Seminar on tariff policies, tariff models and
methodologies for the determination of costs of
services provided with NGN
Monday 8 September, 2008
ITU Headquarters - Geneva, Switzerland
NGN: Migration and Investment Strategy
Oscar González Soto
ITU Consultant Expert
Strategic Planning and Assessment
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 1
NGN: Migration and Investment Strategy
Content
• Key factors
for the evolution towards NGN
• Convergence factors
• Issues in network evolution
• Network architecture evolution at transit, local
and access levels
• Topology and architecture migration
• OSS/BSS evolution and IMS
• Investment factors and business strategies
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 2
NGN: Migration and Investment Strategy
Convergence dimensions
Convergence is taking place at several domains
At Network domain
• One network for all service types: NGN, IMS
At Service domain
• Fixed, Nomadic, Mobile, Interactive and Broadcasting, etc.
At radio Access domain
• DECT, Wi-Fi, WiMax, 3G, 4G, etc.
At Operational and Business domain
• OSS, Billing, etc, for all customer classes
At Terminal domain
• 2G, 3G, PDA, iPod, etc.
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 3
NGN: Migration and Investment Strategy
Convergence profiles as a function of investment
and deployment time
Level of convergence
Convergence Domain
Separated
Implementation
Low level
convergence
Medium level
convergence
Full
convergence
Network
Services
Access
Operations
Terminals
Present Mode
of Operation
Partial
Convergence Profile
Ambitious
Convergence Profile
Migration profile driven by: Initial status, Market development, Economy of
scale and Operator Strategy
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 4
NGN: Migration and Investment Strategy
Key Drivers: Economies of scale
Economies of scale are an inherent characteristic to the telecom technologies
that impacts on solutions, evolution, tariffs and survivability in competition
– The five dimensions of the economy of scale:
• By Size of the systems
• By Technology capabilities
Larger systems cheaper per unit
New technologies with higher capacity
• By Traffic efficiency with occupancy
Higher utilization for a given
GoS when more servers
• By customers Density
• By Volume of purchasing
September 2008
Quadratic increase with coverage radio
Discount per volume in log scale
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 5
NGN: Migration and Investment Strategy
Issues in evolution (I)
• Why to evolve?
• Services and revenue increase with multimedia services:
• Cost reductions by sharing network infrastructure and systems
• Simplification of O&M, thus lowering OPEX
• When to evolve?
• According to new technology maturity per network layer (physical,
switching, services and applications)
• Different time scales for access, edge and core segments
• As a function of current network aging and demand grow
• Plan business and investments on time to allow feasible return and
positive NPV at reference periods
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Issues in evolution (II)
• How to evolve?
• Business continuity required to maintain ongoing dominant services and
customers that require carrier-grade service
• Flexibility to incorporate existing new services and react quickly to the
ones that appear on real time (main advantage of IP mode)
• Plan architecture and capacity for end to end QOS and interoperability
between domains
• Services security and network survivability ensured over all period
• What-if for multiple alternatives and each decision?
• Architecture, starting, number of steps, timing, investment rate,
charging, etc.
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 7
NGN: Migration and Investment Strategy
Content
• Key factors
for the evolution towards NGN
• Convergence factors
• Issues in network evolution
• Network architecture evolution at transit, local
and access levels
• Topology and architecture migration
• OSS/BSS evolution and IMS
• Investment factors and business strategies
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 8
NGN: Migration and Investment Strategy
Architecture Evolution: Topology
Topological changes impact on infrastructure and are slower
to implement than technology substitution
• Less network nodes and links due to the higher capacity of systems
(one order of magnitude).
• Same capillarity at access level due to identical customer location
• Topological connectivity higher for high capacity nodes and paths due
to security
• High protection level and diversity paths/sources in all high capacity
systems, both at functional and physical levels
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture migration: Topology
What changes from current scenario towards target network ?
NMC
OSS
SCP
IN
SS7
Services
Softswitch
Control
Mob
Distributed Switching
Transport/Media
LEX/TEX
NAS
TDM
Data
ATM/IP
LEX
Packet
Network
IP/MPLS/CAC
Access
gateway
RSU
Trunk
gateway
Other
Networks
Access
gateway
DSL
PCM
POTS
Access
gateway
MUX/DSLAM
ISDN
Wireless
gateway
DLC
HDSL/XDSL
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture Evolution: Topology
TRANSIT NETWORK
NATIONAL LAYER
REGIONAL LAYER
LEX
LAYER
Access
LAYER
Structure
Simplification
NATIONAL/REGIONAL
LAYER
Single-layered
Single
Single-layered
TRANSIT NETWORK
LEX/GW
LAYER
Access
LAYER
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture Evolution: Access
Access dominated by physical infrastructure cost and
deployment time
• Quick deployment of DSL and Multimedia Services
• FO closer to customer when implementing new outside plant or
renovating existing one
• New Wireless technologies for low density customer scenarios
• Shorter LL length than classical network to be prepared for high
bandwidth Multimedia services
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture Evolution: Local
Dominated by functions migration investment and
interoperability
• Move from joint switching and control to separated control and media
GW
• Introduce Multimedia Services at all areas
• Optimize number, location of nodes and interfaces among existing and
new network
• Requires longer time and higher investments due to variety of geoscenarios and geographical distribution
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture Evolution: Core
Dominated by high capacity and protection level
• Overlay deployment for full coverage in all regions
• Quick deployment needed for homogeneous end to end connections
• Strong requirements for high quality, protection and survivability
• Importance of the optimization for location and interconnection
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture Evolution: Combined Segments
Where to start and how to co-ordinate migration?
- Network “consolidation”
Cost Optimisation of the network
- Reducing nodes and increase their capacity
- Deployment of ADSL and multiservice access
- Network expansion
NGN solution :
- Cap and Grow; this means keeping the existing PSTN network as it is, and
grow demand with NGN equipment
- Network replacement
Replacement of out-phased (end of life) TDM equipment
- gradual replacement : this means coexistence of the two technologies
- full accelerated replacement with a short transition period
Need to optimize overall network evolution: technically and economically
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Overall Convergence steps at network and service domains
• Starting with the 5 current separated networks based on TDM ( PSTN,
IN, SS7, Mobile, Data ATM/IP)
• Migrating to single IP based NGN at core segment
• Migrating at IP based NGN at Edge and Access Segments
• Incorporating partial pre-IMS open service architecture
• Incorporating full end-to-end IP mode with IPv6
• Implementing full IMS functionality
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Architecture Evolution: Combined Segments
Overall impact of evolution on network CAPEX and OPEX
CAPEX
OPEX
•
TDM and NGN CAPEX are close
•
OPEX in NGN trends to be lower
•
NGN CAPEX in the first years
driven by geographic coverage
•
•
Access systems represent a large
part of CAPEX
Migration scenarios will have a mix
of TDM OPEX (installed base) and
NGN OPEX (substitution and
growth)
•
Significant impact of manpower cost
due to convergence in operations
– similar values in TDM and
NGN
Key factors for the evaluation: Geo-scenarios, Network grow rates,
Aging of equipment, New services
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Evolution to converged OSS BSS: New requirements
- In addition to conventional typical functions, new requirements and higher
relevance for existing tasks are needed in the NGN IP mode technology as
follows:
- Managing support to multimedia services with voice, data, video and multiple play
- Security policy management,
- Content management,
- Managing interdomain operational activities
- Managing functionalities for the coexistence of legacy and new technologies
- Implementing new business procedures associated to bundled offers
- Manage multimedia/multiparty charging application
- Service Level Agreements (SLA) management,
- Service creation and upgrading management,
- Focus on common processes to all support functions and technologies
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Evolution to converged OSS BSS: Phases
MOBILE
MOBILE
DATA
PSTN
BSS
BSS/OSS
OSS Application n
PSTN
OSS Application 2
OSS Application 1
DATA
OSS Applications
OSS Middleware
Integrated IT Platform
Separated OSS, BSS
and Platforms
Integrated OSS/BSS in
Common Platform
Migration from legacy support systems in vertical piles towards integrated
OSS/BSS in an IT platform per network type
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Evolution to converged OSS BSS: Phases
Third Party Applications
MOBILE
PSTN/DATA
BSS/OSS
NGSS
Applic. Support Functions
based on
OSS Applications
BSS/OSS
Applications
(SOA)
Service Control Functions
IMS
Service Stratum
Transport Control Functions
OSS Middleware
Transport Functions
Integrated IT Platform
Transport Stratum
IMS Architecture
Integrated OSS/BSS in
Common Platform
Full Integrated NGSS platform interworking with IMS
Migration from IT platforms per network type towards New Generation
OSS/BSS for an NGN multiservice network with IMS functionality
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 20
NGN: Migration and Investment Strategy
Evolution to converged OSS BSS: Benefits
Converged OSS/BSS applications will provide a series of benefits similar to the
ones obtained by the IMS within the network but related to the overall company
operational activities external to the network:
- Short time reaction to new services introduction
- Labor force reduction for the operation
- Common look & feel for the support services with easier training
- New facilities for charging adaptation to costing and for agile reaction to
business competitive forces
- Profitability increase due to advance in the revenues and decrease of Opex
- Quick reaction to contract updates, customer care and SLA requirements
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Matching evolution to NGN, IMS and NGSS
Convergence to
NGN infrastructure
End to End
NGN
- Open Service Architecture
- Integration of OSS and BSS
functionalities
NGN IP core
PSTN
Pre - IMS
Coexistence for PSTN and NGN
- NGSS based on “SOA”
- Incorporation of new operations
for IMS new services
PSTN Architecture
Separated OSS and BSS
platforms for PSTN,
Mobile,& Data
September 2008
Full IMS “SIP” Services
Convergence to
Integrated OSS/BSS
OSS/BSS Integration for
PSTN and Data
Full Integrated platform
Fixed + Mobile & federated with IMS
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 22
NGN: Migration and Investment Strategy
Content
• Key factors
for the evolution towards NGN
• Convergence factors
• Issues in network evolution
• Network architecture evolution at transit, local
and access levels
• Topology and architecture migration
• OSS/BSS evolution and IMS
• Investment factors and business strategies
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 23
NGN: Migration and Investment Strategy
Key Factors: Cost structure and savings
– High cost impact of network infrastructure layer: > 60% in Greenfield
areas of which > 70% in access segment.
– Dimensioning and cost evolving in 3 phases through time:
– A) Accessibility due to Geo
coverage either physical or radio
– B) Equipment in Ports/users as customers grow
– C) Capacity in Traffic due to increase of multiservice applications
– Significant savings by resources and equipment sharing within an
operator due to convergence at network layers : i.e.: 30%
– Additional savings inter-operators due to cost sharing of non-core
equipment (buildings, towers, etc.) > 20%
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 24
NGN: Migration and Investment Strategy
Investment Distribution in Greenfield Access
Network Cost Composition
for traditional PSTN and Data
(Urban 1 node Ducts+ Aerial)
5 %5 %
4%
12 %
74%
OSP
PSTN access
PSTN core
DATA Overlay
Transport
Infrastructure (OSP) Cost
Composition
(Urban 1 node Ducts+Aerial)
4%
51 %
7%
25 %
13 %
Primary
Secondary
Civil Works
Engineering
Management
Dominant Outside Plant component compared to Electronic Equipment
for traditional WL technologies
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Example for Composition of prices: WL vs WLL cases
Solutions for Greenfield scenarios (excluding Backhauling)
Rural WL
Rural WLL
2%
6%
20%
16%
Switching
0%
Access Equipment
Transmission
20%
62%
Infrastructure
74%
- WL more intensive in Infrastructure and density dependent
- WLL more intensive in Electronic equipment and traffic demand dependent
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
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NGN: Migration and Investment Strategy
Example for Cumulated Capex by layers: DLC case
Villages: DLC based solution (Greenfield)
6000000
5000000
monetary units
Infrastructure
Transmission
4000000
Access Equipment
3000000
Switching
2000000
1000000
0
1
2
3
4
5
6
7
8
9
10
Years
- High investment at launching phase with dominant contribution by Infrastructure and access
equipment by geo-coverage and customer volume
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 27
NGN: Migration and Investment Strategy
WL extension in
existing network
.WL solution Greenfield
53
47
40
33
27
20
WLL solution Greenfield
13
5 000
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
7
CAPEX, price per line,
Monetary units
Cost sensitivity to customer density per type of solution
Density: (customers/ km^2)
- Clear cross-point between WL and WLL solutions as a density function
- Important impact of existing network reusability
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 28
NGN: Migration and Investment Strategy
Role of Business Strategy Planning
•
Net Present Value (NPV) for the overall migration project is the best global evaluator
NPV for two migration strategies
20000
15000
KEuro
10000
5000
0
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
-5000
-10000
Ambitious migration
•
Conservative migration
Conservative migration deploy new technologies for demand grow of existing services
and substitution of obsolete equipment
• Ambitious migration forces deployment of new technologies and new services as
allowed by state of the art technology
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 29
NGN: Migration and Investment Strategy
Role of Business Strategy Planning
Effects of the mix of customers on Reference Scenario: Low competition level
Network NPV
8e+08
7e+08
6e+08
SOHO and
Small
Enterprise
All
Segments
(reference)
Residential
Euro
5e+08
4e+08
3e+08
2e+08
1e+08
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
0e+08
-1e+08
•
Year
SME and SOHO with quicker recovery but less NPV and company value at
medium term
• “All customer segments” case with much better behavior
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 30
NGN: Migration and Investment Strategy
Role of Business Strategy Planning
Effects of the mix of services on Reference Scenario: Low competition level
Network NPV
7e+08
6e+08
Internet
5e+08
Euro
4e+08
Internet &
VoDSL
3e+08
Internet &
Video
2e+08
1e+08
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
All
Services
(reference)
0e+08
-1e+08
-2e+08
•
September 2008
Year
Major impact of service classes on NPV and company survivability
• Single service classes without future
• High benefit of “all services” case
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 31
NGN: Migration and Investment Strategy
Role of Business Strategy Planning
Effects of the mix of services on typical scenario: Medium competition level
Network NPV
5e+08
4e+08
Internet
Euro
3e+08
Internet &
VoDSL
2e+08
Internet &
Video
1e+08
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
0e+08
Y10
All
Services
(reference)
-1e+08
-2e+08
•
Year
Increase of competition level decrease market share and tariffs, amplifies the
previous effects on feasibility: big differences between service mixes
• Very robust behavior for the “all services” case
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 32
NGN: Migration and Investment Strategy
Evaluation for 2G to 3G migration
Resource Capital Expenditure
1.2e+08
1e+08
GSM base stations
US $
8e+07
UMTS base stations
6+07
UMTS carriers
GSM TRXs
4e+07
2e+07
0e+07
Y0
Y2
Y4
Y6
Y8
Year
Investment in Network elements during network transition at an scenario with
accelerated migration and customers growth (non saturated market)
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 33
NGN: Migration and Investment Strategy
Evaluation for 2G to 3G migration
Bandwidth per service class of business customers
3.200.000
2.800.000
Mbit/s
2.400.000
2.000.000
Data bandwidth
1.600.000
1.200.000
800.000
400.000
0
Y0
Voice bandwidth
Y2
Y4
Y6
Y8
Year
Dominant bandwidth demand by data services as new network scenario with
service maturity
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 34
NGN: Migration and Investment Strategy
Evaluation for 2G to 3G migration
Revenue per service type for consumer customers
28e+07
24e+07
20e+07
US $
Data services
16e+07
12e+07
8e+07
UMTS voice
4e+07
GSM voice
0e+07
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Year
Significant increase of data services revenues when network and new services
are promoted
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 35
NGN: Migration and Investment Strategy
Summary of Evolution Strategy
• Plan a phased approach for the network migration based
on business evaluation per network segment.
• Start at Core network segment and OSS/BSS
• Ensure coordination between network segments,
OSS/BSS functionality, IMS and IPv6
• Select overall strategy as a function of network aging,
demand grow and competition level
September 2008
ITU/BDT NGN: Migration and Investment Strategy - O.G.S.
slide 36