IRU-based customer right to general use of telecommunication infrastructure with cost-based upgrade. [email protected] Workshop on CEF Networks,

IRU-based customer right to general use of telecommunication

infrastructure with cost-based upgrade.

[email protected]

Workshop on CEF Networks, Praha, may 2005

UNINETT – a nordic perspective

… more close look

UNINETT main topology

Norway – some figures

• Population: 4 554 000 (Jan 2003)• Coastline: 25 148 km• Area: 385 155 km^2• Shortest distance north/south: 1 752 km (approx 3 days

by car ;-))• Lot of mountains, fjords, islands and widespread

population gives high infrastructure costs; both roads, railways and telecom.

• Two nation-wide Telecom Carriers; BaneTele and Telenor. A lot of smaller local or regional Telecom Carriers in the bigger cities.

• 4 universities• About 40 regional university colleges

UNINETT history

• Research project from 1976

• Operational from mid 80’s connecting universities, research institutions and some colleges.

• Government owned legal entity from 1993, 3 employees.

• 2004; UNINETT consists of 4 companies, 55 employees.

History of UNINETT’s network• In the beginning, from 9,6 kbps to 2Mbit/s.• 1992: 34 Mbit/s capacity between universities (Telenor)• 1995: Transition to 34 Mbit/s ATM (Telenor)• 1997; Upgrade to 155 Mbit/s ATM, with some colleges on lower capacity

VCs. (Telenor)• 1998/99: UNINETT-owned or -leased fiber established from several

colleges/universities to railway stations and power plants gave access to several well-priced 155 Mbit/s SDH from the new carriers BaneTele and EniTel.

• 2000: Call for Tender; Leased 2.5 Gbit/s Trondheim-Oslo (Telenor), several leased 34/155Mbit/s SDH-links. Tendency towards acceptable pricing.

• 2001/2002 Huge fiber ring project in Tromsø, co-funded by UNINETT. Participants; local community, municipality, University, College, hospital. 14 km ring structure , 96 fibers, abt 15 drops. Price: 1.5 MEuro. Other similar and smaller projects in Bergen and Trondheim.

• 2002: EniTel bankrupt and assets bougtht by BaneTele. Now only two national carriers; duopoly, increased cost on leased lines. Depressing …

Rethinking the situation ..• Our own fibers had earlier helped us a lot gaining competion in the

market. • There must be a weak point in the duopoly situation that we can take

advantage of, but which? Need for capital?• Given Norway’s geographical distance, it’s costly to own national fibre

infrastructure by oneself. One also need access to local technical knowledge all over the country to fix broken fibers etc.

• Longterm agreement do give lower prices – our main presence point (universities and colleges) are geographical very stable in a long time scale.

• There exists a lot of unused fiberpairs in current national infrastructure – not used because of marketing judgements. Why etstablish new fibre infrastructure when this already exists?

• We’re a private company, which allow us to loan money in a bank.• There is a need for a clever strategy here …

Call for tender, summer 2002, a new model

• Suggested a 10-15 year agreement with upfront payment (IRU=Irrevocable Rigths of Use)

• Suggested an initial topology and capacity• Suggested cost based capacity upgrade and possible

topology additions/changes.• Invitated to infrastructure cooperation, not competion. • Clearly defined UNINETTs user groups and market.• Result: Telenor negative. BaneTele willing to discuss

further. Negotiations for nearly 6 months.

Agreement with BaneTele, april 2003

• Initial IRU amount + yearly O&M cost. 15 years + 5 optional years duration.

• 55 initial lines (2.5 Gbit/s wavelengths/transmission, local/regional fibers, 155 Mbit/s). Initial topology defined.

• Cooperation for maximum redundancy. All fiber paths are examined.

• To implement the agreement nearly 30 new local fibre loops widespread along Norway was established by UNINETT, BaneTele, local power plant companies, other 3rd-party during 2003. A lot of hectic work (pheew …;-))

• Upgrade to cost of equipment (share of cabinet, linecards, switch, regenerators, etc.) and an administrative fee.

• Fiber/Duct-exchange agreement with pre-agreed-upon price for fiber. Cooperation in new fiber projects, telehousing, issues regarding new infrastructure etc.

Negotiation strategy

• Include as much infrastructure as possible in the IRU for as long time scale as possible.

• The IRU must does not demand significant investments for the provider in order to negotiate the price downwards. Important to know the providers infrastructure in much detail.

• Focus on ”rights to communication”. • Calculate risk of investment/bankruptsy. • Be a non-profit organization and define your

market as academic sector and not as a competitor to your provider.

Current situation• UNINETT has gained more predictable costs the coming

years. More initial costs now, also a 5 year bank loan, but this will result in significantly reduced cost after end of bank loan.

• The 15 year IRU break-evens after short time versus leased lined in the market. Cost of leased infrastructure are still not falling.

• The network has more capacity and redundancy than ever before. (By an agreement with the Norwegian Space Agency we also bouth 30 years rigths to155Mbit/s to Svalbard in january 2004. Upgrade to Gigabit Ethernet late summer 2004 included.)

• More upgrade gives a even more beneficial model versus market price.

• And, we’re upgrading quite a lot .

Questions?