Ubiquitous Carrier Ethernet Service Offering Leveraging Ethernet Access Aggregation Agenda ® Adtran, Inc. 2008 All rights reserved 2 How Big Is The Ethernet Service Market ® Adtran, Inc. 2010 All rights reserved Worldwide Ethernet Services Market • U.S. revenue was up 24% in 2009 to $4.5B • EMEA is projected to grow to $10.7B by 2014, 21% CAGR • Asia/Pacific region grew 22% in 2009 to $6.8B • Regional revenue is projected to rise to $15.6B by 2014, 18% CAGR • Rest of World is projected to grow from $642M in 2009 to $2B in 2014 Feb 2010 Business Ethernet services are projected to grow from $16.1B in 2009 to $40.2B by 2014, 20% CAGR ® Adtran, Inc. 2008 All rights reserved 4 Regional Demand for Business Ethernet All Regions continue to expand at Double Digit Rates ® Adtran, Inc. 2008 All rights reserved 5 2010+ Outlook Outlook for 2010+ Major market initiatives for 2010 include filling in the Big 3 Ethernet Market Gaps and advancements on OAM. The Big 3 Ethernet Market Gaps & OAM Ongoing Fiber Buildouts Expanded EoC Rollouts ENNI Standardized Higher Speed Demand Competition Heats Up More Sub-10 Mbps ‘Designer’ Pricing 10 Gbps emerges End-to-End BusinessClass Experience L2/L3 Interworking Presentation to the MEF - WW Business Ethernet Market Update January 26, 2010 ® Adtran, Inc. 2008 All rights reserved IT Budget Constraints Ethernet OAM Vertical Systems Group Page 11 of 14 www.verticalsystems.com 6 Regional Demand for Business Ethernet • Colt and Orange are addressing global enterprise application requirements by capitalizing on existing fiber infrastructures in major commerce centers throughout Europe • Verizon and AT&T are expanding their Business Ethernet access worldwide • Deliver pan-European and pan-Asian networks • Broaden service accessibility for U.S.based multinational networks Global interconnect for Business Ethernet is about service footprint ® Adtran, Inc. 2008 All rights reserved 7 Ethernet Service Drivers Business Ethernet Drivers Service Applications Drivers Internet Access DIY VPNs Data/Voice Bundles Hosting • Migration from TDM lines or DSL • Bandwidth up to Gigabit speeds • Lower $/bit as compared to other options • Convergence offers EPL & EVPL Data Center links Disaster Recovery Video Storage Area Networks • Migration of TDM PLs • Improve application performance / reduce latency • Lower $/bit as compared to TDM services Metro LAN Intra-metro site connectivity IP Convergence Regional site aggregation • Migration from Local FR/ATM services • Improve application performance / reduce latency Inter-metro connectivity Access to IP/MPLS VPNs Backbone convergence • Migration from U.S. or global FR/ATM • Greater control than Layer 3 VPNs • “Future proof”, scalable to Gigabit speeds Dedicated Internet Access (DIA) Long Haul Mesh Vertical Systems Group – ENS ® Adtran, Inc. 2008 All rights reserved 8 Ethernet Migration Sources Business Ethernet Applications & Migration Sources Service Applications Top Migration Sources Internet Access DIY VPNs Data/Voice Bundles Migration of IP Circuits Business DSL upgrades Metro LAN Intra-metro connectivity IP Convergence Regional site aggregation Migration of DIY IP VPNs Migration from Broadband services Conversions of Local FR/ATM networks EPL & EVPL Data Center links Backup / Disaster Recovery Video transport Backbone connections Conversions of legacy Local Private Lines Conversions of legacy Long Haul PLs Greenfield applications Inter-metro connectivity Integration with IP/MPLS VPNs Backbone convergence Migration from Dedicated IP/MPLS VPNs Conversions of domestic or global FR/ATM Greenfield applications Ethernet DIA Long Haul Mesh Vertical Systems Group – ENS ® Adtran, Inc. 2008 All rights reserved 9 Ethernet Purchase Decisions Main Drivers Are Service Availability And Reliability ® Adtran, Inc. 2008 All rights reserved 10 U.S. Ethernet Service Addressable Market Ethernet Service Opportunity Available U.S. Market Access Technology Filter Application Bandwidth Filter Addressable Market Ethernet Services 2 Mbps - 20 Mbps Ethernet Services >20 Mbps - 45 Mbps 3,667,993 1,618,717 Connections Connections T1/FT1, T3/FT3, DSL T3/FT3, DSL 2,786,459 1,259,035 Connections Connections No fiber No fiber 971,045 19,582 Connections Connections 2 Mbps - 20 Mbps >20 Mbps - 45 Mbps 1,106,183 28,265 Connections Connections 5-year target 5-year target Number of high speed retail access end points based on 2006 U.S. business customer installations Number of connections into buildings with no fiber available Number of connections with Ethernet (2 Mbps - 20 Mbps) or (>20 Mbps 45 Mbps) bandwidth requirement within next five years Addressable market opportunity between 2007 and 2011; includes adjustments for projected service growth / decline Vertical Systems Group ® Adtran, Inc. 2008 All rights reserved 11 5-Year Ethernet Opportunity Ethernet over X Opportunity 5-Year Target by Technology / Speed Technology / Speed T1/FT1 Frame Relay T1/FT1 Private Lines DSL Internet Access T1/FT1 IP VPN Circuits T1/FT1 Internet Access T1/FT1 PBX Circuits T1/FT1 ATM T3/FT3 IP VPN Circuits T3/FT3 Private Lines T3/FT3 ATM T3/FT3 Internet Access T3/FT3 Frame Relay T3/FT3 PBX Circuits Total Connections # of Connections % of Total 291,575 248,540 225,539 179,069 110,306 43,296 3,330 1,271 1,232 814 642 348 221 1,106,183 26.4% 22.5% 20.4% 16.2% 10.0% 3.9% 0.3% 0.1% 0.1% 0.1% 0.1% < 0.1% < 0.1% 100.0% Source: Vertical Systems Group The addressable market for Ethernet services (2 Mbps - 20 Mbps) between 2007 and 2011 is 1.1 million connections. ® Adtran, Inc. 2008 All rights reserved 12 U.S. Ethernet Service Installations ® Adtran, Inc. 2008 All rights reserved 13 Ethernet Technology Forecast Carrier Ethernet $450 $400 $350 Million$ $300 $250 $200 $150 $100 $50 $2007 2008 2009 E-o-TDM ® Adtran, Inc. 2008 All rights reserved 2010 2011 E-o-Bonded Copper 2012 Source: Heavy Reading, Carrier Ethernet Access Platforms Quarterly Market Tracker; January, 2009 14 What Market Segments & Applications To Target ® Adtran, Inc. 2010 All rights reserved Ethernet Service - Target Applications Ethernet is high bandwidth upgrade alternative for… T1 Point-to-Point and DIA Fiber Where fiber is not available • Healthcare / HIPAA requirements for VPN’s & Executive Suites Ethernet Private Lines Full Connection to IP PBX via duplex all speeds Ethernet • Video Conferencing Multilink Frame Diverse Routes - EoC Replacement (since it (copper) uses different route can’t support CoS) City-Wide WiFi Networks to building than fiber E-Rate / Educational Internet Access CAD/Engineering Replacement of point to transmission Point-to-Point between point Frame Relay office locations Secure Government apps Hosted VoIP High-end workers at home Wireless retail providers (Starbucks) Service win back from other T1 providers over the past few years of intense T1 pricing competition Frame Relay Point-to-Point, Multilink ® Adtran, Inc. 2008 All rights reserved Apartments and Hotels 16 The Fiber Gap Business Fiber Availability 2005 vs. 2009 % of Buildings w/20+ Employees 15.1% 2009 22.9% Europe U.S. 6.9% 2005 11.7% 77% to 88% of Businesses don’t have fiber ® Adtran, Inc. 2008 All rights reserved 17 Business Ethernet Speed Forecast 10M and sub 10M is the Sweet Spot ® Adtran, Inc. 2008 All rights reserved 18 Ethernet Market Growth By Speed U.S. Retail Business Ethernet Services Market All Access Technologies by Speed 250000 # Ports by Speed 200000 1 Gbps 150000 100 Mbps 10 Mbps 100000 Sub-10 Mbps 50000 0 2007 2008 2009 2010 2011 2012 Sub 10 Mbps Ethernet grew at 227% in 2008 Source: Vertical Systems Group ® Adtran, Inc. 2008 All rights reserved 19 Ethernet Service Target Market Displace T1s – DIA – 30%, Frame Relay – 26%, Private Lines – 22%, IP VPN Circuits – 16% and PBX – 4% Multi-Location – Financial, Medical, Insurance, Schools, Gov’t, Business Offices Sub 10Mbps – Fastest growing market segment 10Mbps – Market sweet spot Up to 45Mbps – Upsell existing customers to higher rates [beyond 10Mbps] Many opportunities to ramp high growth revenue ® Adtran, Inc. 2008 All rights reserved 20 Typical 10Mbps EoC Deployment Bandwidth available to 10Mbps Customers 24.1% 10 Mbps 0.2% 5.6% 24.4% 10 - 15 Mbps 15 - 20 Mbps 20 - 25 Mbps 25 < 30 Mbps 20.2% 25.5% 45 Mbps 70% of 10Mbps customers can be up-sold bandwidth Average of 4.48 pairs deployed per customer • More bandwidth is available by deploying 8 pairs per customer Upsell bandwidth at no additional cost ® Adtran, Inc. 2008 All rights reserved 21 Business Ethernet Service Delivery Understanding the Importance of Delivering Carrier Ethernet to the Business ® Adtran, Inc. 2010 All rights reserved Addressing the Coverage Gaps Increasing coverage with disparate technology models limits revenue and profitability – Slow customer response time – Disparate systems increases operational complexity – Management methods and capabilities vary between systems Ethernet over Copper EoCu OSS Ethernet over TDM EoTDM OSS Ethernet over Fiber EoF OSS Different Platforms per Access Technology Limits Solution Value and Increases Operation Complexity and Cost ® Adtran, Inc. 2008 All rights reserved 23 Addressing the Coverage Gaps Agile coverage model enables new business – Ubiquitous coverage – Expediting New Applications/Services – Capable and consistent management Improved Reliability Assured QoS and SLA management Testability and Troubleshooting – Improved Scalability Unified OSS ® Adtran, Inc. 2008 All rights reserved 24 EoCu, EoTDM, EoF Completing the customer reach puzzle • EoCu – Ethernet over Copper – Optimized bandwidth per loop – Perfect for short to medium length loops – Requires local deployments & loop access • EoTDM – Ethernet over TDM – Predictable bandwidth per circuit – A FastBreak™ toward customer deployments – Minimizes CapEx by centralizing aggregation platform Ethernet over Fiber – Active Ethernet for higher rate business service offerings • Combination enables ubiquitous coverage – Complete Ethernet solution from 2 , 10, 100+Mpbs to 1 Gbps – Consistent service offering ® Adtran, Inc. 2008 All rights reserved 25 Ubiquitous Ethernet Service Offering EoC 45Mbps - 4Kft EoC 10Mbps 12Kft EoTDM 12Mbps beyond 12Kft ® Adtran, Inc. 2008 All rights reserved 26 ADTRAN Carrier Ethernet Getting Customers, Keeping Customers • Acquiring new customers with improved profitability – Increased revenue via new service enablement – Reduced CAPEX by leveraging existing assets – Reduced OPEX with simplified OAM&P • Retaining existing customers with quality, reliable service – Scalable, granular QoS mechanisms – Compatibility with adjacent DSL applications – Innovative solutions such as ADTRAN AnyPortTM bonding and TScanTM diagnostic tools ® Adtran, Inc. 2008 All rights reserved 27 A Single Centralized Solution Single Platform, Common OAM&P, Full Coverage ® Adtran, Inc. 2008 All rights reserved 28 ADTRAN CARRIER ETHERNET Architecture Overview ® Adtran, Inc. 2010 All rights reserved A Single Centralized Solution Single Platform, Common OAM&P, Full Coverage Partial Vision of Single Operational Model – Single Service and Maintenance Launch Point – Full suite of dedicated, low cost Ethernet Access Gateway for every access medium ® Adtran, Inc. 2008 All rights reserved 33 Ethernet over TDM Legacy Transport Solutions • DS1 32-Port Line Module – EFM bonding—any port to any port – Aggregation of Ethernet over TDM “Fast Break” circuits • 4 port DS3 EFM Access Module – EFM bonding support – Full featured diagnostic and loop test capabilities – 1:1 Redundancy • 3 port channelized DS3 EFM Access Module – EFM bonding support – Supports any order bonding across DS3s – 1:1 Redundancy ® Adtran, Inc. 2007 All rights reserved Proprietary and Confidential 34 TA5000 EoCu Delivery Mid-band Ethernet Solutions • E.SHDSL 32-Port Access Module – EFM bonding support – any port to any port – Sealing current for loop conditioning – TScan® advanced diagnostic tools • E.SHDSL 24-Port Access Module – EFM bonding support – any port to any port – Sealing current for loop conditioning – TScan® advanced diagnostic tools ® Adtran, Inc. 2007 All rights reserved Proprietary and Confidential 35 ADTRAN EFM NTU Every Rate, Every Reach, Everywhere The NetVanta 800 Series NTU – MEF certified and compliant – 2, 4 & 8 port bonding solutions Robust Ethernet capabilities – Common Ethernet switching and bonding engines – Resilient to loop failures with dynamic link adaptation NCTE Technology Rate per port 814, 818 T1 1.5 Mbps 828 HDSL2 2 Port 4 Port 8 Port 814 818 (8 pair) (16 pair) 1.5 Mbps 828 (8 pair) 832, 834, 838 844 E.SHDSL HDSL4 Up to 5.7 Mbps 1.5 Mbps 832 834 838 (2 pair) (4 pair) (8 pair) 844 (8 pair) 86x 873 VDSL2 DS3 1 – 100 Mbps 45 Mbps 864 868 (2010) (2010) 873 (3 port unchannelized DS3) ® Adtran, Inc. 2008 All rights reserved 36 NetVanta EoCu Network Termination ADTRAN EoCu (e.SHDSL) NTU Interface (Quantity)Type; Connector Model Part No. 10/100T GigE NetVanta 838 1200633G4 (4) RJ-45 (1) SFP NetVanta 834 1200633G6 (4) RJ-45 NetVanta 832 1200718E1 (1) RJ-45 NetVanta 838T 1172838G1 NetVanta 834T Power Supply Temp.* EP* OSP* DC AC (1) RJ-21 (8) Cu pairs Yes No No -48 or +/-24V Convertor (1) SFP (1) RJ-21 (4) Cu pairs Yes No No -48 or +/-24V Convertor No (1) RJ-45 rear (2) Cu pairs No No No No 110 – 240V (4) RJ-45 No (8) RJ-45 (8) Cu pairs Yes No No No 110 – 240V 1172834G1 (4) RJ-45 No (4) RJ-45 (4) Cu pairs Yes No No No 110 – 240V NetVanta 832T 1172832G1 (4) RJ-45 No (1) RJ-45 rear (2) Cu pairs No No No No 110 – 240V NetVanta 838 EP 1172839G1 (2) RJ-45 (1) SFP (8) RJ-45 (8) Cu pairs Yes Yes No -48 or +/-24V No NetVanta 838 OSP 1172830G1 (2) RJ-45 (1) SFP (8) RJ-45 (8) Cu pairs Yes Yes Yes -48 or +/-24V rear access rear access NetVanta 838 ® Adtran, Inc. 2008 All rights reserved Network Environmental Hardening P/N 1202470E1 P/N 1202470E1 Convertor P/N 1172290G1 NetVanta 838T 37 NetVanta 838 (834) NTU 4 or 8 pair e.SHDSL Network interface: Up to 8 (4) bonded e.SHDSL ports – – – – Line Rate : 200kbps to 5.7Mbps per loop Resiliency through dynamic circuit removal and restoration Front Access 50 pin RJ-21 (AMP) ITU-T G.991.2 Annex A Physical – – – – – Four 10/100 Bt Ethernet interface via RJ-45 Single Gigabit Ethernet interface via SFP Rackmountable solution in 19” or 23” racks Wallmountable +/- 24VDC, -48 VDC, AC local powering ® Adtran, Inc. 2008 All rights reserved 38 NetVanta 818 (814) NTU 4 or 8 DS1 Network interface: Up to 8 (4) bonded DS1/E1 ports – 1.5 / 2 Mbps to 12 / 16Mbps – Resiliency through dynamic circuit removal and restoration – Front Access 50 pin RJ-21 (AMP) Physical – – – – – Four 10/100 Bt Ethernet interface via RJ-45 Single Gigabit Ethernet interface via SFP Rack mountable solution in 19” or 23” racks Wallmountable +/- 24VDC, -48 VDC, AC local powering ® Adtran, Inc. 2008 All rights reserved 39 NetVanta 873 NTU Network interface: Up to 3 EFM bonded DS3 ports – 45Mbps to 134 Mbps – Resiliency through dynamic circuit removal and restoration – Front Access 75 ohm BNC Physical – – – – – Four 10/100 Bt Ethernet interface via RJ-45 Single Gigabit Ethernet interface via SFP Rack mountable solution in 19” or 23” racks Wallmountable +/- 24VDC, -48 VDC, AC local powering ® Adtran, Inc. 2008 All rights reserved 40 NetVanta 832T Network interface: Up to 2 bonded e.SHDSL ports – – – – Line Rate : 200kbps to 5.7Mbps per loop Resiliency through dynamic circuit removal and restoration Rear Access RJ-45 ITU-T G.991.2 Annex A/B Physical – Four 10/100 Bt Ethernet interface via RJ-45 – Desktop unit – AC powering via desk supply ® Adtran, Inc. 2008 All rights reserved 41 NetVanta 834T Network interface: Up to 4 bonded e.SHDSL ports – – – – Line Rate : 200kbps to 5.7Mbps per loop Resiliency through dynamic circuit removal and restoration Front Access RJ-45 per port ITU-T G.991.2 Annex A/B Physical – Four 10/100 Bt Ethernet interface via RJ-45 – Rack or Wall mountable – Universal AC powering ® Adtran, Inc. 2008 All rights reserved 42 NetVanta 838T Network interface: Up to 8 bonded e.SHDSL ports – – – – Line Rate : 200kbps to 5.7Mbps per loop Resiliency through dynamic circuit removal and restoration Front Access RJ-45 per port ITU-T G.991.2 Annex A/B Physical – Four 10/100 Bt Ethernet interface via RJ-45 – Rack or Wall mountable – Universal AC powering ® Adtran, Inc. 2008 All rights reserved 43 NetVanta 8044 Physical Specs Front Panel Interfaces – 4 -10/100/1000BaseT LAN/WAN – 4 -100/1000BaseX SFP LAN/WAN – DB9 local craft (RS-232) Mounting Options – 1 RMU Wall, Rack or Desktop Mounting – 19” or 23” Universal brackets, rubber feet. Powering Options – Wide mouth Universal AC powering. AC/DC Power Convertor kit option IEC cord set options to provide EU plug or Australian 10 A/240 V 100 – 240 V at 50 or 60 Hz. Grounding via Post and Lug type conn. ® Adtran, Inc. 2008 All rights reserved NetVanta 8044 Dimensions – Height: 44mm (1 RMU) – Width: 437mm or 483mm (with mounting brackets) – Depth: 254 mm or 301mm (with fibre guide) Weight – 6 lb – 2 ¾ kg Power – 18W worst case/fully loaded – 14W typical 44 Ethernet over Fiber Components TA5000 8-port Gigabit Ethernet Access Module – 8 GigE SFP cages – Link Aggregation – Link OAM NetVanta 8044M – – – – – – 4 -10/100/1000BaseT WAN or LAN 4 - GigE SFP WAN or LAN 2 - Expansion Slots 1 and 2.5G ERPS Ring support with optical bypass option. Clock Sync over Packet Ready e.g. G.8261/62 SyncE Dual fed DC options (+/-24V, -48V DC) Carrier Ethernet – MEF 9, 14, 18 – Eth OAM CFM and PM – TACASC+ and RADIUS Authentication, Authorization 8-port GigE Access Module ® Adtran, Inc. 2008 All rights reserved NetVanta 8044M Modular NTE 45 ADTRAN EoCu OAM&P Standards based TSCAN diagnostic capability – FaultDetector™ – SpliceDetector™ EFM OAM for trouble isolation/ detection – Link performance monitoring – Fault detection – Loopbacks Ethernet OAM – – – – – EoCu Aggregation EoCu CPE Continuity check Loopback Link Trace Round trip delay Loss measurements – using continuity check messages Comprehensive Operational Measurements / Statistics – Physical Loop and Ethernet statistics captured in 15-minute and 24-hour buckets – End-to-End and segment-based monitoring (IP SLA equivalent) – Alarm signaling – Threshold alarming ® Adtran, Inc. 2008 All rights reserved 46 Ethernet OAM – Supporting/Selling Ethernet SLAs Common OAM&P across NV800 and 8000 series NTU NTU (UNI) IEEE 802.1ag IEEE 802.3ah ® Adtran, Inc. 2008 All rights reserved 802.1aj Demarc Switch ITU-T Y.1731 IETF T-WAMP Leased TDM MEN Switch Service Layer OAM (per UNI) Connectivity Layer OAM (per EVC) Access Links OAM 802.1aj Demarc SONET NTU (UNI) 47 ADTRAN EoCu OAM&P Standards based SLA monitoring Two-Way Active Measurement Protocol – Jitter and Latency measurements for SLA guarantees – NCTE implementation draft-ietf-ippm-twamp-04. Session reflector/server Ethernet OAM Physical layer turn-up and troubleshooting tools – Loopbacks – Bit Error Rate Testing capabilities ® Adtran, Inc. 2008 All rights reserved 48 Detection Notification Verification Isolation Delay Jitter Loss IEEE 802.1ag ITU-T Y.1731 IETF TWAMP ITU-T Y.1731 IEEE 802.3ah Link OAM Performance Management Connectivity Fault Management (CFM) ADTRAN Ethernet OAM Multiple paths for both Fault & Performance Management ® Adtran, Inc. 2008 All rights reserved 49 Simplified Ethernet Service Activation • Minimize operational costs associated with Ethernet service rollouts – Pre-provisioning by Operations Centers in advance of NCTE – Allows for easy service activation • EZ Series for Ethernet activation – EZ Bonding: Link assignment – EZ Set-up: NTU pre-provisioning – EZ Ethernet: User profiles ® Adtran, Inc. 2008 All rights reserved 50 EASY ELAN Service Provisioning Same Wizard Screens as for EPL and EVPL. Allows single S-tag to be configured on multiple ports with MAC switching of traffic between those ports ® Adtran, Inc. 2008 All rights reserved 51 ADTRAN Operations Environment Intelligent Service Activation Application awareness OSS integration via Robust Modular Gateway/Network Automation Interface (TL1/XML) Strong Decision Support Fault Response Advanced testing, troubleshooting and diagnostics Flexible Integrated Security Advanced PM, Traffic and Capacity Management Performance Monitoring/Trending Traffic Engineering/Network Tuning VQM/DQM Fully Integrated from Planning to Operations to Customer Service ® Adtran, Inc. 2008 All rights reserved 52 Ubiquitous Carrier Ethernet Service Offering Leveraging Ethernet Access Aggregation