Rim Semiconductor Company (fka RSMI)

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letter from Brad Ketch on website...
http://www.newvisual.com/letters/pres_letter_10_17_03.cfm


Friday, October 17th, 2003

A Personal Dispatch from USTA Telecom 03 Annual Conference and Exhibition

To the Shareholders of New Visual

This Spring I wrote an "insider's perspective" of the SuperComm trade show that was very well received. Many shareholders wrote or called to say that it helped them understand the potential of the powerful and ground-breaking technology that we bringing to market. This week I attended the United States Telecom Association's (USTA), trade show, and thought that I would offer to you a similar perspective. Just as before, I believe that New Visual's future looks bright.

I have talked to you in the past about the many uses for the Embarq™ technology - services like VDSL, Ethernet, and DS3 replacement. Today I would like to focus on another exciting use that is now evolving for a variety of consumer and commercial grade services. That use is video delivery over standard telephone wire and was the main topic of the USTA show. It's really remarkable to me that video, a subject that the US telcos were not even talking about two years ago, was the theme of the USTA show this year!

Why would the US telephone companies be interested in offering video across their phone lines? I think that they are finally starting to respond to a competitive threat from the cable companies. Specifically, the average household spends around $180 per month on services like cable TV, local phone calls, and long-distance phone calls. Today, the cable companies and the telcos split this money evenly between them, as shown in the figure below.



With more than 100 million US households subscribing to these services each year, that $180 per month adds up to an $18 billion prize for service providers that can offer what is known as the "triple play", a highly sought after level of service that can deliver standard voice services, internet connectivity, and now, Video. In a nutshell, what is at stake here is a chance for each of the companies (cable operators like Adelphia vs. phone operators like SBC) to grab the other guy's $90 per month share. As you can imagine, a lot of smart people on both sides of the divide are trying to get there faster than the other guy.

What we're doing here at New Visual is helping the telcos get there first by empowering their existing network to deliver the triple play. And I believe that we're making a pretty good bet in doing so. The telcos right now are losing the race to the cable companies, but my feeling is that they will wake up - and catch up - in plenty of time. These are the early days of the conflict, and the telcos are strong competitors with the largest built-in network of infrastructure and existing customers in the world..

One of the reasons that the telcos have been slow to respond to the threat from the cable companies in the US is a technical one. Without getting too deep into the "bits and bytes", you should know that at this moment the only option that they telcos have is to lay fiber. Laying fiber is very expensive and time consuming, far more so than the upgrades that their competitors, the cable companies, face in upgrading their networks. Well, we mean to fix that problem. Embarq™ will let them upgrade without laying fiber optics.



So, that's why Embarq™ will be a powerful and ground-breaking technology. Of course, all of this analysis would be meaningless if it wasn't validated by real-world telcos and honest-to-goodness customers. I met with the heads of several smaller telcos this week (the four biggest ones do not usually come to the USTA trade show in large numbers) and asked them what they would do if they had Embarq™. All of them were enthusiastic.

"You know, Brad," stated the head of network design for a telco "we're excited about what you've got a hold of. This could be very big."

After closely examining the business case for telcos to get into video services this week, I am more excited than ever that what we have is a powerful and ground-breaking technology that will arm the telcos in their battle for bundled service revenue. And it's truly gratifying to confirm that the rest of the US telephone industry agrees!


Warm regards,

Brad Ketch
President and CEO