News Release

Cable Operators Must Face Convergence Challenge or Lose Lead in Triple-Play Innovation, Cisco / Yankee Group Study Reveals

ECCA Congress, BUDAPEST, Hungary - March 23, 2005 - Cisco
Mar 23, 2005

ECCA Congress, BUDAPEST, Hungary - March 23, 2005 - Cisco Systems® presented key findings from an important new study commissioned on the European cable industry, designed to help cable operators determine strategies for a profitable future. The Yankee Group Consulting Report, Defining a Profitable Future for European Cable, is based on current broadband market analyses and in-depth interviews with Europe's most successful and innovative cable operators.

The main tenet of the report looks to IP-based broadband applications for all future consumer services as radio frequency-based and circuit-switched networks recede to obsolescence, and data, voice and video converge onto an IP network. The report also highlights the challenges to the industry as Western European consumer broadband subscription growth is projected to slow down from 32 percent in 2002 to 16 percent in 2008, and cable broadband average revenue per user (ARPU) declines to €23.6 per month by 2008.

"The key challenge for European cable operators is in identifying and prioritising the business and technology issues that need to be addressed to realise this future," said Boyd Peterson, senior vice president, Consumer, Media & Entertainment, Yankee Group, one of the authors of the report. "Mapping out appropriate convergence strategies and fending off growing service competition from rival platforms presents cable operators with a set of choices that will be crucial to the industry's long-term survival. This report draws on the experiences of major players in the broadband arena and offers a prescription for European cable's success in tomorrow's converged multiservice environment."

Tactics for gaining broadband market share are explored in the report, from increasing speeds and improving security to innovative services such as video IP telephony, advanced video services and home networking. The report also discusses key technology enablers including the PacketCable Multimedia framework and the Wideband protocol for DOCSIS, a new technology pioneered by Cisco to deliver up to 1 gigabit per second broadband speeds over existing hybrid fiber coax (HFC) networks.

Martin Kull, CTO, Com Hem AB, who contributed to the report, said: "The most interesting point raised by the report is that cable's future is about convergence and services. That is why I believe next generation DOCSIS systems will be the tool that will give cable operators the capacity to reclaim their position as leaders of service innovation over other broadband platforms." Com Hem is currently working with Cisco to evaluate the application of Wideband protocol for DOCSIS technology over its existing infrastructure.

"The industry is emerging from the speed-price battle and entering a much tougher phase of competition - the services battle," said Enrico Deluchi, managing director, EMEA Business Development and Marketing, Service Provider Wireline, Cisco Systems. "For cable operators, the service differentiation they need to stay ahead of the competition is going to require greater intelligence in the network, and this is fundamental to Cisco's approach to IP Next Generation Networks. The Yankee Group report comes at an important point in the development of the cable industry. With exciting technologies emerging, I believe there is a very bright future for cable."

Notes to editors: The Yankee Group report, "Defining a Profitable Future for European Cable" was commissioned by Cisco Systems. A hard copy of the report is available to members of the press and can be obtained by contacting JoAnne Hughes, Cisco Systems PR.