Fixed broadband solutions for rural areas: a techno-economic analysis
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1 Presentation at the Department of Economics, Universidad Complutense de Madrid Madrid, Spain, November 2014 Fixed broadband solutions for rural areas: a techno-economic analysis Juan Rendon Schneir Senior Finance and Regulatory Manager Huawei Western Europe Department Düsseldorf, Germany juan.rendon@huawei.com
2 Content Introduction Network scenarios Costing methodology Results Conclusions Page 2
3 Introduction Status of NGA deployment in the European Union Achievement of the Digital Agenda Targets (as of 2014) Basic broadband for all by 2013: 100% in 2013 Mission accomplished! Fast broadband (>30Mbps) for all by 2020: 62% in 2013 Not yet, but as of 2014 there are 6 years left. Next Generation Access (NGA), >30Mbps, broadband coverage in the EU, % NGA networks and coverage: Cable Docsis 3.0 (41.2%) VDSL (31.2%) FTTP (14.5%) 80% 60% 40% 20% 0% Source: IHS,VVA and Point Topic Next Generation Access (NGA) covers 62%, but in rural areas the penetration is low. Source: European Commission, Digital Agenda Scoreboard 2014 Page 3
4 Introduction Lack of NGA deployment in rural areas in Europe 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Total Rural Next Generation Access (FTTP, VDSL and Docsis 3.0 cable) coverage, % IT EL HR FR PL IE SK IS EU CZ ES RO BG AT SE FI SI EE DE NO HU CY UK DK PT LV LU LT NL BE MT Source: IHS and VVA NGA rural coverage:18.1% (mostly through VDSL) Source: European Commission, Digital Agenda Scoreboard 2014 Page 4
5 What is a rural area? Example of a village and its surroundings This is a satellite picture of google maps of a village in Germany. The results presented in this study are not based on this specific case. Street Cabinet Central Office Street Cabinet Street Cabinet In this case two types of households are identified: a) those that are close to the Central Office located in the village (in pink), and b) those that are far away (in yellow) 200 m Page 5
6 Australian NBN Co: Importance of the cost analysis Why 93% with fibre? The cost curve provides the answer Fibre to the premises cost curve The cumulative and marginal cost curve of the fibre access network ranges from 0 to 100% coverage of premises in Australia. It helps to understand where it becomes more dramatically more expensive to service additional premises. The cost curve demonstrates that the incremental cost to connect premises accelerates very sharply after the 93 rd percentile. Source: Australia NBN Implementation Study Page 6
7 Australian NBN Co: Importance of the cost analysis A mix of fibre, wireless and satellite networks Government s coverage objective should be interpreted as ensuring at least 12Mbps peak data rates are available to all premises beyond the fibre footprint. NBN Co should offer a wholesale Ka-band satellite broadband service targeting the final 3% of premises. A fixed wireless service should provide coverage between the 94 th and 97 th percentiles. Cost comparison of alternative technologies in the final 10 percent Source: Australia NBN Implementation Study Page 7
8 Introduction Motivation and Objectives In many cases NGA deployment in urban areas -and for a few suburban areas -can be provided by means of competition. The business case in these areas is rather clear. As of 2014, there is very little deployment of NGA networks in rural areas. Policy makers and operators in Europe are examining different possibilities to provide high-speed fixed broadband services in ruralareas over the next years. This presentation examines the use of different NGA networks in rural areas. A techno-economic analysis of the following networks is provided: FTTC Vectoring FTTdP-Street G.fast FTTdP-Building G.fast FTTH GPON Page 8
9 Content Introduction Network scenarios Costing methodology Results Conclusions Page 9
10 Network architecture FTTC Vectoring This is a reference architecture. No fault management system is considered in this architecture ODF: Optical Distribution Frame OLT: Optical Line Terminal AGS: Aggregation Switch MSAN: Multi-Service Access Node CPE: Customer Premises Equipment CPE In-building Twistedpair Central Office Feeder Street Cabinet Distribution Drop Twistedpair CPE AGS ODF Operator s network Ethernet port GE Fiber MSAN Copper Page 10
11 Network architecture FTTdP-Street G.fast This is a reference architecture. No fault management system is considered in this architecture CPE: Customer Premises Equipment DPU: Distribution Point Unit MDF: Main Distribution Frame ODF: Optical Distribution Frame OLT: Optical Line Terminal RPF: Reverse Power Feeding RPF CPE In-building Copper RPF CPE Central Office Feeder Street Cabinet Distribution Drop Copper Operator s network Ethernet port OLT GPON port ODF Fiber Splitter 1:8 Fiber DPU Cabinet Copper MDF Page 11
12 Network architecture FTTdP-Building G.fast This is a reference architecture. No fault management system is considered in this architecture CPE: Customer Premises Equipment DPU: Distribution Point Unit MDF: Main Distribution Frame ODF: Optical Distribution Frame OLT: Optical Line Terminal RPF: Reverse Power Feeding RPF CPE In-building Copper RPF CPE Central Office Feeder Street Cabinet Distribution Drop Copper Operator s network Ethernet port OLT GPON port ODF Fiber Splitter 1:8 Fiber DPU Cabinet Copper MDF Page 12
13 Network architecture FTTH/GPON This is a reference architecture. No fault management system is considered in this architecture CPE: Customer Premises Equipment ODF: Optical Distribution Frame ONT: Optical Network Terminal OLT: Optical Line Terminal ONT CPE In-building Fiber Central Office Feeder Street Cabinet Distribution Drop Fiber ONT CPE OLT ODF Operator s network Ethernet port GPON port Fiber Splitter 1:8 Fiber Splitter 1:4 Page 13
14 Content Introduction Network scenarios Costing methodology Results Conclusions Page 14
15 Assumptions for the average rural area Item Total number of subscribers per Central Office Average feeder segment length Average distribution segment length Average drop segment length Value 3,000 2,500 m 220 m 26 m Number of households per building 5 Time period for the analysis 15 years These values are not based on the example of a rural area shown in the previous slide. Page 15
16 Type of results presented in the study CAPEX/OPEX? Market Share Effect of churn rate on the number of subscribers? 1) Homes Passed only CAPEX 100% No 2) Homes Connected CAPEX and OPEX 50% Yes CAPEX: Material and installation of equipment (Homes Passed and Homes Connected) Connection works of a new user (Homes connected) OPEX: Maintenance of the equipment (Homes connected) GREENFIELD APPROACH: Feeder and Distribution segments: The ducts in the feeder and distribution segment should be deployed. Page 16
17 Content Introduction Network scenarios Costing methodology Results Conclusions Page 17
18 Set of Results Cost per Home Passed, CAPEX only, 100% market share Cost per Home Connected, CAPEX and OPEX, 50% market share Techno-economic comparison Page 18
19 Rural Area Cost Per Home Passed: CAPEX only, 100% market share Cost Reductions achieved vs. FTTH: FTTdP-Building G.fast: 0% FTTdP-Street G.fast: 13% FTTC-Vectoring: 60% Page 19
20 Cost per Home Connected, CAPEX and OPEX, 50% market share: Time period: 15 years. It includes the effect of the churn rate (10%). Rural area Cost Reductions achieved vs. FTTH: FTTdP-Building G.fast: 1% FTTdP-Street G.fast: 9 % FTTC-Vectoring: 55 % Page 20
21 Rural area Techno economic comparison Network type Theoretical transmission capacity (Cost per home connected, 50% market share) FTTC-Vectoring [100 Mbps] (distance of 250 m) (1,876 ) FTTdP-Street G.fast [ Mbps] (GPON splitting ratio of 32) (3,776 ) FTTdP-Building G.fast [ Mbps] (GPON splitting ratio of 32) (4,143 ) FTTH GPON [ Mbps] (GPON splitting ratio of 32) (4,165 ) Page 21
22 Content Introduction Network scenarios Costing methodology Results Conclusions Page 22
23 Conclusions In rural areas, the cost of FTTC-Vectoring is lower than the cost of the other networks described (FTTH and FTTdP G.fast) The cost of FTTdP G.fast is lower than the cost of FTTH. The question that operators and policy makers will ask is: which broadband capacity should be provided? More rural scenarios will be studied to understand better the technical and cost implications of fixed broadband access networks. Page 23
24 Thank You Copyright 2013 Huawei Technologies Co., Ltd. All Rights Reserved. The information in this document may contain predictive statements including, without limitation, statements regarding the future financial and operating results, future product portfolio, new technology, etc. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied in the predictive statements. Therefore, such information is provided for reference purpose only and constitutes neither an offer nor an acceptance. Huawei may change the information at any time without notice.
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