U.S. Consumers Viewing Habits: It s not Just TV. Market Brief Third Quarter, 2012

U.S. Consumers Viewing Habits: It s not Just TV Market Brief Third Quarter, 2012

U.S. Consumers Viewing Habits: It s not Just TV A Market Brief Published Third Quarter, 2012 Version 1.0 Report Number: 3Q2012-03 igr 12400 W. Hwy 71 Suite 350 PMB 341 Austin TX 78738

Table of Contents Abstract... 1 Executive Summary... 3 Figure A: Amount of Traditional Television Service Per Day... 3 Methodology... 6 Traditional Television Service... 7 Type of Television Service in Household...7 Table 1: Type of Television Service in Household... 8 Figure 1: Type of Television Service in Household... 8 Amount of Live Television Per Day... 10 Table 2: Amount of Live Television Per Day... 10 Figure 2: Amount of Live Television Per Day... 11 Amount of Recorded Television Per Day... 11 Table 3: Amount of Recorded Television Per Day... 12 Figure 3: Amount of Recorded Television Per Day... 13 Amount of Video on Demand Per Day... 13 Table 4: Amount of Video on Demand Per Day... 14 Figure 4: Amount of Video on Demand Per Day... 15 Internet-based Video... 16 Frequency of Watching TV Content on Computer... 16 Table 5: Frequency of Watching TV Content on Computer... 16 Figure 5: Frequency of Watching TV Content on Computer... 17 Frequency of Renting Video on Demand... 17 Table 6: Frequency of Renting Video on Demand... 18 Figure 6: Frequency of Renting Video on Demand... 19 Internet-based Streaming Video Service... 19 Table 7: Internet-based Streaming Video Service... 20 Figure 7: Internet-based Streaming Video Service... 21 Amount of Video from Internet-based Streaming Video Service... 21 Table 8: Amount of Video from Internet-based Streaming Video Service... 22 Figure 8: Amount of Video from Internet-based Streaming Video Service... 22 Frequency of YouTube Videos... 22 Table 9: Frequency of YouTube Videos... 23 Figure 9: Frequency of YouTube Videos... 24 Interest in Sharing Devices... 24 Table 10: Interest in Sharing Devices... 25 Figure 10: Interest in Sharing Devices... 26 Consumer Demographics... 27 Demographic Profile of U.S. Consumer Respondents... 27 Table 11: Respondent Age... 27 Quoting information from an igillottresearch publication: external any igillottresearch information that is to be used in press releases, sales presentations, marketing materials, advertising, or promotional materials requires prior written approval from igillottresearch. igillottresearch reserves the right to deny approval of external usage for any reason. Internal-quoting individual sentences and paragraphs for use in your company s internal communications activities does not require permission from igillottresearch. The use of large portions or the reproduction of any igillottresearch document in its entirety does require prior written approval and may have some financial implications. Copyright 2012 igillottresearch, Inc. Reproduction is forbidden unless authorized. FOR INFORMATION PLEASE CONTACT IAIN GILLOTT (512) 263-5682.

Figure 11: Respondent Age... 28 Table 12: Respondent Gender... 28 Figure 12: Respondent Gender... 29 Table 13: Respondent Ethnic Background... 29 Figure 13: Respondent Ethnic Background... 30 Table 14: Respondent Annual Household Income... 30 Figure 14: Respondent Annual Household Income... 31 Table 15: Respondent Level of Education... 31 Figure 15: Respondent Level of Education... 32 Table 16: Age of Children in Household... 32 Figure 16: Age of Children in Household... 33 Table 17: Respondent Region... 33 Figure 17: Respondent Region... 34 Table 18: Respondent Marital Status... 34 Figure 18: Respondent Marital Status... 35 Definitions... 36 General... 36 Device Types... 36 Services... 37 Network Technology... 38 About igr... 42 Disclaimer... 42 Quoting information from an igillottresearch publication: external any igillottresearch information that is to be used in press releases, sales presentations, marketing materials, advertising, or promotional materials requires prior written approval from igillottresearch. igillottresearch reserves the right to deny approval of external usage for any reason. Internal-quoting individual sentences and paragraphs for use in your company s internal communications activities does not require permission from igillottresearch. The use of large portions or the reproduction of any igillottresearch document in its entirety does require prior written approval and may have some financial implications. Copyright 2012 igillottresearch, Inc. Reproduction is forbidden unless authorized. FOR INFORMATION PLEASE CONTACT IAIN GILLOTT (512) 263-5682.

Abstract U.S. consumers have many available options when it comes to watching video in their homes. Not only can they watch live or recorded television programs offered by their television service provider, but they can also watch video from Internet-based streaming video services, such as Netflix, rent video on demand from itunes or watch videos on YouTube. These viewing habits are of interest because as more consumers start to view this Internet-based video content on their mobile device over a 3G/4G mobile broadband connection, more traffic will be added to the already congested mobile data networks. This report provides an overview of the video viewing habits of U.S. Consumers. The data in this report is based on a Web-based survey of 1,014 U.S. consumers that igr fielded during the first week of May 2012. Key questions addressed: What type of television service is used in U.S. households? How much live television, recorded television and video on demand programs are watched by U.S. consumers? How often do U.S. consumers watch television content on a computer instead of a TV? How often do U.S. consumers rent video on demand from their television service provider? How often do U.S. consumers rent video on demand from itunes? How often do U.S. consumers rent video on demand from Google Play? What types of Internet-based video streaming services do U.S. consumers use? How often do U.S. consumers watch content from Internet-based video streaming services? How often do U.S. consumers watch YouTube videos? Are U.S. consumers interested in the ability to share video content between two different devices? How do demographic variables, such as age, gender, income and marital status affect the video viewing habits of U.S. consumers? 1

What relationships exist between U.S. consumers current use of technology such as cell phones and tablets and their video viewing habits? Who should read this report? Mobile operators Device OEMs Mobile Content Delivery Network solution vendors Content providers and distributors Financial analysts and investors. 2

Executive Summary As mobile data network providers struggle with high traffic, the introduction of more video users on the mobile data network is a great concern. U.S. consumers have many video choices. Not only can they watch live or recorded television programs offered by their television service provider, but they can also watch video from Internet-based streaming video services, such as Netflix, or rent video on demand from itunes or watch YouTube videos. The majority of this video is currently watched from the comfort of home on a television over a cable TV or satellite connection or on a desktop computer over a wired connection or on a laptop or tablet over a WiFi connection. However, as consumers gradually move away from home and start to watch this video content on their tablet or mobile phone over their 3G/4G mobile broadband network, the capacity of the mobile data networks will be further challenged. Note that half of all 3G/4G mobile data traffic is already due to video. As more consumers start to consume video on mobile devices, this percentage will increase. Figure A: Amount of Traditional Television Service Per Day Figure A summarizes the number of hours of traditional television service being watched in U.S. consumers households. Live TV is watched for multiple hours each day more frequently than recorded TV or video on demand. Furthermore, more than 25 percent of households do not have a DVR or video on demand service. 3

35.0% 30.0% 25.0% 20.0% 15.0% Live TV Recorded TV Video on Demand 10.0% 5.0% 0.0% No DVR or Video on Demand None Less than 1 hour per day About 1 to 2 hours per day About 2 to 3 hours per day About 4 to 5 hours per day More than 5 hours per day This report overviews the video viewing habits of U.S. consumers. The data in this report is based on a Web-based survey of 1,014 U.S. consumers that igr fielded during the first week of May 2012. Some of our key findings include: Much more video content is still watched on traditional TV than on the Internet. Of all age groups, significantly more 18-34 year olds reported having no television service, which indicates that these consumers rely on the Internet for their video content. They are also the least likely group to report watching live TV. Those households with no children are the least likely to have a video on demand service, while those households with children ages 14-18 are the most likely. Males, consumers between the age of 18 and 34 years, single consumers, students, and those that live in urban areas are more likely than other groups to watch content from their television service provider on their computer. Half of respondents are not subscribed to an Internet-based video streaming service, but Netflix is by far the most popular for those that do have this service. 4

Respondents who own a tablet are more likely than those that only own a desktop computer or laptop to watch video from an Internet-based video streaming service, such as Netflix or Hulu Plus. Only 9 percent of 18-24 year olds never watch YouTube, increasing to 37 percent of 55-64 year olds. A wide range of ages, 18-44 years old, are interested in the capability of pausing a show on their TV and resuming watching the show where they left off on a different device, such as a desktop computer or tablet. 5

Methodology This report provides an overview of the video viewing habits of U.S. consumers. The data in this report is based on a Web-based survey of 1,014 U.S. consumers that igr fielded during the first week of May 2012. In order to participate in the survey respondents were required to: Be between 18-64 years of age. Own and use a mobile phone. Further detail on the characteristics of the respondents can be found in the Survey Demographics section of this report. The survey results presented in this report are shown in tables and figures. Other information presented in this report originates from igr s other primary and secondary research. Definitions of industry terminology can be found in the Definitions section towards the end of this report. 6

Traditional Television Service Whether their traditional television service is provided by cable, satellite or an antenna, most U.S. consumers spend one or more hours each day watching live or recorded programming on their TV. Less frequently, they also watch video on demand programming offered by their television service provider. Type of Television Service in Household As shown in Table 1 and Figure 1, Cable TV is by far the most common Television Service in the households of the respondents, followed by Satellite TV and Antenna-based TV. In addition to these overall percentages, several demographic variables are worth noting. Of all age groups, significantly more 18-34 year olds reported having no television service. Additionally, U-Verse is significantly more popular with the 55-64 year old age group. When looking at the income level of the respondents, U-Verse is significantly more popular with those earning more than $100,000 and FiOS is significantly more popular with those earning more than $75,000. A relationship exists between the marital status of the respondents and the type of TV service. Singles were significantly more likely than divorced or married respondents to have either Antenna-based or no television service at all. Divorced respondents were much more likely than other respondents to have FiOS. Those respondents with no children in their household were the most likely group to have no television service. Urban respondents used an Antenna-based service and U-Verse much more than suburban or rural respondents, while suburban respondents used FiOS much more than the other two groups. Suburban respondents were also the least likely group to report having no TV service. 45 percent of rural respondents use Satellite TV, which makes it more popular than Cable TV for this group. There exists a relationship between the type of cell phone of the user and the type of television service. Those users with a basic cell phone are significantly more likely to have Antenna-based service than those users with a smartphone, while those users with a smartphone are significantly more likely to have U-verse than basic phone users. Users of Apple or RIM Blackberry phones were significantly more likely than Motorola users to have U-Verse as their television provider. 7

Users that reported owning a tablet were significantly more likely to have U-Verse than those users who reported having only a desktop or laptop computer in their household. Table 1: Type of Television Service in Household Type of Television Service Survey U-Verse 4.2% None of these 5.2% FiOS 6.2% Antenna-based / broadcast only 12.7% Satellite TV 24.5% Cable TV 50.3% Figure 1: Type of Television Service in Household 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% U-Verse None of these FiOS Antenna-based / broadcast only Satellite TV Cable TV 8

9

Amount of Live Television Per Day Table 2 and Figure 2 show a bell-shaped distribution in the amount of live TV being watched in respondents households, with the majority watching 1-3 hours per day. In addition, several demographic variables exist. 18-34 year olds are the least likely group to report watching any live TV. Divorced respondents reported watching 4 or more hours of live TV much more frequently than singles or married respondents. Singles reported watching no live TV more often than married or divorced respondents. A relationship exists between the level of education of the respondents and the responses at both extremes no live TV and 4 or more hours of live TV. Those respondents with a graduate or professional degree were significantly more likely to report watching no live TV, while those respondents with an educational level less than a bachelor s degree were significantly more likely to watch 4 or more hours of TV each day. A relationship also exists between the employment status of the respondents and the responses at both extremes. Unemployed respondents were significantly more likely to watch more than 4 hours of live TV each day, while students who are also working were significantly more likely to watch no live TV. Those users who currently use a basic phone are significantly more likely than those users with a smartphone to watch 4 or more hours of TV each day. Those users who own a tablet are significantly less likely to watch 4 or more hours of live TV each day, as compared to those respondents who only own a desktop or laptop computer. Table 2: Amount of Live Television Per Day Amount of Live Television per Day Survey None -- I never watch "live" TV 11.0% Less than 1 hour per day 23.2% About 1 to 2 hours per day 25.4% 10

Amount of Live Television per Day Survey About 2 to 3 hours per day 24.9% About 4 to 5 hours per day 9.6% More than 5 hours per day 4.4% Figure 2: Amount of Live Television Per Day 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% None -- I never watch "live" TV Less than 1 hour per day About 1 to 2 hours per day About 2 to 3 hours per day About 4 to 5 hours per day More than 5 hours per day Amount of Recorded Television Per Day Table 3 and Figure 3 show the number of hours of recorded television that respondents reported watching daily. 45 percent of respondents do not have a DVR or watch no recorded television per day, while of the remaining respondents, the majority watch 1 to 2 hours per day. In addition, several relationships to demographic variables exist. 18-24 year olds watch recorded television less than any other age group. 53 percent report not having a DVR or watching no recorded television. 11

Respondents with incomes higher than $50,000 watched significantly more recorded television than those respondents with lower incomes. Single and divorced respondents watched less recorded television than married respondents. Those respondents who currently have a smartphone are significantly more likely than owners of basic cell phones to own a DVR and watch recorded television. Table 3: Amount of Recorded Television Per Day Amount of Recorded Television Per Day Survey I don't have a DVR 30.6% None 15.1% Less than 1 hour per day 17.0% About 1 to 2 hours per day 19.9% About 2 to 3 hours per day 10.6% About 4 to 5 hours per day 3.7% More than 5 hours per day 1.8% 12

Figure 3: Amount of Recorded Television Per Day 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% I don't have a DVR None Less than 1 hour per day About 1 to 2 hours per day About 2 to 3 hours per day About 4 to 5 hours per day More than 5 hours per day Amount of Video on Demand Per Day As Table 4 and Figure 4 show, nearly 56 percent of respondents do not have a video on demand service from their television provider or watch no video on demand television per day, while the remaining respondents watch less than 1 hour per day. In addition to these general observations, several demographic variables exist. Males are more likely than females to use video on demand. Those respondents 18-24 years old are significantly less likely to have a video on demand service. However, those 18-24 year olds who do have the service are much more likely than other age groups to watch 2-5 hours per day. Those respondents with an income less than $35,000 are significantly less likely to have a video on demand service. Married respondents are most likely to have the video on demand service. Those households with no children are least likely to have a video on demand service, while those households with children ages 14-18 are most likely. 13

Rural respondents are least likely to have the service, while urban respondents are more likely than either rural or suburban respondents to watch 1 or more hours daily. Among all employment statuses, respondents who were students who were also working were the least likely to have a video on demand service. On the other hand, students who were not working were the most likely group of respondents to have the service. Smartphone users were significantly more likely than basic phone users to have a video on demand service and watch one or more hours each day. Respondents who use a cell phone with an Android operating system were significantly less likely than users of other operating systems, such as RIM Blackberry and ios, to have a video on demand service. Table 4: Amount of Video on Demand Per Day Amount of Video on Demand Per Day Survey I don't have video on demand service 23.8% None 32.1% Less than 1 hour per day 27.9% About 1 to 2 hours per day 9.6% About 2 to 3 hours per day 3.6% About 4 to 5 hours per day 1.3% 14

Figure 4: Amount of Video on Demand Per Day 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% I don't have video on demand service None Less than 1 hour per day About 1 to 2 About 2 to 3 About 4 to 5 hours per dayhours per dayhours per day 15

Internet-based Video In addition to watching content offered by their traditional television service provider on their TV, some U.S. consumers also spend time watching content provided through the Internet. With the exception of YouTube videos, most of these services are not used widely. However, this video content, which could be viewed on a mobile device over a 3G/4G mobile broadband connection, is of interest to those concerned about the high traffic on mobile data networks. Frequency of Watching TV Content on Computer Some television service providers give their subscribers the option to watch TV shows and movies on their computer, instead of their TV. In the survey, the respondents were asked how often they watch this TV content on their computer, as opposed to their TV. As Table 5 and Figure 5 show, the majority of respondents have never used this option and the majority of the other respondents use this service rarely. Several relationships can be noted when studying the demographic variables. Males are more likely than females to watch TV content on their computer. Younger consumers, 18-34 years old, are more likely to use this service. Single respondents are more likely than married or divorced respondents to use this service. Respondents that live in urban areas are significantly more likely to use this service. Compared to other groups with different employment statuses, students are much more likely to watch TV content on their computer. Respondents with smartphones are more likely than basic phone users to use this service. Table 5: Frequency of Watching TV Content on Computer Frequency of Watching TV Content on Computer Survey Very often: A few times per day 3.2% Often: Maybe once per day 6.5% 16

Frequency of Watching TV Content on Computer Survey Sometimes: Maybe 2 or 3 times per week 11.1% Rarely: Maybe once or twice per month 25.4% Never 53.7% Figure 5: Frequency of Watching TV Content on Computer 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Very often: A few times per day Often: Maybe once per day Sometimes: Maybe 2 or 3 times per week Rarely: Maybe once or twice per month Never Frequency of Renting Video on Demand Respondents were asked how often they rent video on demand content from three different sources: their TV provider, Apple itunes and Google Play. As Table 6 and Figure 6 demonstrate, the majority of respondents never rent video on demand. However, of those respondents that do rent video on demand, the 17

majority rent from their TV provider. relationships also exist. Several demographic variable Males are more likely than females to rent video on demand from all sources. Younger respondents (18-34 years old) are much more likely than other age groups to rent video on demand from Apple itunes or Google Play. Single respondents are more likely than married or divorced respondents to rent video on demand from Apple itunes or Google Play. Respondents that live in households with children ages 14-18 are more likely than respondents in other households to rent from Apple itunes, while Google Play is most popular with respondents with children ages 10-18. Rural respondents are less likely than suburban or urban respondents to rent video on demand from these three sources. Compared to other employment statuses, students who also work are most likely to rent video on demand from Apple itunes and Google Play. Similarly, compared to other employment statuses, part time employees are much more likely to rent video on demand from their TV service provider. Smartphone users are more likely than basic phone users to rent video on demand from any of these three sources. Not surprisingly, Apple itunes is more popular with Apple cell phone users than with RIM Blackberry or Android cell phone users. Table 6: Frequency of Renting Video on Demand Frequency of Renting Video on Demand From TV Provider From Apple itunes From Google Play Often: maybe twice per month 4.8% 2.7% 2.0% Sometimes: maybe once per month 7.5% 3.4% 2.5% Rarely: maybe once or twice every 3 months 23.2% 10.0% 5.0% Never 63.4% 83.2% 89.5% 18

Figure 6: Frequency of Renting Video on Demand 100.0% 90.0% 80.0% 70.0% 60.0% From TV Provider From Apple itunes 50.0% 40.0% From Google Play 30.0% 20.0% 10.0% 0.0% Often: maybe twice per month Sometimes: maybe once per month Rarely: maybe once or twice every 3 months Never Internet-based Streaming Video Service Respondents were asked to which Internet-based Streaming Video Service they subscribe. As shown in Table 7 and Figure 7, half of respondents are not subscribed to any service, and Netflix is by far the most popular service for the other respondents. Other relationships exist when demographic variables are considered. Males are more likely than females to have a streaming video service. 18-34 year olds are more likely than other age groups to have a streaming video service. Respondents that subscribe to Amazon Prime are more likely to have an income greater than $75,000, while respondents that subscribe to Hulu Plus are more likely to have an income less that $50,000. Divorced respondents are much less likely than either married or single respondents to have any type of streaming video service. Several relationships exist when one considers the number of children in the respondents households. First of all, when there are children in a household, the respondent is most likely to have a streaming video service. Furthermore, households with children ages 0-4 years of age are the most likely users of Amazon Prime, while households with children ages 5-18 are the most likely users of Netflix, Hulu Plus, Vudu or Other. 19

Respondents who live in rural areas are the least likely to have a video streaming service. Compared to other employment statuses, respondents who work part time or are unemployed are less likely to have a video streaming service. Smartphone users are more likely than basic phone users to subscribe to a video streaming service. Users of an Apple iphone are more likely than users of other types of phone to have some type of video streaming service. Respondents who currently own a tablet are much more likely than respondents who only own a desktop computer or laptop to subscribe to one of these video streaming services. Table 7: Internet-based Streaming Video Service Internet-based Streaming Video Service Survey Vudu 1.5% Other 2.4% Hulu Plus 7.5% Amazon Prime 8.7% Netflix 36.6% None of these 53.6% 20

Figure 7: Internet-based Streaming Video Service 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Vudu Other Hulu Plus Amazon Prime Netflix None of these Amount of Video from Internet-based Streaming Video Service Respondents estimated how much time they normally spend watching content from sources other than their TV service provider, such as the Internet-based Streaming Video Services of Netflix, Amazon Prime, Hulu Plus or Vudu. Almost half never watch content from these sources (Table 8 and Figure 8). Additionally, the following was noted. Males are more likely than females to watch content from these alternate sources. Younger respondents, 18-34 years old, were the most likely to watch video from these sources. Divorced respondents were the most likely group to never watch content from these Internet-based sources, while single respondents were the most likely to watch 1-5 hours per day. Households without children were much less likely than households with children to watch videos from these sources. Smartphone users were more likely than basic phone users to watch video from these alternate sources. Respondents who own a tablet are more likely than those that only own a desktop computer or laptop to watch video from an alternate source. 21

Table 8: Amount of Video from Internet-based Streaming Video Service Amount of Video from Internetbased Source Survey None at all / never 47.2% Less than 1 hour per day 22.9% About 1 to 2 hours per day 13.7% About 2 to 3 hours per day 7.9% About 4 to 5 hours per day 2.8% More than 5 hours per day 1.7% Figure 8: Amount of Video from Internet-based Streaming Video Service 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% None at all / never Less than 1 About 1 to 2 hour per day hours per day About 2 to 3 hours per day About 4 to 5 hours per day More than 5 hours per day Frequency of YouTube Videos As Table 9 and Figure 9 demonstrate, respondents watch YouTube videos with more frequency than they watch other types of Internet-based video. Only 25 22

percent of respondents say they never watch YouTube videos, and nearly half watch a YouTube video weekly. The following demographic variables also exist. Table 9: Frequency of YouTube Videos Males are more likely than females to watch YouTube videos. There are two important relationships between YouTube videos and age. First of all, 18-24 year olds are much more likely than other age groups to watch YouTube videos. There is also a direct relationship between age groups and reporting never watching: only 9 percent of 18-24 year olds never watch, increasing to 37 percent of 55-64 year olds that never watch. Respondents with incomes under $50,000 are the most likely group to watch YouTube videos multiple times per day. When analyzing marital status, single respondents are the most likely group to watch YouTube videos multiple times a day, while divorced respondents are the most likely to never watch. Those respondents with no children in their household are the group most likely to watch YouTube videos daily. Urban respondents are more likely than suburban or rural respondents to watch YouTube videos daily. According to employment status, the unemployed respondents and student respondents are the most likely groups to watch YouTube videos one or more times daily. Smartphone users are more likely than basic cell phone users to watch YouTube videos. Respondents who use an LG cellular phone are more likely than respondents who own other brands of cell phones to never watch YouTube videos. Frequency of YouTube Videos Survey More than 3 times per day 7.0% Maybe 2 to 3 times per day 9.9% About 1 time per day 10.6% Maybe 2 or 3 times per week 44.0% 23

Frequency of YouTube Videos Survey None at all / never 25.0% Figure 9: Frequency of YouTube Videos 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% More than 3 times per day Maybe 2 to 3 times per day About 1 time per day Maybe 2 or 3 times per week None at all / never Interest in Sharing Devices Respondents were asked to express their interest in the ability to pause a show on their TV and resume watching the show where they left off on a different device, such as a desktop computer or tablet. Their interest in this type of TV Anywhere service, which is shown in Table 10 and Figure 10, has a wide range and is most likely to be possibly interested. According to demographic variables, other relationships exist. A wide of ages, 18-44 years old, are likely to be interested, while those respondents 45 years old or older are much more likely to be uninterested. Single respondents are most likely to be interested, while divorced respondents are the most likely group to be uninterested. 24

Not surprisingly, respondents who live in households with children of any age are more likely to be interested in this ability. Respondents who live in rural areas are much less interested than urban or suburban respondents. Students are significantly more interested in this ability than respondents with other employment statuses. Smartphone users are much more likely than basic phone users to already have this capability or be interested in it. Respondents who currently use a Motorola phone are much more likely to already use this capability, while Apple phone users are the most likely to be interested. Those respondents who own a tablet are much more likely than respondents who only own a desktop computer or laptop to be interested in or to already use this capability. Table 10: Interest in Sharing Devices Interest in Sharing Devices Survey I do that already 9.3% Very interested 15.7% Interested 15.1% Possibly interested 27.2% Uninterested 19.9% Very uninterested 12.8% 25

Figure 10: Interest in Sharing Devices 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% I do that already Very interested Interested Possibly interested Uninterested Very uninterested 26

Consumer Demographics Demographic Profile of U.S. Consumer Respondents Table 11: Respondent Age The above report described data resulting from a May 2012 survey of U.S. consumers. The following tables and figures demonstrate the demographics of the survey respondents. igr adheres as closely as possible to the national averages reported by the U.S. Census and 2009 American Community Survey in order to provide a representative sample. As such, weights are continually applied to the age and household income data to build a nationally representative sample for the market model. As the following data shows, the respondent sample closely matched the U.S. national averages by age group. Age Group Survey National Average 18 to 24 16.5% 15.6% 25 to 34 20.6% 21.4% 35 to 44 21.4% 21.6% 45 to 54 22.9% 23.1% 55 to 64 17.9% 18.0% 27

Figure 11: Respondent Age 22.9% 17.9% 21.4% 16.5% 20.6% 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 Table 12: Respondent Gender As the following data shows, the survey sample closely matched the U.S. population split by gender. Gender Survey National Average Male 50.1% 49.0% Female 49.9% 51.0% 28

Figure 12: Respondent Gender 49.9% 50.1% Male Female As the following data shows, the survey sample was not balanced against the ethnicity of the respondents. Table 13: Respondent Ethnic Background Ethnic Background Survey National Average Caucasian 75.0% 65.8% Hispanic 6.9% 15.8% African American 7.1% 12.4% Asian/Asian American 6.6% 4.6% Native American 0.7% 1.6% 29

Figure 13: Respondent Ethnic Background 0.7% 6.9% 6.6% 7.1% 75.0% Caucasian Hispanic African American Asian/Asian American Native American As the following data shows, the respondents were balanced against the national average for annual household income. Table 14: Respondent Annual Household Income Annual Household Income Survey National Average Less than $15,000 12.3% 13.5% $15,001 to $25,000 11.5% 11.2% $25,001 to $35,000 11.5% 10.7% $35,001 to $50,000 14.5% 14.4% $50,001 to $75,000 18.0% 18.3% $75,001 to $100,000 11.9% 12.0% $100,001 to $150,000 12.5% 11.7% $150,001 to $200,000 4.2% 4.1% $200,001 or more 3.7% 3.9% 30

Figure 14: Respondent Annual Household Income 3.7% 4.2% 12.5% 11.9% 18.0% 12.3% 11.5% 11.5% 14.5% Less than $15,000 $15,001 to $25,000 $25,001 to $35,000 $35,001 to $50,000 $50,001 to $75,000 $75,001 to $100,000 $100,001 to $150,000 $150,001 to $200,000 $200,001 or more As the following data shows, the survey sample was not balanced against the national averages on level of completed education. Table 15: Respondent Level of Education Respondent Level of Education Survey National Average Less than 9 th grade.4% 6.3% Some High School 1.5% 8.5% High School 12.8% 28.5% Some College 25.5% 21.3% Associates Degree 8.5% 7.5% Bachelors Degree 32.1% 17.6% Graduate or Professional Degree 19.3% 10.3% 31

Figure 15: Respondent Level of Education 0.4% 19.3% 32.1% 1.5% 12.8% 25.5% 8.5% Less than 9th grade Some High School High School Some College Associates Degree Bachelors Degree Graduate or Professional Degree The following data shows that about 71 percent of the respondents do not have children under 18 in their households. Table 16: Age of Children in Household Age of Children Survey No Children under 18 in Household 71.1% 0-4 years of age 10.1% 5-9 years of age 10.0% 10-14 years of age 9.6% 14-18 years of age 10.6% 32

Figure 16: Age of Children in Household 9.6% 10.6% No Children under 18 in Household 0-4 years of age 10.0% 5-9 years of age 10.1% 71.1% 10-14 years of age 14-18 years of age Table 17: Respondent Region As the following data shows, about 81 percent of the respondents self-reported living in an urban (region with 50,000+ population) or suburban (region with a population between 10,000 to 50,000). About 18 percent of the sample said they reside in a rural region (an area with a population of less than 10,000). Region Survey National Average Urban 32.8% 80.7% Suburban 48.8% combined Rural 18.4% 19.3% igr s secondary research of various U.S. Federal government sites uncovered 9 different definitions for the urban, suburban and rural regions with each resulting in a different total number of people residing in those various areas. igr s definition, then, is our own best approximation of the various definitions. The self-reported results of the respondents are actually quite consistent with earlier survey results in which we did not define the various regions. 33

Figure 17: Respondent Region 18.4% 32.8% Urban Suburban Rural 48.8% As the following data shows, the survey data is not balanced against the national averages for marital status. Table 18: Respondent Marital Status Marital Status Survey National Average Single 38.3% 31.9% Married/Living with partner 51.7% 51.4% Divorced 9.1% 10.6% Widowed 0.9% 6.1% 34

Figure 18: Respondent Marital Status 0.9% 51.7% 9.1% 38.3% Single Married/Living with partner Divorced Widowed 35

Definitions General ARPU (Average Revenue Per User): The average amount of money a subscriber spends each month on their wireless service. CAGR (Compounded Annual Growth Rate): A formula used to calculate the growth rate over a period of time. Churn: The percent of subscribers who discontinue wireless usage with the carrier in a given month. CPGA (Cost Per Gross Addition): The average marketing, handset subsidy, and other costs incurred by an operator to acquire a new subscriber. Penetration: The percentage of a country or region s population that has adopted a given technology or service. Postpaid: The traditional method of service billing where the customer receives a bill at the end of the month detailing what they owe for the month s usage. Postpaid plans are generally packaged with service contracts that provide phone subsidies. Prepaid: A method of paying for wireless service prior to use, either by purchasing a bucket of usage at the beginning of the month or drawing from an account with stored value on a per usage basis. Prepaid plans generally forgo service contracts or credit checks and are unlikely to provide phone subsidies. Device Types Embedded Modem: A modem that is internally embedded in a device to give the device mobile broadband access. Most laptops and netbooks can be configured to come with embedded modems. Ereader: Ereaders are portable devices specifically designed for reading digital books, newspapers, magazines, and other literary content. Though ereaders may perform a variety of functions, their focus on reading differentiates them from other devices. Examples include the Amazon Kindle, the Sony Reader, and the Barnes & Noble Nook. Feature Phone: A conventional cellular phone for calls, SMS, and other simple tasks with an ordinary, 10-digit keypad and, usually, a camera. Netbook: A highly portable laptop that is generally smaller, lighter, cheaper, and more energy efficient than a laptop, at the expense of processing power. Resultantly, many netbooks use legacy or specialized operating systems, such as Windows XP, Windows 7 Starter Edition, or custom Linux distributions. Some netbooks are subsidized when sold in conjunction with 3G mobile broadband service contracts. 36

Portable Modem: A modem packaged in a portable form such as a USB Dongle or ExpressCard that can be used to give compatible devices mobile broadband access. Smartphone: A cellular phone that uses a recognizable operating system with an advanced web browser and the capability to install third-party applications. Common smartphone operating systems include Apple s ios, RIM s BlackBerry OS, Palm s webos, Google s Android, Microsoft s Windows Mobile, and Nokia s Symbian Platform. Tablet: A portable computing device that, unlike laptops or netbooks, uses a touch screen as its primary method of input, not a mouse and keyboard. Tablets are generally larger than smartphones, but smaller than laptops. One examples of a tablet is Apple s ipad. Texting Phone: Similar to a feature phone, except has a full QWERTY keyboard, virtual or physical, for convenient messaging. Texting phones often have support for email, some form of web access, and playing music. Services IM (Instant Messaging): a form of live, text based communication between two or more users. A plethora of IM services exist and two users generally must be using the same service in order to chat. Popular IM services include AOL IM (AIM), Yahoo! Messenger, Google Talk (GTalk/GChat), and MSN Messenger. IMS (IP Multimedia Subsystem): a framework originally developed by the 3GPP for delivering multimedia services over an all-ip network, such as voice calling, messaging, video calling, IP TV, or IP radio. MMS (Multimedia Messaging Service): an improved version of the popular SMS that allows for the inclusion of larger amounts of text, images, audio, and even video. NFC (Near Field Communications): a high frequency wireless technology used at extremely short range. NFC is often implemented in wallet style cards (such as credit, identification, or mass transit cards) as an alternative to magnetic strips, allowing users to make so called blink transactions where their card is held in front of a card reader instead of being slid through it. NFC chips can also be embedded in mobile devices to allow the device to make blink transactions. SMS (Short Message Service): often referred to as text messaging or simply texting, SMS is a text based communication service used to send short messages (generally under 160 characters in length) between mobile phones. VoIP (Voice over IP): a term used to describe any service that provides voice communications over a network with IP-based architecture. This could refer to services such as Skype, which provide voice calling over the Internet s IP network, or a voice service for a carrier that is being delivered over an all-ip mobile network. 37

Network Technology 1G (First Generation): a generic term to describe analog mobile telecommunications technologies, such as AMPS (Advanced Mobile Phone System) and TACS (Total Access Communication System). 1X: shorthand for CDMA2000 1X (also known as IS-2000), a 2.5G, CDMA based technology developed by Qualcomm that builds on cdmaone and is capable of peak data rates of 153 Kbit/s. 1X can be upgraded to 1X Advanced, which increases voice and data capacity. 2.5G: a term used to describe to mobile communications technologies evolved from 2G technologies that served as a transitional step to 3G networks, such as EDGE and 1X, which achieved higher voice and data capacity than their 2G counterparts. 2G (Second Generation): a generic term to describe early digital mobile communications technologies, such as cdmaone, GSM, and iden. 3G (Third Generation): technically used to describe technologies that fulfill the ITU s IMT-2000 requirement, but in practice a generic term to describe advanced wireless technologies that are capable of high data rates, such as UMTS and EV-DO. 3GPP: Third Generation Partnership Project is a collaboration between multiple telecommunications associations, known as the Organizational Partners, with the principle goal of making a globally applicable 3G mobile phone system specification based on evolved GSM specifications. The 3GPP is designed to work within the scope of the IMT-2000 specs. Today, 3GPP is principally tasked with development of LTE and LTE-A specifications. 4G (Fourth Generation): used to describe technologies that fulfill the ITU s IMT-Advanced specifications, such as WiMax 2 and LTE Advanced. 4G technologies have flexible channel bandwidths; peak speeds of 100 Mbit/s when mobile and 1.5 Gbit/s when fixed; high spectral efficiency; smooth handoff between different network types; and a flat, all-ip network architecture. In practice, 4G is also used to describe technologies that nearly meet these requirements such Mobile WiMAX and LTE. CDMA (Code Division Multiple Access): an FDD approach to wireless communications where each transmission is digitized and then tagged with a code. The mobile phone is then instructed to decipher only a particular code to pluck the right conversation off the air. The process can be compared in some ways to an English-speaking person picking out in a crowded room of French speakers the only other person speaking English. cdmaone: a CDMA based 2G network technology developed by Qualcomm that is also known by its technical name, IS-95, or just CDMA for short. DAS: Distributed Antenna System is a network of spatially separated antenna nodes connected to a common radio that provides wireless service within a geographic area or structure. 38

E-UTRAN: Evolved UMTS Terrestrial Radio Access Network is the air interface for LTE. EDGE (Enhanced Data rates for Global Evolution): a 2.5G technology for GSM and TDMA networks that offers peak mobile data downlinks speeds of up to 384 Kbit/s in end-user devices. EMS: Element Management System are the systems and applications used to manage network elements on the network element management layer (NEL) of the Telecommunication Management Network (TMN) model. enode B: E-UTRAN Node B is the base transceiver station hardware in LTE networks. Node B uses the WCDMA/TD-SCDMA as the air interface technology. enode B is therefore the enhanced version of Node B. EPC: Evolved Packet Core is the core IP processing functionality for LTE and beyond, as defined by the SAE. EV-DO: shorthand for CDMA2000 1xEV-DO (also known as IS-856), a CDMA based 3G technology developed by Qualcomm and supported by the 3GPP2 that builds on 1X and supports entirely packet based networks. The first iteration of the technology, Rel. 0, can be upgraded to Rev. A, Rev. B, Rev. B Multi-Carrier with a hardware upgrade, and even EV-DO Advanced. Rev A, the most deployed version of the technology, is capable of peak rates of 3.1 Mbit/s in a 1.25 MHz channel. FDD (Frequency Division Duplex): segregates uplink and downlink operations into two spectrum bands of equal width (paired spectrum bands), which are separated by one or more other bands to avoid interference. Fixed WiMax: the common name for 802.16d, since it does not support client or terminal mobility. GPRS (General Packet Radio Service): a technology for data transmission on GSM networks. GSM (Global System for Mobile Communications): a TDMA based 2G air interface technology used throughout the world. HETNET: Heterogeneous Network is a network connecting computers and other devices with different operating systems and/or protocols. In wireless, HetNet indicates the use of multiple types of access nodes, including macrocells, picocells, femtocells and/or WiFi, in order to offer wireless coverage in an environment with a wide variety of wireless coverage zones. HSPA: High Speed Packet Access is an amalgamation of High Speed Downlink Packet Access (HSDPA) and High Speed Uplink Packet Access (HSUPA) that supports increased peak data rates of up to 14 Mbit/s in the downlink and 5.76 Mbit/s in the uplink. Evolved HSPA (also known as HSPA+) is a wireless broadband standard defined in 3GPP release 7 and 8 of the WCDMA specification that provides data rates up to 84 Mbit/s in the downlink and 22 Mbit/s in the uplink (per 5 MHz carrier) with MIM) technologies and higher order modulation. 39

HSS: Home Subscriber Server is the central network database that contains user-related and subscription-related information. The HSS provides mobility management, call and session establishment support, user authentication and access authorization. The HSS is based on pre-rel-4 Home Location Register (HLR) and Authentication Center (AuC). iden (Integrated Digital Enhanced Network) is a 2G TDMA based mobile communications technology developed by Motorola that provides users with the benefit of Push To Talk (walkie talkie style) communication. IMS: IP Multimedia Subsystem is an architectural framework for delivering Internet Protocol (IP) multimedia services, originally designed by the 3GPP as a part of the vision for evolving mobile networks beyond GSM. LTE (Long Term Evolution): a OFDMA based 3GPP standard, generally branded as 4G, that uses an all-ip flat network architecture and is capable of peak downlink speeds 100 Mbit/s and uplink speeds of 50 Mbit/s when deployed in a 20 MHz channel, and even higher rates if used with MIMO to deploy LTE in multiple channels. LTE is generally FDD, but also has an TDD implementation, TD-LTE. LTE-Advanced: a 3GPP standard that builds off LTE, offering even greater channel flexibility and peak data rates of more than 1 Gbit/s. MIMO (Multiple Input Multiple Output): the use of multiple antennas at both the transmitter and receiver to increase spectral efficiency and link reliability. MME: Mobile Managed Entity is the key control-node for the LTE accessnetwork. It is responsible for idle mode UE (User Equipment) tracking and paging procedure including retransmissions. Mobile WiMax: the common name for 802.16e, since the technology includes support for high-speed client mobility. Mobile WiMax networks are not backwards compatible with Fixed WiMax networks and offer peak speeds of up to 40 Mbit/s in a single 20 MHz channel. NGMN: Next Generation Mobile Networks Alliance is an industry association founded to develop a common solutions view of next generation wireless networks. OFDMA (Orthogonal Frequency Division Multiple Access): and advanced method of wireless communications that uses complex channel division methods to achieve minimal interference, high spectral efficiency, and efficient use of MIMO. PGW (PDN Gateway): PDN Gateway provides connectivity from the user equipment (UE) to external packet data networks by being the point of exit and entry of traffic for the device. A UE may have simultaneous connectivity with more than one PGW for accessing multiple PDNs. The PGW performs policy enforcement, packet filtering for each user, charging support, lawful interception and packet screening. PGW also provides for mobility between 3GPP and non-3gpp technologies such as WiMAX, CDMA 1X and EvDO. 40

RAN: Radio Access Network the physical radio layer at the front of each wireless network. Provides the RF connection to the end user device. S-GW: Serving Gateway routes and forwards user data packets and acts as the mobility anchor for the user plane during inter-enodeb handovers. The S-GW also manages mobility between LTE and other 3GPP technologies (terminating S4 interface and relaying the traffic between 2G/3G systems and PGW). SAE: System Architecture Evolution is the core network architecture of 3GPP's LTE wireless communication standard. SGSN: Service GPRS Support Node is responsible for the delivery of data packets from and to the 2G and 3G mobile base stations within its geographical service area. Its tasks include packet routing and transfer, mobility management (attach/detach and location management), logical link management, and authentication and charging functions. SON: Self-Organizing Network has been defined by the 3GPP and NGMN as a framework for functions on future radio access networks that make it easier to plan, configure, manage, optimize and correct radio networks. TDD (Time Division Duplex): a method of separating a channel s uplink and downlink signals by assigning each unique time slots, allowing use of a single, unpaired block of spectrum. TDMA (Time Division Multiple Access): a TDD method of wireless communications that allows many users to access a single radio frequency channel without interference by allocating unique time slots to each user within each channel. UMTS (Universal Mobile Telecommunications System): the 3GPP s standardized CDMA based approach to 3G cellular systems. UMTS includes technologies such as W-CDMA (Wideband CDMA), HSPA (High Speed Packet Access), and HSPA+. In a 5 MHz channel, HSPA+ can reach peak download speeds of 21 Mbit/s, or even higher if deployed with MIMO. WiFi: Wireless Fidelity is a wireless network for connecting computing devices, as defined by IEEE 802.11 in the 2.4 GHz, 3.6 GHz and 5 GHz frequency bands. WiMax (Worldwide Interoperability for Microwave Access): refers to set of implementations of the IEEE s 802.16 wireless network standards supported by the WiMax Forum, which certifies vendor equipment to ensure interoperability. WiMax requires an all-ip, network architecture, makes uses of OFDMA, and generally uses unpaired, TDD spectrum. WiMax 2: the common name for 802.16m, which is expected to be the first truly 4G WiMax technology capable of mobile data speeds up to 120 Mbit/s in a single 20 MHz channel. 802.16m will succeed 802.16e, with which it is backwards compatible. 41