An Industry View of NGN Wireline
Geneva July 9, 2003
Jean-Pierre Lartigue
VP Business Strategy, Fixed Networks
ITU workshop, 07/09/03 — 1
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Towards a Smarter Consolidated Network
Application services
Any
Service
Any
Access
Services for Mission Critical Business Aplications
Traditional VPNs
Leased Lines
Multi-service
Optical Aggr.
Switching
Evolution
IP-VPN
Ethernet VPN
Hosted Services
Multi-service
ATM Aggr.
Consolidated
Services PoP
Any
Backbone
Routing
Evolution
Metro
Ethernet Aggr.
Broadband
Access
Edge
network
Network
management
Multi-protocol
IP/MPLS/ATM
Core
IP/MPLS
Core
MPLS
G-MPLS
G-MPLS
Optical Core
ITU workshop, 07/09/03 — 2
Internet Access
IP-VPN
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NGN Wireline/Voice, an evasive market?
Softswitching investment Market by IDC
Million $
6,000
5,000
Decline
4,000
3,000
2,000
Delay
1,000
0
2000
2001
June 2000
ITU workshop, 07/09/03 — 3
2002
2003
August 2001
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2004
2005
July 2002
NGN Wireline covers three market segments
>
Competitive Voice: Long Distance Bypass & local competitive
basic IP Telephony
>
Broadband NGN: New business and high end residential
Broadband services, including Voice + services
>
PSTN evolution: Incumbents’ traditional Voice Local & Long
Distance/transit services
Different dynamics - different solutions requirements
Common NGN building blocks
ITU workshop, 07/09/03 — 4
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Broadband seen as a key catalyst across segments
WW NGN Voice Equipment market
(1)
WW NGN
4000
CAPEX
(Mio €)
PSTN evolution
BB NGN
Competitive voice
3000
PSTN & BB
convergence
2000
New BB services
• Managed
communications.
• Multimedia
1000
Voice over BB
competition
0
2001
2002
2003
2004
2005
Source: Conservative analysts perspectives for Softswitch, C-AGW and TGW market
ITU workshop, 07/09/03 — 5
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2006
Market perspective for Competitive Voice
An early growing niche market
>
Long Distance Bypass: a proven NGN voice service
• Alternative Long Distance for Competitive operators
• Bypass to out-of-region for incumbents
>
Internet (PC) Telephony deployed in some countries
• Niche service to High End residential or businesses
>
Emerging Residential Voice over Broadband competition
• Yahoo BB Japan (1.6 Mio Subs), Voice over Cable (2.9 Mio Subs)
• Cheap basic telephony bundled with High Speed Internet
• Yahoo example: $3.3/subs/month & $0.06/3minutes (local, LD,US)
(1) Regulation, competition offering and perceived end-users needs
ITU workshop, 07/09/03 — 6
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Market perspective for Broadband NGN
Premises of a new Broadband Economy market
Total CAGR = 47%
180,000
160,000
Subscribers (000)
140,000
120,000
DSL
Cable
Satellite
FWA
FTTU/Other
Cable
41%
CAGR
100,000
80,000
DSL
49%
CAGR
60,000
40,000
20,000
0
2001
2002
2003
2004
2005
 DSL annualized service provider revenue end 2002 > 14 Bn €
 Starts to compensate for voice revenues erosion
 Growth rate continues at > 2M lines per month
Source: Jefferies & Company, RHK, Yankee Group
ITU workshop, 07/09/03 — 7
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Market perspective for Broadband
Grow Broadband services value in three waves
$
Address new audiences (PC, TV, console) with new services
(gaming, personal communication, content sharing)
Residential Multimedia
Build on existing infrastructure &
start with underserved SOHO segment
Business Access
Move aggressively
into HSI
High Speed Internet access
Today
Observed timeframe to generate positive contribution
• For an incremental Consumer: 12 to 14 months
• For an incremental Business subscriber: 4 to 6 months
ITU workshop, 07/09/03 — 8
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TIME
Market perspective for Broadband NGN
Raising Managed Communications for Small businesses
End-user
segments
Profile
Services
Stronger interest in
turn-key solutions
Networkers
(30%)
Remote worker or
Multi site & remote
• IP & Voice VPNs
• Web call centers
• IP Videoconferencing
Conservatives
(25%)
Average access
needs - no real
leading service
Source: Alcatel end-users analysis
ITU workshop, 07/09/03 — 9
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Hosted IP PBx
Web call centers
Web hosting
Hosted messaging
IP Videoconferencing
E-commerce
• Traditional voice
• High Speed Internet
Security & mobile office
Full hosting
seekers
(45%)
•
•
•
•
•
•
Market perspective for Broadband NGN
Telephony, embedded in BB residential services
Video/audio
streaming
On-line gaming
VOD
E-mail, chat, and
instant message
Video
conferencing
PC- and cablebased telephony
Unified
messaging
Walled Gardens,
security
Virtual models
and tours
“Click and talk“
audio/video
support
Music download
Entertainmen
t
content
Wired &
unwired
Communication
connection
Enabling /
Productivity
tools
Embedded BB NGN telephony services
ITU workshop, 07/09/03 — 10
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On-line care
Market perspective for Broadband NGN
Telephony, embedded in BB residential services
Video/audio
streaming
On-line gaming
VOD
E-mail, chat, and
instant message
Video
conferencing
PC- and cablebased telephony
Unified
messaging
Walled Gardens,
security
Virtual models
and tours
“Click and talk“
audio/video
support
Music download
Entertainmen
t
content
Wired &
unwired
Communication
connection
Enabling /
Productivity
tools
Embedded BB NGN telephony services
ITU workshop, 07/09/03 — 11
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On-line care
ITU workshop, 07/09/03 — 12
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Market perspective for Broadband NGN
Home networking: a key dimension for future
Alice’s Video portal
Alice’s Home
Alice’s Phone
ITU workshop, 07/09/03 — 13
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Market perspective for Broadband NGN
BB NGN net contribution to an Operator’s wireline business
Share of
operators’ Wireline
value (% NPV
DCF )
BB NGN
Business
BB NGN
Residential
1,3%
3.6%
21,6%
25,3%
0,1%
1,0%
0,7%
0,5%
Hoted IP PBX
Hosted
IP PBX
Messaging
Messaging
Video conf.
Videoconf.
Payback: ~12 months
Phone
Messaging
IPIPPhone
Messaging
HSI, VPN & BBE
HSI,
BBE,
VPN
Total BB
Total
BB
Payback: ~30 months
Source: Alcatel analysis, (1) includes full cost impacts (billing, network management, network impact); HIS: High Speed Internet, BBE: Entertainment
ITU workshop, 07/09/03 — 14
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Market perspective for PSTN evolution
Not yet a shift from PSTN to full NGN
>
Traditional switching telephony is still preferred choice
• Economically competitive
• Optimised (voice services regulation & feature) & robust
• Existing investment protection
>
Operators anticipating evolution towards NGN
• Network consolidation opportunities
• Replacement of end-of-life TDM technology
>
Evolution scenario and timing specific to local situations
• Constraints of legacy architectures
• Feature parity requirements
• Broadband penetration
ITU workshop, 07/09/03 — 15
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Market perspective for PSTN evolution
~25% estimated OPEX savings for large deployments
TDM drawbacks
•
Layered & meshed network
NGN voice improvements
•
•
Self managing
More flat networks
•
Many network nodes
•
Less # service-related nodes
•
Large footprint per node
•
Reduced # switching ports
Lower site costs per node
•
•
Dedicated networks for
individual services
•
•
•
•
ITU workshop, 07/09/03 — 16
Shared voice & data resources
Centralised management
Reduced transmission capacity
Cheaper new SW development
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Market perspective for PSTN evolution
Upfront CAPEX remains the key barrier: C4 networks
Relative C4
equipement
Cost (%)
140
120
100
80
60
40
20
0
TDM
1 hop
TDM
50% 1 hop
50% 2 hops
TDM
2 hops
Complex C4 networks replaced with NGN
Note: CDE included. Important impact on 200K project. Network description in note page
ITU workshop, 07/09/03 — 17
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NGN
with trunking
gateway
Market perspective for PSTN evolution
Upfront CAPEX remains the key barrier : C5 networks
•
NGN Voice comparable with TDM costs
Large obsolescence or
•
C5/NGN replacement under consideration
extension in BB markets
•
Risk hedging (maintenance, failure, BB Voice)
•
Fast PSTN/BB access synergies
•
TDM still advantageous
•
No major C5/NGN replacement
•
Gradual access (& mobile) synergies
•
Primary TDM investment
•
NGN-readiness of the infrastructure
•
BB, the main next investment wave
Limited obsolescence
or extension
Other situations
ITU workshop, 07/09/03 — 18
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In summary
> NGN build out will occur from three different markets
• Competitive voice, Broadband NGN & PSTN Evolution
> Broadband, a key catalyst to opening the opportunities for new
NGN services
• Basic voice over BB
• Managed Communications for SMEs
• Embedded telephony in new residential BB services
> PSTN will progressively be improved with NGN components
• Converging PSTN & BB infrastructure over time
ITU workshop, 07/09/03 — 19
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Questions and comments
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