ITU-D Regional Development Forums 2010 on
NGN and Broadband for the Arab Region
“NGN and Broadband, Opportunities and
Challenges”
Business Planning case for Triple play
enabling access
Cairo, Egypt, 13 to 15 December 2010
Oscar González Soto
ITU Consultant Expert
Spain
oscar.gonzalez-soto@ties.itu.int
Cairo, Egypt December 2010
ITU – Business case for Access - OGS
International
Telecommunication
Union
Agenda
• Context and case study definition
• Access assessment
• Business evaluation
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
Union
2
Planning project for Access Evolution:
Questions and issues
Does access enhancement for NGN profit in
developing countries?
What reusability may be expected in fixed access
infrastructure?
How much to invest in access for BB?
How CAPEX and OPEX change with NGN and xDSL?
What benefits may be addressed by convergence?
Others…………?
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
Union
3
Planning project for Access Evolution:
Project context and objectives
• Context
for access evolution planning
• Developing countries are now faced with the a challenge of migrating
from existing PSTN networks in urban areas to advanced NGN
networks capable to provide multimedia services under limited
financial conditions.
• Access network segment is playing a key role for provisioning of
Broadband services, being dominant in investments (> than 50% of
total network). This implies the need to learn and share know-how on
processes, network studies and business planning activities.
• TOT and ITU have agreed to undertake a joint case study for the
most convenient evolution of the access towards BB with multi-play
capabilities and share results with countries in the Region
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
Union
4
Planning project for Access Evolution:
Project context and objectives
• Access
project objectives
Following previous context and agreement, the next objectives were
defined for this project:
• To undertake network assessment and audit for the status of the
existing copper access network infrastructure in Bangkok
• Evaluate dynamic migration models over time towards target
solution to support triple play services with at least 8 Mbps
• To provide guidelines and recommendations on current access
network capability toward NGN including network upgrading, NGN
planning and deployment of ICT-based services over the access
network
• To extract generic conclusions and experiences with applicability
to other countries of the Region
Cairo, Egypt December 2010
International
Telecommunication
Union
ITU – Business case - OGS
5
Planning project for Access Evolution:
Project activities for OSP and NGN
Activity 1: Objectives and Market analysis
Activity 5: Identification of issues ,
scenarios and target solutions for NGN
Activity 6: NGN model development
Activity 2: Physical network evaluation
Activity 7: Gathering T/E inputs
Activity 3: Functional network evaluation
Activity 8: Model implementation on tool
Activity 4: Operations and processes
Activity 9: NGN Business evaluation
Activity 5: Assessment for OSP
enhancement
Activity 10: What-if analysis
Activity 11:Recommendations
on Planning and Migration
P1: Access network infrastructure evaluation
Cairo, Egypt December 2010
P2: NGN access network Planning
ITU – Business case - OGS
International
Telecommunication
Union
6
Planning project for Access Evolution:
OSP architecture
Structure of the OSP Access Network at initial status
LD network
Primary OSP network
Distribution OSP network
branching cables
AN:DLC
DSLAM
MSAN
Optical
Interface
FO
SDF
.
.
.
.
Regional
Exchange
.
.
SDF
NTBA
ISDN
basic rate
FDF
Local
Exchange
SDF
MDF
FDF
SDF
.
.
FDF
main cable
MDF
SDF
drop line
SDF
Main Distribution Frame
Feeder Distribution Frame
Subscriber Distribution Frame
Cairo, Egypt December 2010
drop line
.
.
ITU – Business case - OGS
International
Telecommunication
Union
7
International
Telecommunication
Union
8
Agenda
• Context and case study definition
• Access assessment
• Business evaluation
Cairo, Egypt December 2010
ITU – Business case - OGS
Planning project for Access Evolution:
Assessment on access : BKK areas
under analysis
• Following diagram illustrates geographically the 4 BKK metropolitan areas
that are the object of the study with selection of Area 3 for techno–economic
evaluations
Cairo, Egypt December 2010
International
Telecommunication
Union
ITU – Business case - OGS
9
Planning project for Access Evolution:
Assessment on access
• Taking as a base the operational lines that generate revenues, the following diagram
illustrates the ratios of different Network Elements (NE) at A3 as a characterization of
the access structure.
NE ratios per operational line in BKK A3
2,82
3
2,5
1,86
Ratio
2
1,5
1,24
1,00
1
0,5
0,21
0,15
0
Population
Cairo, Egypt December 2010
Cable
Installed
lines
Operation ADSL inst.
lines
ITU – Business case - OGS
ADSL
oper.
NE
International
Telecommunication
10
Union
Planning project for Access Evolution:
Assessment on access
Physical network characterization
Transmission for the utilization of high frequencies in access copper
cables is done by the measurement of Signal to Noise ratio (SNR)
measured in dBs. Attenuation of transmission signal increases as a
function of characteristics in order of importance:
The length of cable
Cable gauge and material
Amount of crosstalk between adjacent cables (function of cable
age, isolation, humidity and filling degree)
Cable discontinuities through the path (function of the historical
connection practices)
Noise gathered by induction of electromagnetic sources at
customer premises or along the cable path (i.e.: radio emission,
electrical power, etc. as a function of the Electromagnetic
Compatibility practices)
Cairo, Egypt December 2010
International
Telecommunication
11
Union
ITU – Business case - OGS
Planning project for Access Evolution:
Assessment on access
• LL length distribution within the A1 and A3 of Bangkok shows a relatively good
shape due to the population settlements around nucleus and good historical
practices in topology design
OSP LL Distribution
100
%<D
80
60
40
20
0
.5
Thai BKK
Cairo, Egypt December 2010
1.5
2.5
Italy
UK
3.5
USA
ITU – Business case - OGS
5.0
Distance (Km)
International
Telecommunication
12
Union
Planning project for Access Evolution:
Assessment on access
• Capabilities of the xDSL technologies including both ADSL and VDSL are given in
the diagram below as a function of the distance: Blue line gives the maximum
theoretical capacity in Mbps with cables at lab conditions while the red line illustrates
the engineering capability at real conditions of the field
xDSL reachability (ADSL & VDSL)
60,00
Capacity Mbps
50,00
40,00
30,00
20,00
10,00
0,00
0
1
2
3
Limit capacity
Cairo, Egypt December 2010
4
5
Engineering capacity
6
7
Km
International
Telecommunication
13
Union
ITU – Business case - OGS
Planning project for Access Evolution:
Assessment on access
• Cable gauges in A1 and A3 are dominant for .4 and .5 mm. as indicated in
the diagram thus limiting the data rates at the high end of the loop
Cable gauge
90,00
80,00
70,00
Ratio
60,00
50,00
40,00
30,00
20,00
10,00
0,00
.4
.5
Aerial
Cairo, Egypt December 2010
Underg.
ITU – Business case - OGS
.65
Diameter (mm)
International
Telecommunication
14
Union
Planning project for Access Evolution:
Assessment on access
• Cable ages in A1 and A3 follow the distribution indicated with significant
proportion of cables at the end or close to the end of life cycle (more than 15
years) that should be enhanced
%>
OSP Age
50
45
40
35
30
25
20
15
10
5
0
5.0
10.0
Underg.
Cairo, Egypt December 2010
15.0
20.0
Aerial
30.0
Years
ITU – Business case - OGS
International
Telecommunication
15
Union
Planning project for Access Evolution:
Outcome on OSP assessment
• Outside plant in access has important reusability for xDSL solutions
needing enhancement for wider deployment of 8 Mbps services mainly in
the secondary section and new remote unite associated to the cabinets
• It is recommended to have OSP information and inventory in digital and
integrated form by use of the applications associated to the OSS
• It is recommended to have a wide characterization of the local loop
properties by use measurements with proper sampling techniques for a first
step characterization and use of specific testing equipment for massive
measurement later.
• In order to avoid multiple sequential civil works it is recommended to
agree among different players for a common deployment in shared mode
(i.e.: common works with assigned ducts per operator or even shared ducts
options)
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
16
Union
Agenda
• Context and case study definition
• Access assessment
• Business evaluation
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
17
Union
Planning project for Access Evolution:
Access Modelling: Global migration
scenarios
NGN at AN and
Dual Play
a
en
Sc
rio
Sc
PMO
1
ari
en
o2
Scenario
Sc
en
a
rio
NGN at AN and Triple Play
3
NGN at customers
GW and triple play
n
NGN at user CPE over
FTTH
Access migration scenarios are defined by the evolution between
the pair of originating (Present Mode of Operation) and destination
network configurations
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
18
Union
Planning project for Access Evolution:
Access Modelling: Specific migration
scenarios for NGN
a
en
Sc
rio
N
NG
NGN at AN and
Dual Play
DP
O SP
NGN
ario
Scen
PMO
Separate
networks
1
NGN at AN and Triple Play
Without OSP enhancement
Scenario
NGN OSP2
Sc
e
O S nar
P3 io
NG
N
NGN at AN and Triple Play
With OSP enhancement
for dense areas
NGN at AN and Triple Play
With OSP enhancement
for all
Access migration scenarios evaluated in the case study as the
most convenient for the current country situation
Cairo, Egypt December 2010
International
Telecommunication
19
Union
ITU – Business case - OGS
Planning project for Access Evolution:
Functional scenarios
• Historical configuration to be modeled as scenario S1 or Present Mode
of Operation (PMO ) with separated voice and data networks and the
following functional elements
Voice
service
CPE
voice
AN
Voice
Transmission
circuit
PSTN
Switching
LD circuit net
Customers
AN
Aggreg.
DSLAM
Data
service
CPE
data
modem
Transmission
data
Data BRAS
LD data net
OSP
conditioning
OSS/BSS
Cairo, Egypt December 2010
O&M
ITU – Business case - OGS
International
Telecommunication
20
Union
Planning project for Access Evolution:
Functional scenarios
• New configuration to be modeled as scenarios S2, S3, S4, S5 or NGN
with convergence of network and services at the access node either with
provisioning of dual play: VoIP and BB internet or triple play adding IPTV
Voice
service
AN
Multiservice
Transmission
MSAN
edge
CPE
voice
NGN
Equipment
Router
LD NGN net
Data
service
Customers
Video
service
OSP
conditioning
CPE
data+
video
Video servers
equipment
OSP cable
Planning,
Design &
engineering
OSP civil
Installation and
commissioning
NGSS
O&M
International
NGN segments
Cairo, Egypt December 2010
Telecommunication
21
Union
ITU – Business case - OGS
Planning project for Access Evolution:
Network structure for NGN based
deployments
• New deployments of ADSL receiving service through an IP based network
with access by MSANs connected to a metroLAN and an IP Core towards
the Gateway to Internet as described in the reference diagram
Internet
Customer
PC
ADSL
Modem Copper line
Access
SW
AGG
SW
IIG
IP Core
Splitter
DSLAM/MSAN
Cairo, Egypt December 2010
IP Access
Network/
MetroLAN
BRAS/
TSG
ITU – Business case - OGS
IS
P
WW
W
NIX
International
Telecommunication
22
Union
Planning project for Access Evolution
Business evaluations
General assumption for the evaluations (I)
• Analysis period for the evaluations of 10 years in order to be able to see
the life-cycle effects of different network element types
• Standard reference financial parameters for discount rates of 10%
during the evaluation period and long term perpetuity rate to evaluate
terminal values of network (3%)
• Life cycles for NE: of 4 years for CPEs, 6 years for AN, 6 to 8 years for
core nodes and 20 years for OSP
• Existing installed equipments not at the end of life-cycle at the start of
the period thus requiring substitution at the corresponding life expiration
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
23
Union
Planning project for Access Evolution
Business evaluations
Assumptions for BKK Area 3 (II)
• Population of 2,383.811 inhabitants at end 2008
• Population density of 3.833 at year 2008
• Customer density: 569 customers per Km2 at 2008
• Initial Market share at the country: 56% for fixed lines and 36% for
ADSL lines
• Potential market in lines for TOT 460.000 at year 10
• ADSL LL length for 8 Mbps. guarantee: 2 Km or 1,43 geographical radius
• Average number of cables per operational line 1,86
• Proportion of reachable LL for BB 8 Mbps. 45%
• Proportion Aerial/underground distribution network: 70/30
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
24
Union
Planning project for Access Evolution
Business evaluations
Assumptions for BKK Area 3 (III)
• Migration speed towards NGN at a medium pace in 3 years with rates of
20/60/20 that is feasible in a region (note that is not feasible in all regions
at the same time for financial and know-how limitations)
• Tariffs for voice service decreasing 5% per year
• Tariffs for data service of 1000 baths/month for BB access of 8 Mbps and
decreasing 3% per year
• Tariffs for IPTV equivalent to current market silver type: 750 bahts
• Pricing Access Nodes for an initial configuration of voice /data ports:
80/20
• Company financed CPEs for users: 30% for traditional, 50% for new
voice/data and 60% for new IPTV.
Cairo, Egypt December 2010
International
Telecommunication
25
Union
ITU – Business case - OGS
Planning project for Access Evolution
Business evaluations: Triple play
• Evolution of services demand projected with the mentioned assumptions for
voice, BB internet and IPTV with VOD as a function of customer geographical
coverage that depends on the level of OSP enhancement
Service Demands
500000,00
Connections
450000,00
400000,00
350000,00
300000,00
250000,00
200000,00
150000,00
100000,00
50000,00
0,00
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
no OSP enhance, iptv
All cases, voice
All cases, data
high level enhance, iptv
Y9
Y10
Year
medium level enhance, iptv
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
26
Union
Planning project for Access Evolution
Business evaluations: Triple play
• Global project evaluator: Net Present Value (NPV) at perpetuity rate shows
a gain for al NGN alternatives that is high higher as wider enhancement of
OSP and more customers reached for BB services and IPTV. Thus new
revenues and convergence economy of scale largely compensate the high
OSP investments
NPV for PMO and 4 NGN scenarios
2500,00
Currency Units
2000,00
1500,00
1000,00
500,00
0,00
Y0
Y1
Y2
Y3
Y4
Y5
medium speed NPV (Perpetuity Rate)
no OSP enhance NPV (Perpetuity Rate)
medium level enhance NPV (Perpetuity Rate)
Cairo, Egypt December 2010
Y6
Y7
Y8
Y9
Y10
Year
no migration NPV (Perpetuity Rate)
high level enhance NPV (Perpetuity Rate)
International
Telecommunication
27
Union
ITU – Business case - OGS
Planning project for Access Evolution
Business evaluations: Triple play
• Differential NPV at perpetuity rate trough time: gain after year 3 justifies the
important investments in OSP and access modernization with NPV increasing
through time in proportion to the number of reachable customers that
generate new revenues
Differential NPV for NGN MS alternatives with triple play
800,00
700,00
Currency Units
600,00
500,00
400,00
300,00
200,00
100,00
0,00
Y0
-100,00
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
-200,00
Year
NPV diff. no OSP enhance
Cairo, Egypt December 2010
NPV diff. medium enhance
ITU – Business case - OGS
NPV diff. high enhance
International
Telecommunication
28
Union
Planning project for Access Evolution
Business evaluations: Triple play
• Capital expenditure shows a different profile at the 4 scenarios due to the
important investments at the transition years in OSP modernization, new
integrated Access Nodes and renovation of multiservice CPEs but converging
at medium term when modernization completed
Expenditure for NGN triple play scenarios and PMO
40000,00
Currency Units
35000,00
30000,00
25000,00
20000,00
15000,00
10000,00
5000,00
0,00
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
Year
medium speed Capital Expenditure
no OSP enhance Capital Expenditure
high level enhance Capital Expenditure
medium level enhance Capital Expenditure
Cairo, Egypt December 2010
International
Telecommunication
29
Union
ITU – Business case - OGS
Planning project for Access Evolution
Business evaluations: Triple play
• Differential expenditure and revenues with the PMO illustrates the
importance of migration towards NGN with a high capacity access network to
benefit from the new revenues and positioning for competition
Differntial Revenue and Expenditures for NGN triple play
alternatives versus PMO
90000,00
80000,00
Currency Units
70000,00
60000,00
50000,00
40000,00
30000,00
20000,00
10000,00
0,00
-10000,00
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
-20000,00
Year
Revenue no OSP enhance
Revenue high enhance
Expenditure Medium enhance
Cairo, Egypt December 2010
Revenue medium enhance
Expenditure no OSP enhance
Expenditure high enhance
ITU – Business case - OGS
International
Telecommunication
30
Union
Planning project for Access Evolution
Business evaluations: Triple play
• Diagram provides the services revenues evolution through time as function of the
assumptions taken. Voice revenues will decrease due to tariff deterioration by high
competition and BB internet and IPTV will increase due to the number of incorporated
customers. At period end data and IPTV services revenues will be dominant (66%)
over voice even with a lower penetration
Services revenues per MS triple play scenario
100000,00
Currency units
90000,00
80000,00
70000,00
60000,00
50000,00
40000,00
30000,00
20000,00
10000,00
0,00
Y0
Y1
Y2
Y3
no OSP enhance, iptv
all cases, data
high level enhance, iptv
medium level enhance, iptv
Cairo, Egypt December 2010
Y4
Y5
Y6
Y7
Y8
Y9
Y10
all cases, voice
no OSP enhance, VOD
high level enhance, VOD
medium level enhance, VOD
Year
International
Telecommunication
31
Union
ITU – Business case - OGS
Planning project for Access Evolution
Business evaluations: Triple play
• Diagram illustrates the investment per category of network elements in percentage
for the accumulated value in the 10 years period in the scenario of full network
enhancement. The three main investments correspond to the modernization of
secondary network, the provisioning of new CPEs with video capability and the
remote multiservice nodes to reach all population
CAPEX Distribution (%) per goup type of NE
OSP secondary
civil
13%
OSP Secondary
cable
7%
Edge
6%
Core
12%
OSP Primary civil
6%
Co-located MS
4%
OSP Primary cable
2%
Data term
9%
MS remote
14%
historical access
4%
Cairo, Egypt December 2010
Transformation
projects
2%
Video term
21%
ITU – Business case - OGS
International
Telecommunication
32
Union
Planning project for Access Evolution
Business evaluations: Triple play
• Diagram shows the operational costs in percentage per category of elements
subject to operation and maintenance expenses considered in the 10 years period.
Operation and maintenance for the equipments and activities at the network
periphery are the main contributors to the expenses with customer service and
remote nodes taking the lead
OPEX distribution (%) per group type of elements
MS remote
access
16%
Edge
7%
Core
12%
Co-located MS
Access
6%
interconnection
8%
data terminal
3%
conditioning
8%
video terminal
5%
custom service
18%
Cairo, Egypt December 2010
historical
terminals
6%
historical
access
11%
International
Telecommunication
33
Union
ITU – Business case - OGS
Planning project for Access Evolution
Business sensitivity to tariffs:
Triple play
• Differential NPV between the three scenarios per level of OSP modernization
illustrates the sensitivity to the tariffs of IPTV and VOD services. But even with a
reduction to half project is positive after year 4 due to the efficiency of
convergence and economies of scale in triple play
NPV for NGN triple play alternatives and video tariffs reduced 50%
400,00
Currency Units
300,00
200,00
100,00
0,00
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
-100,00
-200,00
-300,00
Year
NPV diff. no OSP enhance
Cairo, Egypt December 2010
NPV diff. medium enhance
ITU – Business case - OGS
NPV diff. high enhance
International
Telecommunication
34
Union
Planning project for Access Evolution
Business evaluations: Migration steps
Steps
Year 1
Year 2
Year 3
-S1.-PD NGN
-S2.-PD Video
-S3.-Engin. AN
-S4.-OSP design
-S5.-OSP Deployment
-S6.-AN & Trans. deployment
-S7.-Video Platf. deployment
-S8.-OSS/BSS deployment
-S9.-Integ., Test, Valid
-S10.-Service trials
-S11.-Service deployment
-S12.-.Project Lead & Direction
• Example of project design and execution. Should be in close collaboration to Equipment,
International
Content and Service providers
Cairo, Egypt December 2010
ITU – Business case - OGS
Telecommunication
35
Union
Planning project for Access Evolution
Business evaluations: Outcome
• Access modernization for NGN solutions to allow triple play services (at 8
Mbps.) show an important increase in the Net Present Value of the network
due to the convergence efficiencies and position the company for a higher
revenues and competition level in the market
• Introduction of IPTV and VOD should be based on negotiations with content
providers that provide attractive and high quality content in order to assure
important customer adoption rates and loyalty.
• Quality of Service, Service Availability, Customer Care and Sustained Bit
Rate (i.e.: all path dimensioning at 80% of peak rate) guarantee are the
decisive factors for a customer to select a new provider or remain at the
current one.
• Customer Care platform is recommended with traffic dimensioning ensuring
rapid response to calls and with differentiation of service per customer class,
history of previous customer calls and SLA.
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
36
Union
Planning project for Access Evolution
Business evaluations: Outcome
• Further studies and sensitivity analysis recommended for the
access scenarios include the following ones:
A) Lower density cases in suburban scenarios in order to
analyze up to which density and services mix the current
conclusions of this study could be maintained.
B) New architectures with IP closer to the customer at an all
IP CPE that allows for services end-to-end IP, cost
reduction in the node but higher investments in customer
CPE renovation
C) FTTH for services requiring 30 or 100 Mbps according to
customer density services demand and OSP status versus
VDSL solutions
D) Infrastructure sharing modeling and business evaluation
for cases as well as for a common underground
renovation/installation of ducts at a single shot for all
involved companies (Telecom, CATV, Electricity, etc.) International
Cairo, Egypt December 2010
ITU – Business case - OGS
Telecommunication
37
Union
Planning project for Access Evolution :
Conclusions
New service revenues pay for the required
infrastructure enhancement for high speeds
High impact of economy of scale benefits for
convergence in multiservice triple play
Powerful modeling and support tools needed
to optimize evolution
Cairo, Egypt December 2010
ITU – Business case - OGS
International
Telecommunication
38
Union