Multimedia Services in Residential Broadband Networks - Techno-Economics of Residential Broadband Deployment - Ph.D. Dissertation Defence Lyngby, 11. June, 2007 Lyngby, 11. June, 2007 Halldor Matthias Sigurdsson ([email protected]) Center for Information and Communication Technologies
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Multimedia Services in Residential Broadband Networks
- Techno-Economics of Residential Broadband Deployment -
Techno-Economics of Residential Broadband Deployment Page 3
The thesis was motivated by the questionable financial feasibility of coexisting FTTH and DSL deployment in Denmark
Contradiction between (and within) literature and empirical evidence
Evidence of wide-scale upgrades of access network infrastructures:– “broadband markets are advancing to the next stage of development” (OECD 2005)
Literature findings: – “FTTH is only profitable in dense urban areas” (Olsen et al. 2006)– “The costs are such that high take rates .. are almost mandatory” (Frigo et al. 2004)– “FTTH in urban scenario does not lead to positive payback” (Monat et al. 2003)
Empirical evidence:
Existing and expected wide-scale FTTH deployment in Denmark
– 21% households by 2007
– 50% households by 2016
Expected wide-scale VDSL deployment in Europe
– VDSL deployment by T-Systems
– VDSL deployment by France Telecom
Techno-Economics of Residential Broadband Deployment Page 4
The goal was to perform a multidisciplinary study of telecom vs. entrant deployment strategies
Analyse the nature and near-future transmission requirements of converged voice, video and data services
Analyse the approaches of telecoms using Digital Subscriber Line (DSL) technology in comparison to entry strategies based on Fibre-to-the-Home (FTTH)
Investigate the effect of coexisting and competing DSL and FTTH
Broadband
Networks
Services
Technology
Econ
om
ics
Reg
ula
tion
Multidisciplinary study with roots in the theory of technology, economics, and regulation
Evaluate and compare deployment strategies through financial feasibility
Based on the case of Denmark
Techno-Economics of Residential Broadband Deployment Page 5
The solution approach is based on comparing financial feasibility under competition using the theory of
techno-economics combined with game-theory
Tilted Annuity
CAPEX OPEX Revenues
Price Change
Depreciation
EBITDA
EBITInterests
Pre-TaxProfit
-+
-
-
+
+
FEA
SA
BIL
ITY
M
OD
EL
Input Scenarios
Model DatabaseNetwork
DimensioningService
Dimensioning
Input Parameters
Techno-EconomicModel
SIM
ULA
TIO
N
MO
DEL
Analysisof
Networks
Analysisof
Services
AN
ALY
SIS
CO
MP
ETIT
ION
M
OD
EL
CompetitiveScenario 1
CompetitiveScenario 2
CompetitiveScenario …
Analyse Broadband Services
Analyse Access
Networks
Construct Feasibility
Model
Evaluate DSL
Feasibility
Analyse Infrastructure Competition
Simulate DSL
Deployment
Simulate FTTH
Deployment
Evaluate FTTH
Feasibility
Chapter 2 Chapter 3 Chapter 4
Chapter 5
Chapter 6
Selected Theory and Methodology
Techno-Economics– Developed in RACE 2087/TITAN– Described in Ims et al. 1998– Currently under development in FP6-IST-BROADWAN
and CP1-021-ECOSYS– Recently published results by Olsen et al. (2006)
Game-theory– Developed within economics during the second part of the last
century– General references: Fundenberg and Tirole (1991) and Kreps
Techno-Economics of Residential Broadband Deployment Page 7
A new approach is needed to define broadband
The new way to define broadband is dynamic:
Broadband Definition 1: Local access link performance should not be the limiting factor in a user’s capability for running today’s applications.
Broadband Definition 2: Broadband services should provide sufficient performance — and wide enough penetration of services reaching that performance level—to encourage the development of new applications.
Previously broadband was defined through transmission capacity:
> 56 Kb/s (more than PSTN modem)> 128 Kb/s (more than IDSN)> 512 Kb/s …
Today many literature sources use:> 2 Mb/s
Near-future demand:> 20 Mb/s
Based on: National Research Council, 2002
Techno-Economics of Residential Broadband Deployment Page 8
Quality of Packet Based Services is governed by QoS of transmission
Packet Based Network
Payload
Head
er
Multimedia Services have different transmission requirements:
Voice services require timeliness (<180 ms delay) TOS1– Coding used to reduce effect of congestion
Video services require throughput (>2-10 Mbps) TOS2– Coding used to reduce the transmission requirements
Data services require consistent data (no package loss) TOS3– TCP used ensure retransmission of lost packages
Congestion
Payload
Head
er
UserService Provider
Techno-Economics of Residential Broadband Deployment Page 9
Managed Networks can guarantee QoS of different types of services but only within their boundaries
Network Access Providers can guarantee QoS through:– Over Provisioning– Loose control– Strict control
QoS can only be offered from within managed networks– Operators need to select provisional strategy– Limits revenue sharing on the Internet
Voice
VLAN
Data
VLAN
Voice PVC
Data PVC
PVC / VLAN mapping at local exchange
Techno-Economics of Residential Broadband Deployment Page 10
To this day multimedia services have been complements to existing services but that is likely to change
Voice
Video
Data
Maturity Adoption
Disruptive potentials
Users have kept their traditional services– PSTN– Cable TV
Users have adapted new services– IM– P2P
Traditional services such as PSTN will continue to diminish while new converged services gain maturity and momentum
Techno-Economics of Residential Broadband Deployment Page 11
Increased available transmission speeds are being absorbed by new services and applications
Techno-Economics of Residential Broadband Deployment Page 13
Two approaches are available and competing: DSL by telecoms and FTTH by entrants
Time
Investment and Capacity
ADSL
ADSL2+
VDSL
PON/FTTH
Active Ethernet FTTHEntrant / Energy Utility Company
Telecom
Demand
Telecoms follow a migration strategy based on diminishing copper using DSL technology
Entrants / Energy Utility Companies only have a realistic option of deploying FTTH
Techno-Economics of Residential Broadband Deployment Page 14
Low speedData
High speedIPTV mm.
Length of copper loops limits the service offerings of DSL
– DSL technology uses the existing PSTN copper loop– Currently DSL equipment (DSLAM) is located in local exchanges– Attainable transmission speeds in DSL are determined by cooper loop length– As a result customers in the vicinity of local exchanges can get high speed transmission
while customers further away can risk getting no service
Local ExchangeSDP
Optical Backbone Network
SDP
PDP
No service
Techno-Economics of Residential Broadband Deployment Page 15
Telecoms can increase service offerings by deploying DSLAM equipment in PDP or SDP
Local ExchangeSDP
Twisted Copper Pair
Trench/Duct/Cable for PDP
Trench/Duct/Cable for SDP
PDP = Primary Distribution Point
RSS = Secondary Distribution Point
Optical Backbone Network
SDP
PDP
STRATEGY 1:DSLAMs in PDP
STRATEGY 2:DSLAMs in SDP
DSLAM in PDP– 20-40 Mbps theoretical average– 7-17 PDP nodes for each LE
DSLAM in SDP– 67-90 Mbps theoretical average– 126-1731 SDP nodes for each LE
CAPEX and OPEX increases withnumber nodes outside of LE andTherefore:cost LE < cost PDP << cost SDP
Techno-Economics of Residential Broadband Deployment Page 16
While telecoms can migrate between deployment strategies entrants can only deploy FTTH
Copper
PSTNISDN
ADSL
Copper FTTC
PSTNISDN
IPTVVDSL
Current Telecom
Scenario 2
FTTH
VoIP IPTVBPON
Scenario 3
Copper
PSTNISDN
ADSL2+
Scenario 1
IPTVU
pg
rad
e S
trat
egy
PON
Active
Scenario options and
future proofing
Network optimisation
Key decision to find position and number of nodes
An entrant only has the option of deploying FTTH
Two FTTH technical solutions –Star based active Ethernet–Tree based Passive Optical Networks
FTTH is technologically superior– Facilitates higher transmission speeds– “Future Proof” transmission medium
Both require expensive groundwork Neither solution is mature Equipment prices will change Regulatory uncertainty
Techno-Economics of Residential Broadband Deployment Page 18
Empirical study of Hasselager in Denmark demonstrates how telecoms map out strategic roll-out strategies
Techno-Economics of Residential Broadband Deployment Page 36
“Information Chain”
Services / Applicaitons
Access Networks
Backbone Networks
Middleware
Service Provision
Value Chain
Business Models
Cost
Techno-Economics
Economics
Policy & Regulation
Market and
competition
Techno-Economics of Residential Broadband Deployment Page 37
Academic Conclusion
Solved an insolubleproblem
Break problem down and solve individually
Milestones are necessary
Maturing
Need for discipline
Interactivity
Transmission Interactivity
Unidirectional Bidirectional
Con
ten
t In
tera
cti
vit
y
Linear
Cust
om
ised
BroadcastTV
VoD
MultiplayerGames
Developm
ent Path
of I
PTV
Techno-Economics of Residential Broadband Deployment Page 39
Netværkskonvergens
Fra dedikerede til multifunktionelle netværker Resultat er konkurrence mellem infrastrukturer (infrastructure competition) Ikke én løsning er bedst Hvad er så forskellen?
Henrik Clausen,IDC Telecom Konference 2006
Techno-Economics of Residential Broadband Deployment Page 40
DSL Existing Infrastructure
Contradiction between literature and empirical evidence:
Existing and expected wide-scale FTTH in Denmark: The Danish Energy utility sector is planning FTTH deployment to xx% of danish homes in
Data-rate and distance performance in DSL
0
20
40
60
80
100
120
0,0
0,3
0,6
0,9
1,2
1,5
1,8
2,1
2,4
2,7
3,0
3,4
3,7
4,0
4,3
4,6
4,9
5,2
5,5
5,8
6,1
6,4
km
Max
imu
m t
ran
smis
sio
n r
ate
ADSL
ADSL2+
VDSL
ADSL2RE
VDSL2
DSL
1.5 km
1 km
0.75 km
0.5 km
0.3 km
52 Mbps
30 Mbps
20 Mbps
26 Mbps
45 Mbps
Techno-Economics of Residential Broadband Deployment Page 41
DSL Existing Infrastructure
Contradiction between literature and empirical evidence:
Existing and expected wide-scale FTTH in Denmark: The Danish Energy utility sector is planning FTTH deployment to xx% of danish homes in
Local Exchange
RSS
SDP
Twisted Copper Pair
Trunk Line
SDP = Secondary Distribution Point
RSS = Remote Subscriber Stage
Optical Backbone Network
PDP
Cumulative distribution of line lengths
0
20
40
60
80
100
-1 1 3 5 7
Line length (km)
Perc
en
t
Norway
Italy
U.K.
Germany
India
U.S.
Iceland
Techno-Economics of Residential Broadband Deployment Page 42
Historically transmission speeds have doubled every 1,9 years and are expected to continue doing so
1
10
100
1000
10000
1985 1990 1995 2000 2005 2010Year
Bit
rate
[k
b/s
]
According to Moore'slawAnalogue Modems
ISDN
ADSL
Exponential growth according to Moore’s law Enabled by new transmission technologies 2007 predictions are ~ 20 Mbps BT Technology Journal predicts a demand of 100 Mbps in 2010