
      Figure 20: Asia's Growth of VDSL and FTTH (Japan, China and Rest of Asia),
                 2006-2013 ..................................................................................... 43
      Figure 21: Japan's Broadband Market Growth by Technology 2006-2013 ............. 44
      Figure 22: China's Broadband Market Growth by Technology, 2006-2013 ............ 45
      Figure 23: Rest of Asia's Broadband Market Growth by Technology, 2006-2013.... 46
      Figure 24: Europe's Broadband Market Growth by Technology, 2006-2013 .......... 48
      Figure 25: North America's Broadband Market Growth by Technology, 2006-2013 49
      Figure 26: Latin America's Broadband Market Growth by Technology, 2006-2013 . 50
      Figure 27: Middle East and Africa's Broadband Market Growth by Technology,
                 2006-2013 ..................................................................................... 51
      Figure 28: Conexant CX96xxx VDSL SoC......................................................... 59
      Figure 29: Infineon VDSL 2 VINAXTM–VE PSB80800 ......................................... 60



Wired Communications   – Q3 2008                                                                                      September 2008

Copyright © 2000-2008 iSuppli Corporation        |   All Worldwide Rights Reserved      |   Confidential   |   Patents Pending
                                                                                                              September 2008

                 Telco TV Drives Resurgence in Broadband Equipment Revenues
By Steve Rago Principal Analyst                                                           Wired Communications — Q3 2008




      Figure 30: Ikanos’ Fusiv Vx170/Vx180 System Architecture............................... 60
      Figure 31: Freescale’s MSC 7104 GPON ONT.................................................... 61
      Figure 32: Conexant Xenon-IIIG GPON ........................................................... 62
      Figure 33: Teknovus TK3713 E-PON Solution ................................................... 62
      Figure 34: Cortina’s ONU – 8016 4FE + VoIP ................................................... 63
      Figure 35: PMC-Sierra PAS630 Gigabit Ethernet MAC ........................................ 63
      Figure 36: Schematic of Typical PON Topology ................................................. 65
      Figure 37: VDSL-2 Standard – Profiles ............................................................ 69

      List of Tables
      Table 1: Bandwidth Usage Profile Down Stream by Region, 2006-2013 ................ 6
      Table 2: Bandwidth Usage Profile UpStream by Region, 2006-2013 ..................... 8
      Table 3: Network Technology Required by Region, 2006-201 ............................ 10
      Table 4: Broadband Landscape and Forecast, 2006-2013 ................................. 16
      Table 5: FTTH Subscriber Growth by Technology, 2006-2013 ............................ 22
      Table 6: Global Market for FTTP ONTS, 2006-2013 .......................................... 23
      Table 7: Global Market for FTTP PON-OLT at Carrier Central Offices, 2006-2013 .. 24
      Table 8: Global Market for FTTP PON-OLT at Carrier Central Offices, 2006-2013 .. 25
      Table 9: ADSL, VDSL Infrastructure Port Shipped, 2006-2013 ........................... 27
      Table 10: ADSL, VDSL Infrastructure Factory Revenues, 2006-2013 .................. 27
      Table 11: VDSL and ADSL CPE Shipments, 2006-2013 ..................................... 27
      Table 12: VDSL and ADSL CPE Factory Revenues, 2006-2013 ........................... 28
      Table 13: Component BOM for EPON FTTH ONT, 2006-2013 ............................. 31
      Table 14: BOM for B/GPON FTTP ONT (RF lambda and ONT outside), 2006-2013 . 32
      Table 15: BOM for B/GPON FTTP ONT (IPTV), 2006-2013 ................................. 33
      Table 16: ONT Silicon and Miscellaneous Component TAM, 2006-2013 ............... 35
      Table 17: TAM ONT Optical Component (Millions), 2006-2013 ........................... 36
      Table 18: OLT TAM, 2006-2013 .................................................................... 36
      Table 19: BOM VDSL 2 Line Card, 2006-2013 ................................................. 38
      Table 20: BOM VDSL 2 CPE Bridge, 2006-2013 ............................................... 38
      Table 21: BOM VDSL 2 NGRG W/802.11, 2006-2013 ....................................... 39
      Table 22: VDSL Infrastructure TAM, 2006-2013 .............................................. 41
      Table 23: VDSL 2 CPE TAM, 2006-2013 ......................................................... 41
      Table 24: Japanese VSDL 2 Market Players ..................................................... 58



Wired Communications   – Q3 2008                                                                              September 2008

Copyright © 2000-2008 iSuppli Corporation     |   All Worldwide Rights Reserved   |   Confidential   |   Patents Pending
                                                                                                               September 2008

                   Telco TV Drives Resurgence in Broadband Equipment Revenues
By Steve Rago, Principal Analyst                                                            Wired Communications — Q3 2008




      List of Companies Mentioned in Report

        Alcatel-Lucent                  Alloptic                              AT&T

        Belgacom                        Broadcom                              Broadlight

        BT                              China Netcom                          China Telecom

        Chungwa Telecom                 Conexant Systems                      Cortina Systems

        Deutsche Telekom                France Telecom                        Free

        Freescale Semiconductor         Iamba Networks                        Ikanos Communications Inc.

        Infineon                        JCOM                                  KDDI

        Korea Telecom                   KPN                                   Manitoba Telecom

        Neuf Cegetel                    Nokia-Siemens                         NTT East

        NTT West                        PCCW                                  PMC-Sierra

        Source Photonics                SureWest                              Swisscom

        Teknovus                        Telefonica                            Verizon

        Zhone Technologies




Wired Communications     – Q3 2008                                                                            September 2008

Copyright © 2000-2008 iSuppli Corporation   |      All Worldwide Rights Reserved   |    Confidential   |   Patents Pending
                                                                                                                —1—

                           Telco TV Drives Resurgence in Broadband Equipment Revenues




  Executive Summary
  The world’s telephone companies have their focus on video. Virtually every telephone company
  and competitive access provider is planning to deploy or deploying Telco TV-video services
  including both Video on Demand (VOD) and broadcast video. At the end of 2007, there were 10
  million Telco TV subscribers worldwide. By 2013, the number of Telco TV subscribers will reach
  more than 115 million, iSuppli projects.

  The telephone companies’ strategic thrust into Telco TV and other multimedia services is a
  matter of survival. Telephone companies worldwide are experiencing subscriber erosion in
  excess of 4% per year. Revenues are stagnating. Competition from cellular service providers,
  Multiple Service Operators (MSOs)—also known as cable service providers—and competitive
  access providers is fierce. Telephone companies know that if they do not reinvent themselves,
  they could become extinct.

  Telco TV is the first but not the only multimedia service that telephone companies will be
  offering in the future. One area of opportunity is Peer to Peer (P2P) networks that allow
  subscribers to share video clips, music, digital pictures, etc. iSuppli expects P2P services to
  grow very rapidly over the next five years, providing telephone companies an additional source
  of revenue.

  However, before telephone companies reap the rewards of Telco TV and P2P services, they must
  upgrade their access plant. Both Telco TV and P2P networks require access bandwidths that
  exceed the capabilities of today’s 260 million ADSL loops.

  Telephone companies are wrestling with the question of what is the best architecture for their
  next generation of access networks; is it Fiber to the Home (FTTH), VDSL 2, or a combination of
  deep fiber deployment and VDSL 2X

  Several major telephone companies have made their access network decisions. NTT East and
  West, Verizon, Korea Telecom and France Telecom are proceeding with or have announced plans
  for FTTH. At the same time, Deutsche Telekom, AT&T, Swisscom and KPN in the Netherlands are
  heading down the VDSL 2 path. BT has just announced plans for a fiber network, but it is too
  early to know whether it will be a pure FTTH or fiber plus VDSL 2 network.

  Telephone companies are facing major architectural decisions for both upgrading the installed
  base of ADSL loops and deploying future-proof access loops for the expected 260 million new
  broadband subscribers to be added over the next five years.

  Telephone companies are not the only service providers focusing on very high bandwidth access
  solutions. MSOs are poised to deploy DOCSIS 3.0 and are starting to deploy RF over Glass
  (RFoG) PON access networks. Even though it is not yet standardized, RFoG is being deployed by
  several independent MSOs. RFoG is primarily deployed in Greenfield applications but is also
  being considered when the cable plant undergoes rehab and when the node splits are made to
  reduce the number of subscribers per node.

  The future of very high-speed access networks is upbeat. iSuppli projects that by 2013 very
  high-speed access loops comprised of FTTH and VDSL 2 will account for 33% of all telephone
  companies’ access loops.



Wired Communications — Q3 2008                                                                           September 2008

 Copyright © 2000-2008 iSuppli Corporation   |   All Worldwide Rights Reserved   |   Confidential   |   Patents Pending
                                                                                                                 —2—

                            Telco TV Drives Resurgence in Broadband Equipment Revenues



  For OEMs, the yearly revenue potential will grow from $2.4 billion or 20% of factory broadband
  revenues in 2008 to $8.2 billion or 54% of factory broadband revenues by 2013.

  There is little doubt that the broadband industry is about to experience a major change in
  direction leading to significant opportunities for OEMs and component suppliers. The questions
  for OEMs and component suppliers are: “In which technology should investments be made?”
  “When should investments be made?” and “Which regions should I focus on?”

  The objective of this report is to provide OEMs and component suppliers targeting telephone
  companies and competitive access providers with the needed intelligence to develop winning
  strategies in the VDSL 2 and fiber in the access plant equipment segments.

  The report provides insight into the developing VDSL 2 and fiber access technologies,
  architectural trade-offs services providers are considering, drivers of very high-speed
  broadband technologies, market dynamics by region, obstacles that must be overcome before
  mass deployment can occur and potential inflection points in demand. The report includes by
  region, broadband subscriber forecasts, VDSL and FTTH unit shipments and factory revenues.
  The report also provides an average Bill of Materials (BOM) for each equipment type and global
  TAM forecasts by major component.




Wired Communications — Q3 2008                                                                            September 2008

 Copyright © 2000-2008 iSuppli Corporation   |   All Worldwide Rights Reserved   |   Confidential   |   Patents Pending
                                                                                                                —3—

                           Telco TV Drives Resurgence in Broadband Equipment Revenues




  Significant Findings and Recommendations
       Providing services, not raw bandwidth, is the ultimate winning formula for service provider
        growth.
                  The battle for the residential customer has emphasized high bandwidth
                  coupled with basic voice and television services. As a result, the company that
                  has provided the basic bundle with the highest bandwidth at an acceptable
                  cost has been the winner.
                  However, as the bundled market enters its high growth phase, “services” and
                  not raw bandwidth will become the differentiator. The battleground will be over
                  providing interactive services that capture the imagination of the subscriber.
                  OEM and silicon suppliers must develop products that can become the
                  platform for a diverse offering of interactive services and not just raw
                  bandwidth.


       The universal DSL line card is still more of a vision than reality.
                  Telephone companies’ vision of a single VDSL 2 line card that can support both
                  VDSL 2 and ADSL has had only limited success. For many, DSLAMs are too far
                  from subscribers to offer VDSL 2 services. For most, the cost differential
                  between a VDSL 2 line card and an ADSL 2 line card is too great to enable a
                  universal VDSL 2 card.
                  OEMs and silicon providers must continue development of ADSL 2+ while
                  adding VDSL 2 products to their portfolios. The cost of VDSL 2 needs to
                  approach that of ADSL 2 before a universal line card can become practical.


       Very high-speed broadband solutions will grow from 20% to 50% of the broadband market
        in five years.
                  iSuppli estimates that sales of VDSL 2 and FTTH equipment will account for
                  20% of the total broadband purchases made by telephone companies and
                  competitive access providers during 2008. This segment is expected to grow
                  to $8.2 billion, which is 54% of the market, by 2013
                  Very high-speed broadband is the future of the telephone company broadband
                  market.


       VDSL 2 interoperability has made significant progress since last year.
                  Telephone companies have driven the issue of VDSL 2 silicon interoperability.
                  Aided by the University of New Hampshire interoperability testing labs and
                  cooperation among silicon suppliers, the issues of device interoperability that
                  existed one year ago have been virtually eliminated.
                  OEMs and component suppliers need to continue improving interoperability
                  with their competitors for the overall market to grow. Telephone companies
                  demand a second source, which implies interoperability.




Wired Communications — Q3 2008                                                                           September 2008

 Copyright © 2000-2008 iSuppli Corporation   |   All Worldwide Rights Reserved   |   Confidential   |   Patents Pending
                                                                                                                 —4—

                            Telco TV Drives Resurgence in Broadband Equipment Revenues



       Bandwidth requirements to the home will increase to 80 Mbps down and 30 Mbps up by
        2013.
                  The bandwidth requirements to and from the home will grow significantly over
                  the next five years. The bandwidth will vary by region with Japan, North
                  America and Europe demanding the highest bandwidths. By 2013, these
                  regions will require downstream data rates of up to 80 Mbps and upstream
                  rates up to 35 Mbps to provide non-blocking performance
                  Carriers and OEMs need to plan for these data rates today. VDSL 2 and FTTH
                  are capable of supporting the rates stated above, but for VDSL 2 it means that
                  the fiber loop must be deployed deep into the neighborhood.


       Japan will account for more than 33% of the FTTH subscriber base until 2012.
                  Japan remains the center of FTTH with more than 56% of all FTTH subscribers
                  at the end of 2007. Japan’s dominance will erode to 40% by 2010. By 2012
                  Japan will account for one out of every three FTTH subscribers.
                  OEMs and component suppliers participating in Japan’s FTTH market today
                  should experience good growth for the next few years. Those not participating
                  in the Japanese FTTH market will find it very difficult to secure a beachhead in
                  Japan.


       Driven by Japan and Asia, E-PON will be the technology of choice for FTTH deployments.
                  E-PON accounted for 70% of all FTTH deployments at the end of 2007. E-PON
                  will decline slightly to 60% by 2012.
                  E-PON will continue to be the technology of choice because of cost and an
                  aggressive plan to migrate to a 10Gig version of the technology starting in
                  mid-2009.
                  G-PON and the planned 10G-PON migration will become the product of choice
                  in North America and much of Europe but will not reach shipment parity with
                  E-PON until after 2013.
                  OEMs and component suppliers in the E-PON segment need to include 10G
                  EPON in their portfolio as the standard is finalized by the ITU.


        Very high-speed broadband deployments will be an evolutionary migration.
                  The deployment of very high-speed loops by telephone companies will be on
                  an opportunistic basis. Telephone companies and competitive access suppliers
                  will only deploy very high-speed technology in subscriber segments where
                  they have a strong opportunity to sell value-added services such as Telco TV.
                  OEMs and silicon providers need to view this market as evolutionary. There will
                  not be a wholesale upgrade of the access market.




Wired Communications — Q3 2008                                                                            September 2008

 Copyright © 2000-2008 iSuppli Corporation   |   All Worldwide Rights Reserved   |   Confidential   |   Patents Pending
                                                                                                                —5—

                           Telco TV Drives Resurgence in Broadband Equipment Revenues



       Integration of the Optical Network Termination (ONT) and home gateway will take time.
                  The integration of the basic ONT and home gateway will occur but at a much
                  slower pace than that experienced in the VDSL 2 market. There are two
                  reasons for this: the cost of the ONT is significantly higher than the cost of the
                  VDSL 2 transceiver and the market for ONTs is not as mature as the market for
                  DSL CPE.
                  OEMs and silicon need to plan for integration today and be ready to offer a
                  product when the service provider wants to proceed with integration. The
                  bottom line is an integrated product is less expensive and easier to maintain
                  than two separate devices.


       FTTB is going PON.
                  Fiber to the Building (FTTB) deployments are moving away from active
                  Ethernet in favor of PON. The question for service providers is whether PON
                  deployments in FTTB applications can provide the necessary bandwidth.
                  Standardization of 10 Gig E-PON could solve the bandwidth question. Overall,
                  the cost to deploy a PON architecture for FTTB is less costly than Active
                  Ethernet solutions.
                  OEMs and silicon providers need to look at FTTB with a PON solution in mind.


  Market Environment
  Drivers of Very High-speed Broadband Access
  Telephone companies worldwide are facing stiff competition from competitive access suppliers,
  MSOs (cable companies) and cellular phone service providers. This competitive pressure has
  resulted in subscriber erosion in excess of 4% per year and stagnating revenue that has caused
  telephone companies to rethink how they do business in the residential space. Virtually all
  carriers as well as competitive access suppliers have chosen a strategy of deploying value-
  added services such as Telco TV in combination with their core residential business of voice and
  data to stop subscriber erosion and increase subscriber ARPU.

  Telco TV is only one of the value-added services telephone companies and competitive access
  suppliers are planning to offer. Some of the other services iSuppli believes will be offered over
  the next several years could include time shift television, distance learning, Peer to Peer (P2P)
  managed networks, gaming rooms, video telephony, home automation and remote home
  networking management.

  Each of these services demand increased bandwidth in the service providers’ access loops.
  Today, service providers have 260 million ADSL loops deployed, most of which cannot support
  the increased bandwidths, both downstream and upstream, required to enable the value-added
  services telephone companies would like to offer.

  Table 1 provides an outline of the potential downstream speed required to support various
  value-added services.




Wired Communications — Q3 2008                                                                           September 2008

 Copyright © 2000-2008 iSuppli Corporation   |   All Worldwide Rights Reserved   |   Confidential   |   Patents Pending
                                                                                                                                                                                                         —6—

                              Telco TV Drives Resurgence in Broadband Equipment Revenues




                            Table 1: Bandwidth Usage Profile Down Stream by Region, 2006-2013
                                         Occurrences of Application per Household




                                                                                                                    Peer to Peer (Music, Video,.)




                                                                                                                                                                                  Peek Downstream Rate
                                                                                            Distance Learning




                                                                                                                                                             Video Telephony
                                                                         Web Browsing




                                                                                                                                                    Gaming
                                             HDTV


                                                          SDTV


                                                                 VoIP
                     Mbps Bandwidth/
           Year      Application.          8.00          1.50    0.07   1.00               1.00                 1.00                                1.00     1.00               Mbps
           06-'07    Asia                    0.0          2.0     1.0      1.0                 0.0                       0.5                         1.0       0.0                   5.6
           08-'10    Asia                    1.0          1.0     2.0      4.0                 1.0                       2.0                         2.0       0.5                19.1
           10-'13    Asia                    2.0          1.0     2.0      6.0                 2.0                  10.0                             3.0       1.0                39.6
           06-'07    China                   0.0          0.0     1.0      1.0                 0.0                       0.0                         1.0       0.0                   2.1
           08-'10    China                   0.0          2.0     1.0      1.0                 0.5                       1.0                         2.0       0.0                   7.6
           10-'13    China                   1.0          1.0     2.0      2.0                 1.0                       4.0                         3.0       1.0                20.6
           06-'07    Europe                  0.0          1.0     1.0      5.0                 0.0                       1.0                         1.0       0.0                   8.6
           08-'10    Europe                  1.0          1.0     2.0      8.0                 1.0                  10.0                             2.0       0.5                31.1
           10-'13    Europe                  2.0          1.0     2.0    10.0                  1.0                  20.0                             3.0       1.0                52.6
           06-'07    Japan                   0.0          1.0     2.0    10.0                  0.0                       1.0                         1.0       0.0                13.6
           08-'10    Japan                   2.0          1.0     2.0    15.0                  2.0                  10.0                             3.0       1.0                48.6
           10-'13    Japan                   3.0          0.0     2.0    20.0                  4.0                  25.0                             4.0       2.0                79.1
           06-'07    Latin America           0.0          0.0     0.0      2.0                 0.0                       0.0                         0.0       0.0                   2.0
           08-'10    Latin America           1.0          1.0     1.0      4.0                 0.0                       4.0                         2.0       0.0                19.6
           10-'13    Latin America           2.0          1.0     2.0      6.0                 1.0                  10.0                             3.0       1.0                38.6
           06-'07    N.A.                    1.0          1.0     2.0      5.0                 0.0                       1.0                         1.0       0.0                16.6
           08-'10    N.A.                    3.0          1.0     3.0      8.0                 1.0                  10.0                             2.0       1.0                47.7
           10-'13    N.A.                    4.0          2.0     3.0    10.0                  2.0                  20.0                             3.0       1.0                71.2
                                                                                        Source: iSuppli Corp. | September 2008


  Segmentation of the table is by region and time period. The region segmentation takes into
  account differences such as number of televisions per home and whether the televisions are
  standard definition or high definition. Regional consideration also includes the need for very
  high-speed Internet access, the number of VoIP lines per household, the expected P2P activity
  and the level of gaming.

  A minimal bandwidth is assigned to each service. For each region, the actual bandwidth
  required is shown as a multiple of the minimum bandwidth.

Wired Communications — Q3 2008                                                                                                                                                   September 2008

 Copyright © 2000-2008 iSuppli Corporation          |   All Worldwide Rights Reserved                           |                         Confidential        |                Patents Pending
                                                                                                                                              —7—

                           Telco TV Drives Resurgence in Broadband Equipment Revenues



  For the next several years, Telco TV will exert the most demand on downstream bandwidth.

  Telco TV will grow at a CAGR of 50% over the next five years, reaching 115 million subscribers,
  making it the major driver to increase downstream data rates. Figure 1 illustrates the growth of
  Telco TV by region for the period 2006 to 2013.

                                                       Figure 1: Telco TV Growths by Region, 2006-2013

                                                      120


                                                      100
                            Millions of Subscribers




                                                                                                                      N.A.
                                                      80                                                              ME&A
                                                                                                                      Latin America
                                                                                                                      Japan
                                                      60
                                                                                                                      Europe
                                                                                                                      China
                                                      40                                                              Asia (RO)



                                                      20


                                                       0
                                                       2006   2007       2008   2009   2010   2011    2012   2013

                                                                                                     Source: iSuppli Corp. | September 2008


  ADSL 2 Plus is adequate for several regions today, but will not meet the needs of most regions
  by 2010, and will not be applicable for any region by 2013.

  Not all services will be required simultaneously; however, telephone companies and competitive
  access suppliers will need to engineer their networks so they can accommodate all the services
  that the subscribers subscribe to. Blockage will not be acceptable.

  The downstream data rate is not the only parameter telephone companies need to plan for;
  upstream rates are equally as important. As Table 2 reflects, upstream bandwidths will grow
  exponentially over the next few years.




Wired Communications — Q3 2008                                                                                                         September 2008

 Copyright © 2000-2008 iSuppli Corporation                           |    All Worldwide Rights Reserved      |   Confidential     |   Patents Pending
                                                                                                                                                                                                                                            —8—

                               Telco TV Drives Resurgence in Broadband Equipment Revenues




                              Table 2: Bandwidth Usage Profile UpStream by Region, 2006-2013
                                         Occurrences of Application per Household




                                                                                                                                                                Home surveillance and Security
                                                                  Peer to Peer (Music, Video,.)




                                                                                                                                                                                                                      Peek Up Stream Rate
                                                                                                                      Distance Learning




                                                                                                                                                                                                 Home Automation
                                                                                                                                              Video Telephony
                                             Web Browsing




                                                                                                  Gaming


                                                                                                           VoIP
                     Mbps Bandwidth/
           Year      Application.           1.00                 1.00                             1.00     1.00      1.00                 1.00                  1.00                             1.00               Mbps
           06-'07    Asia                      0.3                     0.5                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   1.1
           08-'10    Asia                      0.3                     2.0                         0.5      0.1          0.0                    0.5                  0.0                           0.0                   3.3
           10-'13    Asia                      0.5               10.0                              1.0      0.1          2.0                    1.0                  0.1                           0.1                14.9
           06-'07    China                     0.3                     0.0                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   0.6
           08-'10    China                     0.3                     1.0                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   1.6
           10-'13    China                     0.3                     4.0                         1.0      0.1          2.0                    1.0                  0.0                           0.0                   8.4
           06-'07    Europe                    0.3                     1.0                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   1.6
           08-'10    Europe                    0.5               10.0                              0.5      0.1          2.0                    0.5                  0.1                           0.0                13.8
           10-'13    Europe                    0.5               20.0                              0.8      0.1          2.0                    1.0                  0.1                           0.1                24.6
           06-'07    Japan                     0.5                     1.0                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   1.9
           08-'10    Japan                     1.0               10.0                              0.8      0.1          2.0                    1.0                  0.1                           0.0                15.0
           10-'13    Japan                     2.5               25.0                              1.0      0.1          4.0                    1.0                  0.1                           0.1                33.9
           06-'07    Latin America             0.3                     0.0                         0.0      0.0          0.0                    0.0                  0.0                           0.0                   0.3
           08-'10    Latin America             0.3                     4.0                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   4.6
           10-'13    Latin America             0.3               10.0                              0.5      0.1          2.0                    1.0                  0.0                           0.0                13.9
           06-'07    N.A.                      0.3                     1.0                         0.3      0.1          0.0                    0.0                  0.0                           0.0                   1.6
           08-'10    N.A.                      0.5               10.0                              0.5      0.2          2.0                    1.0                  0.1                           0.1                14.4
           10-'13    N.A.                      0.5               20.0                              0.8      0.2          4.0                    2.0                  0.1                           0.1                27.7
                                                                                                                  Source: iSuppli Corp. | September 2008


  By 2009, ADSL’s limited upstream bandwidth capacity will be challenging in most regions.

  For service providers to meet the growing interest in next-generation online gaming and P2P
  applications, they will need to migrate to very high-speed access loop technologies.

  P2P will be a major driver to increase upstream bandwidth, iSuppli believes. Figure 2 provides
  an analysis of the times required to transport specific files by channel capacity.

Wired Communications — Q3 2008                                                                                                                                                                                       September 2008

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                                                                                                                           —9—

                                   Telco TV Drives Resurgence in Broadband Equipment Revenues




                     Figure 2: File Transfer Times (Video, Music, and Misc.) by Channel Rate

                                   1,000




                                     100

                                                                                                       HD (MPEG 4)
                         Minutes




                                                                                                      SD (Mpeg4)
                                      10
                                                                                                      Misc. file
                                                                                                      (2GigB)
                                                                                                      100 MP3-song
                                       1




                                                                                            0
                                           10

                                                20

                                                     30

                                                           40

                                                                50

                                                                     60

                                                                          70

                                                                               80

                                                                                    90

                                                                                         10
                                       0
                                                                                Source: iSuppli Corp. | September 2008


  As illustrated in Figure 2, the time required to transport one hour of HDTV content at 1 Mbps
  would be 480 minutes. For one hour of SDTV content at 1 Mbps, the time would be 90 minutes.
  At 20 Mbps, the relative times required for one hour of HDTV and SDTV content would be 24
  minutes and 5 minutes respectively.

  P2P file sharing is growing rapidly worldwide. The sharing of video content, music files, and
  other large files is becoming commonplace. Subscribers will continue to demand higher speeds
  to accommodate P2P applications, thereby driving the need for higher speed upstream
  bandwidth. Today, ADSL2+ can marginally meet these demands, but within the next year or
  two, service providers will be driven to offer very high-speed access technology, iSuppli
  projects.

  ADSL2+ is not sufficient in the long term to support the strategies of the telephone companies.
  The technology has a maximum downstream rate of 24 Mbps and upstream of 1 Mbps. In
  practice, the actual rates will be less because the data rate for DSL technology is inversely
  proportional to the DSL loop length.

  To support Telco TV and multimedia services with the data rates estimated in Tables 1 and 2,
  telephone companies will need to migrate to very high-speed access technologies, VDSL 2 or
  FTTH. Table 3 provides a visual look at the adequate broadband topologies for maximum
  downstream bandwidths by region.




Wired Communications — Q3 2008                                                                                       September 2008

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                                                                                                                                                                                                         — 10 —

                                 Telco TV Drives Resurgence in Broadband Equipment Revenues




                                    Table 3: Network Technology Required by Region, 2006-201




                                                                                                                                                                                         FTTH or FTTC+ VDSL2 Bonding
                                                                                      FTTB/FTTN + ADSL 2+
                                                                   Copper (ADSL 2+)




                                                                                                                                 FTTN + VDSL 2


                                                                                                                                                 FTTB + VDSL 2


                                                                                                                                                                     FTTC + VDSL 2
                                                                                                                FTTN, VDSL 2
        Legend:
        X = Adequate
        X = Marginal
        X = Not Acceptable
        Downstream Network Capacity                                            8             12                     24                32              40                  55             100
        Upstream Network Capacity                                     0.7                1.0                        12                15              15                  30             100

                                                Downstream Network Requirement

                                     Typical    Maximum non-
        Period   Region               Mpbs      blocking Mbps
        06-'07   Asia                    3.1               5.57           X                   X                      X                X               X                   X                          X
        06-'07   China                   1.1               2.07           X                   X                      X                X               X                   X                          X
        06-'07   Europe                  4.7               8.57           X                   X                      X                X               X                   X                          X
        06-'07   Japan                   7.5              13.64           X                   X                      X                X               X                   X                          X
        06-'07   Latin America           1.1               2.00           X                   X                      X                X               X                   X                          X
        06-'07   N.A.                    9.2              16.64           X                   X                      X                X               X                   X                          X
        10-'13   Asia                   21.8              39.64           X                   X                      X                X               X                   X                          X
        10-'13   China                  11.4              20.64           X                   X                      X                X               X                   X                          X
        10-'13   Europe                 29.0              52.64           X                   X                      X                X               X                   X                          X
        10-'13   Japan                  43.5              79.14           X                   X                      X                X               X                   X                          X
        10-'13   Latin America          21.3              38.64           X                   X                      X                X               X                   X                          X
        10-'13   N.A.                   39.2              71.21           X                   X                      X                X               X                   X                          X
                                                 Upstream Network Requirement

                                     Typical    Maximum non-
        Period   Region               Mpbs      blocking Mbps
        06-'07   Asia                    0.6               1.07           X                   X                      X                X               X                   X                          X
        06-'07   China                   0.3               0.57           X                   X                      X                X               X                   X                          X
        06-'07   Europe                  0.9               1.57           X                   X                      X                X               X                   X                          X
        06-'07   Japan                   1.0               1.89           X                   X                      X                X               X                   X                          X
                                                                                                            Source: iSuppli Corp. | September 2008



Wired Communications — Q3 2008                                                                                                                                                       September 2008

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                                                                                                                                                                                        — 11 —

                                 Telco TV Drives Resurgence in Broadband Equipment Revenues



                                  Table 3: Network Technology Required by Region, 2006-201




                                                                                                                                                                                   FTTH or FTTC+ VDSL2 Bonding
                                                                                    FTTB/FTTN + ADSL 2+
                                                                 Copper (ADSL 2+)




                                                                                                                               FTTN + VDSL 2


                                                                                                                                               FTTB + VDSL 2


                                                                                                                                                                   FTTC + VDSL 2
                                                                                                              FTTN, VDSL 2
        Legend:
        X = Adequate
        X = Marginal
        X = Not Acceptable
        06-'07   Latin America          0.1              0.25           X                   X                      X                X               X                   X                      X
        06-'07   N.A.                   0.9              1.64           X                   X                      X                X               X                   X                      X
        10-'13   Asia                   8.2             14.87           X                   X                      X                X               X                   X                      X
        10-'13   China                  4.6              8.39           X                   X                      X                X               X                   X                      X
        10-'13   Europe                13.5             24.62           X                   X                      X                X               X                   X                      X
        10-'13   Japan                 18.6             33.87           X                   X                      X                X               X                   X                      X
        10-'13   Latin America          7.6             13.89           X                   X                      X                X               X                   X                      X
        10-'13   N.A.                  15.2             27.69           X                   X                      X                X               X                   X                      X
                                                                                                          Source: iSuppli Corp. | September 2008


  Choosing the right very high-speed access technology is unique for each telephone company. It
  depends on many factors, such as the bandwidth required, current deployment of fiber in the
  access network, the availability of conduits or aerial facilities to run fiber in the neighborhood
  without the need for trench work, Greenfield vs. Brownfield, length of copper loops and the time
  to market.

  The tier-one telephone companies are starting to declare their preferences. Those choosing
  FTTH include:

       NTT East and West
       Verizon
       KT-Korea Telecom
       France Telecom
       Free
       Neuf Cegetel
       Several Middle East countries have chosen FTTH




Wired Communications — Q3 2008                                                                                                                                              September 2008

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                                                                                                                 — 12 —

                            Telco TV Drives Resurgence in Broadband Equipment Revenues



  Those choosing VDSL include:

       Deutsche Telekom
       AT&T
       Swisscom
       KNP
       Belgacom
       Chunghwa Telecom

  During July 2008 BT revealed plans to invest £1.5bn in a fiber broadband network that could
  deliver top speeds of 100 Mbps to up to 10 million homes by 2012.

  Tier-two and tier-three players active in IPTV deployment are divided on their subscriber loop
  approaches. For example, SureWest in the U.S. has chosen FTTH, while Manitoba Telecom in
  Canada has chosen VDSL.

  The answer to the bandwidth requirement question varies significantly by region and by
  country. For the U.S., the need will include the simultaneous transmission of multiple HDTV data
  streams to the home that require a large amount of bandwidth. For some telephone companies
  in Asia and Europe, the need is to transmit two SDTV channels, which in many cases can be met
  by the existing ADSL networks.

  Telephone companies have chosen a strategy to turn around their stagnating revenues and
  subscriber erosion in the residential segment and it is the transformation from being a voice
  and data service provider to a full line multimedia service provider. For most telephone
  companies, this strategy demands that they migrate their installed base of ADSL subscribers to
  next-generation, very high-speed broadband access technologies—VDSL 2 and FTTTH.

  Very High-Speed Broadband Subscriber Growth
  Migrating subscribers to very high-speed access technologies will be done on an opportunistic
  basis, iSuppli believes. Telephone companies will only deploy these next-generation
  technologies where they believe they can get an immediate return on their investment. Both
  VDSL 2 and FTTH take considerably more capex to deploy than ADSL.

  Telephone companies will also deploy VDSL 2 and/or FTTH for Greenfield developments in areas
  that have potential subscribers to multimedia services.

  As Figure 3 illustrates, the migration to the next generation of broadband access technologies
  will be slow.




Wired Communications — Q3 2008                                                                            September 2008

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                                                                                                                                                                 — 13 —

                                               Telco TV Drives Resurgence in Broadband Equipment Revenues




                                                Figure 3: Subscriber Growth VDSL and FTTH, 2006-2013

                                        160                                                                    40%




                                                                                                                       % of FTTH & VDSL to Total Fixed BB
                                        140                                                                    35%

                                        120                                                                    30%
              Millions of Subscribers




                                        100                                                                    25%




                                                                                                                                  Subscribers
                                        80                                                                     20%

                                        60                                                                     15%

                                        40                                                                     10%

                                        20                                                                     5%

                                         0                                                                     0%
                                              2006   2007   2008    2009    2010    2011     2012       2013

                                                            VDSL        FTTH       % to Total

                                                                                           Source: iSuppli Corp. | September 2008


  Over the next five years, VDSL 2 and FTTH will grow from 10% of all telephone companies and
  competitive access service provider broadband loops to 33%.

  During the last three years, Japan has been the leader in deploying VDSL and FTTH as Figure 4
  depicts.




Wired Communications — Q3 2008                                                                                                                              September 2008

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                                                                                                                                                                     — 14 —

                                                     Telco TV Drives Resurgence in Broadband Equipment Revenues




                                               Figure 4: Japan Dominates VDSL and FTTH Subscriber Base, 2006-2013

                                               225                                                                      70%

                                               200
                                                                                                                        60%
                                               175
                Millions of FTTH Subscribers




                                                                                                                                  Japan as Percent to ROW
                                                                                                                        50%
                                               150

                                               125                                                                      40%

                                               100                                                                      30%

                                               75
                                                                                                                        20%
                                               50
                                                                                                                        10%
                                               25

                                                0                                                                       0%
                                                     2006   2007    2008      2009    2010    2011    2012      2013

                                                                   Japan       ROW       Japan % of Total

                                                                                                  Source: iSuppli Corp. | September 2008


  Just two years ago, Japan accounted for two-thirds of the world’s very high-speed broadband
  subscribers. By the end of 2008, Japan will account for 40% of all very high-speed subscribers.
  However, over the next five years, as telephone companies worldwide start deploying very high-
  speed broadband loops in support of their transition strategies, Japan’s share will drop to 18%.

  For OEMs and silicon suppliers looking to enter Japan’s high-speed access market, it may be too
  late. Japan’s major service providers—NTT East, NTT West and KDDI—have settled on their
  suppliers and are now in mass deployment. There will be niche service areas where a new
  entrant to the market may be able to gain a beachhead, but this will not materialize into a
  major revenue opportunity.

  There will be many opportunities for the OEMs and silicon providers not participating in Japan
  today. As Figure 5 shows, over the next few years Europe will emerge as a significant
  opportunity for OEMs as will Asia and North America.




Wired Communications — Q3 2008                                                                                                                                September 2008

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                                                                                                                                                  — 15 —

                           Telco TV Drives Resurgence in Broadband Equipment Revenues




                 Figure 5: Very High-Speed Broadband Subscriber Growth by Region, 2006-2013

                                                               260
                                                               240
                                                               220
                              Millions of VHS BB Subscribers


                                                               200
                                                                                                                             NA
                                                               180
                                                                                                                             ME&A
                                                               160                                                           Latin America
                                                               140                                                           Japan
                                                               120                                                           Europe
                                                               100                                                           China
                                                                                                                             A/PAC
                                                               80
                                                               60
                                                               40
                                                               20
                                                                0
                                                                2006   2007   2008   2009   2010   2011   2012       2013

                                                                                                     Source: iSuppli Corp. | September 2008


  China is a wild card in the demand picture. OEMs and component suppliers need to watch China
  closely. China has been very aggressive in FTTH while preparing for the 2008 Olympics. This
  momentum may not continue. Greenfield opportunities in China will go to FTTB and fiber up the
  risers but may not migrate all the way to FTTH or VDSL 2.

  Table 4 provides a view of the current and future broadband landscape.




Wired Communications — Q3 2008                                                                                                             September 2008

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                                                                                                                                — 16 —

                                   Telco TV Drives Resurgence in Broadband Equipment Revenues




                                      Table 4: Broadband Landscape and Forecast, 2006-2013

                                                                                                                                  CAGR
                                                       2006    2007    2008    2009     2010         2011    2012       2013    '08 - '13
   Total Households (Millions)                         2,259   2,286   2,313   2,341    2,369        2,397   2,426      2,455        1%
   Internet Subscriber Households (Thousands)            684     757     817     867      919         975    1,019      1,043        5%
   Percentage of Households With Internet Access       30.3%   33.1%   35.3%   37.1%    38.8%       40.7%    42.0%     42.5%         4%
   Total Broadband Subscribers (Thousands)               271     346     414     478      537         592        648     721        12%
   Broadband by Technology
   ADSL                                                  186     234     269     291      305         310        310     293         2%
   VDSL                                                    6      11      20      31         43        56         71      98        38%
   Cable                                                  62      74      85      93         97       103        108     114         6%
   FTTH                                                    5      11      21      39         64        86        113     146        47%
   FLAN (Ethernet)                                        12      16      19      22         24        26         26      30        10%
   WiMAX                                                   0       1       1       2          5        12         19      40       112%
   Broadband by Service Provider
   Telco's and CLECs                                     209     272     330     385      440         489        540     607        13%
   MSO (cable operators)                                  62      74      85      93         97       103        108     114         6%
   % Telco and CLEC                                     77%     79%     80%     81%      82%          83%        83%     84%
                                                                                        Source: iSuppli Corp. | September 2008


  As illustrated above, telephone companies and competitive access suppliers will continue to
  dominate the broadband service provider space for the next five years. Within this segment,
  ADSL 2+ will continue to be the most common broadband access technology. For OEMs and
  component suppliers, it will be very important to have both ADSL and VDSL in their product
  portfolios. Those OEMs and component manufacturers who can offer all the necessary
  technologies for telephone companies as they transition their subscribers to very high-speed
  access technologies, should be in a good sales position.

  Technology Choices
  Telephone companies and competitive access service providers have several very high-speed
  broadband topologies that they can deploy.

  Figure 6 illustrates the different downstream bandwidths that each of the existing telephone
  company broadband technologies can support.




Wired Communications — Q3 2008                                                                                           September 2008

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                                                                                                                            — 17 —

                                   Telco TV Drives Resurgence in Broadband Equipment Revenues




                                Figure 6: Bandwidth Potential: Loop Technology vs. Loop Length

                          100




                           60
              Data rate
               [Mbit/s]




                                VD
                                  SL
                                    2




                           20                                        FTTH


                           8        ADS
                                       L     2+

                           2



                                      1 km        2 km           3 km       4 km      5 km

                                                             Line Length

                                                                                    Source: iSuppli Corp. | September 2008


  As illustrated, the sweet spot for VDSL 2 is a loop length of 1km from the central office or
  remote cabinet to the home. Beyond 1km, VDSL 2 does not offer a decided advantage over
  ADSL2+. VDSL at very short loop lengths (less than 500 meters) can meet the downstream
  needs of most regions through 2013. Fiber can meet all downstream requirements. Deploying
  FTTH at first glance appears to be the obvious solution. However, the cost of running fiber to the
  home, especially with buried cable, could prove to be too expensive.

  Figure 7 provides a quick comparison of the relative costs of deploying xDSL versus FTTH.




Wired Communications — Q3 2008                                                                                       September 2008

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                                                                                                                                      — 18 —

                                 Telco TV Drives Resurgence in Broadband Equipment Revenues




                                   Figure 7: Relative Cost of Deployment by Topology

                                        CAPEX Comparison FTTN vs. FTTH


                                                                                      Divided by 2 if
                           15                                                         available ducts

                                         Fiber, trenching
                                         Cabinet install
                           10            Access HW




                             5


                       Ref = 1

                                      CO         FTTN         FTTH         FTTH           FTTH in
                                     ADSL       VDSL2         new          aerial       current ducts
                                                                          Note: CAPEX including CPE at 33% FTTx uptake


                                     •FTTH civil works: 50-80% of the total cost
                                     •FTTN/VDSL2 more cost effective by re-using existing copper


                                                                                                                 Source: Alcatel-Lucent


  As Figure 7 illustrates, driving fiber deeper into the neighborhood raises deployment costs as
  compared to conventional central office deployment, by five to twelve times. The migration to a
  high bandwidth subscriber pipe (greater than 20 Mbps) is very costly to telephone companies
  and competitive access service providers.

  The two questions being addressed by most telephone companies today are: “What broadband
  architectures best supports planned services?” and “When must it be deployed?”

  The answers to these questions are unique for each telephone company. It depends on many
  factors, such as the bandwidth required, copper loop lengths, current deployment of fiber in the
  access network, the availability of conduits or aerial facilities to run fiber in the neighborhood
  without the need for trench work, Greenfield vs. Brownfield, single family homes versus multi-
  dwelling units, available capital and time to market.

  To support TV and multimedia services with efficient data rates, telephone companies need to
  focus their architectural evaluations on VDSL 2, PON, Active Ethernet and FTTB.

  One obvious need in the access architecture of the future is fiber in the loop. The question is
  how close to the home should the fiber run. The closer fiber is deployed to the subscriber the
  higher the bandwidth that can be offered. The ultimate bandwidth achievable is when the fiber
  is terminated at the home.

  Figures 8 and 9 illustrate several access topologies that service providers are implementing or
  considering for very high-speed broadband deployment.




Wired Communications — Q3 2008                                                                                                  September 2008

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                                                                                                                                         — 19 —

                            Telco TV Drives Resurgence in Broadband Equipment Revenues




                    Figure 8: Telco Broadband Deployment Topologies-Single Family Homes

                                          Active Ethernet
                          Fiber
                                                                                                 Active Ethernet
                                           Active Ethernet                                       > 100 mbps

                     Ethernet     Fiber

                      Switch

                                                                  Passive
                      Central
                                                                  Splitter                     Passive Optical Networking
                       Office      Fiber                                 Fiber
                                               PON                                             Fiber to the Premises
                                            FTTH - 15kft                                       > 100 mbps


                                                                Curb                           FTTC + VDSL2
                                      Fiber                             VDSL 2
                                                                                               Fiber to the curb 50 to 100 ft from
                                                                        <1km                   The home 50 to 75 Mbps

                                                 Node
                                   Fiber                       VDSL 2                          FTTN + VDSL2
                                                                                               Fiber to the Node
                                                            1km< loop<5km                      12 to 32 mbsp


                                  Fiber          Node VDSL 2+ With Bonding                     FTTN + VDSL2 & Bonding
                                                                                               Fiber to the Node with Bonding
                                                                                               16 to 60 mbsp



                                               ADSL 2+ or VDSL 2                               Central Office Feed ADSL
                                                                                               5 to 12 mbsp
                                          1 km<Copper loop<5km
                                                                                           Source: iSuppli Corp. | September 2008



                           Figure 9: Telco Broadband Deployment Topologies for MDU


                                                                                               FTTB
                                                                                               Fiber to the Building
                                               Active Ethernet                                 xDSL or Cat 5 FE in the raisers
                                                                                 Etherne
                                  Fiber
                                                                                    t
                                                                                                 24 to 50 Mbps
                                                                                 Switch




                                                                                           FTTB
                      Central                              Passive                         Fiber to the Building
                       Office                              Splitter     ONT
                                    Fiber                                                  xDSL or Cat 5 FE in the raisers
                                               PON
                                                                                             10 to 50 Mbps




                                                                Fiber
                                                                                            FTTB
                                                                                            Fiber to the Building
                                                                         ONT                xDSL or Cat 5 FE in the raisers
                                                                                              10 to 50 Mbps




                                                                                                F-LAN
                                                                                                Fiber to the Building
                                                                                                Shared FE to each Apartment
                                  Fiber       Active Ethernet or OC 3                             < 10 Mbps per Apartment


                                                                                           Source: iSuppli Corp. | September 2008



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                                                                                                                                                                      — 20 —

                                               Telco TV Drives Resurgence in Broadband Equipment Revenues



  Passive Optical Network (PON) technologies are becoming popular deployment technologies for
  multi-dwelling units worldwide. The initial deployments used Active Ethernet or a dedicated
  optical pipe such as an OC-3 to the building. This required a full set of optics at both ends of
  each loop. PON architecture helps reduce the cost of the optics at the CO. One challenge of PON
  in MDU environments is the overall downstream bandwidths. If an E-PON loop capable of 1
  Gbps is split among three buildings and each building had thirty tenants, then the maximum
  bandwidth per tenant would be approximately 10 Mbps. This would not be sufficient for most
  multimedia applications. For this reason, both E-PON and G-PON (see appendix A-C for more
  information on these technologies) are working on new standards to provide 10 Gbps. In the
  ITU, standards for 10 G-PON are being developed while in the IEEE the standard for 10 GEPON
  is nearing completion. Ratification is expected mid-2009. Several suppliers are offering or
  planning to offer 10 GEPON products this year.

  Ratification of VDSL 2 (see Appendix C for details on the technology) occurred in 2005. When
  coupled with fiber, VDSL 2 can meet the service needs of many telephone companies. For some,
  VDSL 2 could be a very good start in a migration path that will ultimately result in fiber all the
  way to the home. The focus on VDSL 2 has been in improving interoperability and noise
  mitigation. Interoperability, which was an issue just one year ago, no longer appears to be a
  problem. While work on the addendum to the standards for rapid retransmission at the physical
  layer is progressing, the goal is to make VDSL 2 a very good transport medium for linear TV.

  Factory Revenues and Unit Forecasts
  VDSL and FTTH will comprise 20% of the total broadband infrastructure and CPE factory
  revenue during 2008. The percentage will grow to more than 50% by 2013 (Figure 10).

                                                Figure 10: Revenue Growth VDSL and FTTH, 2006-2013

                                      $4,500                                                                   60%
                                                                                                                      % of Total Fixed BB Factory Revenues




                                      $4,000
                                                                                                               50%
                                      $3,500
               Factory Revenue ($M)




                                      $3,000                                                                   40%

                                      $2,500
                                                                                                               30%
                                      $2,000

                                      $1,500                                                                   20%

                                      $1,000
                                                                                                               10%
                                       $500

                                         $0                                                                    0%
                                               2006   2007    2008    2009    2010     2011   2012     2013

                                                       VDSL        Fiber to the Home      % to Total BB

                                                                                          Source: iSuppli Corp. | September 2008




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                           Telco TV Drives Resurgence in Broadband Equipment Revenues



  OEMs and component suppliers should note that more than 50% of the total VDSL and FTTH
  factory revenue during 2008 is derived by CPE equipment. CPE will grow to 70% of the very
  high-speed broadband equipment market by 2013.

  During the early growth phase, virtually all service providers will require their primary suppliers
  to offer both ends of the loop. The reason for this is to ensure performance and the ability to
  monitor the loop. As service providers enter a mature growth phase, they will demand
  interoperability to guarantee price and supply. Figure 11 illustrates the product mix by factory
  revenue for the very high-speed broadband market.

                 Figure 11: Factory Revenues VDSL and VDSL CPE and Infrastructure, 2006-2013

                                                   $8,000

                                                   $7,000

                                                   $6,000                                                  Fiber Splitter
                             Millions of Dollars




                                                   $5,000                                                  Fiber-ONT

                                                                                                           Fiber-OLT
                                                   $4,000
                                                                                                           VDSL CPE
                                                   $3,000                                                  VDSL
                                                                                                           Infrastructure
                                                   $2,000

                                                   $1,000

                                                      $0
                                                       2006 2007 2008 2009 2010 2011 2012 2013

                                                                                        Source: iSuppli Corp. | September 2008


  Forecasts Assumptions
  VDSL 2 Growth Assumptions
       The cost premium for VDSL 2 equipment will approach 25% of comparable ADSL2+
        equipment by 2010. At this price differential, iSuppli projects ADSL infrastructure
        replacement ports will utilize VDSL 2 equipment.
       Fiber to the Neighborhood (FTTN), Fiber to the Curb (FTTC) and Fiber to the Building
        (FTTB) are not included in the factory revenue forecasts.
       MSO deployments of fiber in the loop are not included in the following factory revenue
        forecasts.
       Replacement rates for ONTs averages five years.
       Replacement rates of VDLSL 2 CPE will vary by region, ranging from two to five years.
       E-PON Optical Line Termination (OLT) split rates average 20.
       B/G-PON split rates average 25.
       The majority of IPTV subscribers are serviced by VDSL 2 or FTTH.


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                                                                                                                         — 22 —

                             Telco TV Drives Resurgence in Broadband Equipment Revenues



       VDSL 2 line cards average 48 ports.
       Bandwidth wars will heighten by the end of 2008 as cable operators initiate deployment of
        DOCSIS 3.0. The answer from service providers will be VDSL 2 or FTTH.
       Regulations, specifically ULL in the common market, will slow the deployment of VDSL 2
        and FTTH by the major telephone companies through 2009. After 2009, the major
        telephone companies will start to deploy significant numbers of very high-speed access
        loops.
       Interoperability of VDSL 2 silicon will not be an issue for service providers.
       MPEG 4 will become ubiquitous for Telco TV by the end of 2008.
       The cost of deploying fiber to the home will remain significantly higher than running fiber
        deep into the neighborhood and then utilizing existing copper to the home.
       Service providers that select FTTH will stay the course.
       FTTB will deploy 10G E-PON after 2009. In the following forecasts, iSuppli uses E-PON to
        reflect both 1G and 10G E-PON.
       ONTs are treated as basic optical termination equipment with some layer 2 functionality
        and VoIP capabilities. The integration of the home gateway and home controller function
        with the ONT is not included in the revenue estimates.
       The cost to deploy FTTH versus FTTx + VDSL 2 is 3 to 1, minimum.
       VDSL 2 will have sufficient bandwidth to meet most Telco TV applications.
       Starting in 2008 many telephone companies will deploy FTTH for their new subscribers,
        including Greenfield applications and new IPTV subscribers. The projected yearly growth is
        between 3 and 10% with the exception of Korea and Japan, which are much more
        aggressive in their deployments.
       Competition in the U.S., driven by cable companies and DOCSIS 3.0, will drive FTTH
        deployment starting mid-2009.
       VDSL 2 equipment costs will average 30% higher than comparable ADSL equipment.

  FTTH Unit Shipments and Factory Revenues Forecasts
  E-PON, driven by NTT East and NTT West’s aggressive deployment, will remain the leading FTTH
  technology through 2012 as reflected in Table 5.

                                 Table 5: FTTH Subscriber Growth by Technology, 2006-2013

       Subscribers in Millions                         2006    2007    2008    2009    2010     2011        2012      2013
       E-PON                                            3.68    7.78   14.90   26.76   41.18   49.88        59.23     71.25
       B/G-PON                                          0.96    2.47    5.62   11.03   21.38   34.42        51.95     72.23
       Active E                                         0.48    0.70    0.95    1.24    1.67     1.94         2.03     2.68
       Total                                            5.12   10.94   21.48   39.02   64.22   86.24        113.20   146.16
                                                                           Source: iSuppli Corp. | September 2008




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                                                                                                                                    — 23 —

                                  Telco TV Drives Resurgence in Broadband Equipment Revenues



  G-PON on the strength of Europe and North America deployments will gain parity with E-PON by
  2013. Active Ethernet, the choice of many municipalities and some service providers, will not
  achieve a significant market share. With 10 Gig GPON and 10 Gig EPON availability starting in
  2009, Active Ethernet will also lose out to PON for FTTB applications.

  The equipment forecasts for FTTH include the following three major elements:

       ONT that terminates the fiber loop at the subscribers’ residences
       OLT located at the central office
       Splitters

  Optical Network Terminations
  The following ONT forecast treats the ONT as a standalone device with limited layer 2
  functionality and some VoIP capabilities. Over the forecast period (2006-2013), a trend toward
  fully integrated ONTs with home gateway/router (layer 2-4) functionality will occur, iSuppli
  projects. Integration, driven by the need to reduce costs within the ONT and gateways while
  providing enhanced provisioning and maintenance capabilities, will become the norm. ONTs will
  represent the majority of opportunities for OEMs and component suppliers in the FTTH
  segment. Table 6 provides iSuppli’s unit and revenue forecasts for ONTs.

                                              Table 6: Global Market for FTTP ONTS, 2006-2013
      EPON                                                         2006    2007     2008     2009      2010     2011       2012     2013
      FTTP-EPON                                                    1,632   4,092    7,128   11,853    14,421    8,703      9,347   12,018
      EPON Subscribers Net Adds (1000s)                            1,746   5,536    9,304   14,712    19,532   16,320     20,568   24,755
      EPON ONT Unit shipments (1000s)                               $72     $68      $65      $62        $60        $59     $59      $59
      ASP of ONT at CPE ($)                                        $126    $379     $608     $913     $1,164    $970      $1,221   $1,468
      EPON FTTP ONT         (Millions of $)                        3,683   7,775   14,903   26,757    41,178   49,881     59,228   71,245
      BPON/GPON
      FTTP-B&GPON                                                   959    2,468    5,619   11,030    21,378   34,422     51,946   72,230
      BPON/GPON Subscribers Net Adds (1000s)                        605    1,509    3,151    5,411    10,348   13,044     17,524   20,284
      BPON/GPON ONT Unit Shipments (1000s)                          635    1,586    3,652    6,227    12,550   16,561     23,821   29,978
      ASP of ONT at CPE ($)                                        $139    $124     $117     $106       $105    $100        $80      $79
      Total Market for BPON/GPON FTTP ONT (Millions of $)           $89    $196     $426     $660     $1,320   $1,652     $1,906   $2,368
      Active Ethernet
      FTTP-Active E                                                 478     695      953     1,236     1,670    1,939      2,030    2,682
      Active FTTH Net Adds (1000s)                                  125     217      258      283        434        269      92      651
      Active ONT Unit Shipments (1000s)                             131     233      298      380        607        502     388      984
      ASP of ONT at CPE ($)                                         $72     $68      $65      $62        $60        $59     $59      $59
      Total Market for Active FTTP ONT (Millions of $)               $9     $16      $19      $24        $36        $30     $23      $58
      Total                                                        $224    $591    $1,054   $1,596    $2,520   $2,652     $3,150   $3,894
                                                                                        Source: iSuppli Corp. | September 2008



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                                                                                                                              — 24 —

                                   Telco TV Drives Resurgence in Broadband Equipment Revenues



  OLT infrastructure equipment accounted for approximately 27% of the total FTTH revenues
  during 2007. iSuppli projects that by 2013, OLTs will account for approximately 8% of the
  revenue as OLT utilization grows to 60%.

  Table 7 provides an in-depth view of iSuppli’s factory forecasts for OLTs by technology, including
  units, ASPs and revenues.

                           Table 7: Global Market for FTTP PON-OLT at Carrier Central Offices, 2006-2013

                                                                  2006    2007   2008     2009      2010      2011     2012    2013
    EPON
    Each OLT card can support a maximum of 32 ONTs
    EPON OLT ports shipped (1000s)                                 174     450     630        791    798       466      504     645
    ASP of OLT at CO ($)/port                                     $297    $263    $239    $223      $210      $202     $202    $200
    Total Market for EPON FTTP ONT (Millions of $)                 $52    $118    $150    $176      $167       $94     $102    $129
    BPON/GPON
    Each GPON OLT card can support a maximum of 62 ONTs
    BPON/GPON OLT Ports shipped (1000s)                             48     101     195        268    438       538      693     803
    ASP of OLT at CO ($)                                          $340    $303    $274    $255      $239      $230     $230    $285
    Total Market for BPON/GPON FTTP OLT (Millions of $)            $16     $31     $53        $68   $105      $124     $159    $229
    Active Ethernet (point to point)
    Active Ethernet Port shipments (1,000)                         125     217     258        283    434       269      127     651
    ASP at CO ($)/port                                            $237    $210    $191    $178      $168      $161     $162    $160
    Active Ethernet FTTP OLT (Millions of $)                       $30     $45     $49        $50    $73       $43      $21    $104
    Total Market PON OLT market                                    $98    $195    $253    $295      $345      $261     $282    $462
                                                                                      Source: iSuppli Corp. | September 2008


  Splitters, the enabling component of PON technology, accounted for 11% of the total FTTH
  revenue in 2007. However, iSuppli projects they will decline to 9% by 2010 and 7% by 2013.

  Table 8 provides an in-depth view of iSuppli’s factory forecasts for PON splitters by technology,
  including units, ASPs and revenues.




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                                                                                                                                       — 25 —

                                     Telco TV Drives Resurgence in Broadband Equipment Revenues




                           Table 8: Global Market for FTTP PON-OLT at Carrier Central Offices, 2006-2013

                                                                          2006    2007   2008     2009      2010      2011     2012     2013
    EPON Splitter forecasts
    Number of Overall 1x32 Passive Splitters (1000s)                       174     450     630        791    798       466      504      645
    ASP of Passive Splitters ($)                                          $141    $136    $133    $126      $125      $120      $117    $115
    Total Market for Passive Splitters (Millions of $)                     $25     $61     $84    $100      $100       $56      $59      $74
    GPON Splitter forecasts
    Number of Overall 1x32 Passive Splitters (1000s)                        44      71     107        139    228       280      361      418
    ASP of Passive Splitters ($)                                          $282    $266    $256    $250      $242      $235     $228     $221
    Total Market for Passive Splitters (Millions of $)                     $12     $19     $27        $35    $55       $66      $82      $92
    Number of Overall 1x64 Passive Splitters (1000s)                         5      30      88        129    210       258      333      386
    ASP of Passive Splitters ($)                                          $378    $358    $326    $320      $307      $292     $283     $275
    Total Market for 1x64 Passive Splitters (Millions of $)                 $2     $11     $29        $41    $65       $75      $94     $106
    Total Market For FTTH Splitters (Millions of $)                        $39     $91    $140    $176      $219      $197     $235     $272
                                                                                              Source: iSuppli Corp. | September 2008


  VDSL 2 Unit Shipments and Factory Revenues Forecasts
  VDSL 2 accounted for 57% of the very high-speed broadband equipment revenues at the end of
  2007. VDSL 2 revenue share of this segment will fall to 39% by 2010 and then grow to 46% by
  2013. The reason for the decline through 2010 will be the reluctance of several European
  nations to deploy VDSL 2 in significant numbers while the EU’s ULL regulations remain in effect.

  The vision of a universal DSL line card has not yet come to fruition because the cost differential
  on a DSLAM per port basis for VDSL versus ADSL was more than 60% at the end of 2007. As
  the differential approaches 30%, iSuppli expects major telephone companies will start to deploy
  universal VDSL line cards, making it much easier to upgrade subscribers and maintain the
  installed plant.

  As Figure 12 illustrates the overbuild of VDSL infrastructure will be in the range of 3 to 1 until
  2010, when iSuppli expects to see the initial deployments of the universal line card creating a
  ratio of 4.5 to 1 in terms of VDSL ports shipped versus net new VDSL subscribers.




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                                                                                                                                                                   — 26 —

                                                          Telco TV Drives Resurgence in Broadband Equipment Revenues




                                                              Figure 12: VDSL Port Ships vs. New VDSL Subscribers

                                                        100

                                                         90

                                                         80

                                                         70

                                                         60
                                             Millions




                                                         50

                                                         40

                                                         30

                                                         20

                                                         10

                                                          0
                                                                2006 2007 2008 2009        2010 2011 2012 2013

                                                                  VDSL Net New Subscribers       VDSL Ports Shipped

                                                                                                        Source: iSuppli Corp. | September 2008


  Figure 13 illustrates the impact of the universal line card in terms of DSLAM ASP differences.

                                                        Figure 13: DSLAM Price Per Port ADSL and VDSL, 2006-2013

                                            40                                                                                60%

                                            35
                                                                                                                              50%
                                            30
                Millions of Ports Shipped




                                                                                                                              40%
                                                                                                                                        % of VDSL Ports




                                            25

                                            20                                                                                30%

                                            15
                                                                                                                              20%
                                            10
                                                                                                                              10%
                                            5

                                            0                                                                                 0%
                                                        2006      2007    2008     2009     2010    2011     2012     2013

                                                                             ADSL         VDSL      % VDSL
                                                                                                        Source: iSuppli Corp. | September 2008




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                                                                                                                                  — 27 —

                                    Telco TV Drives Resurgence in Broadband Equipment Revenues



  Table 9 provides iSuppli’s unit forecasts for DSLAM ports for both ADSL and VDSL.

                                     Table 9: ADSL, VDSL Infrastructure Port Shipped, 2006-2013

    Ports Shipped in Millions                                    2006     2007     2008     2009       2010     2011      2012     2013
    ADSL Inf. ports shipped                                       210      184      163        131      155      116        118      69
    VDSL Inf. ports shipped                                        17       21       28         41       50       58        76       97
    Total port shipments                                          228      205      191        171      205      174       194      166
    VDSL 2% of total xDSL ports shipped                            8%      10%      14%        24%      24%      33%       39%      58%
                                                                                       Source: iSuppli Corp. | September 2008


  The VDSL infrastructure revenues will take a higher percentage of the ADSL VDSL factory
  revenue because of the higher ASP for VDSL infrastructure ports as shown in Table 10.

                                   Table 10: ADSL, VDSL Infrastructure Factory Revenues, 2006-2013

    Revenues in $M                                               2006     2007     2008     2009       2010     2011      2012     2013
    ADSL                                                        $4,335   $3,441   $2,950   $2,228     $2,494   $1,717    $1,607    $893
    VDSL                                                         $665     $654     $706     $952      $1,006   $1,157    $1,446   $1,639
    Total Inf. Revenues                                         $5,000   $4,095   $3,656   $3,179     $3,500   $2,874    $3,053   $2,532
    VDSL% of total ports shipped                                  13%      16%      19%        30%      29%      40%       47%      65%
                                                                                       Source: iSuppli Corp. | September 2008


  During the same period, VDSL 2 CPE will not fare as well. As shown in Table 11, ADSL 2+ will
  dominate the xDSL CPE shipments through 2013.

                                          Table 11: VDSL and ADSL CPE Shipments, 2006-2013

    CPE Shipments in Millions                                    2006     2007     2008     2009       2010     2011      2012     2013
    VDSL Router & Simple Bridge                                   1.39     1.72     2.22       3.92     7.32     5.21      7.67    14.51
    VDSL Gateway w/802.11                                         1.59     4.09     6.22    10.55      10.84    16.59     24.31    32.11
    ADSL 2+ all models                                           99.93   126.17   132.02   140.17     147.58   149.33    157.33   150.04
    VDSL & ADSL CPE total                                       102.91   131.98   140.46   154.63     165.74   171.12    189.31   196.66
    % of VDSL                                                      3%       4%       6%         9%      11%      13%       17%      24%
                                                                                       Source: iSuppli Corp. | September 2008




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                                                                                                                              — 28 —

                                   Telco TV Drives Resurgence in Broadband Equipment Revenues



  Table 12 provides iSuppli’s forecast for VDSL and ADSL CPE factory revenues.

                                   Table 12: VDSL and ADSL CPE Factory Revenues, 2006-2013

    Revenues in $M                                            2006     2007     2008     2009      2010      2011     2012     2013
    ADSL CPE Revenues                                        $3,082   $3,735   $3,689   $3,786    $3,783   $3,738    $3,791   $3,540
    VDSL CPE Revenues                                         $213     $388     $478     $769      $846    $1,091    $1,565   $2,105
    DSL CPE Revenues                                         $3,295   $4,123   $4,168   $4,555    $4,629   $4,829    $5,356   $5,645
    VDSL% of total ports shipped                                6%       9%      11%        17%     18%      23%       29%      37%
                                                                                    Source: iSuppli Corp. | September 2008


  Component Cost
  FTTH: Component TAMs and BOMs
  ONT
  The cost of the ONT is determined by several factors:

        Technology— EPON, G/BPON
       –    Optics for EPON today are less expensive than for G/BPON
        Battery back up
        Ruggedized housing for installation on the outside of the residence
        RF Video transport
       –    Optics to support an additional wavelength to transport RF video (lambda 1550 nm)

  One area where significant cost reduction occurred is in the silicon required within the ONT. This
  cost reduction has been most prevalent in E-PON where high volume demand and large scale
  integrations have helped to drive the costs down.

  Today, an E-PON SOC may include the basic 802.3ah MAC, Gigabit SerDes, optical controls,
  Ethernet layer 2 with VLAN functionality, 10/100/1000 MAC(s), memory and memory controller,
  MCU and I/Os. Products from PMC-Sierra, the leader in EPON SOCs, Teknovus, the number two
  player in the market and Cortina, the number three player have very high levels of integration.

  The ONT component forecast considers the ONT as a separate device from the home router/
  gateway. The ONT is assumed to have Ethernet layer 2 functionality and in some cases VoIP
  capability, but full integration with the next-generation home gateway router (layer 2-4
  capability) is not included in the analysis.

  iSuppli does expect that integration of the ONT and Next-Generation Residential Gateway
  (NGRG) to take place over the next few years. For mote information see iSuppli’s report
  “Broadband Gateways Bulk Up for Digital Home Battle”.




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                                                                                                                             — 29 —

                                Telco TV Drives Resurgence in Broadband Equipment Revenues



  An architecture that integrates the ONT and NGRG costs substantially less than two separate
  boxes and therefore will become the preferred architecture for service providers over time,
  iSuppli forecasts. However, the timing of this migration to an integrated product is still unclear.
  Japan, the largest market for ONTs, has chosen not to integrate. However, iSuppli expects
  Japan will not integrate for several years. For other regions, the ONT market will have to enter
  a mature phase before integration will take place. The migration from standalone to integrated
  devices will take longer than was experienced in the DSL world. The only question is when will
  the integration happen.

  Figures 14 and 15 provide a high-level view of the major functions within an E-PON and G-PON
  ONT.

                                     Figure 14: Generic E-PON ONT Block Diagram



                                              Burst Mode Laser Driver
                                                                                      Power          Power
                                                                                      Supply

                                         1310 FP
                                                                  SERDES
                                          Laser
                                                                   CDR
                                                        Digital
                Optical Fiber       1310/14
                                                         TIA                           ONT
                                    90 WDM
         • 1310 nm Upstream                      1450
           Digital                              Detector                EPON MAC
         • 1410 nm Downstream
           Digital
                                    Biplexer Module

                                                                        Processor
                                                                        10/100/1000                   Home Gateway
                                                                            MAC
                                                                                                           VoIP
                                                        Memory                                            802.11
                                                        SDRAM                                            Ethernet
                                                                               10/100/
                                                       and FLASH                               PHY        Switch
                                                                                 1000
                                                                                                           USB
                                                                               Ethernet
                                                                                                        Codec/SLIC
                                                                                                           Video




                                                                                 Source: iSuppli Corp. | September 2008




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                                                                                                                                                        — 30 —

                                        Telco TV Drives Resurgence in Broadband Equipment Revenues




                                             Figure 15: Generic G-PON ONT Block Diagram


                                           Triplexer      Burst Mode Laser Driver
                                            Module                                                                        Power
                                                                                                       Power
                                                                                                       Supply
                                                  1310 FP
                                                                               SERDES
                                                   Laser                                           Battery Backup
                                                                    Digital     CDR
                                                                     TIA
                  Optical Fiber            1310/1490
                                             /1550
                                                                                         B/G PON
         • 1310 nm Upstream Digital
         • 1410 nm Downstream Digital
                                             WDM          1450
                                                                                           MAC              ONT
         • 1550 nm Downstream Analog                     Detector

                                                 1550 Detector
                                                                                         Processor                         Home Gateway
                                                       RF Video                                                                 VoIP
                                                       Amplifier                    AAL2 &1         AAL5                       802.1
                                                                                     SAR            SAR                       Ethernet
                                                                                                                               Switch
                                                                                           MAC10,100,1000           PHY
                                                                                                                                USB
                                                                                                                             Codec/SLIC

                                                                      Memory
                                                                      SDRAM
                                                                     and FLASH                     Codec/SLIC                      4-POTS
                                                                                                     4_Ports                      Telephones

                                                                                                                                  Set Top
                                                                       RF Video Signal
                                                                                                                                    Box
                                                                                                                          Coax

                                                                                                    Source: iSuppli Corp. | September 2008


  In the BOM estimates that follow, iSuppli has priced each required function separately, though
  integration of these functions on a single silicon solution is the norm.

  The E-PON BOM estimates represented in Table 13 assume that the termination of the ONT is in
  the home and therefore does not require a ruggedized housing or battery backup. Other
  assumptions are VoIP and home networking are not included in the ONT and the ONT supports
  two wavelengths and one Gig E port.




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                                                                                                                                — 31 —

                                  Telco TV Drives Resurgence in Broadband Equipment Revenues




                                      Table 13: Component BOM for EPON FTTH ONT, 2006-2013

                                                                  2006    2007    2008      2009     2010     2011      2012    2013
      Individual Components                                        22.1    20.4    18.4     16.6      15.5    15.2       14.9    14.6
      •     1310/1490 Wavelength Division Multiplexer              10.0     9.5     9.0      8.5       8.2        8.0     7.8     7.7
      •     1310 nm Laser                                           1.6     1.5     1.3      1.2       1.1        1.1     1.1     1.1
      •     Burst Mode Laser Driver                                 1.1     1.1     1.0      1.0       1.0        1.0     0.9     0.9
      •     Photodiode Receiver                                     1.4     1.3     1.2      1.0       0.9        0.9     0.9     0.9
      •     Transimpedance Amplifier                                1.0     1.0     0.9      0.9       0.9        0.9     0.8     0.8
      Alignment, Testing and Packaging                              7.0     6.0     5.0      4.0       3.5        3.4     3.3     3.3
      ONU Basic function and cost                                  20.3    19.3    18.5     18.0      17.5    17.2       16.8    16.5
      SerDes/CDR                                                    2.0     1.8     1.7      1.8       1.8        1.7     1.7     1.7
      EPON MAC (Basic)                                              4.0     3.7     3.6      3.5       3.4        3.3     3.3     3.2
      Processor & Ethernet MAC                                      5.6     5.5     5.3      5.2       5.1        5.0     4.9     4.8
      Memory (Flash & SDRAM)                                        1.9     1.8     1.7      1.7       1.7        1.6     1.6     1.6
      PHY                                                           1.8     1.8     1.8      1.7       1.7        1.7     1.6     1.6
      PCB and Connectors                                            1.3     1.1     1.0      0.8       0.7        0.7     0.7     0.7
      Power Supply                                                  1.8     1.8     1.7      1.7       1.7        1.6     1.6     1.6
      Plastic Housing                                               1.0     0.9     0.9      0.8       0.8        0.7     0.7     0.7
      Miscellaneous                                                 0.9     0.9     0.8      0.8       0.8        0.8     0.7     0.7
      Total BOM E-PON ONU                                          42.4    39.7    36.9     34.6      33.0    32.4       31.7    31.1
                                                                                      Source: iSuppli Corp. | September 2008


  Table 14 provides iSuppli’s BOM estimates for a Verizon-like ONT. The ONT will be located
  outside the home and therefore will require a ruggedized housing. The ONT will also have
  battery backup, which is an expensive component. In addition, the ONT will support a third
  lambda for the delivery of RF broadcast television and a VoIP component (two ports) to provide
  basic POTS-like services. This third lambda will require the deployment of a wavelength division
  triplexer, which also adds to the cost of the ONT. The ONT will require a separate home router/
  gateway. Verizon’s ONT relies on MoCA chipsets to interconnect it to the home router/gateway.
  The estimates in Table 14 do not include the MoCA home networking interfaces. The MoCA
  interface would increase the ONT BOM represented in Table 14 by approximately $10. In place
  of the MoCA chipset, the BOM analysis includes a Gig E interface.




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                          Table 14: BOM for B/GPON FTTP ONT (RF lambda and ONT outside), 2006-2013

                                                               2006    2007    2008      2009     2010     2011      2012    2013
      Optical                                                   41.5    36.5   34.5      32.7      31.3    30.1       28.9    27.8
      •   1310/1490/1550 Wavelength Division Triplexer          16.0    15.5   15.1      14.8      14.5    14.2       13.9    13.6
      •   1310 nm Laser                                          2.1     2.0    1.7       1.6       1.5        1.5     1.4     1.4
      •   Burst Mode Laser Driver                                2.0     1.9    1.8       1.6       1.5        1.4     1.3     1.2
      •   1490 Digital Photodiode Receiver                       1.9     1.7    1.6       1.3       1.2        1.2     1.2     1.2
      •   Digital Amplifier                                      1.3     1.2    1.1       1.0       1.0        0.9     0.8     0.8
      •   1550 Analog Photodiode Receiver for RF                 1.9     1.6    1.5       1.4       1.3        1.2     1.1     1.0
      •   RF Amplifier & CATV Circuitry                          2.2     2.1    2.0       1.8       1.7        1.6     1.5     1.4
      Alignment, Testing and Packaging                          14.1    10.4    9.8       9.2       8.6        8.1     7.7     7.3
      Silicon and other components                              62.0    58.9   55.7      52.7      50.6    48.8       47.6    46.4
      •     SerDes/CDR                                           1.9     1.7    1.6       1.5       1.4        1.4     1.4     1.4
      •     B/GPON MAC (Basic)                                   6.4     6.3    6.2       6.1       6.0        5.9     5.8     5.8
      •     Processor & Ethernet MAC                             5.6     5.5    5.3       5.2       5.1        5.0     5.0     4.9
      •     Memory (Flash and SDRAM)                             1.9     1.8    1.7       1.7       1.7        1.6     1.6     1.6
      •     PHY                                                  1.8     1.8    1.8       1.7       1.7        1.7     1.7     1.6
      •     PCB and Connectors                                   2.1     1.9    1.5       1.0       0.8        0.8     0.8     0.8
      •     VoIP processor & Dual SLIC                           7.0     6.5    6.0       5.5       5.5        5.5     5.4     5.4
      •         Power Supply - with Battery   Backup            23.8    22.6   21.4      20.4      19.3    18.4       17.5    16.6
      •     Ruggedized Housing                                  10.6     9.9    9.3       8.8       8.3        7.8     7.8     7.8
      •         Miscellaneous                                    0.9     0.9    0.8       0.8       0.8        0.8     0.8     0.7
      Total BOM E-PON ONU                                      103.5    95.4   90.1      85.4      81.9    78.9       76.5    74.3
                                                                                   Source: iSuppli Corp. | September 2008


  Table 15 provides the B/G-PON ONT BOM for a device terminated in the home that offers only
  IPTV services and VoIP functionality (two ports). Battery backup and router/gateway
  functionality were assumed to be external to the ONT. The interface between the ONT and
  router was assumed to be Gig E.




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                                   Telco TV Drives Resurgence in Broadband Equipment Revenues




                                         Table 15: BOM for B/GPON FTTP ONT (IPTV), 2006-2013

                                                               2006    2007    2008      2009     2010     2011      2012    2013
      Optical                                                   32.6    28.3    25.7     23.3      21.3    19.6       18.2    16.9
      1310/1490 Wavelength Division Multiplexer                 10.0    10.0     8.7      7.6       6.6        5.7     5.0     4.3
      1310 nm Laser                                              2.1     2.0     1.7      1.6       1.5        1.5     1.4     1.4
      Burst Mode Laser Driver                                    2.0     1.9     1.8      1.6       1.5        1.4     1.3     1.2
      1490 Digital Photodiode Receiver                           1.9     1.7     1.6      1.3       1.2        1.2     1.2     1.2
      Digital Amplifier                                          1.3     1.2     1.1      1.0       1.0        0.9     0.8     0.8
      1550 Analog Photodiode Receiver                            1.9     1.6     1.5      1.4       1.3        1.2     1.1     1.0
      Alignment, Testing and Packaging                          13.4     9.9     9.3      8.7       8.2        7.7     7.3     6.9
      Silicon and Other                                         32.4    31.1    29.4     27.9      27.3    26.9       26.5    26.1
      SerDes/CDR                                                 1.9     1.7     1.6      1.5       1.4        1.4     1.4     1.4
      B/GPON MAC (Basic)                                         6.4     6.3     6.2      6.1       6.0        5.9     5.8     5.8
      Processor & Ethernet MAC                                   5.6     5.5     5.3      5.2       5.1        5.0     5.0     4.9
      Memory (Flash & SDRAM)                                     1.9     1.8     1.7      1.7       1.7        1.6     1.6     1.6
      PHY                                                        1.8     1.8     1.8      1.7       1.7        1.7     1.7     1.6
      PCB and Connectors                                         2.1     1.9     1.5      1.0       0.8        0.8     0.8     0.8
      VoIP processor & Dual SLIC                                 7.0     6.5     6.0      5.5       5.5        5.5     5.4     5.4
      Power Supply - Wo Battery                                  3.6     3.6     3.4      3.4       3.4        3.3     3.2     3.2
      Plastic Housing                                            1.2     1.1     1.1      1.0       0.9        0.9     0.9     0.9
      Miscellaneous                                              0.9     0.9     0.8      0.8       0.8        0.8     0.8     0.7
      Total BOM E-PON O                                         65.0    59.4    55.0     51.2      48.5    46.5       44.7    43.0
                                                                                   Source: iSuppli Corp. | September 2008


  During the initial deployments of B/G-PON ONTs the Verizon style ONT will dominate this
  segment; however, by 2010 the Verizon style ONT will comprise only 30% of the total G-PON
  ONTs shipped.

  ONT TAM
  As illustrated in Figure 16, the component TAM composition of ONTs will average 47% silicon,
  35% optical and 19% for PCBs, power supplies, and housings, etc.




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                                                     Figure 16: ONT TAM Composition, 2006-2013

                                              100%

                                              90%

                                              80%
                     Composition Percentage




                                              70%

                                              60%                                                             Other
                                                                                                              Optical
                                              50%
                                                                                                              Silic on
                                              40%

                                              30%

                                              20%

                                              10%

                                               0%
                                                     2006 2007 2008 2009 2010 2011 2012 2013
                                                                                          Source: iSuppli Corp. | September 2008


  Over time, optical components for G-PON and E-PON will come down in cost while performance
  will remain steady. Silicon will take a different path. The functionality of the silicon will increase
  substantially while the cost increases modestly.

  Tables 16 and 17 provide details of the ONT component TAM for these three major groups.




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                                 Table 16: ONT Silicon and Miscellaneous Component TAM, 2006-2013

      Function                                                 2006    2007    2008      2009     2010     2011      2012    2013
      SerDes/CDR                                                  5      13      22        37        53        52       68     83
      EPON MAC (Basic)                                            8      21      35        53        68        56       68     82
      B/GPON MAC (Basic)                                          4      10      23        38        76        98      139    173
      Processor & Ethernet MAC                                   14      40      70       111       167        167     221    270
      Memory (Flash & SDRAM)                                      5      13      23        36        54        54       71     87
      PHY                                                         5      13      23        37        56        56       74     90
      VoIP processor & Dual SLIC                                  4      10      22        34        69        90      129    161
      Miscellaneous                                               2       7      11        17        25        25       34     41
      Semiconductor total                                        47     128     228       363       568        599     804    987
      PCB and Connectors                                          4       9      15        18        25        25       33     41
      Power Supply                                                3      12      24        41        62        67       98    122
      Power Supply - with Battery Backup (outside)               15      25      32        37        79        86       65     67
      Plastic Housing (inside)                                    2       6      11        16        23        23       33     40
      Ruggedized Housing (outside)                                7      11      14        16        34        36       29     31
      Other                                                      31      63      96       128       222        238     259    303
      Total non-Optical TAM                                      78     192     324       491       790        837   1,062   1,289
                                                                                   Source: iSuppli Corp. | September 2008




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                                      Telco TV Drives Resurgence in Broadband Equipment Revenues




                                        Table 17: TAM ONT Optical Component (Millions), 2006-2013

         Technology         Function                                        2006 2007 2008 2009 2010                       2011 2012 2013
         E-PON              1310/1490 Wavelength Division Multiplexer         17      53      84        125      159        131     161     190
         E-PON              1310 nm Laser                                      3       8      12        18        22         18      22      26
         E-PON              Burst Mode Laser Driver E-PON                      2       6       9        15        19         16      19      23
         E-PON              Photodiode Receiver                                2       7       11       15        18         15      18      21
         E-PON              Total                                             25      74      116       172      218        179     221     260
         B/G-PON            1310/1490 Wavelength Division Multiplexer          0       5      19        33        56         68     100     112
         B/G-PON            1310/1490/1550 Wavelength Division Triplexer      10      17      23        27        59         67      52      55
         B/G-PON            RF Amplifier & CATV Circuitry                      1       2       3         3            7       7      5       6
         B/G-PON            1310 nm Laser                                      1       3       6        10        19         24      34      42
         B/G-PON            Burst Mode Laser Driver                            1       3       6        10        19         24      31      37
         B/G-PON            1490 Digital Photodiode Receiver                   1       3       6         8        15         20      28      34
         B/G-PON            Digital Amplifier                                  1       2       4         6        12         15      20      23
         B/G-PON            1550 Analog Photodiode Receiver                    1       3       5         9        16         20      27      31
         B/G-PON            Total                                             17      38      72        107      203        244     297     341
         Total Optical
         Components                                                           42     112      189       279      421        423     518     601
                                                                                           Source: iSuppli Corp. | September 2008


  OLT TAM Forecast
  The OLT comprised just 15% of the total FTTH TAM at the end of 2007 and is forecasted to
  account for less than 7% by 2013. Even though the potential market for OLT components is not
  substantial, for the next few years suppliers must remember that they will need to supply
  products for both ends of the fiber loop to win contracts.

                                                            Table 18: OLT TAM, 2006-2013

                                                                    2006     2007     2008     2009           2010         2011     2012      2013
    Laser                                                          $10.78   $22.28   $26.98   $30.75      $35.38          $26.20   $28.41    $44.14
    Receiver                                                        $2.51    $5.14    $6.62    $6.82          $7.75        $5.74    $6.22     $9.67
    Wavelength Division Multiplexer                                 $3.37    $7.06    $9.34   $10.89      $12.93           $9.58   $10.38    $16.13
    Transimpedance Amplifier                                        $0.34    $0.74    $0.93    $1.15          $1.39        $1.03    $1.12     $1.73
    Other Optical (test+)                                           $9.50   $15.46   $20.24   $23.47      $27.32          $19.51   $20.41    $30.62
    PON MAC                                                         $2.02    $4.12    $5.60    $6.73          $8.04        $5.96    $6.46    $10.04
    Other semiconductors                                            $5.00   $10.70   $14.29   $17.35      $20.95          $15.57   $16.95    $26.44
    Miscellaneous                                                   $0.30    $0.67    $0.83    $1.03          $1.23        $0.91    $0.99     $1.54
    Total TAM OLTs                                                 $33.81   $66.17   $84.83   $98.18     $114.98          $84.50   $90.94   $140.30
                                                                                               Source: iSuppli Corp. | September 2008



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  VDSL 2 Silicon TAM and BOM
  iSuppli’s silicon TAM forecast examines the value of each function discretely and builds a TAM by
  function. Many of these discrete functions are often placed on an SoC product for the silicon
  vendor. Integrating multiple functions on a chip typically results in a less expensive device, a
  smaller footprint, and lower power consumption than providing all the required functions on
  separate components.

  VDSL 2 CPE chips incorporate a plethora of features in a single chip. Features include:

       Support of VDSL 2(G.933.2) plus fall back to all flavors of ADSL
       Accommodates all VDSL 2 profiles
       VDSL 2 bonding
       10/100 and Gig Ethernet MAC(s)
       GMII, MII, TBI interfaces
       PCI, USB-2, PCM for standard SLIC interface on chip
       Integrated VoIP engine
       Power management
       Support of suite of DSLHOMEtm protocols
       Ethernet –VPN and VPN security
       On-chip RISC process for control, packet management, TCP/IP, and routing protocols
       Memory on chip

  The rule in the VDSL silicon market is integration. As with the early days of ADSL, the objective
  of all VDSL 2 silicon vendors is to offer the lowest power consumption chipset with the smallest
  footprint. Today’s CO solutions from silicon vendors enable OEMs to build line cards with 48
  ports of VDSL 2 ports meeting current requirements of OEMs.

  VDSL 2 also brings a third objective into the silicon wars—the chips’ ability to provide high-
  speed robust transmission in the face of noise and other loop performance deterrents. iSuppli
  expects the service robustness of the competing chipsets to be the focal point of the market
  share wars. The company with the most robust chip gains the advantage.

  The following sample BOM provides iSuppli’s estimates of cost by functionality. The reader
  should note that the majority of chipsets on the market integrate much of the following
  functionality into a single SoC.




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                                   Telco TV Drives Resurgence in Broadband Equipment Revenues



  BOM-VDSL 2 Line Card
  Table 19 provides iSuppli’s BOM estimate for a VDSL 2 line card, while Table 20 and Table 21
  provides iSuppli’s BOM estimate for a VDSL 2 CPE device.

                                                Table 19: BOM VDSL 2 Line Card, 2006-2013

    Components/Port                                            2006     2007     2008     2009     2010      2011     2012     2013
    BOM VDSL/port                                             $25.54   $19.74   $17.57   $15.78   $14.81   $13.92    $13.10   $12.34
    Inf. VDSL Datapump + AFE                                  $10.58    $5.71    $4.30    $3.22    $2.91    $2.62     $2.37    $2.13
    Inf VDSL Line driver                                       $3.65    $3.28    $2.95    $2.66    $2.39    $2.15     $1.94    $1.74
    Power supply                                               $0.69    $0.68    $0.66    $0.65    $0.64    $0.63     $0.61    $0.60
    Inf Line driver                                            $1.26    $1.07    $1.00    $0.93    $0.86    $0.80     $0.75    $0.70
    Transformer, Hybrid, filters (Rs&Cs)                       $1.79    $1.68    $1.58    $1.49    $1.40    $1.31     $1.23    $1.16
    Control data plane processing plus Memory                  $3.73    $3.66    $3.59    $3.51    $3.44    $3.38     $3.31    $3.24
    Backplane interface                                        $0.99    $0.97    $0.95    $0.93    $0.91    $0.89     $0.87    $0.86
    PCB                                                        $0.30    $0.30    $0.29    $0.29    $0.28    $0.28     $0.27    $0.26
    Miscellaneous                                              $2.54    $2.39    $2.24    $2.11    $1.98    $1.86     $1.75    $1.65
                                                                                          Source: iSuppli Corp. | September 2008



                                            Table 20: BOM VDSL 2 CPE Bridge, 2006-2013

    Silicon & Miscellaneous Functions                          2006     2007     2008     2009     2010      2011     2012     2013
    Total BOM                                                  28.76    24.50    19.77    18.60    17.52    16.71     15.97    15.30
    VDSL 2 Datapump and AFE                                    14.57    10.86     6.69     6.03     5.38     4.83      4.32     3.87
    VDSL2 CPE Line driver                                       2.03     2.00     1.96     1.92     1.88     1.84      1.81     1.77
    Controller with Ethernet hub                                1.47     1.42     1.36     1.30     1.25     1.25      1.25     1.25
    Ethernet Phy                                                2.50     2.44     2.39     2.35     2.31     2.28      2.25     2.23
    Flash                                                       0.98     0.90     0.83     0.75     0.68     0.68      0.68     0.68
    Mechanical                                                  3.33     3.23     3.13     3.04     2.95     2.86      2.77     2.69
    Power supply                                                2.17     2.06     1.96     1.86     1.76     1.68      1.59     1.51
    Rs + Cs + Inductors+Transformer                             1.00     1.00     1.00     1.00     1.00     1.00      1.00     1.00
    SDRAM                                                       0.72     0.60     0.46     0.35     0.30     0.30      0.30     0.30
                                                                                          Source: iSuppli Corp. | September 2008




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                                        Table 21: BOM VDSL 2 NGRG W/802.11, 2006-2013

    Silicon & Miscellaneous Functions                        2006    2007    2008    2009     2010      2011     2012     2013
    Total BOM                                                46.27   39.73   33.90   32.37    30.91    30.05     29.58    28.76
    VDSL 2 Datapump and AFE                                  14.57   10.86    6.69    6.03     5.38     4.83      4.32     3.87
    VDSL2 CPE Line driver                                     2.03    2.00    1.96    1.92     1.88     1.84      1.81     1.77
    NGRG Controller MIPS (300) + DSP+ accelerators            3.62    3.44    3.26    3.10     2.95     2.95      2.95     2.95
    802.11g chip set                                          8.03    6.15    5.47    5.47     5.41     5.38      5.68     5.55
    Codec                                                     0.00    0.00    0.00    0.00     0.00     0.00      0.00     0.00
    Ethernet Phy                                              2.50    2.44    2.39    2.35     2.31     2.28      2.25     2.23
    Flash                                                     1.95    1.80    1.65    1.50     1.35     1.35      1.35     1.35
    SDRAM                                                     1.44    1.20    0.91    0.70     0.60     0.60      0.60     0.60
    SLIC                                                      3.64    3.59    3.54    3.48     3.43     3.43      3.43     3.43
    Power supply                                              2.17    2.06    1.96    1.86     1.76     1.68      1.59     1.51
    Rs + Cs + Inductors+Transformer                           2.00    2.00    2.00    2.00     2.00     2.00      2.00     2.00
    Mechanical                                                4.33    4.20    4.07    3.95     3.83     3.72      3.61     3.50
                                                                                     Source: iSuppli Corp. | September 2008


  As shown in Table 21, iSuppli is expecting aggressive price erosion for VDSL 2 chipsets and line
  drivers. Silicon suppliers are likely to engage in forward pricing with the hope of making profits
  when their products go into volume production. iSuppli’s VDSL 2 silicon ASP forecasts are
  similar to ADSL ASPs.

  VDSL 2 Silicon TAM
  Figure 17 graphically illustrates the relationship of units shipped versus VDSL silicon revenues
  for CPE and infrastructure silicon.




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                                                      Telco TV Drives Resurgence in Broadband Equipment Revenues




                                             Figure 17: VDSL Chipset Silicon TAM CPE and Infrastructure, 2006-2013

                                             $1,200                                                                       120
                                             $1,100
                                             $1,000                                                                       100
                                              $900
                VSDL Silicon Revenues ($M)




                                              $800                                                                        80




                                                                                                                                Millions of Units
                                              $700
                                              $600                                                                        60
                                              $500
                                              $400                                                                        40
                                              $300
                                              $200                                                                        20
                                              $100
                                                $0                                                                        0
                                                       2006     2007    2008     2009   2010    2011    2012     2013
                                                              TAM Inf. Silicon                  TAM CPE Silicon
                                                              CPE shipped                       Inf. Ports shipped

                                                                                                   Source: iSuppli Corp. | September 2008


  Even with VDSL 2 infrastructure ports shipping at twice the rate of CPE devices in 2008 and
  2009, the silicon TAM revenues derived from CPE and infrastructure silicon are expected to be
  very close due to the higher ASP for VDSL 2-specific CPE silicon.

  In the first couple of years of deployment, iSuppli expects service providers, driven by the fear
  of interoperability, will demand that the same silicon provider be sourced for infrastructure and
  CPE silicon. However, by 2009, the challenges and fears of interoperability should cease, thus
  making room for silicon providers that focus only on CPE.

  Tables 22 and 23 provide iSuppli’s forecasts for VDSL 2 component TAM.




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                                   Telco TV Drives Resurgence in Broadband Equipment Revenues




                                           Table 22: VDSL Infrastructure TAM, 2006-2013

     ($M)                                                  2006         2007         2008         2009            2010         2011            2012         2013
     Total Infrastructure Component TAM                  $217.41      $204.19      $234.73      $310.74         $357.35      $389.81         $481.58      $575.52
        Line Driver                                            $33          $36          $42          $56             $61          $64             $76        $86
        VDSL Datapump and AFE                                  $95          $63          $61          $67             $74          $78             $92       $105
        Transformer, hybrid, Filters,.                         $16          $18          $22          $31             $36          $39             $48        $57
     Control and Data Plane processor and Memory               $33          $40          $51          $74             $88      $100            $129          $160
        Backplane interface                                    $9           $11          $13          $19             $23          $26             $34        $42
        PCB                                                    $3           $3           $4           $6              $7           $8              $11        $13
        Power Supply                                           $6           $7           $9           $14             $16          $19             $24        $30
        Miscellaneous                                          $23          $26          $32          $44             $51          $55             $68        $81
                                                                                                  Source: iSuppli Corp. | September 2008



                                               Table 23: VDSL 2 CPE TAM, 2006-2013

     CPE ($M)                                        2006            2007         2008         2009         2010            2011         2012               2013
     Total CPE Component TAM                       $122.70      $223.66      $279.20      $454.55      $509.49         $644.10      $925.62              $1,259.86
       Line Driver                                       $7           $13          $18          $31             $38          $44             $64              $91
       VDSL Datapump and AFE                             $48          $69          $62          $96         $107            $116         $152                $198
       Rs + Cs + Inductors+Transformer                   $5           $11          $16          $28             $32          $42             $62              $87
       Gateway/Home network Controller                   $5           $14          $21          $35             $35          $54             $79             $104
       Router controller                                 $3            $4           $4           $6             $10           $7             $11              $20
       SLIC                                              $8           $18          $25          $42             $41          $63             $92             $121
       802.11x chip set                                  $11          $25          $36          $62             $64          $98         $152                $196
       Flash                                             $5           $10          $13          $20             $22          $29             $42              $58
       SDRAM                                             $4            $7           $7          $10             $10          $13             $19              $26
       Ethernet & USB Phys                               $8           $16          $22          $37             $46          $55             $79             $114
       Power supply                                      $7           $13          $18          $30             $35          $40             $56              $78
       Mechanical & Miscellaneous                        $13          $25          $36          $59             $69          $84         $120                $167
                                                                                                  Source: iSuppli Corp. | September 2008




Wired Communications — Q3 2008                                                                                                                     September 2008

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                                                       Telco TV Drives Resurgence in Broadband Equipment Revenues




  Regional Forecasts
  Japan will remain the strongest region in terms of very high-speed broadband subscribers until
  2012, when Europe will over take Japan. Japan led in both the deployment of FTTH and VDSL
  subscribers at the end of 2007 as indicated in Figures 18 and 19.

                                                         Figure 18: FTTH Subscribers by Region, 2006-2013

                                                  40


                                                  35


                                                  30
                        Millions of Subscribers




                                                                                                                           A/PAC
                                                                                                                           China
                                                  25
                                                                                                                           Europe
                                                                                                                           Japan
                                                  20
                                                                                                                           Latin Americ a

                                                  15                                                                       ME&A
                                                                                                                           NA
                                                  10


                                                   5


                                                   0
                                                         2006   2007       2008   2009    2010    2012      2013

                                                                                                   Source: iSuppli Corp. | September 2008



                                                         Figure 19: VDSL Subscribers by Region, 2006-2013

                                                  35


                                                  30
                      Millions of Subscribers




                                                                                                                           A/PAC
                                                  25
                                                                                                                           China
                                                                                                                           Europe
                                                  20
                                                                                                                           Japan
                                                                                                                           Latin America
                                                  15
                                                                                                                           ME&A
                                                                                                                           NA
                                                  10


                                                   5


                                                   0
                                                        2006    2007   2008       2009   2010    2012       2013
                                                                                                   Source: iSuppli Corp. | September 2008




Wired Communications — Q3 2008                                                                                                           September 2008

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                                                  Telco TV Drives Resurgence in Broadband Equipment Revenues



  Japan’s NTT East and West started to deploy significantly more FTTH than FTTB and VDSL
  during 2007. The goal of NTT and KDDI in Japan is to deploy fiber all the way to the subscriber.
  Therefore, the growth of VDSL in Japan is slowing rapidly.

  VDSL will lag behind FTTH in new subscriber additions until 2009, when Europe starts to ramp
  its deployment of VDSL.

  By 2012, on the strength of VDSL 2 and FTTH deployments driven by Telco TV, Europe is
  expected to become the leading region for very high-speed broadband loops.

  Asia
  In the following analysis, Asia is divided into three sub-regions: Japan, China and Rest of Asia.

  As illustrated in Figure 20, Japan will account for 50% or more of the very high-speed
  broadband subscribers in the region throughout the forecast period. Japan will also dominate
  the region in terms of FTTH subscribers.

              Figure 20: Asia's Growth of VDSL and FTTH (Japan, China and Rest of Asia), 2006-2013

                                                  40


                                                  35


                                                  30
                        Millions of Subscribers




                                                                                                                       Japan VDSL
                                                  25                                                                   Japan FTTH
                                                                                                                       China VDSL
                                                  20                                                                   China FTTH
                                                                                                                       ROA VDSL
                                                  15
                                                                                                                       ROA FTTH

                                                  10


                                                   5


                                                   0
                                                       2006   2007       2008   2009     2010   2012     2013

                                                                                                Source: iSuppli Corp. | September 2008




Wired Communications — Q3 2008                                                                                                   September 2008

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                                                    Telco TV Drives Resurgence in Broadband Equipment Revenues



  Japan
  As illustrated in Figure 21, the broadband market in Japan migrates to FTTH subscribers rapidly.

                     Figure 21: Japan's Broadband Market Growth by Technology 2006-2013

                                                     45

                                                     40

                                                     35
                          Millions of Subscribers




                                                     30
                                                                                                                      ADSL
                                                     25                                                               Cable
                                                                                                                      VDSL
                                                     20
                                                                                                                      FTTH-EPON
                                                     15

                                                     10

                                                      5

                                                      0
                                                          2006   2007   2008   2009   2010   2011   2012    2013
                                                                                               Source: iSuppli Corp. | September 2008


  The push by NTT East, NTT West and KDDI to deploy FTTH has created a sense of urgency by
  JCOM, Japan’s leading cable provider, to deploy DOCSIS 3.0.

  The battle for the fastest subscriber pipe will encourage NTT and KDDI to continue to deploy
  FTTH through 2013.

  Broadband household penetration in Japan will exceed 54% by the end of 2008. Therefore, the
  market for FTTH will be virtually a replacement market for ADSL and VDSL existing subscriber
  loops.

  For additional details on Japan’s very high-speed broadband market, please reference the
  following tables in the database that accompanies this report:

       Japan Broadband Overview and Forecast (2006-2013)
       Japan FTTH and VDSL Subscribers by Service Providers (2006-2013)
       Japan FTTH Factory Revenues and Units Shipped (2006-2013)
       Japan's Market for VDSL Equipment (2006-2013)




Wired Communications — Q3 2008                                                                                                   September 2008

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                                                    Telco TV Drives Resurgence in Broadband Equipment Revenues



  China
  China ended 2007 with 48 million broadband households and will end 2008 with 63 million,
  iSuppli projects. China’s broadband subscriber growth will continue to grow at a CAGR of 10%
  per year through 2013, bringing China equal to the U.S. in number of broadband subscribers.

  As illustrated in Figure 22, China’s broadband market will remain primarily ADSL-based through
  2013.

                        Figure 22: China's Broadband Market Growth by Technology, 2006-2013

                                               80


                                               70


                                               60
                     Millions of Subscribers




                                               50                                                                     ADSL
                                                                                                                      VDSL
                                               40                                                                     Cable Modem
                                                                                                                      FTTP-EPON
                                               30                                                                     FTLAN

                                               20


                                               10


                                                0
                                                     2006   2007   2008     2009    2010    2011       2012
                                                                                              Source: iSuppli Corp. | September 2008


  China is aggressively deploying IPTV trials with an IPTV subscriber installed base expected to
  reach 2.3 million by the end of 2008. However, unlike the U.S. and other areas of the world that
  require HDTV and multi video streams transmitted to the home simultaneously, China will
  require just one or two SDTV streams. Therefore, in a majority of households, an ADSL 2+
  connection with a downstream rate of 4 to 6 Mbps would be adequate to support initial
  deployments of IPTV services for the next few years. This is the primary reason China is actively
  upgrading its subscriber base from sub 1 Mbps service to 3 to 5 Mbps via ADSL2+. China does
  not need VDSL or FTTH at this time, which is the primary reason it lags the rest of the world on
  deployments of very high-speed broadband connections.

  However, China Telecom is active in FTTH and FTTB. The company has issued its own China E-
  PON standard and has been conducting performance and interoperability testing since 2006.

  China ended 2007 with 400,000 E-PON subscribers in field trials. China’s two major operators—
  China Telecom and China Netcom—are expected to grow their E-PON subscriber base to more
  than 2 million by the end of 2008. E-PON deployments were primarily in “Greenfield” areas,
  such as new apartment buildings, offices, and Internet cafés.




Wired Communications — Q3 2008                                                                                                    September 2008

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                                                   Telco TV Drives Resurgence in Broadband Equipment Revenues



  The majority of China’s E-PON deployments will be FTTB, iSuppli projects. However, in the long
  run, FTTB PON requires more bandwidth than E-PON can deliver today; therefore, China could
  be an early adopter of 10G E-PON for its FTTB deployments. Note that iSuppli does not provide
  forecasts in this analysis for FTTB.

  China deserves to be monitored closely by OEMs and silicon suppliers. This region always has
  the potential of deploying large numbers of new technologies very rapidly. However, at this
  time, iSuppli does not believe the drivers are in place to propel VDSL or FTTH deployments.

  For additional details on China’s very high-speed broadband market, please reference the
  following tables in the database that accompanies this report:

       China Broadband Overview and Forecast (2006-2013)
       China FTTH and VDSL Subscribers by Service Providers (2006-2013)
       China FTTH Factory Revenues and Units Shipped (2006-2013)
       China's Market for VDSL Equipment (2006-2013)

  Rest of Asia
  The rest of Asia includes the most progressive broadband country, Korea, and a potential giant
  in India. Figure 23 provides a visual glance at the broadband base for the region.

                  Figure 23: Rest of Asia's Broadband Market Growth by Technology, 2006-2013

                                                  45

                                                  40

                                                  35
                        Millions of Subscribers




                                                  30                                                                   ADSL
                                                                                                                       VDSL
                                                  25                                                                   Cable modem
                                                                                                                       FTTP-EPON
                                                  20
                                                                                                                       FTTP-B&GPON
                                                  15                                                                   WiMAX

                                                  10

                                                   5

                                                   0
                                                       2006   2007   2008    2009   2010   2011   2012       2013

                                                                                                Source: iSuppli Corp. | September 2008


  As illustrated in Figure 23, ADSL will remain the most deployed broadband technology
  throughout the forecasted period. However, VDSL and FTTH, in both E-PON and G-PON flavors,
  will be the fastest growing broadband technologies.




Wired Communications — Q3 2008                                                                                                      September 2008

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                           Telco TV Drives Resurgence in Broadband Equipment Revenues



  Korea has dominated the broadband market in this region. In fact, Korea accounted for 36% of
  the region’s total subscriber base at the end of 2007 and is expected to fall slightly in 2008 to
  33%. Like Japan, Korea has deployed VDSL technology and now plans to pursue FTTH and FTTB
  access networks.

  Korea’s broadband dominance in the region is expected to decline to just 17% by 2013, as the
  other countries in the region start to accelerate their broadband deployments.

  However, Korea’s percentage of the very high-speed broadband market (FTTH and VDSL) will
  stay at more than 80% through 2008 and will remain at least 33% of the total market in the
  region through 2013.

  The region includes one of the largest IPTV suppliers, PCCW in Hong Kong. Like China, ADSL 2+
  is currently sufficient for PCCW’s IPTV services, but this may change over the next couple of
  years. Chunghwa Telecom is also offering IPTV and it is currently deploying VDSL in support of
  IPTV services.

  For additional details on the rest of Asia’s very high-speed broadband market, please reference
  the following tables in the database that accompanies this report:

       Rest of Asia Broadband Overview and Forecast (2006-2013)
       Republic of Korea Broadband Overview and Forecast
       Rest of Asia FTTH and VDSL Subscribers by Service Providers (2006-2013)
       Rest of Asia FTTH Factory Revenues and Units Shipped (2006-2013)
       Rest of Asia's Market for VDSL Equipment (2006-2013)
       Republic of Korea FTTH Factory Revenues and Units Shipped (2006-2013)

  Europe
  Europe is passing through a major paradigm shift in its broadband market. No other region is as
  aggressive as Europe when it comes to Telco TV or has the number of competitive service
  providers driving competition with the incumbent telephone companies. Virtually every tier-one
  telephone company and most competitive access suppliers are planning or deploying very high-
  speed access networks, either FTTH or VDSL.

  However, the story is not entirely simple in the region. Regulators are playing a major role in
  the deployment of new services and in enabling competitive access providers. This has been a
  good situation to date for the consumer. In France, the two major competitive access providers,
  Free and Neuf Cegetel, are providing new services and creating stiff competition for France
  Telecom. The major regulatory issue over the next few years is the required unbundling of new
  high-speed access loops. Incumbent telephone companies such as Deutsche Telekom and
  Telefonica have tried to get the EU to declare new fiber and VDSL loops free of ULL regulations.
  However, the EU is sticking to ULL regulations, even with new high-speed deployments. This
  has created a slower-than-expected deployment of high-speed loops by telephone companies.

  BT recently revealed plans to invest £1.5bn (EUR1.9bn) in a fiber broadband network that could
  deliver top speeds of 100 Mbps to up to 10 million homes by 2012.



Wired Communications — Q3 2008                                                                           September 2008

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                                                                                                                                     — 48 —

                                                  Telco TV Drives Resurgence in Broadband Equipment Revenues



  France Telecom plans to deploy FTTH via PON technology in its home market. The local
  regulators want to understand how France Telecom can provide equal access to competitors
  over PON architecture. The question is why an incumbent should spend on major network
  upgrades if they have to share these facilities with competitors.

  In summary, the future of FTTH and deep fiber deployment by telephone companies in Europe
  will be determined by regulators. Today’s EU regulations demand unbundling of the local loop. If
  an incumbent telephone company spends billions on deploying deep fiber, such as Deutsche
  Telekom has planned or spending on FTTH as France Telecom has announced, regulators want
  them to share their investments with their competitors.

  iSuppli believes the issue will become mute by 2009, as telephone companies, in the face of
  regulations, start to ramp their broadband networks in support of their strategy to offer value-
  added services.

  While Europe’s incumbent telephone companies facing ULL regulations are taking a cautious
  approach to FTTH and deep fiber + VDSL 2 deployments, municipalities and utilities in Europe
  have emerged as the leading drivers of fiber in the access. Today, municipalities including City
  of Stockholm’s Stokab, Amsterdam, Paris and Vienna are pursuing fiber deployments.
  Municipalities have generated significant hype, but as of now they have achieved little
  penetration into the European broadband market.

  Europe’s telephone and competitive access service providers will see their percentage of very
  high-speed broadband subscribers grow from 3% at the end of 2007 to 37% by the end of
  2013. As Figure 24 depicts, Europe’s service providers will deploy VDSL 2 and FTTH in equal
  numbers through 2013.

                    Figure 24: Europe's Broadband Market Growth by Technology, 2006-2013

                                                140


                                                120
                      Millions of Subscribers




                                                100
                                                                                                                ADSL
                                                                                                                VDSL
                                                 80
                                                                                                                Cable modem
                                                                                                                FTTP-B&GPON
                                                 60                                                             FTTP-Ac tive E
                                                                                                                WiMAX
                                                 40


                                                 20


                                                  0
                                                      2006 2007 2008 2009 2010 2011 2012 2013
                                                                                            Source: iSuppli Corp. | September 2008




Wired Communications — Q3 2008                                                                                                September 2008

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                                                                                                                                   — 49 —

                                                 Telco TV Drives Resurgence in Broadband Equipment Revenues



  For additional details on the European very high-speed broadband market, please reference the
  following tables in the database that accompanies this report:

       Europe Broadband Overview and Forecast (2006-2013)
       Europe FTTH and VDSL Subscribers by Service Providers (2006-2013)
       Europe FTTH Factory Revenues and Units Shipped (2006-2013)
       Europe's Market for VDSL Equipment (2006-2013)

  North America
  North America is divided into two high-speed broadband camps—VDSL and FTTH. iSuppli
  expects FTTH to surpass VDSL over the next five years. Figure 25 provides a graphical view of
  the North America broadband landscape by technology for the next five years.

                 Figure 25: North America's Broadband Market Growth by Technology, 2006-2013

                                                140


                                                120
                      Millions of Subscribers




                                                100                                                            ADSL
                                                                                                               VDSL
                                                 80                                                            Cable modem
                                                                                                               FTTP-EPON

                                                 60
                                                                                                               FTTP-B&GPON
                                                                                                               FTTP-Ac tive E
                                                                                                               WiMAX
                                                 40


                                                 20


                                                  0
                                                      2006 2007 2008 2009 2010 2011 2012 2013
                                                                                           Source: iSuppli Corp. | September 2008


  In November 2004, AT&T announced Project Lightspeed, a fiber to the node and VDSL project.
  AT&T chose this scheme because at the time it enabled the required bandwidth and was
  significantly lower in cost than driving fiber all the way to the home. AT&T estimated at the time
  that it would need to spend $4.4 billion for the deployment of the Lightspeed project. Its target
  was to pass 18 million homes. AT&T has since realized that it needs to increase the bandwidth
  to support its “U-verse” IPTV service To do this, AT&T is planning to drive fiber closer to the
  subscriber and deploy VDSL bonding when needed to achieve the desired bandwidth. Bonding
  requires two or more pairs that can both be configured with VDSL.

  Verizon is deploying fiber to the home. One of the advantages Verizon has with FTTH
  deployment is that a large percentage of its subscribers are connected via aerial loops, which
  significantly reduces the cost of deployment. For some multi-dwelling residences, Verizon will
  not be able to deploy fiber all the way to the subscriber. In these cases, it plans to deploy VDSL.

Wired Communications — Q3 2008                                                                                              September 2008

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                                                                                                                                          — 50 —

                                                     Telco TV Drives Resurgence in Broadband Equipment Revenues



  The forecast for VDSL could change significantly if the challenge from MSOs deploying DOCSIS
  3.0 starts to take broadband subscribers from the major telephone companies in North
  America. OEMs and silicon suppliers need to monitor the successes or failures of DOCSIS 3.0.
  This has the potential of creating a major inflection point in the demand for VDSL.

  For additional details on the North American very high-speed broadband market, please
  reference the following tables in the database that accompanies this report:

       North America Broadband Overview and Forecast (2006-2013)
       North America FTTH and VDSL Subscribers by Service Providers (2006-2013)
       North America FTTH Factory Revenues and Units Shipped (2006-2013)
       North America's Market for VDSL Equipment (2006-2013)

  Latin America
  Latin America’s broadband market is still in its early growth stage, with 18 million broadband
  subscribers and a household penetration of 9% expected at the end of 2008. Two-thirds of the
  Latin America broadband market was concentrated in two countries: Brazil and Mexico. These
  two countries will account for at least 50% of the total Latin American broadband market over
  the next five years. Figure 26 provides a graphical view of the broadband market in Latin
  America.

                 Figure 26: Latin America's Broadband Market Growth by Technology, 2006-2013

                                                40


                                                35


                                                30
                      Millions of Subscribers




                                                                                                                      ADSL
                                                25
                                                                                                                      VDSL

                                                20                                                                    Cable modem
                                                                                                                      FTTP-EPON
                                                15                                                                    WiMAX


                                                10


                                                 5


                                                 0
                                                      2006   2007   2008   2009   2010   2011   2012     2013

                                                                                                Source: iSuppli Corp. | September 2008


  Unlike Europe, North America and much of Asia, video in Latin America is not a prime focus of
  the incumbent telephone companies today, although they are looking into video. iSuppli
  projects that IPTV will penetrate just 8% of the Latin American broadband households by 2013.
  Therefore, one of the two principal drivers behind very high-speed data (video) has a low profile



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                                                                                                                                        — 51 —

                                                     Telco TV Drives Resurgence in Broadband Equipment Revenues



  in this region. The other driver for very high bandwidth (IPTV) does not appear to be a factor
  either. Without a substantial driver, VDSL and FTTH will not become growth segments in Latin
  America for the next five years.

  For additional details on the Latin American very high-speed broadband market, please
  reference the following tables in the database that accompanies this report:

       Latin America Broadband Overview and Forecast (2006-2013)
       Latin America FTTH and VDSL Subscribers by Service Providers (2006-2013)
       Latin America FTTH Factory Revenues and Units Shipped (2006-2013)
       Latin America's Market for VDSL Equipment (2006-2013)

  Middle East and Africa
  This region is seeing active deployment of very high-speed broadband in the oil-rich countries
  including the United Arab Emirates, Kuwait and Saudi Arabia.

  Deployments in these countries are being driven by private enterprises as well as government-
  owned telephone companies placing fiber access in new apartment buildings. The activity is
  presenting opportunities, but the overall impact on the global very high-speed broadband
  market is quite small. Figure 27 provides an overview of the broadband market in the MEA
  region.

             Figure 27: Middle East and Africa's Broadband Market Growth by Technology, 2006-2013

                                                 6



                                                 5
                       Millions of Subscribers




                                                 4                                                                   ADSL
                                                                                                                     VDSL

                                                 3                                                                   FTTP-EPON
                                                                                                                     FTTP-B&GPON
                                                                                                                     WiMAX
                                                 2



                                                 1



                                                 0
                                                      2006   2007   2008   2009   2010   2011    2012    2013

                                                                                                Source: iSuppli Corp. | September 2008




Wired Communications — Q3 2008                                                                                                   September 2008

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                                                                                                                 — 52 —

                            Telco TV Drives Resurgence in Broadband Equipment Revenues



  For additional details on the Middle East and Africa’s very high-speed broadband market, please
  reference the following tables in the database that accompanies this report:

       Middle East and Africa Broadband Overview and Forecast (2006-2013)
       Middle East and Africa FTTH Factory Revenues and Units Shipped (2006-2013)
       Middle East and Africa's Market for VDSL Equipment (2006-2013)

  Players, Products (silicon) and Market Share
  Players in the Very High-Speed Broadband Market
  The following includes several of the major players in the broadband market for both systems
  and components.

  Alcatel-Lucent
  Alcatel-Lucent provides solutions that enable service providers, enterprises and governments
  worldwide to deliver voice, data and video communication services to end-users. As a leader in
  fixed, mobile and converged broadband networking, IP technologies, applications, and services,
  Alcatel-Lucent offers end-to-end solutions that enable compelling communications services for
  people at home, at work and on the move. With 79,000 employees and operations in more than
  130 countries, Alcatel-Lucent is a local partner with global reach. The company has the most
  experienced global services team in the industry, and one of the largest research, technology
  and innovation organizations in the telecommunications industry. Alcatel-Lucent achieved
  proforma combined revenues of Euro 18.6 billion in 2005, and is incorporated in France, with
  executive offices located in Paris. For more information, visit Alcatel-Lucent on the Internet:
  http://www.alcatel-lucent.co

  Alloptic
  Alloptic delivers proven, standards-based passive optical network access equipment that
  operates at gigabit speeds. A complete suite of central office and customer premise equipment
  simplifies deployment for both Fiber-to-the-Business and Fiber-to-the-Home applications.
  Alloptic uses a pure Gigabit Ethernet Passive Optical Network (GEPON) architecture; i.e., no
  active components in the field.

  Alloptic was founded in June 1999 to address the "last mile bottleneck" in communications
  infrastructure. The core problem is the lack of adequate bandwidth in the local loop for service
  providers to deliver a complete bundle of data, video and voice services to business and
  residential customers. This problem manifests itself in service providers' need for a cost-
  effective means of delivering high bandwidth services that will reduce their expenses,
  immediately generate new revenues, improve their competitiveness and ultimately boost their
  market valuation.

  Unlike first-generation ATM-based access equipment, Alloptic has developed a disruptive GEPON
  technology, which provides a low-cost method of deploying optical access lines between a
  service provider's central office and a user's site. Alloptic's GEPON enables service providers to
  deliver bundled data, video, and voice services over fiber directly to businesses and homes at
  high speeds and low price points.




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                                                                                                                — 53 —

                           Telco TV Drives Resurgence in Broadband Equipment Revenues



  Current broadband access technologies, such as DSL, HFC, and even the more recent ATM-
  based PONs, do not deliver the most cost-effective solution to the last mile bottleneck. None of
  these older solutions create sufficient bandwidth to deliver those new value-added services that
  will generate renewed revenue growth for service providers. In sharp contrast, Alloptic's EPON
  technology delivers 1 Gbps of bandwidth, enabling a broad range of voice, data, and video
  services for FTTB and a compelling case for FTTH.

  By leveraging both widely accepted and flexible Ethernet technologies, as well as an intellectual
  property portfolio of two patents and five pending patents, the Alloptic solution enjoys cost
  advantages over competing PON offerings, as well as the benefits of a network architecture that
  is technologically superior, simpler and easier to maintain than current solutions.

  Broadcom Corporation
  Broadcom Corporation is a major technology innovator and global leader in semiconductors for
  wired and wireless communications. Broadcom products enable the delivery of voice, video,
  data and multimedia to and throughout the home, the office and the mobile environment.
  Broadcom provides the industry's broadest portfolio of state-of-the-art, system-on-a-chip and
  software solutions to manufacturers of computing and networking equipment, digital
  entertainment and broadband access products, and mobile devices. These solutions support a
  core mission: Connecting everything®.

  Broadcom is one of the world's largest fabless semiconductor companies, with 2007 revenue of
  $3.78 billion, and holds more than 2,600 U.S and 1,200 foreign patents, more than 7,450
  additional pending patent applications, and one of the broadest intellectual property portfolios
  addressing both wired and wireless transmission of voice, video, data and multimedia.

  Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North
  America, Asia and Europe.

  Broadcom may be contacted at +1.949.926.5000 or at http://www.broadcom.com.

  BroadLight
  BroadLight leads delivery of end-to-end (E2E) Passive Optical Network (PON) technology
  through its comprehensive and innovative product solutions consisting of highly integrated
  semiconductor devices, embedded and application software, reference designs and support
  tools.

  Broadlight is the only company delivering complete E2E BPON and GPON component solutions
  for the central office (CO) and customer premise equipment (CPE). These solutions help
  equipment companies bring standards-based PON products quickly to service providers and
  with low risk.

  BroadLight has been supplying the PON industry with components longer than any other
  company and is the most experienced in turning up BPON and GPON. As one of the pioneers in
  GPON, BroadLight's groundbreaking first-to-market product line is now delivering the majority
  of today's GPON solutions worldwide.

  Since its founding in June 2000, BroadLight has established itself globally with offices in
  Mountain View, California USA, Ramat Gan Israel, Taipei Taiwan and Shanghai China.



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  Conexant Systems, Inc.
  Conexant Systems, Inc. (NASDAQ: CNXT) is a leading provider of solutions for imaging, video,
  audio, and Internet access applications, and holds the No. 1 or No. 2 market positions in the
  major segments it addresses. The company’s businesses consist of Imaging and PC Media, and
  Broadband Access.

  The Imaging and PC Media group is focused on delivering innovative solutions for high-growth
  imaging, video, and audio applications, as well as analog modems that enable cost-effective
  Internet connectivity. Its product portfolio includes a comprehensive suite of imaging solutions
  for fax machines, multifunction printers, and digital photo frames. Additional products include
  components and systems solutions for PCTV and video surveillance applications, and a broad
  range of audio products for personal computers, speakers, and audio subsystems.

  The Broadband Access group provides central office and CPE system solutions for xDSL
  networks worldwide, including growth markets for VDSL and high-end ADSL residential
  gateways with integrated voice and wireless networking capabilities. Additional broadband
  access products include solutions for next-generation PON applications.

  Conexant is a fabless semiconductor company that was founded in 1999, and is headquartered
  in Newport Beach, Calif.

  Cortina Systems
  Through continuous innovations in advanced port processing and intelligent port connectivity,
  Cortina Systems, Inc. is a leading supplier of intelligent communication solutions for the core,
  metro, access, enterprise and digital home network market segments. Cortina delivers a wide
  suite of products that addresses customers' performance, density, and flexibility needs with
  state-of-the-art, high-speed, analog-digital integration technology. Cortina solutions enable
  faster time-to-market, longer time-in-market, and increased revenue opportunities. Working
  closely with customers to understand their system requirements and anticipate their needs,
  Cortina is creating the foundation for new generations of services.

  Founded in 2001, Cortina has invested more than $217 million and made three acquisitions to
  expand its product offerings. The company currently has more than 1200 customers worldwide
  with a pipeline of more than 500 new line cards in design. Cortina has a diverse product
  portfolio (over 440 products) with over 22 million units shipped annually.

  Cortina offers a complete PON system-on-chip solution with very high density, scalability, and
  price and performance ratio. Cortina’s complete system solution integrates all the functions
  implemented between ONU chips located at customer premises and OLTs at the central office. It
  embeds multiple components in a single chip including SerDes, on-chip memory for ONU, and
  microprocessors for intelligent control and management. It also incorporates multi-layer
  protocol functionality and packet processing into a single chipset.

  Freescale
  Freescale Semiconductor, Inc. is a global leader in the design and manufacture of embedded
  semiconductors for the automotive, consumer, industrial, networking and wireless markets. The
  privately held company is based in Austin, Texas, and has design, research and development,
  manufacturing or sales operations in more than 30 countries. Freescale is one of the world's
  largest semiconductor companies with 2007 semiconductor sales of $5.3 billion.


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  On February 7, 2007 Alcatel-Lucent and Freescale Semiconductor announced plans to facilitate
  the adoption of fiber-to-the-home technologies by making available jointly developed GPON
  technology and interoperability specifications to vendors of terminal equipment worldwide.

  Through an agreement with Freescale, terminal vendors will now be able to license critical
  technologies, including reference designs and support for GPON that is compliant with Alcatel-
  Lucent's 7342 ISAM Fiber-To-The-User (FTTU) product family. In addition, and under a separate
  agreement, Alcatel-Lucent will offer support services required to promote interoperability.

  iamba Networks
  iamba Networks, Inc. is a leading provider of GPON solutions for Telecommunications
  Equipment Manufacturers (TEMs) and Original Device Manufacturers (ODMs). iamba’s end-to-
  end GPON solutions are based on iamba's high-performance SoC, application software and
  reference designs, enabling TEMs to deliver a complete, leading edge, cost-effective GPON
  system solution to telecom network operators in record time.

  Since early 2005 the company has concentrated on GPON, the highest growth area in telecom.
  This PON technology is being widely adopted by telecom network operators worldwide for
  delivering new revenue-generating triple-play services to their subscribers. iamba, the first
  company to demonstrate a complete, standards-based GPON solution to US operators, is an
  active member of Full Service Access Network (FSAN), the industry consortium under the ITU,
  responsible for defining and driving GPON technology to market.

  In 2007 iamba launched its complete, next-generation, end-to-end GPON Eco-System (iGES)
  solution. The iGES solution is comprised of leading-edge, proven ONT and OLT SoCs, highly
  cost-competitive, production-ready OLT and ONT designs and a full complement of software
  packages for GPON management, triple-play services and network management.

  Ikanos Communications Inc.
  Ikanos Communications Inc. (NASDAQ: IKAN) is a leading global provider of high performance
  silicon and software for interactive broadband. The company develops and markets end-to-end
  solutions for the last mile access infrastructure and for the digital home. These solutions enable
  carriers to deliver enhanced “triple play” voice, video and data services. Ikanos’ solutions power
  DSLAMs, ONUs, concentrators, CPE, modems and residential gateways for the world’s leading
  network equipment manufacturers. Ikanos’ products have been deployed by carriers worldwide.

  Headquartered in Fremont, Calif., Ikanos has offices in China, France, India, Japan, Korea,
  Singapore and Taiwan. Most of the company’s engineering and research is conducted in
  Fremont; Nice, France; and Bangalore and Hyderabad, India. Ikanos’ engineers have filed for
  approximately 120 patents. Ikanos recognizes that participation in and contributions to industry
  forums and standards development organizations benefit the entire community of broadband
  technology developers and users. With its involvement in these efforts, Ikanos is playing a vital
  role in driving worldwide consensus on standards that result in rapid implementation of highly
  interoperable solutions.

  Ikanos sells its products directly as well as via international sales partners to Original
  Equipment Manufacturers (OEMs) and Original Design Manufacturers (ODMs).




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  Most of the world's leading access equipment manufacturers use Ikanos products. Ikanos'
  customer list includes leading DSLAM, remote terminal, ONU and concentrator manufacturers,
  as well as the premier developers of CPE, residential gateways and firewall/security-enabled
  equipment. Ikanos’ customers are located in Asia, Europe and North America.

  Infineon
  The Infineon Communication Solutions business develops, manufactures and markets end-to-
  end, leading-edge semiconductor products and solutions for cellular, wireless and wired
  communications, enabling smooth transmission of voice and high-speed data from the
  backbone of the telecommunication network infrastructure to the end user’s equipment.

  Featuring one of the most extensive product portfolios on the market, the Infineon advanced
  ICs and complete hardware/software reference designs for broadband CPEs cover nearly all
  deployment scenarios. Infineon’s ADSL2+, VDSL 2 and SHDSL single-chip solutions power the
  most advanced systems in the world, driving services such as IPTV and HDTV. Coupled with the
  Infineon powerful wired and wireless network processor technology and state-of-the-art VoIP
  chipsets, these solutions comprise the core of simple to high-end broadband gateways.

  Nokia-Siemens
  Nokia-Siemens’ customers require end-to-end solutions and the pace of their requirements will
  accelerate in the future. Nokia-Siemens can help change the way they do business and capture
  value.

  Nokia-Siemens brings the benefits of scale and global reach, plus a deep understanding of
  operator business, an industry-leading research and development organization, and a wide
  range of services, products and solutions to its customers. But, to succeed in a rapidly evolving
  communications industry, scale is not enough. Therefore, Nokia-Siemens is building an
  organization and culture that constantly evolves to address its customers’ key challenges and
  lead industry change.

  The explosive growth of network and Internet traffic, both in terms of bandwidth and
  subscribers, represents a great opportunity for operators and equipment providers. However,
  the legacy of the traditional telecom business has resulted in complex and partly overlapping
  network layering and architecture. The complexity of network architecture is not just a technical
  issue. It is a highly prominent business challenge for most of Nokia-Siemens’ customers.
  Therefore, Nokia-Siemens drives the transition toward simplified network architecture enabled
  through innovative, environmentally sustainable solutions that enable rapid growth.

  Source Photonics
  Source Photonics is a leading provider of optical communication products used in
  telecommunication systems and data communication networks. The company designs,
  manufactures and sells a broad portfolio of optical communication products, including passive
  optical network subsystems, optical transceivers used in the enterprise, access, and
  metropolitan segments of the market, as well as other optical components, modules, and
  subsystems. In particular, Source products include optical subsystems used in FTTP
  deployments, which many telecommunication service providers are using to deliver video,
  voice, and data services.




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  Source Photonics products enable telecommunication service providers to provide high-
  bandwidth video, voice and data services to keep up with today's evolving telecommunication
  networks and to enhance and upgrade their networks efficiently and economically.

  The global, vertically integrated business model and expertise in optical design enables Source
  to rapidly deliver market-leading, high performance fiber optic components and subsystems.
  The R&D and engineering teams provide strong innovative capability with more than 250
  engineers and research scientists based in North America and Asia, who have core technical
  knowledge ranging from optoelectronic device, optical subassembly, and module design, to
  product and manufacturing process development expertise. With more than 1500 total
  employees primarily in Taiwan and Mainland China, corporate headquarters in California, and a
  worldwide sales force through regional offices and distribution partners, Source Photonics is
  well positioned for future growth in the global optical transceiver market space.

  Teknovus
  FTTH is the next big leap in bringing broadband access to consumers. Teknovus develops and
  delivers the only proven, fourth-generation EPON chipset with the features and performance to
  enable fast, easy-to-deploy, low-cost triple-play (voice, data, and video) via FTTH at 1000 times
  the bandwidth of DSL.

  EPON—the key to massive deployment of fiber-to-the-home, fiber-to-the-business, and fiber-
  to-the-premise—is an accepted proven standard that will drive improved and simplified
  broadband access. Within the next few years, fiber-access networks will render copper-access
  plants obsolete.

  The Teknovus EPON chipset enables carriers and service providers to win with a higher return
  on investment. They can now expand their subscriber services with television and video, thus
  enabling competition with satellite and cable providers. This capability is based upon the speed
  and lower cost of FTTH; easier maintenance; radically lower power usage (40%); and
  downloadable software upgrades.

  Consumers and subscribers win with the simplified convenience of a single source for enhanced
  communications and entertainment services, including HDTV, conventional television, on-
  demand video, Web access, and telephony.

  PMC-Sierra
  PMC-Sierra is a leading provider of broadband communications and storage semiconductors for
  metro, access, fiber to the home, wireless infrastructure, storage, laser printers and fiber
  access gateway equipment. PMC-Sierra offers worldwide technical and sales support, including
  a network of offices throughout North America, Europe, Israel and Asia. T

  In the second quarter of 2006, PMC-Sierra acquired Passave, making PMC the leader in gigabit
  EPON solutions for FTTH broadband access network equipment. PMC-Sierra is the only supplier
  to support both EPON (IEEE 803.2ah Ethernet in the First Mile) and GPON (ITU-T G.984)
  standards. PMC-Sierra’s system-on-a-chip solutions provide end-to-end gigabit per second
  bandwidth solutions linking central office equipment and customer premise equipment. OLT
  devices connect the central office to the PON network and ONU or ONT devices connect
  customer premises to the PON network.




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  PMC-Sierra's family of CPE solutions provide the foundation for the robust delivery of advanced
  IP services including IPTV, VoIP, network attached storage, and other converged voice, video
  and data services into the digital home. PMC-Sierra's family of residential gateway and
  integrated access devices support new high-bandwidth broadband access technologies, such as
  VDSL 2 and FTTH.

  Zhone
  Zhone Technologies is a global provider of advanced telecommunication equipment to more
  than 600 operators in both emerging and established markets.

  Zhone's market leading MALC Broadband Loop Carrier (MALC) equipment enables operators to
  rapidly deploy revenue-generating access services using their existing infrastructure, while
  providing a migration path to cost-efficient, all-IP access network. The company's products
  address a full range of applications including residential and business broadband, VoIP, IPTV,
  and Ethernet over both copper and fiber access lines.

  By utilizing Ethernet and IP technology, Zhone's products simplify network operations by
  consolidating multiple services onto a single access line. This convergence of services and
  networks simplifies provisioning and operations, enhances quality and reliability, and opens the
  door for delivering exciting new services.

  With corporate headquarters in Oakland, California, Zhone operates development centers
  across North America and has sales and service facilities spanning the globe.

  Products and Market Share
  VDSL 2
  Ikanos, the market leader in the Japanese VDSL 2 market, saw its market share position erode
  in 2007 and 2008, as Conexant, Infineon and Broadcom started to ship.

                                        Table 24: Japanese VSDL 2 Market Players

                                                                2006      2007    H1 - 2008
                             Ikanos                              81%       61%          51%
                             Conexant                             7%       23%          25%
                             Broadcom                             2%        9%          18%
                             Infineon                            11%        8%           6%
                                                   Source: iSuppli Corp. | September 2008


  VDSL 2 CPE silicon solutions are following the ADSL trend toward highly integrated CPE SoCs.

  The vender supplied block diagrams that follow represent the level of integration achieved by
  today’s silicon suppliers.




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  Some silicon suppliers like Conexant and Infineon integrate the router/gateway functions on
  chip with the VDSL transceiver (see Figure 28 and Figure 29), while others like Ikanos (see
  Figure 30) offer an additional highly integrated, high performance router/gateway processor
  chip, providing the OEM a high level of performance.

                                    Figure 28: Conexant CX96xxx VDSL SoC




                                                                                               Source: Conexant




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                                          Figure 29: Infineon VDSL 2 VINAXTM–VE PSB80800




                                                                                                                                       Source: Infineon



                                    Figure 30: Ikanos’ Fusiv Vx170/Vx180 System Architecture

                                                                                                                                          TAD
                                                                PCM
                                   Security                                                                    RNG
                                                                                                                                          GPIO
                                   Engine
                                                                                                                 GPT                      UART
                                 SHA-1       MD5
                                  DES       3DES                                                                                           SPI

                                  AES      SHA256                                                                                          IC
                                                              Voice
                                                                                                                                          SCU
                                Security Accelerator          Engine
                                    Processor                                               USB 2.0
                                                                                 PCI         Host
                                                                                                                                          PLL

                                                                                                                                          Bus
                                                                                                     Data                                Bridge
              32 bit DDRAM




                                                                                                     Control
                Controller




                                                 Bridge             Memory

                                                                                                       Data




                                                                                                                                    xDSL
                                                             Eth           Eth            BM                   PCI                Accelerator
                                                          Accelerator   Accelerator    Accelerator          Accelerator           Processor
                                                          Processor     Processor      Processor            Processor
                                     RISC
                                    Engine                                                                                 Multi-mode VDSL2
                                                          G/EMAC        G/EMAC                                                Datapump
                                                                                                                             (Vx180 only)
                             FUSIV® Technology
                                                                                                                                          Source: Ikanos




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  FTTH-ONT
  PMC-Sierra, on the strength of its EPON wins in Japan, holds the market share lead in the EPON
  MAC segment followed by Teknovus with its strong position in China and Korea. Cortina, holds
  down the third-place position. These three suppliers control virtually the entire EPON MAC
  market.

  GPON, which is still in its early stages of development, has several silicon suppliers trying to
  grab a beachhead in what iSuppli forecasts to be a market growing at a CAGR of 65% over the
  next five years. The two early leaders are Broadlight and Freescale. Unlike the more mature
  EPON silicon market, the GPON market has several silicon suppliers competing for share. As the
  GPON silicon market enters its growth phase, the number of suppliers is expected to be reduced
  to three as in the EPON segment.

  The vender supplied block diagrams that follow represent the levels of integration achieved by
  today’s PON MAC silicon suppliers. Most vendors in the market are providing MACs that are
  focused on reducing the cost of the standalone ONT. The router function for most vendors is not
  integrated today.

                                  Figure 31: Freescale’s MSC 7104 GPON ONT




                                                                                               Source: Freescale




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                                     Figure 32: Conexant Xenon-IIIG GPON




                                                                                               Source: Conexant



                                  Figure 33: Teknovus TK3713 E-PON Solution




                                                                                               Source: Teknovus




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                                   Figure 34: Cortina’s ONU – 8016 4FE + VoIP


                            ONU - Major Component

                               EPON               Cortina ONU     GE      Ethernet
                PON Fiber   Transceiver             CS8016                 Switch         Ethernet FE or GE



                                                                        VoIP + SLIC
                                                 Flash    SRAM                            VoIP


                                                                                                     Source: Cortina



                               Figure 35: PMC-Sierra PAS630 Gigabit Ethernet MAC




                                                                                                 Source: PMC-Sierra


  Summary
  The transition from voice and data service provider to multimedia, value-added service provider
  by telephone companies worldwide is driving the requirements for a new generation of very
  high-speed broadband subscriber loops.

  Technologies being deployed in support of very high-speed subscriber loops include VDSL 2,
  VDSL 2 with bonding, hybrid loops of fiber to the neighborhood or curb and VDSL 2 to the home
  and fiber all the way to the home. There are several choices for FTTH including E-PON, G-PON
  and Active (point to point) Ethernet.

  There is no technology winner for increasing capacity in the subscriber loop. Each telephone
  company is analyzing its existing networks, the additional capacity required for future value-
  added multimedia services and the capital it will take to enable their networks to support the
  additional capacity. These decisions are very difficult. The right decisions will create a platform
  for these service providers to grow and prosper. The wrong decision could spell the end of life

Wired Communications — Q3 2008                                                                              September 2008

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  for the service provider. Regulations also are complicating the telephone companies’ decisions.
  In some regions, if the telephone company invests the billion of dollars required in new access
  infrastructure, they are responsible to make these facilities available to their competitors.

  However, to survive and grow, virtually all telephone companies understand that they must
  upgrade their access plant to support the needed value-added services.

  The bandwidth requirements to support value-added services differ greatly by region. The
  downstream bandwidth achievable via ADSL2+ is sufficient for some regions; others will require
  FTTH to achieve their service goals. The one common denominator is in the upstream path.
  Virtually all telephone companies will require higher upstream paths in the future than can be
  supported by ADSL2+.

  The migration to very high-speed subscriber loops will take time. Overall, net new broadband
  subscribers are expected to grow at a CAGR of 12% through 2013 while net new very high-
  speed subscribers for the same period will achieve a CAGR of 43%.

  From a technology view, hybrid fiber and VDSL 2 deployments will grow at a CAGR of 38%
  while FTTH for the same period will grow at a CAGE of 47% through 2013, iSuppli projects. By
  2013, 98 million VDSL lines and 146 million FTTH loops will be active.

  FTTH installations, currently dominated by E-PON, will be on an equal footing with G-PON in
  terms of subscriber installations by 2013.

  There are several new fiber technologies being worked on today. These include 10Gig E-PON
  and 10Gig G-PON and PON - WDM. These technologies will not affect the FTTH deployments
  over the forecasted period, but should make strides in capturing fiber to the building
  deployments starting in 2011.

  Factory revenues from very high-speed subscriber access will grow at a CAGR of 27%. By 2012,
  factory revenues from this segment will be above $8 billion annually, iSuppli forecasts.

  Although the growth of net new broadband subscribers is slowing, the market for broadband
  equipment and components will remain strong as telephone companies migrate their existing
  access networks to very high-speed technologies.




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  Appendix A: PON Overview
  PON is a point-to-multipoint optical access technology in which the service provider CO is
  connected to multiple subscribers in a tree-like topology with multiple branches split off the
  main trunk. This architecture uses passive optical components like splitters and WDMs in the
  network to deliver broadband services including voice, data and video. Figure 36 shows a
  schematic of typical FTTP PON architectures.

                                  Figure 36: Schematic of Typical PON Topology

                                                                                                        Individual Residential
                                                                                                       Households or Business
                                                                                   ONT
                Service Provider CO                                Optical Fiber



               Internet                Optical Fiber                                                 ONT
                            OLT                                                    Optical Fiber
                                                                                                   (Optical
              Telephony    (Optical                                                                Network
                             Line                       Passive                                    Terminal)
                                                        Splitter
                           Terminal)
                Video
                                                                                    ONT
                                                                                                       Fiber to the Premises

                                                                                     Source: iSuppli Corp. | September 2008


  PONs differ from the more active optical network architectures that rely on active components
  like switches, lasers and amplifiers and are typically configured as point-to-point links between
  sites.

  In a PON, at the service provider's CO, an Optical Line Termination (OLT) handles the
  distribution of TDM voice (regular telephone service), high-speed data and video services to the
  different service subscribers.

  In the FTTP PON architecture, optical fiber is deployed all the way from the carrier CO to the
  customer premises (residential or business). An Optical Network Termination (ONT) unit,
  located at each subscriber premise, acts as the point of demarcation between the carrier
  network and that customer’s local network of voice, data and video equipment. Depending on
  the region, the ONT is either owned by the service provider, as in the U.S., or by the subscriber,
  as in Japan. The ownership of the ONT has a direct effect on its architecture.

  FTTP PON offers several advantages over competing copper-based and fiber-based
  technologies. FTTP PON has a much higher bandwidth when compared with copper-based
  technologies like ADSL, ADSL2+ and VDSL. In addition, since PON uses only passive optical
  components between the CO and the customer premise, there are no active electronics in the
  loop that need to be maintained. This results in fewer points of failure in the access network
  and significantly lowers maintenance costs and operational expenses for the carrier over the life
  of the network.




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  PON architectures with fiber right up to the customer premise are also future-proof, with almost
  unlimited bandwidth available to support the voice, video and data applications of today as well
  as emerging applications of the future. This affords service providers the ability to offer new
  revenue-generating services, bundle multiple services together, reduce churn and increase the
  customer base by attracting customers from competing MSOs.

  The drawbacks with FTTP PON are the high upfront costs and longer times required to roll out
  networks to a neighborhood. iSuppli estimates that in 2005 Verizon’s capital expenditure per
  home passed for its FTTP FiOS project was between $1,000 and $1,200.

  The Technology Standards for PON
  In PON architecture, communication between the OLT and ONT is based on one of three
  different international protocols: Broadband PON (BPON), Ethernet PON (EPON) and Gigabit
  PON (GPON). These protocols vary in terms of data transport protocols used, link distances and
  bandwidths supported.

  The BPON standard was ratified in 2001 by the ITU and uses ATM as the data transport layer.
  EPON was ratified in 2004 by the IEE-EFM (Ethernet in the First Mile) alliance and since it uses
  Gigabit Ethernet as the data transport layer, it is also referred to as G-EPON. GPON can be
  viewed as a superset of BPON and was ratified by the ITU in 2004. It uses GPON Encapsulation
  Method (GEM) to provide a protocol agnostic approach for any type of service (both TDM and
  packet).

  Irrespective of the PON standard, downstream optical communication of voice and data traffic
  from the OLT to the ONT equipment typically takes place at 1490 nm, while upstream data and
  voice traffic from the subscriber ONT to the OLT is transmitted at 1310 nm.

  For BPON networks, video services are broadcast downstream on an overlay optical wavelength
  at 1550 nm as per the ITU-T G.983.3 standard. In this architecture the video content is
  transported as traditional analog channels, spanning the typical 50 - 870 MHz range.

  On the other hand, in EPON architecture the video signal is transmitted as a digital signal as
  part of the high-speed downstream data content. So, only two different wavelengths are used
  to communicate between the OLT and the ONT. But at the customer premises a home gateway
  has to be used to interface the ONT to the customer’s voice and video equipment.

  Typically, a burst-mode Time Division Multiple Access (TDMA) technique is used for upstream
  communications between the multiple ONTs connected to a single OLT. An upstream Media
  Access Coordination and Control (MAC) layer is provided by the OLT, which grants access to
  each ONT for upstream transmission within specified time slots.

  In Japan, NTT and other carriers have adopted EPON architectures with aerial deployment of
  optical fiber to provide high bandwidth data-centric services to subscribers in a point-to-
  multipoint configuration. Carriers in other Asian countries also are embracing EPON
  architectures.

  BPON
  BPON is a cell-based PON protocol and is at present the most mature PON technology. BPON
  uses Asynchronous Transfer Mode (ATM) as the transport and signaling protocol between an
  OLT and multiple remote ONTs and supports reach distances of up to 20 km.

Wired Communications — Q3 2008                                                                            September 2008

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  The BPON standard is based on specifications defined in the early 1990s by the Full-Service
  Access Network (FSAN) initiative and ratified in 2001 by the International Telecommunications
  Union (ITU) as the G.983.1 standard.

  In BPON architecture, a single OLT can support a maximum of sixty-four remote ONTs with full-
  duplex (simultaneous upstream and downstream) transmission over independent wavelengths.
  BPON currently supports 622 Mbps in the downstream direction and 155 Mbps upstream. The
  downstream bandwidth is shared by all ONTs.

  An additional optical wavelength can be deployed for video broadcast. The additional video
  optical wavelength is at 1550 nm as defined in the ITU-T G.983.3 standard. The BPON video
  content is transported as traditional CATV channels, spanning the typical 50 to 870 MHz range.
  The advantage of using traditional CATV channels is that existing cable set-top boxes can be
  used to interface the ONT to the premises televisions.

  Since BPON employs an ATM switching and transport layer, the technology inherently provides a
  relatively straightforward interface at the OLT to ATM-based backhaul and aggregation
  networks. This is especially important for incumbent carriers seeking access technologies
  compatible with huge investments in legacy ATM infrastructure.

  BPON provides a very rich and exhaustive set of operation, administration and maintenance
  features, including bit error rate monitoring, alarms and defects, auto discovery and automatic
  ranging, and churning as a security mechanism for downstream traffic encryption, etc.
  However, BPON systems have a low overall efficiency for data transport.

  As is well known, in 2003 the three U.S. RBOCs—Verizon, BellSouth and SBC (now AT&T)—
  issued a joint RFP for PON architecture based on the BPON protocol. Verizon has been deploying
  an FTTP access network based on BPON since 2004. Tellabs is the primary equipment vendor for
  Verizon in this deployment.

  EPON
  Ethernet PON or EPON uses Gigabit Ethernet as the transport protocol between the OLT and the
  remote ONTs. EPON combines the functionality of Ethernet and the Ethernet family of Physical
  (PHY) layers with a minimal set of extensions to the IEEE 802.3 MAC layer and a mechanism for
  network operations, administration and maintenance in a point-to-multipoint network topology.

  EPON architectures support symmetrical bandwidths of 1.25 Gbits/sec. in the upstream and
  downstream directions over link distances of up to 20 km. However, with EPON, a single OLT
  can support only thirty-two users, with each end user typically receiving 10 or 100Mbits/sec.

  In the EPON architecture the video signal is transmitted as a digital signal as part of the high-
  speed downstream data content. The advantage in transporting video embedded in the
  downstream data wavelength is that the OLT and the ONT do not need to multiplex in or
  optically split out the signal as is required in BPON deployment. The disadvantage is that the
  optical video signal will need to be processed by a new type of set-top box to convert the digital
  bit stream to a TV-compatible input format.




Wired Communications — Q3 2008                                                                           September 2008

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                            Telco TV Drives Resurgence in Broadband Equipment Revenues



  In addition to supporting higher data transmission rates than BPON, Ethernet-based PON
  architectures utilize less expensive optical components than BPON, address a large base of
  Ethernet knowledgeable engineers and provide compatibility with Wi-Fi and user PC-based
  Ethernet devices. In addition, EPONs require a smaller packet header overhead than APONs,
  increasing the usable bandwidth, and tend to be more efficient for data transfer.

  The specifications and standards for EPON are incorporated into the IEEE's EFM 802.3ah
  Ethernet in the First Mile standard that was ratified in 2004.

  Japan has adopted EPON architecture for its FTTP deployments with equipment being provided
  by Fujitsu, Mitsubishi, and Sumitomo. In North America, vendors like Alloptic are shipping EPON
  equipment for FTTP deployments championed by city councils and municipalities.

  GPON
  The GPON standard (ITU-T G.984 series Gigabit PON) can be viewed as a superset of the BPON
  standard. The GPON standards were ratified by ITU-T in January 2003 and are known as ITU-T
  Recommendations G.984.1, G.984.2 and G.984.3.

  GPON offers a scalable framing structure from symmetrical 622 Mbps and symmetrical 1.25
  Gbps to asymmetrical 2.5 Gbps downstream and 1.25 Gbps upstream. Unlike BPON and EPON,
  GPON is protocol agnostic and can support both TDM and packet data over a synchronous
  transport protocol with GPON Encapsulation Method (GEM) encapsulation.

  The goal of GPON is to lower system costs for all applications via the elimination of the need for
  an external adaptation layer while providing greater data transport efficiency than BPON and
  EPON. In addition, while the EPON standard supports only two ODN classes (Class A and Class
  B), the GPON specifications also support Class C ODNs that extend the PON network reach to
  beyond 20 kilometers while supporting up to 64 ONTs with a single OLT.

  Table 54 in the accompanying database summarizes the features of the different ratified PON
  standards.

  Appendix B: Active Ethernet or point to point Ethernet Overview
  In Active Ethernet, data is transported between a central office and a remote access point over
  several optical fibers using carrier grade Gigabit Ethernet (GigE) on each fiber as the underlying
  transport protocol. These architectures are designed to bring fiber deep into the neighborhood
  or node, often just a few hundred feet from the subscriber premise. Unlike PON, this
  configuration employs active optical components including lasers, receivers and amplifiers in
  locations remote from the service provider CO.

  Appendix C: VDSL Technology
  Table 55 in the accompanying database illustrates the progression of DSL technology over the
  last several years.

  VDSL 2, which was ratified in 2005, provides several major enhancements over its predecessor,
  VDSL1.




Wired Communications — Q3 2008                                                                            September 2008

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                                                                                                                                      — 69 —

                              Telco TV Drives Resurgence in Broadband Equipment Revenues



  One of the features of VDSL 2 is the definition of standard profiles of operations. These profiles
  define a baseline performance level for a given application. The basic profiles are graphically
  represented in Figure 37.

                                          Figure 37: VDSL-2 Standard – Profiles

                  Tx
                Power


               20.5 dBm
                Europe
                 China
                                    VDSL2 8b
                 Japan
                 Korea
                Taiwan
                                                                 Central Office
                              A
               17.5 dBm   A   D
                  US
                Canada    D   S
                                    VDSL2 8a
                          S   L                                         Remote Terminal
                          L   2                                                      Remote Terminal
                                                                                        and MDU
                              +
                                                                                                                MDU
               14.5 dBm
                 Japan
                 Korea
                Taiwan              VDSL2 8d
                                                     VDSL2            VDSL2               VDSL2
                                                     12 a, b           17a                 30a

               11.5 dBm
                                    VDSL2 8c

                          1.1 2.2              8.8             12.0           17.6        MHz          30.0

                          256 512              2048            2782           4096    # of Tones       3478

                                                                                                                      Source: Infineon


  The VDSL 2 (G.993.2) standard defines several features that are intended to provide a robust
  service level, even in the face of disturbers that may affect the loop. How well these features
  work in practice will determine whether VDSL 2 becomes mainstream or not. IPTV is the driving
  force behind the adoption of VDSL 2 by telcos. It is, therefore, a necessary condition of VDSL 2
  to manage video in a robust manner, keeping video faults to a level equal to or less than that
  experienced from satellite or cable transport.

  Noise provides the most disturbing factor to the VDSL 2 loop. There are four sources of noise:
  cross talk, impulse noise, Gaussian noise and RF interference. Of these, cross talk and impulse
  noise represent significant challenges to providing a robust link. The VDSL 2 standard calls out
  procedures for handling these noise sources. Some of the key VDSL 2 specifications are:

       Dual latency paths: Provides a very low latency path for voice and a different latency
        path for data and video, which allows the latter to be buffered and incorporate Forward
        Error Correction (FEC) to reduce transmission errors. Buffering and FEC add delay.
       Dynamic Rate Re-partitioning (DRR): Dynamically manages the size of the data pipes
        assigned to the two latency paths. If one path requires less bandwidth than is available,
        DRR will assign the excess bandwidth to the other path.
       Seamless Rate Adaptation (SRA): In SRA, the receiver monitors the Signal-to-Noise-
        Ratio (SNR) of the channel, and then determines that a data rate change is necessary to


Wired Communications — Q3 2008                                                                                                 September 2008

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                                                                                                                 — 70 —

                            Telco TV Drives Resurgence in Broadband Equipment Revenues



        compensate for changes in channel SNR, and sends a message to the transmitter to
        initiate a change. The message contains necessary parameters, such as numbers of bits
        modulated and transmit-power of each sub-channel.
       Impulse noise protection: The ability to mitigate an impulse noise spike that spans
        from two to ten symbols. Chips can use buffering of 2 to 10 symbols in both upstream and
        downstream directions along with Forward Error Correction to help mitigate the impact of
        impulse noise. These techniques can substantially reduce the effects of impulse noise, but
        also have an adverse impact on achievable data rates. (The overhead for Forward Error
        Correction reduces the usable data rate.)
       Dynamic Spectrum Management (DSM): DSM is a technique used to mitigate noise
        from cross talk. Cross talk due to VDSL use of high frequencies is a significant challenge.
        Cross talk could cause a connection to be lost. After re-training, the available bandwidth
        may be lower than the original bandwidth. Cross talk mitigations are still developing.
        There are proposals being offered that may become part of the VDSL specification in the
        future.

  Several silicon suppliers, including Broadcom, Conexant, Ikanos and Infineon and OEMs, such
  as Alcatel-Lucent and ECI, are addressing these challenges in various ways.

  Ikanos provides impulse noise protection that includes buffering of up to 10 symbols in both the
  downstream and upstream paths.

  Broadcom has introduced its PhyR technology to solve the problems of noise without the need
  to give up usable bandwidth. Broadcom claims its PhyR technology provides superior impulse
  noise protection and improved BER and packet loss numbers.

  Robustness is a major focus of OEMs and silicon suppliers. If they can execute as advertised,
  VDSL 2 should become a very reliable transport for video. For OEMs and silicon providers, their
  existence may ride on how well they can provide robust video solutions.




Wired Communications — Q3 2008                                                                            September 2008

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                                                                                                                — 71 —

                           Telco TV Drives Resurgence in Broadband Equipment Revenues


 Intellectual Property Notice
 All information and intellectual property contained herein is the sole property of iSuppli Corporation.

 About iSuppli Corporation
 iSuppli Corporation is the global leader in technology value chain research and advisory services. iSuppli
 provides market intelligence services for the EMS, OEM and supplier communities in addition to servicing
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 research to device-specific application market forecasts, from teardown analysis to consumer electronics
 and from display device and systems research to multimedia content and services. More information is
 available at www.isuppli.com.

 Analytical Tools                                                 Display Systems
    Component Pricing                                               Desktop Computer Monitors
    Component Supply Outlook                                        Plasma
    Equipment and Semiconductor Forecast                            Projection
    OEM Semiconductor Spending                                      Signage and Professional
    Semiconductor Application Forecasts                             Specialty Monitors
    Semiconductor Inventory                                         Television Systems
    Semiconductor Market Shares                                  Electronic Components and Subsystems
 Application Markets                                                 Analog and Interface
    Automotive Infotainment                                         DRAM
    Broadband and Digital Home                                      Emerging Memory Technologies
    Compute Platforms                                               Flash, SRAM and MCP
    Consumer Platforms                                              LED
    IPTV                                                            Power Management
    Mobile Handsets                                                 Semiconductor Design and IP
    Storage                                                      Growth Markets
    Wireless Systems
                                                                     China
 Best Practices                                                      India
    For OEMs                                                     Manufacturing Costs and Materials
    For Suppliers
                                                                     Digital Music Distribution
    Procurement
                                                                     Digital Video Distribution
 Cost Models                                                         Home Entertainment
    Compute Systems                                                 Mobile
    Flat Panel Displays Manufacturing                               Video Gaming
    IC Price Evaluator                                              Storage Applications
    Mobile Handsets                                                 Memory
    Set-top Boxes                                                   Products and Systems

 Display Devices                                                  Value Chain Services
    Digital TV Semiconductors                                       EMS and ODM
    Driver ICs                                                      Global OEM Manufacturing and Design
    Emerging Display Technologies                                   ODM Semiconductor Spend
    Mobile Displays                                                 OEM Semiconductor Spend
    OLED                                                            Regional Design Influence
    Small/Medium Displays


                For more information about iSuppli Market Intelligence Practices and Services,
                        contact iSuppli at 310.524.4007 or isupplicorp@isuppli.com.


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                           Telco TV Drives Resurgence in Broadband Equipment Revenues



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                             Telco TV Drives Resurgence in Broadband Equipment Revenues




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