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Enron Broadband Services. Today’s Message. The Broadband Explosion Is Real, It Is Here Now and It Will Fundamentally Change the Existing Internet Delivery Platform - PowerPoint PPT Presentation
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Enron Broadband Services
AC_00_Communications-
2
Today’s Message
The Broadband Explosion Is Real, It Is Here Now and It Will Fundamentally Change the Existing Internet Delivery Platform
The Enron Business Model, Which Emphasizes Open, Robust Networks and Markets, Will Enable Enron to Develop the Most Efficient Broadband Delivery Network in the World
Enron Broadband Has Already Established the Superior Broadband Delivery Network
AC_00_Communications-
3
Key Metrics
1997 1998 1999 2000 2001
Fiber Route Miles
1999
15,00018,000
12,325
2001E 2000E
5,538
1,755
19981997
1997 1998 1999 2000 2001
13
Pooling Points
1999
40
2001E 2000E
30
1997
0
1998
Servers
1997 1998 1999 2000 20011999 2001E 2000E
1,500
3,000
222
1997
0 0
1998
1997 1998 1999 2000 2001
Total Headcount
1999 2001E 2000E
1,100
775
490
8925
19981997
AC_00_Communications-
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Enron’s Target Market
Bandwidth Market
High Bandwidth Applications–Video–Large File Transfer
Illustrative
Low Bandwidth Applications–Voice–Text
1999Today
2001 2002 2003 2004 2005 2006 2007 2008
Volume
AC_00_Communications-
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The Internet
• Open• Ubiquitous• Flexible
• Designed for Text World–Slow Speed–Limited Data Interchange
Advantages Disadvantages
A B
AC_00_Communications-
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A
Proposed Solution
A B A B
Add Intelligence
to the System
Bypass Internet With Point-to- Point Connection
B
AC_00_Communications-
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A
Add Intelligence to the System
Players
Caching
– Inktomi
Route Selection
– Akamai
Router Upgrade
– RSVP Protocol
Issues
Big Improvement for Lower Bandwidth Applications
Does Not Solve Problem for High Bandwidth Applications
B
AC_00_Communications-
8
A B
Bypass Internet with Point-to-Point Connection
Players
MCI Worldcom
Qwest
AT&T
Williams
Level 3
Issues
Lack of Ubiquity, Flexibility
High Capital Intensity
AC_00_Communications-
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A B
Enron’s Approach
MCI WorldComQwest
AT&TWilliams
AC_00_Communications-
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Enron’s Approach
Advantages Extremely High Quality of Service (QoS)
Extremely High Capacity; Ability to Handle the Highest Bandwidth Applications
Ubiquitous
Flexible - Ability to Provision Bandwidth Real-Time
Absolutely Lowest Cost
Other Features
Ability to Differentiate QoS
Ability to Forward Reserve Bandwidth
Ability to Provide Full Range of Financial Products and Services Along-Side Physical Capacity
– Forward Price Contracts– Derivatives and Hedges– Financing
AC_00_Communications-
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Enron Broadband Services
Enron Intelligent
Network
Deploy the Most Open, Efficient Network with
Broad Connectivity
Fiber
Servers
Pooling Points
Software
AC_00_Communications-
12
Enron Broadband Services
BandwidthIntermediation
Enron Intelligent
Network
Deploy the Most Open, Efficient Network with
Broad Connectivity
Fiber
Servers
Pooling Points
Software
Be the World’sLargest Buyer
andSeller of
Bandwidth
Bandwidth Management
Trading
Finance
AC_00_Communications-
13
Enron Broadband Services
Enron Intelligent
Network
Deploy the Most Open, Efficient Network with
Broad Connectivity
Fiber
Servers
Pooling Points
Software
Streaming Broadband Services
Data Asset Management Services
ContentServices
Be the World’s Largest Provider
of Premium Broadband
Delivery Services
Be the World’sLargest Buyer
andSeller of
Bandwidth
BandwidthIntermediation
Bandwidth Management
Trading
FinanceCD Track 3CD Track
1
AC_00_Communications-
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Today’s Discussion
Enron Intelligent Network
Business Centers
Intermediation
Content Services
Financials
BOS
AC_00_Communications-
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Enron Intelligent Network(EIN)Enron
Intelligent Network
Deploy the Most Open, Efficient Network with
Broad Connectivity
Fiber
Servers
Pooling Points
Software
ContentServices
BandwidthIntermediation
Be the World’sLargest Buyer
andSeller of
Bandwidth
Be the World’s Largest Provider
of Premium Broadband
Delivery Services
Bandwidth Management
Trading
Finance
Streaming Broadband Services
Data Asset Management Services
AC_00_Communications-
161997 1998 1999 2000E 2001E
5,538
12,32515,000
18,000
1,755
EIN Route Miles
FiberOwned and Contracted
Dallas
London
Paris
Copenhagen
Munich
Amsterdam
Rome
Omaha
San Francisco
San Jose
Los Angeles
San Diego
TokyoPhoenix
AlbuquerqueLas Vegas
HoustonSan Antonio
Orlando
Miami
New Orleans
Seattle
Portland
Sacramento
Boise
Denver Chicago
Minneapolis
Kansas CityWashington D.C.
Philadelphia
Charlotte
Jackson
Atlanta
Boston
Detroit
Albany
Salt Lake City
Cleveland
St. Louis
Toronto
New York
CD Track 3CD Track 2
AC_00_Communications-
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Fiber
State of the Art Fiber Optic Network
–Pure Internet Protocol (IP)
–12 Fibers, Each Upgradable to
OC-192
–Low Capital and Operating Costs
Low Cost Scalability
Provides Guaranteed Backstop for Enron’s Firm Delivery Commitments
AC_00_Communications-
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Servers
Dallas
London
Paris
Copenhagen
Munich
Amsterdam
Rome
Omaha
San Francisco
San Jose
Los Angeles
San Diego
TokyoPhoenix
AlbuquerqueLas Vegas
HoustonSan Antonio
Orlando
Miami
New Orleans
Seattle
Portland
Sacramento
Boise
DenverChicago
Minneapolis
Kansas City Washington D.C.
Philadelphia
Charlotte
Jackson
Atlanta
Boston
Detroit
Albany
Salt Lake City
Cleveland
St. Louis
Toronto
New York
1998 1999 2000E 2001E
0222
1,500
3,000
CD Track 3CD Track 3
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Servers
18 GB Storage and 500-1,000 Broadband Stream Capacity
Automated, Flexible Market Interconnects
Co-Located With Distribution Partners
High-Capacity Broadband Servers “One Hop” From End Users
Enron’s Distributed Server Architecture Capable of Serving 2-3 Million
Broadband Streams Simultaneously by 2001
AC_00_Communications-
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Pooling Points
Los Angeles
Public
London
New York
AC_00_Communications-
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This Slide is Not in Your Book
AC_00_Communications-
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Pooling Points
Large-Scale Electronic Bandwidth
“Switches” that Enable Real-Time Circuit
ProvisioningOff the Shelf, Proven Lucent Equipment
Proprietary Enron Software
Highly Scalable
Connects Multiple Carriers and Multiple
CircuitsEnron’s Pooling Points Provide Real-Time Access to Bandwidth and Ability to
Dynamically Scale Network
Enron’s Pooling Points Provide Real-Time Access to Bandwidth and Ability to
Dynamically Scale Network
AC_00_Communications-
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Network Connectivity
Dallas
London
Paris
Copenhagen
Munich
Amsterdam
Rome
Omaha
San Francisco
San Jose
Los AngelesSan Diego
TokyoPhoenix
AlbuquerqueLas Vegas
HoustonSan Antonio
Orlando
Miami
New Orleans
Seattle
Portland
Sacramento
Boise
Chicago
Minneapolis
Kansas City Washington D.C.
Charlotte
Jackson
Atlanta
Boston
Detroit
Albany
Salt Lake City
Cleveland
St. Louis
Toronto
New York
Denver
Philadelphia
Fiber Network
Servers
Public Pooling Points
AC_00_Communications-
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Network Control Software
Routing – Network Element
Control
Bandwidth Reservation
Quality of Service
Metering
Applications Management
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ContentProvider
ISP
ISP
Poor Quality Video Stream
The EIN: UnparalleledContent Delivery, Quality and Reliability
CD Track 3CD Track 6
Dallas
London
Paris
Copenhagen
Munich
Amsterdam
Rome
Omaha
San Francisco
San Jose
Los AngelesSan Diego
TokyoPhoenix
AlbuquerqueLas Vegas
HoustonSan Antonio
Orlando
Miami
New Orleans
Seattle
Portland
Sacramento
Boise
Chicago
Minneapolis
Kansas City Washington D.C.
Charlotte
JacksonAtlanta
Boston
Detroit
Albany
Salt Lake City
Cleveland
St. Louis
Toronto
New York
DenverPhiladelphia
EIN
InternetHigh Quality
Low Quality
AC_00_Communications-
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Supplier Functionality
The EINMajor Industry Participants
DWDM Equipment Maximizes Broadband Transmission Capacity Over the EIN Network
Routers Control Physical Flow of Data
Software Provides Data Storage and Retrieval
Servers Interconnect Network and Physically Store Data “One Hop” From End Users
Lucent Bandwidth Manager Enables Real Time Switching of Circuits
DWDM and Optical Switching
Lucent TechnologiesBell Labs Industries
Caching Software Distributes Data Among Servers Closest to End Users
AC_00_Communications-
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The EINComments by Leading Industry Participants
Business Model Technology
Jonathan SchwartzVice President, Venture and
Strategic Investments
Graeme FraserV.P. of Engineering, Optical
Networking
David Peterschmidt Dr. Adam BeguelinChief Executive Officer Senior Scientist
CD Track 3CD Track 7
AC_00_Communications-
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Today’s Discussion
Enron Intelligent Network
Business Centers
Intermediation
Content Services
Financials
BOS
AC_00_Communications-
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Intermediation
Outsourcing of Bandwidth
Customized Bandwidth Solutions
Bandwidth Optimization
Pricing and Structuring
Risk Management
Physical Services
Trading Finance
Structured Financial Solutions
Investments
Bandwidth Management
AC_00_Communications-
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Ease of Creating a Commodity Intermediation Business
Attitude of Participants
Favorable
Unfavorable
Natural Gas1980’s
Electricity1990’s
Bandwidth 2000’s
Motivated Monopoly Massive Take or Pay
MostlyTied to Monopoly
Monopoly Motivated
Motivated Motivated Motivated
Sellers Interconnection BuyersSellers
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Ease of Creating a Commodity Intermediation Business
Number of Players
FavorableUnfavorable
Sellers Interconnection Buyers
Natural Gas1980’s
Electricity1990’s
Bandwidth 2000’s
Many Few Many
Many Few Many
Many Many Many
Sellers
AC_00_Communications-
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Bandwidth Management
AggregateDiscreteBandwidthObligations
Reconfigure& OptimizePortfolios
Build Large Market & Supply Portfolios
Deliver New Products & Contract Structures
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Bandwidth Management –Typical Capacity Utilization Profile
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1/2/2000 1/3/2000 1/4/2000 1/5/2000 1/6/2000 1/7/2000 1/8/2000 1/9/2000 1/10/2000
Peak UtilizationAverage
25%
AC_00_Communications-
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0
20
40
60
80
100
Aggregate Discrete Bundles of Bandwidth Into Diversified Portfolios
• Allows More Efficient Allocation of Bandwidth
• Creates Incremental Bandwidth “Headroom”
• Provides Framework for Tiered QoS Bandwidth
Allocation
Media
0
20
40
60
80
100
Financial
0
20
40
60
80
100
Enron
0
20
40
60
80
100
One Week
One Week
One Week
One Week
Financial
Media
Enron
Retail
%
%
%
%
Composite
0
20
40
60
80
100
One Week
AC_00_Communications-
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Reconfigure and Optimize Portfolios
0
20
40
60
80
100
Avg.
QoS SensitiveApplications
QoS Insensitive Applications
Incremental Firm Capacity
AC_00_Communications-
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By Identifying Non-QoS or Time Sensitive Applications and Routing Them Over Alternate Routes or in “Time Troughs”, Enron Can Create More
Firm “Headroom”
0
20
40
60
80
100
New Product and Contract Structures
QoS SensitiveApplications
QoS Insensitive Applications
3rd Party QoS Insensitive Applications
Capacity Available for Resale
AC_00_Communications-
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Outsourcing of Bandwidth Management
Enables Enron to Accelerate Creation of Portfolios
Businesses, ISP’s, Media Companies and Telecom Resellers Will Increasingly Outsource Bandwidth Requirements as Broadband Becomes More Predominant
Outsourcing is a Direct Application of Enron Energy Services Outsourcing Skill Set
AC_00_Communications-
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Replace With One Term Enron Broadband Contract– Flexible and Reliable– Price Certainty– Expandable
Replace With One Term Enron Broadband Contract– Flexible and Reliable– Price Certainty– Expandable
Global Corporate Customer– 20 Offices Globally– 35 Circuits– $10 Million per Year
Global Corporate Customer– 20 Offices Globally– 35 Circuits– $10 Million per Year
Enron Solution
Outsourcing of Bandwidth Management
Today
Enron
AC_00_Communications-
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Trading
Trading of Bandwidth Enables Reconfiguration of Portfolios
Establishment of Benchmark and Market Pricing for Outsourcing and Portfolio Management
Foundation for Risk Management Services and New Product Development
Enron Has Been the Primary Architect of Market Structures in Most Major
Markets in Which It Participates
AC_00_Communications-
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TradingCreating Cash and Forward Markets for
BandwidthStandardized Benchmark and Emerging Liquidity Become Foundationfor Reliable Market
- Segment City Pair: NY to LA- Bandwidth Unit TDM DS-3 (44.7 Mbps)- Term 1 Month Increments- QoS Errored Seconds: Not More Than 400 Errored Seconds Per Day Severely Errored Seconds: Not More Than 4 Severely Errored
Seconds Per Day Unavailable Seconds: Not More Than 26 Unavailable
Seconds Per Month
With Emergence of Liquidity, Price Discovery and Standardization, Risk Management Products Evolve
Alternative Routes and QoS Will Trade At a Discount or Premiumto Benchmark
AC_00_Communications-
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Finance
Apply Enron Finance Expertise as Tool to Aggregate Portfolios
Lever Structured Finance, Investments and Risk Management Skills into Opportunities that Enhance the Performance and Content of the Network
Enron Has Been the Leader in Creating New Finance Alternatives in Markets in
Which It Participates
AC_00_Communications-
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Structured Finance Investments
Providing Capital Access Solutions for Customers and
Suppliers
Leading Edge Network Technologies and Enron’s
Broadband Content
• Equipment Funding Pools
• Bandwidth Monetization
Structures
• DSL Implementation Fund
NetworkTechnologyEquinixAviciSycamore Networks
BroadbandContentDENSalus MediaM.Show.com
Finance
AC_00_Communications-
43
Trading
Risk Management
Pooling Point
Research
Logistics
Structuring
Finance
Risk Assessment Interface
Intermediation Services Organization
Business Development
Rich DiMichele (6)
Joint Ventures
M & A
Technology
Content
Portfolio Management
Bandwidth Origination
Bandwidth Outsourcing
Bandwidth Restructures
VenturesKevin Garland
(9)
Global FinanceKevin Howard
(12)
Global Trading &
Risk Management
Tom Gros (20)
Bandwidth Management Ted Seitz (10)
AC_00_Communications-
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Content Services
Enron Intelligent
Network
Deploy the Most Open, Efficient Network with
Broad Connectivity
Fiber
Servers
Pooling Points
Software
ContentServices
BandwidthIntermediation
Be the World’sLargest Buyer
andSeller of
Bandwidth
Be the World’s Largest Provider
of Premium Broadband
Delivery Services
Bandwidth Management
Trading
Finance
Streaming Broadband Services
Data Asset Management Services
AC_00_Communications-
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Content Services
High Quality Streaming Video
Usage-Based Business Model
Other Broadband Applications
Video File Transfer
Engineered CAD/CAM Data Management
Storing/Archiving Data
Digital AssetManagement
Services
StreamingBroadbandServices
AC_00_Communications-
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Demand for Streaming Video
The Internet is Inadequate for Premium Broadband Content Delivery
The Internet is Inadequate for Premium Broadband Content Delivery
Red Herring December 1999
In 1998, 9% of U.S. Organizations Were Using Streaming Video on Their Web Sites….This Percentage is Expected to Grow to 25-35% in the Next Two Years
- Gartner/Dataquest
Today, Rich Media Ads Account For 1% of Internet Ads….by 2002, 60% of All Internet Banner Ads Will Be Rich Media
- Jupiter Communications
An Estimated 45 Million Users Actually Stream Media Each Month
- Vision Consultancy
AC_00_Communications-
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Enron’s Solution
Provide EIN Solutions to Enable Enron’s Customers to Effortlessly Utilize Streaming Media to Access Their Customers
- Access Large, Diverse Customer Base
- Encoding Content
- Scheduling and Reserving Bandwidth
- Distribute Content to Servers at the Edge of Network
- High Quality and Reliable Serving of Streams
- Accurate, Quality of Service and Appropriate Billing
Enable Customers to Tailor the Quality of Service That Is Appropriate for the Content
Initial Target Market: Early Adopters
- Financial Services
- Media and Entertainment
- Technology
AC_00_Communications-
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Content ServicesCustomer Base
Financial Services
– Major Financial Institutions
– Major Consulting Firms
– Financial News Services
Media and Entertainment
– Traditional Broadcast Networks
– Emerging Internet-Based Production Companies
– Professional Sports
– Movie Production Companies
Technology
Sample ofDEN
Content
CD Track 3CD Track 8
AC_00_Communications-
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This Slide is Not in Your Book
AC_00_Communications-
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Content Services Organization
Business Development
Media Services
Financial Services
Sales Engineering
North American Distribution
European Distribution
Media Transport
Media Cast
Video Conferencing
QA & Testing
Marketing Communication
Corporate Communication
Strategic Alliances
Jim Crowder (4)
SalesDavid Cox
(90)
Project DevelopmentJohn Bloomer
(39)
MarketingClaudia
Johnson (6)
AC_00_Communications-
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Digital Entertainment Network
Content ServicesCustomer Comments
Jim RittsChief Executive Officer
Greg CarpenterChief Technology Officer
CD Track 3CD Track 9
AC_00_Communications-
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Today’s Discussion
Enron Intelligent Network
Business Centers
Intermediation
Content Services
Financials
BOS
AC_00_Communications-
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Internet Services2Internet Services2Telecommunications Services1
Telecommunications Services1
U.S. Network Industry Growing Rapidly(Billions)
1Includes Long Distance Voice and Data, Wireless, Local Voice, Access Charges, and Managed Data Services (Source: Dataquest; Enron Analysis)
2Includes Basic Internet Access, Premium Broadband Delivery Services, and Web/Application Hosting (Source: Morgan Stanley Dean Witter; IDC; JP Morgan; Forrester; Enron Analysis)
CAGR = 8% CAGR = 35%
2000 2004
$255
$345
2000 2004
$35
$117
AC_00_Communications-
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Internet ServicesTelecommunications Services
Long-Haul Bandwidth Transport
Enron Is Targeting Two Segments Of The Network Industry
Content Services - Be the World’s Largest Provider of Premium Broadband Delivery Services
Bandwidth Intermediation - Be the World’s Largest Buyer and Seller of Bandwidth
Premium Broadband
Delivery Services
AC_00_Communications-
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Bandwidth Capacity in Use (Voice and Data)*Index (2000 = 1.0)
Long-Haul Bandwidth Transport – Rapid Growth Despite Price Declines
PriceIndex (2000 = 1.0)
Long-Haul Bandwidth Transport Market(Billions)CAGR = 57%
CAGR = -15%
*Includes Bandwidth Transport for Internet Infrastructure Services and Traditional Carrier Revenues; Midpoint of Lehman Brothers Bandwidth Capacity Forecast; Excludes Dark Fiber
CAGR = 34%
Source: FCC; Lehman Brothers; Enron Analysis
AC_00_Communications-
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Growth Of Bandwidth Capacity In UseIndex1
1Indexed Against Year 2000 Total Estimate of 16,347 E15 Bits
2Lehman Brothers October 1998 Forecast; Alternative Estimates: Pioneer Projects Internet Backbone Use to Grow at 76% From 1998-2003; Mutooni Projects Data Traffic to Grow at 130% From 1998-2004
3Data Includes Private Line; Residential and Business Internet; Traditional Data Services Such As Frame Relay, ATM, SMDS, and X.25
4Lehman 2004 Value Estimated by Extrapolating 1998-2002 Expected Growth Rates to 2004
Voice
Data2,3
Total
Service
Lehman
Lehman
Pioneer
Mutooni
Lehman
Source
0.4
2.0
2.2
6.4
2.4
2002
0.54
5.74
6.8
34.1
6.1
2004
10%
70%
76%
130%
57%
CAGR
0.3
0.2
0.2
0.2
0.5
1998
AC_00_Communications-
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Enron Intermediation Operating Income
(Millions)
Bandwidth Intermediation Opportunity (U.S. Only)
Bandwidth Transport Market(Billions)
Bandwidth Intermediation Market
(Billions)
Share Intermediated(Percent)
Transaction Velocity(Ratio)
Enron Market Share(Percent)
Enron Operating Income Margin(Percent)
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
2000 2001 2002 2003 2004
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
Source: Dataquest; Lehman Brothers; Enron Analysis
$9 $40$115
$260
$545
AC_00_Communications-
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International Operating Income
Bandwidth Intermediation Value (Millions)
*Assumes Discount Rate of 11%**Global Telecom Long Distance Market Approximately 3x U.S. Market in 2000; Assumes Worldwide Opportunity Reaches 2x U.S. Opportunity for Bandwidth Intermediation in 2004
2004 Operating Income $1,090 million
2004 Value at 20X Multiple $22 billion
Value as of January 2000*
2004 Operating Income $1,090 million
2004 Value at 20X Multiple $22 billion
Value as of January 2000*
U.S Operating Income
**
Global Operating Income
$9
$2
$11
2000
$40
$15
$55
2001
$115
$70
$185
2002
$260
$210
$470
2003
$545
$ 545
$1,090
2004
Source: Enron Analysis
$14 billion
AC_00_Communications-
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U.S. Internet Services Market
CAGR 35%
(Billions)
*Defined As Delivery of Primarily High Bandwidth Content and Applications Requiring Guaranteed/Tiered QoS; J. P. Morgan Forecasts U.S. Market Size for “Intelligent Delivery Network Service” of $24.7 Billion in 2004; Morgan Stanley Dean Witter Projects a $44 Billion U.S. Market for “Intelligent Content and Application Distribution” in 2004
**Defined As Colocated and Shared/Dedicated Web Hosting and Application Hosting (Source: IDC; J.P. Morgan; Forrester; Morgan Stanley Dean Witter)
***Defined As Business and Consumer Narrowband (Dial-up) and Broadband (Cable, DSL, T1/OC3/DS3, Internet Access, (Source: Morgan Stanley Dean Witter)
CAGR151%
Hosting**
Basic Access***
CAGR
64%
CAGR18%
EnronFocus
$117
$87
$60
$45
$35 2
Premium Broadband Delivery Services*
1
AC_00_Communications-
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Enron Content Services Revenues
(Millions)
Content Services Opportunity (U.S. Only)
X
X
X
*Estimated by Morgan Stanley Dean Witter, Broadband Users Defined As Those With Greater Than 100 Kbps Access;Business Users 250 Days/Year, Consumer 365 Days/Year**Enron Analysis
X
U.S. Broadband Internet Users*(Millions)
Premium Delivery (Primarily Streaming)**(Minutes/day)
Average Access Speed*(Kbps)
Premium Delivery Service Charge**(¢/MB)
Premium Broadband Delivery Services Revenues (Billions)
Enron Market Share(Percent)
Source: Enron Estimates; Morgan Stanley Dean Witter; Enron Analysis
2000 2001 2002 2003 2004 2008$45 $240 $690
$1,280$2,400
$5,870
AC_00_Communications-
61
2008 Revenues $11,740 Million
2008 Operating Income @ 30% Margin $3,520 Million
2008 Value at 20X Multiple $70 Billion
Value As of January 2000*
2008 Revenues $11,740 Million
2008 Operating Income @ 30% Margin $3,520 Million
2008 Value at 20X Multiple $70 Billion
Value As of January 2000*$18 Billion
Content Services Value
*Assumes Discount Rate of 17%**Global Broadband Internet Users 3x U.S. in 2000 and 5x U.S. In 2004; Assumes Worldwide Opportunity for Premium Delivery Services Reaches 2x U.S. Opportunity in 2008
(Millions)
U.S Revenues
International Revenues**
$2,400
$1,200
$3,600
2004
$5,870
$5,870
$11,740
2008
Global Revenues
$45
$9
$54
2000
$240
$70
$310
2001
Source: Enron Analysis
$690
$280
$970
2002
$1,280
$580
$1,860
2003
AC_00_Communications-
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Bandwidth Intermediatio
n
Content Services
Enron Broadband Services Potential Value
Source: Enron Analysis
(Billions)
TotalG & A*
$14
$18
$3
$29
* Excluding Depreciation; $125 Million in 2000 Escalated at 12% until 2008 and 5% thereafter; Discount Rate @ 11%
AC_00_Communications-
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2000 2001 2002 2003 2004
Enron’s Intermediation MetricVolumes
(DS-3* Months Delivered)
2000 2001 2002 2003 2004
1,740,000
640,000
170,00041,0005,000
* DS-3 Equals Approximately 45 Mbps
AC_00_Communications-
64
Terabytes Delivered
Enron’s Content Services MetricTotal Contract Value
(Millions)
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$5,390
$3,720
$1,940
$920
$160
2000 2001 2002 2003 2004
Source: Morgan Stanley Dean Witter; Enron Analysis
AC_00_Communications-
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Financial Targets - 2000
Capital Expenditures $650 Million
IBIT ($60) Million
Financials
Metrics
Bandwidth Intermediation 5,000 DS-3 Months
Content Services $160 Million TCV
AC_00_Communications-
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Today’s Discussion
Enron Intelligent Network
Business Centers
Intermediation
Content Services
Financials
BOS
AC_00_Communications-
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Broadband Operating System (BOS)Proposed Standard Protocol for Accessing Real-Time Bandwidth
– Routing - Network Element Control
– Bandwidth Reservation
– Metering
– Verification of User Authorization
– Data Transmission Encryption
– Quality of Service Definition; Confirmation
Single OS Paradigm for All Network Resources: Switches, Routers, Servers and Applications
Direct Software Link Between Applications and the Network Resources
Protocol Consistent With EIN and Enron’s Bandwidth Provisioning Architecture
To Be Made Available to All Software Developers Through Published Application Programming Interface (API)
AC_00_Communications-
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Central Role of BOS
Dallas
London
Paris
Copenhagen
Munich
Amsterdam
Rome
Omaha
San Francisco
San Jose
Los AngelesSan Diego
TokyoPhoenix
AlbuquerqueLas Vegas
HoustonSan Antonio
Orlando
Miami
New Orleans
Seattle
Portland
Sacramento
Boise
Chicago
Minneapolis
Kansas City Washington D.C.
Charlotte
JacksonAtlanta
Boston
Detroit
Albany
Salt Lake City
Cleveland
St. Louis
Toronto
New York
DenverPhiladelphia
Third Party Software
BOSAPI
AC_00_Communications-
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This Slide is Not in Your Book
AC_00_Communications-
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Our Goal: Be the Broadband Platform
Enron Intelligent
Network
Deploy the Most Open, Efficient Network with
Broad Connectivity
Fiber
Servers
Pooling Points
Software
ContentServices
BandwidthIntermediation
Be the World’sLargest Buyer
andSeller of
Bandwidth
Be the World’s Largest Provider
of Premium Broadband
Delivery Services
Bandwidth Management
Trading
Finance
Streaming Broadband Services
Data Asset Management Services
AC_00_Communications-
71
Market Opportunity - U.S.(Revenues in Billions)
2000E 2001E 2002E 2003E 2004E
$30$38
$50
$68
$9534% CAGR
2000E 2001E 2002E 2003E 2004E 2008E
$1 $2
$7
$13
$24
$54
Long Haul Bandwidth Transport
Premium Broadband Delivery Services
Source: Dataquest; J.P. Morgan; Lehman Brothers; Morgan Stanley Dean Witter; Enron Analysis
84% CAGR