ePower Systems Market Research and Analysis Overall Billing Market The total recurring billing market in the US includes utilities, telecom firms, Internet service providers, cable television operators, credit cards and banks. As figure I illustrates, households receive approximately 6 to 17 bills per month, generating over 15 billion recurring bills a year in the US alone. Companies spend on average a $1.50 per bill to send out a traditional paper bill due to paper, printing, postage and processing costs. As the figure 2 illustrates, savings from EBPP can reach $1.90 per bill when all aspects of customer service, financing and billing costs are included. Figure 1 Figure 2

Therefore, the potential for total savings is estimated to be between $15 billion to $28 billion annually depending on the type of the biller. Electronic Bill Presentment and Payment vendors, including ePower, will compete for a share of a market forecasted to reach $4 billion in the year 2000 and $19 billion in the year 2005.⁵

Total recurring billings are estimated to reach 67 billion worldwide by year-end 2000, including telephone, electricity, gas, water, CATV, and other utility services.

Utility Market
ePower's primary target market will be household utility firms. The utility industry is a major component of the overall billing market. This market represents 25% of the overall billing market.⁶

For much of the century utility businesses have been tightly regulated with structured cost plus prices and defined areas of service. However, deregulation is forcing these monopolies to compete for markets and customers. Competition results in lower margins, and firms are forced to focus on reducing costs, increasing revenues, and differentiation. As competition expands, consumers will have multiple choices in a commo4jty market. As utilities lose their monopoly, they will need to differentiate themselves through providing more services and convenience. Utility firms are trying to expand their product offering by providing services such as cable, telecom, and Internet access to their existing customer base in order to increase revenues.

ePower's CustomerDirect represents a solution to the three problems posed by utility deregulation: lower margins, emphasis on service, and promotion of new products. CustomerDirect provides value and convenience to the end customer, lowers the costs of the utility, and offers the capability of targeted customer marketing.

Factors influencing adoption of EBPP
The electronic bill presentment and payment industry is still in the embryonic stage.⁷ There exist several products and services in the initial stages of deployment, which capture in part, the benefits of EBPP. The company is identifying strategic geographic regions with in the United States that combine both growing population trends and high levels of computer usage. Urban centers such as Boston represent strong potential target areas due to high levels of computer usage and large population bases. Growth in Internet usage and the extension of the Internet to include financial transactions are important catalysts that will impact the growth of the EBPP industry.

Internet growth
Business applications on the Internet grow in tandem with the overall acceptance and usage of the network. Internet content is growing at 140% a year, which is driving people of all demographic segments to increase Internet usage. The explosive growth of the Internet has opened the doors for a shift in the billing industry, from paper-based billing to electronic bill presentment and payment. The following points summarize the increasing acceptance of the Internet.

• Internet traffic is doubling every 100 days. In 1994, 3 million people were connected to the Internet. By the end of 1997, more than 100 million people were using it.
• Number of users globally increased by 150% from 40 million in 1996 to over 100 million people in 1997.
• Number of US users measured in November of 1998, increased 16% since May 1998, to 72 million adults.
• Internet commerce will likely surpass $300 billion by 2002.

Growth in financial transactions
The second key contributor to the growth of the EBPP industry is the growth of financial transactions done online. The following points summarize the increasing use of the Internet for financial transactions.⁸

• 10 million people in the US and Canada had made a purchase on the web by the end of 1997, up from 4.7 million people just six months earlier, and up from 2.5 million people in 1996.
• The transactions averaged over $100 per purchase. Contrary to popular belief, 65% of these transactions were credit card based.
• 4.2 million households are banking online in 1998, and projected to grow to 16 million by 2000.
• 7.8 million electronic invoices (including business to business) will be presented in 1998.
• The electronic bill presentment market will reach $2-4 billion in the next four years.
• Electronic bills will constitute 12% of total bills, worldwide, within the next two-and-a-half years.⁹

Competitors in the EBPP industry
Although there are several companies targeting business-to-consumer EBPP services, the following vendors are ePower's main competitors.

Edocs/Checkfree - The edocs-checkfree alliance was created in November 1998. Checkfree intends to use edocs' BillDirect software in its billing system. Checkfree's strategy is to provide bill consolidation and payment services to large billers, consumers and financial institutions. This strategy requires critical mass, as Checkfree adds more billers to the fold it will increase the possibility that all of a customer's many bills are accessible through Checkfree.

Transpoint - This company is an alliance between Microsoft, First Data Corp, and Citibank and was created in September 1998. Transpoint's pilot projects have targeted financial institutions, multi-national corporations like Xerox and GE, cellular communications, and retail firms. Transpoint is following a very broad approach to signing on pilot customers.

BlueGill Technologies - Founded in 1996, BlueGill's 1to1 Server is a data stream parsing engine and translation tool. The product is designed to extract billing data from intelligent data streams, convert the billing data to one of several formats (XML, PDF, and ASCII), and store the information in a relational database.

Addressing the competition
ePower's focused approach will drive its success. The following are key points of differentiation, which provide advantages over competing models.

• ePower is an outsourcing service. Rapidly changing EBPP technology, the uneven pace of federal and state deregulation and the substantial up front costs of developing, buying or supporting technology, positions ePower as a safe, cost efficient option for utility firms.
• Targeting utilities provides focus for product development and sales efforts. EBPP providers blanketing several different industries have more stakeholders to appease and potential conflicts of interest within a diverse customer base.
• The push approach to ePower's EBPP, based on email, allows greater benefits than other solutions. Email is active, and provides a better mechanism for customer interaction and faster payment cycles. Presentment and payment via email is the closest to the current paper bill process and this should which facilitate faster adoption.
• Online banks can provide EBPP services, but only to the subset of the population, which is both signed up with that specific bank, and with the utility. With this model, for the utility would have to make arrangements with all banks to offer EBPP to all its customers.

The market is still taking shape and each solution differs in its approach to delivering and storing billing information. Currently, ePower's CustomerDirect is the only solution that is designed specifically for the utility industry and presentment of bills via email as well as on the Internet. Moreover, ePower's focus on the utility market will enable the company to gain a dominant share as EBPP provider for the utility industry. First mover advantage is critical for EBPP providers-, the first mover can offer the customer all the benefits of applying technology to the bill presentment and payment process. Once a biller has signed on with ePower, the biller will reap the benefits of technology, and follow on competitors will be hard pressed to offer significant additional benefits.