WHITE PAPER
Shridhar Kulkarni, Product Manger, Access Network Solutions
Luis Yu, Senior Product Manager, Access Network Solutions
Aurora Networks, Inc.
October 2009
(First presented at the 2009 FTTH Conference & Expo, Houston, Texas)
©2009 Aurora Networks, Inc. All rights reserved.
Aurora Networks, Inc.
5400 Betsy Ross Drive
Santa Clara, CA 95054
Tel 408.235.7000
Fax 408.845.9045
www.aurora.com
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©2009 Aurora Networks, Inc. All rights reserved.
RFoG ROI in Rural Environments
C
INTRODUCTION
able operators worldwide are aggressively evaluating fiber to the home
(FTTH) technologies as enablers for
providing next generation video and broadband
services. Cable plant modernization via an FTTH
implementation is considered to be a very effective
strategy in countering competitive threats from
telcos and alternative service providers. “RF over
Glass” (RFoG) is a promising new technology that
offers cable operators an evolutionary approach
to implement an FTTH architecture. RFoG
preserves traditional HFC (Hybrid Fiber Coax)
plant investments in headend equipment, customer
premises equipment (QAM set-top boxes,
DOCSIS cable modems, eMTAs) and in addition
does not require any change in the cable
operator’s back-office provisioning and OSS
infrastructure.
In spite of these advantages there is a widespread
belief that RFoG, because it is an FTTH architecture, is much more expensive to implement than
traditional HFC. So it naturally beggars the
question for cable operators whether or not this
additional investment in RFoG is truly justified?
The answer to this question is an unequivocal “yes”
for one particular target market segment: low
density rural areas where a clear business case
for RFoG exists. Our findings reveal that RFoG
carries the potential to be more cost effective than
HFC in low density serving areas and that it makes
more sense to deploy fiber all the way to the
premises in the rural market segment where it
could provide new revenue streams more costeffectively. While there is no formal definition of
“rural”, it does seem to converge on areas where
the households passed per mile (HHP/mile) is less
than 30. Practically for a cable operator, this will
be the outlying regions of their cable franchise
where, historically, it has never been commercially
viable to build cable plant.
However, a big challenge is that the majority of
RFoG implementations as envisioned today have
serious limitations in fulfilling the requirements of
this low density target market segment. A next
generation RFoG architecture is required to reap
the technological benefits of fiber based implementation and to be more cost effective than
traditional HFC at the same time. In the following
sections of this paper we describe RFoG basic
building blocks, limitations of the traditional RFoG
architecture and an enhanced architecture for next
generation RFoG. Last but not least, the paper
lays out the business case for this enhanced RFoG
implementation over traditional HFC in the low
density rural target market segment.
RFoG BUILDING BLOCKS
The reference architecture for an RFoG system is
shown in Figure 1. The reference architecture
comprises a downstream optical transmitter
operating nominally at 1550 nm, optical amplification as required by the topology being served,
and a wave division multiplexer (WDM) used to
combine downstream and upstream optical signals
onto a single fiber. It also comprises an upstream
optical receiver which receives the upstream
optical signals on either 1610 nm or 1310 nm
and converts them to RF. In the field, located near
©2009 Aurora Networks, Inc. All rights reserved.
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Figure 1. RFoG Reference Architecture, Highlighting Distance Limitations
the end customers, there is an optical splitter
whose outputs connect directly to the customer
premises—each fiber from the headend/hub
supporting up to 32 customers. For RFoG implementations, it is assumed that only one fiber is
needed to the premises.
At the customer site, there needs to be an RFoG
CPE, designed for either indoor or outdoor
installation, which comprises an optical demux to
separate the downstream optical signal (at 1550
nm) from the selected upstream wavelength. The
receiver then recovers the RF signals from the
downstream optical carrier, and the RF signal is
fed via coax into the premises. In the upstream,
the RF signal is supplied to an upstream optical
transmitter (with an output at 1310 nm or 1610
nm) for onward transmission to the headend.
The associated RFoG reference diagram of a
frequency/wavelength spectrum for a typical North
America system is shown in Figure 2.
Figure 2. RFoG Spectrum
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©2009 Aurora Networks, Inc. All rights reserved.
The choice of an upstream wavelength is not
arbitrary; the 1310 nm solution today is more
cost-effective given the wide availability of
components (both active and passive) at this
wavelength. However, 1610 nm is more futureproof; it permits an optional overlay with either
an IEEE 802.3ah (EPON) or an ITU G.984
(GPON) system given that both these systems
prescribe the use of 1310 nm for upstream data
communications.
do restrict the reach of the units. Depending upon
actual model and network configuration, a reach
of just 10–20 km is typical. Unfortunately, this
limits the area which can be served directly from
the cable systems' headends/hubs.
TRADITIONAL RFoG LIMITATIONS
In a typical RFoG deployment, each fiber would
serve up to 32 subscribers. For example, in a
256 home service area, a cable operator would
need to dedicate eight fibers from the headend/
hub to that area to ensure service to each
subscriber. Similarly, with these direct fiber runs
from the headend, there is no practical method to
provide any route redundancy in the system;
hence, the greatest cause of fiber network failures
– cut fiber – cannot be mitigated by use of alternate
fiber routes. With the growing importance of highdemand, high-revenue services, this is not an ideal
solution.
hile the system does meet many of
the objectives of the cable operator
to deploy an HFC -compatible
FTTH network, technically, this solution has limitations, namely:
Particularly for low density serving areas with less
than 30 HHP per mile that are typically on the
edge of existing serving areas, the above limitations
make it extremely challenging to successfully
deploy an RFoG architecture.
The same suite of consumer services can be
offered to any subscriber on any area of the cable
plant, not just the areas which are fed via fiber.
This results in a completely unified headend,
significantly simplifying operation for the cable
operator.
W
• Limited downstream reach
NEXT-GENERATION RFoG
• Limited upstream reach
• Lack of route redundancy
T
While the downstream reach is important, the
distance limitation is predominantly driven by the
upstream. The major equipment cost element in
any FTTH system is the RFoG CPE with its
associated laser diode for return transmission;
hence, minimizing the cost of this component is
important. For this purpose the most suitable type
of laser transmitter for CPE devices is the FabryPerot (FP) laser. While these minimize cost, they
• Support for multiple modules (EDFAs, analog
return path receivers, integrated WDM/analog
• Fiber-intensive in the form of large fiber
bundles
his pioneering solution efficiently overcomes all the limitations of an RFoG system, using distributed or virtual hub technology. A virtual hub is a fully operational hub but
hosted in a standard node housing. In this
application it is designed to serve up to 256
subscribers. Effectively, it moves the functionality
of an indoor hub to an environmentally hardened
node enclosure that can be deployed closer to
subscribers in the network. The key virtual hub
features for this application are:
©2009 Aurora Networks, Inc. All rights reserved.
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return path receiver functionality, digital
transceivers and transponders, optical
switches, monitoring transceivers, and optical
multiplexers)
• Monitoring and control via standards-based
EMS (Element Management Software)
• Redundancy and route diversity.
The next-generation RFoG architecture is shown
in Figure 3.
In addition to its flexibility in placement (it can be
located very deep into the network); it overcomes
the limitations of the RFoG reference design noted:
• Downstream reach limitation: With EDFAs
packaged for installation in this housing, the
downstream reach is no longer limited.
• Upstream reach limitation: At the virtual hub,
the return signals are received and then digitized for onward transmission. With the virtual
hub configured with upstream analog return
path receivers, the subscriber CPEs only need
to transport back to the virtual hub a very short
distance of typically much less than 10 km.
With up to four analog receivers in the virtual
hub, effectively 64 or 128 subscribers share
the upstream bandwidth. Use of the CWDM
or DWDM digital return overcomes the
distance limitation (with the reach now
becoming >60 km) as well as maintaining a
very fiber-efficient solution.
• Fiber-intensive: With the traditional RFoG
approach, one dedicated transport fiber from
the headend is needed for 32 subscribers. With
the virtual hub, this is reduced to one transport
fiber for 256 subscribers because it also utilizes
return path combining, whereas the traditional
approach needs eight times more fiber.
• No route-redundancy option: A hardened
optical switch provides route diversity with
switching times less than 10 milliseconds (typically <5 milliseconds).
With the virtual hub approach, a cable operator
has an optimal solution to deploy FTTH today, a
solution which cost-effectively overcomes the
limitations associated with other approaches.
Figure 3. Overcoming the Limitations of RFoG
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©2009 Aurora Networks, Inc. All rights reserved.
The virtual hub-based RFoG solution is
operationally superior to traditional HFC and leads
to a very robust and reliable cable plant.
Eliminating the RF actives (amplifiers and line
extenders) from the network has significant
operating advantages. Reducing the number of
actives in the outside plant also results in significantly fewer units which can fail and hence a
reduction in associated costs and time to repair
those failures. Moreover, in a traditional HFC
network, the cable operator has to sweep and
balance the RF plant on an annual basis. Again,
with no RF units, this requirement has been eliminated. With no RF actives and only the occasional
virtual hub, the powering requirements for the
network are significantly lower. Compared to a
traditional HFC network, the powering need could
be reduced by 75% or more.
Similarly, with the serving area size now effectively
one, with only the CPE at the consumer’s home,
it is much easier to target exactly where a network
problem might exist. Typically, troubleshooting
and correcting these network issues will take less
time given that the field technician can be sent to
a much smaller network area. Ultimately, the mean
time to repair will be reduced.
Taking everything into consideration, there is a
substantial reduction of on-going maintenance
costs when compared to a traditional HFC plant.
This not only lowers the ongoing plant operating
costs but also dovetails perfectly into a cable
operator’s green strategy. The next section
attempts to quantify some of these RFoG
advantages and lays out a business case for
deployment of FTTH for the low density rural
target segment.
NEXT-GENERATION RFoG BUSINESS CASE
A
s noted in previous sections, next-generation RFoG has several advantages
over HFC and traditional RFoG
architectures, particularly in a low density rural
environments. However, a technical case alone is
not sufficient for broadband providers to make
an informed decision. A business case also needs
to exist as a prerequisite for deploying new FTTH
technologies.
Our analysis concludes that the cable
operator’s ROI (Return on Investment) in a
typical low density rural serving area for
RFoG deployment is approximately 10
percentage points higher than that for HFC.
The goal of this section is to present a detailed
quantitative analysis to support this
conclusion.
For any ROI analysis it is very important to
understand the cost structure both from the standpoint of CAPEX (capital expenditures) and OPEX
(operational expenditures) for the architectures
involved.
CAPEX Comparative Analysis
We conducted a comprehensive CAPEX analysis
for all the deployment costs associated with
implementing both the HFC and next-generation
RFoG architectures. The modeling exercise
involved cost analyses for both architectures for
identical node serving areas (in terms of homes
passed and mileage statistics) that fit the typical
rural landscape. The capital costs were split into
the following different categories:
1 Headend / Hub / Field Optoelectronic
Equipment
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2 Coax/Fiber Cables in Serving Area
(Construction, Material, Splicing, Labor)
3 Power Supplies / Active Elements
(Amplifiers, Line Extenders)
4 Passive Elements
5 Aerial Strand Hardware
6 Drop and Installation (CPE included)
7 Project Management / Design Engineering /
Turn Up and Test
Note that with regard to construction and cable
layout costs, the focus of this analysis was the
node serving area itself and not the entire network,
the reason being that the cost associated for laying
fiber from headend to the node serving area is the
same for both HFC and virtual hub-based RFoG.
The real cost differences lie in the implementation
at the node serving area (Fiber Node to Home)
which is typically coax dominated for HFC vis-àvis fiber dominated for RFoG.
Finding I: Our analysis revealed that for a
low density rural node serving area with a 50%
penetration rate, the CAPEX cost per home
for RFoG was lower than that for HFC with a
savings of $26 per HHP (Figure 4).
The major cost drivers for RFOG were markedly
different from that of HFC. The top three cost
differentials between the two architectures were:
1 Cable layout and construction costs comprised
41% of the total cost in HFC as compared to
23% in next-generation RFoG. This was due
to the fact that HFC “last mile,” which is coaxintensive, does not scale as well (costs disproportionately escalate with mileage) as RFoG
which is fiber-intensive.
2 The proportion of power supplies and active
elements (amplifiers, line extenders) were a
high 11% in HFC as compared to 1% in nextgeneration RFoG. Particularly for the rural
target market segment with greater distances,
Figure 4. HFC versus RFoG Cost per HHP Comparison for Rural Deployment
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©2009 Aurora Networks, Inc. All rights reserved.
the HFC solution needed a higher number of bridger
amplifiers and line extenders.
3 HFC did better in terms of the proportional costs
for drop and installation, 2% as opposed to 19%
in the case of RFoG. The major driving factor for
cost here is the inclusion of RFoG CPE that resides
at every home with an active subscriber. However,
an important point to note is that this CPE cost for
RFoG is only incurred for an active subscriber and
not for all the homes passed.
Finding II: Further analysis of the above cost
drivers reveals that the HFC cost structure has a
higher fixed cost component, forcing the operator
to incur higher upfront costs. The RFoG cost
structure, on the contrary, has a lower fixed
(~30% lower) cost component (Figure 5) thus
facilitating reallocation of variable costs at the
time of subscriber acquisition.
The plot in Figure 6 illustrates the downward
sloping curves for average cost per subscriber
with increasing penetration rates for both
architectures. As subscriber take rate improves,
the average cost per subscriber goes down due
to the sharing of fixed costs across a wider
subscriber base. It is evident from cost curves
that the average costs per subscriber for nextgeneration RFoG are lower because of its much
smaller fixed cost component as compared to
Figure 5. HFC vs RFoG CAPEX (Fixed + Variable Cost) Comparison for Rural Deployment
(Node Serving Area of ~ 400 Homes)
©2009 Aurora Networks, Inc. All rights reserved.
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Figure 6. HFC versus RFoG Average Cost Reduction Comparison for Rural Deployment
HFC. However, at very high penetration rates the
RFoG advantage starts to disappear and HFC
average cost per subscriber improves by
comparison.
1 Lower active elements in the network (RF
amplifiers, line extenders, nodes, power
supplies, etc.) leading to lesser plant maintenance.
The breakeven point is at about 60% penetration
rate, and for all penetration rates below 60% the
RFoG average cost per subscriber is favorable as
compared to HFC. This statistics bodes well for
next-generation RFoG as typical penetration rates
for MSO are less than 60% and, according to
Kagan Broadband, this number was estimated to
be 48.1% in the US for 2008.
2 Elimination of sweep and balance activities
required for traditional HFC plant.
OPEX Comparative Analysis
recent and limited deployment base. As a result,
although all the operational advantages for RFoG
are real and expected, real world quantitative data
with regard to operational performance is not
available. A good performance benchmark is to
look closely at the cost savings dynamics of a
As described in the previous sections, a nextgeneration RFoG network is expected to have
significantly lower plant maintenance and operational savings as compared to traditional HFC.
Specific reasons cited are:
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3 Savings in network power related costs due
to lower number of actives.
4 Fiber cables inherently more robust than coaxial
cables for environmental hazards (temperature,
humidity) and animal attacks.
RFoG, being a nascent technology, has a fairly
©2009 Aurora Networks, Inc. All rights reserved.
typical Fiber Deep network. Fiber Deep is a high
performance HFC variant (“N+0” architecture)
that pushes fiber much deeper into the network,
eliminating all actives in the process. From an
OPEX performance standpoint, the RFoG deployment is expected to fare at least as well as Fiber
Deep if not better.
Following are the observed savings for a Fiber
Deep network as compared to traditional HFC:
Reduction of total active devices
70%
Reduction of total power supplies
50%
Savings in maintenance and
power costs
$8.84 per
HHP
Finding III: Based on an extrapolation of
Fiber Deep statistics to the next-generation
RFoG implementation, operational expenses
in terms of plant maintenance and powering
will be at least 50% lower than that for HFC
architecture.
NPV/IRR Comparative Analysis between HFC
and RFoG
Utilizing the above findings for capital and operational expenditures, a comparative return on
investment model was built between HFC and
next-generation RFoG. A similar rural service area
in terms of number of homes passed and homes
per mile was used for modeling both architectures.
The goal of this exercise was to present a
differential return on investment analysis for
deployment of both architectures in a typical low
density rural serving area.
Based on typical plant depreciation schedules, a
12 year cost benefit model was constructed.
Cash inflows for the cable operator were derived
based on national ARPU (Average Revenue per
Unit) numbers. CAPEX numbers for both
architectures, next-generation RFoG and HFC,
were used based on the quantitative model
developed in previous sections. OPEX numbers
were based on typical top down financials data
reported to the SEC by public MSOs. Using both
the CAPEX and OPEX number analysis, cash
outflows were calculated for both deployments
in the service area under consideration.
Based on the projected net cash inflows and
standard cost of capital (10%) Net Present Value
(NPV ) for both projects was determined.
Following are the comparative NPV and IRR
(Internal Rate of Return) numbers for the two
architectures:
NPV (Per Home Passed)
IRR (Internal Rate Of Return)
HFC
RFoG
$2,108
$2,312
49%
58%
Finding IV: Comparative analysis revealed
that the NPV (Net Present Value) and IRR
(Internal Rate of Return) numbers for nextgeneration RFoG were at the very least 10%
higher than those for HFC architecture.
NEXT-GENERATION RFoG STRATEGIC
ADVANTAGE
I
n the previous section we presented the
business case for a next-generation RFoG
solution, taking into account the revenue
numbers for current generation services. An
additional benefit that is not captured in this
quantitative analysis, and one that is more strategic
in nature, is that this next-generation RFoG
architecture can provide a seamless evolutionary
path for deploying ultra high bandwidth broadband access technologies such as GEPON and
©2009 Aurora Networks, Inc. All rights reserved.
11
GPON. Not just fiber but all the virtual hub-based
RFoG infrastructure elements such as housing,
electronics and the back-office provisioning
systems can be leveraged to support such an
evolution.
In addition, these next-generation PON technologies lend themselves to capturing newer market
segments in the commercial services arena such
as cell tower backhaul and SMB/SME business
connectivity. The benefit of this embedded
strategic option is not captured in a typical NPV
analysis, but is nevertheless real and renders the
next-generation RFoG-based FTTH architecture
far superior to traditional HFC.
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CONCLUSION
T
his paper presented a superior business
case for next generation RFoG “RF over
Glass” technology vis-à-vis HFC for the
low density rural market segment. The virtual hubbased RFoG architecture overcomes all the
limitations of traditional RFoG, specifically in areas
of downstream and upstream reach, fiber
preservation and intensiveness, scalability, route
redundancy and cable plant robustness and
reliability. Contrary to popular belief, this nextgeneration RFoG architecture is more cost
effective to deploy for rural serving areas, has
better operational savings and presents superb
return on investment credentials as compared to
traditional HFC-based systems. Finally, there is a
strategic advantage for choosing this nextgeneration RFoG solution as it provides the ability
for seamless migration to ultra high speed PON
technologies, enabling cable operators to offer
next generation broadband access services and
capture newer market segments.
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Aurora Networks, Inc.
5400 Betsy Ross Drive
Santa Clara, CA 95054
Tel 408.235.7000
Fax 408.845.9043
www.aurora.com
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©2009 Aurora Networks, Inc. All rights reserved.