Seeing Optical with Clarity An Overview of Broadband Economics

Transcription

1 Seeing Optical with Clarity An Overview of Broadband Economics Steven Glapa VP of Marketing & Product Management Digital City Expo, January 23, 2008

2 The Cobbler s Children US Broadband Penetration Rank Average Broadband Subscriber s Data Rate, Mbps subscribers/hh Korea, with 0.9 subs/hh Japan Korea Finland Sweden France Netherlands Portugal Canada Poland Norway Austria Belgium Iceland Germany United States Denmark Italy Luxembourg United Kingdom Switzerland New Zealand Top 25 Average: Ireland Australia Czech Republic Spain Source: OECD, April 2007 PROPRIETARY & CONFIDENTIAL 2

3 It s a big country, part one Average Broadband Data Rate v. Urban Population Density Cities over 500k pops 100Mbps Japan Korea R² = Canada Western Europe (Average) United States New Zealand Australia UK 1 0 2,000 4,000 6,000 8,000 10,000 pops/km² Source: OECD, April 2007; Demographia. PROPRIETARY & CONFIDENTIAL 3

4 Part two: It s getting harder in the middle PROPRIETARY & CONFIDENTIAL 4

5 Part three: Partial solutions 9 million homes and businesses passed today 3 million more each year through 2010 That s 20%. Source: Verizon. PROPRIETARY & CONFIDENTIAL 5

6 Clarity Access (a.k.a. the last mile) can be confusing Some contributions to reduce confusion Demand and the future Wireline technology Wireless technology Another time: Content, IPTV, VoIP, backbone, ISP partnerships for full or wholesale operator model

7 Zhone Access for a Converging World Founded in 1999 ZHNE on NASDAQ since 2003 $175m annual revenues, 50% outside US Strategic focus on integrated multi-service access solutions EFM, GPON, Wireless, xdsl, Active Ethernet CO and Customer Prem Silicon Valley R&D for innovation and responsiveness Made in USA for quality (Florida manufacturing) 450 employees Sales & support offices worldwide PROPRIETARY & CONFIDENTIAL 7

8 600 Customers and Counting Global Customer Base: NLECs, IOCs, CLECs, PTTs & MSOs Asia Europe Middle East & Africa Canada USA Caribbean & Latin America PROPRIETARY & CONFIDENTIAL 8

9 Confusion about realistic solutions is all too easy Market Deployment Link Budgets, Capacity and Range Customer Behavior by Segment Financial and Operating Parameters geographic size pop density pops / HH ratio residential broadband penetration total candidate SMEs in market PC penetration laptop share of PC installed base mobile phone penetration morphology mix sectors/cell spectrum available spectrum re-use configuration (intra- and intercell) antennas/sector spectrum operating point capacity reserve planned coverage for fixed service over time planned coverage for mobile service over time backhaul approach baseline hardware link budget adjustments for technology service definition (data rate, cell edge coverage target) sector antenna incremental gain over omni smart antenna gains laptop built-in antenna gain laptop adjustment for celledge data rate desktop built-in antenna gain desktop + window-mount antenna gain desktop + prof l-install antenna gain wall loss composite fading margin ranges by configuration and morphology isolated cell spectral efficiency interference-limited cell spectral efficiency usage per average subscriber in busy hour by service segment and year, over time aggregate consumption as function of busy-hour usage retail ARPU by segment, over time subscriber device price (paid by subscriber), over time subscriber adoption modem type mix over time site acquisition/installation cost 1x site cost per antenna site op & maint cost site wired backhaul recurring cost base station cost / sector modem costs (desktop, laptop, handset) indoor antenna + cable cost outdoor antenna + cable cost outdoor antenna installation cost NOC initial setup NOC cost per data subscriber unit of capacity NOC cost per line of VoIP capacity backbone connectivity per sub tech support (wholesale, retail) NOC opex, all else retail opex, all else (mbx, web space, etc.) subscriber acquisition expense service wholesale price by category wholesaler share of subscriber modem expense subscriber churn corporate overhead network amortization period spectrum unit cost spectrum depreciation period PROPRIETARY & CONFIDENTIAL 9

10 Subscriber demand for bandwidth follows a trend Per-Subscriber Data Rate v. Time bps 100 G 10 G WDM 1 G 100 M 10 M 1 M 100 k 10 k 1 k 100 R² = 0.97 Multiple HD streams HD VOD P2P UGC Gaming Telepresence IP transition Ubiquity FMC Active E, WDM-PON DOCSIS 3.0 VDSL2, GPON ADSL2+, EFM over Cu WiMAX, WiFi 3/3.5G (EV-DO, HSPA) Source: Jakob Nielsen. PROPRIETARY & CONFIDENTIAL 10

11 ARPU v. bandwidth: Pipe economics are critical Willingness to Pay per Unit of Capacity Consumed US$/MB $1 cellular voice wireline voice satellite data cellular data wired broadband on-demand HD satellite TV digital cable TV Sources: US commercial network offers circa January, 2008; Zhone analysis. PROPRIETARY & CONFIDENTIAL 11

12 Clarity Access can be confusing Some contributions to help Demand and the future Wireline technology Wireless technology

13 The current copper crop Rate/Reach for Current Cu-based Broadband Access Technologies VDSL2 2 bonded pairs 200 Mbps VDSL2 ADSL2+ (2 pr) EFM (8 pr) ADSL2+ EFM (1 pr) miles Sources: DSL Forum; Zhone testing. PROPRIETARY & CONFIDENTIAL 13

14 Adding fiber Rate/Reach for Fiber-based Broadband Access Technologies Active Ethernet (Dedicated fiber) 1,000 Mbps VDSL2 2 bonded pairs VDSL2 ADSL2+ (2 pr) EFM (8 pr) ADSL2+ EFM (1 pr) 0 2 GPON (2.5 G split 32 ways) miles Sources: DSL Forum; Zhone testing. PROPRIETARY & CONFIDENTIAL 14

15 Four fiber access scenarios to assess PROPRIETARY & CONFIDENTIAL 15

16 The model capex opex customer prem central office opex per sub per month CPE fiber termination per sub OSP maintenance per sub-month installation subs per terminated fiber OSP maintenance per sub, annual hours cost per fiber termination hours/year per premise cost per hour splitters per terminated fiber hours/year per handhole or splice drop cable fibers per patch panel rack hours/year per cabinet length in m, average patch panel rack hours/year per DSLAM cable cost per m installation cost per fiber hours/year per cable km install cost per m hours per fiber cost per hour splice or connector cost per hour CO operation per sub-month handhole + splitter cost per sub connectorized jumper people costs per sub-month subs per handhole aggregation per sub people costs per sub per year splitter subs per port subs per head handhole unit cost aggregation per port CO operation hours per head installation chassis cost per port cost per hour hours each chassis facilities costs per sub-month cost per hour uplink % of 1 rack per sub (term + agg) node cost per sub slots per chassis cost per rack per month subs per node card cost per port backbone connectivity per sub-month handholes per node card itself busy-hour bandwidth per sub, kbps hardware and install total ports per card backbone cost per Mbps distribution cable (to handholes) SFP per port depreciation expense per sub-month length in m, average backbone connectivity per sub network amortization timeline, years cable cost per m subs per backbone port (1 agg shelf) install cost per m backbone router cost per port cabinet (or handhole), outfitted electronics installation + turn-up per sub VDSL2 DSLAM hours per shelf AE ONT (or uplink for DSLAM) cost per hour splitter splices or connectors quantity price each survey / site engineering costs installation "tax" rate on total hours cost per hour feeder fiber cost per sub splice/connector total fiber cost fiber length, m cable cost per m install cost per m PROPRIETARY & CONFIDENTIAL 16

17 FTTx Cost Comparison Capex per Subscriber, $ Opex per Subscriber-Month, $ CO OSP Depreciation CO Ops OSP Maint. GPON, Field Split 143 1,776 Total: 1,920 Total: GPON, CO Split 233 1,798 2, WDM-PON, CO Split* 327 2,593 2, Active Ethernet FTTP 651 1,798 2, AE FTTN + VDSL2 27 1,121 1, *Rough estimates! Sources: various industry/customer benchmarks; Zhone analysis. PROPRIETARY & CONFIDENTIAL 17

18 FTTx Costs v. Data Rate Capex per Subscriber, $/Mbps Opex per Subscriber-Month, $/Mbps GPON, Field Split GPON, CO Split WDM-PON, CO Split* Active Ethernet FTTP AE FTTN + VDSL *Rough estimates! Sources: various industry/customer benchmarks; Zhone analysis. PROPRIETARY & CONFIDENTIAL 18

19 The right wireline access It all depends... Investment time horizon Service definition Customer segment needs Asset initial conditions Choosing Equipment flexibility, versatility for network evolution and heterogeneity Do the math, with some good help PROPRIETARY & CONFIDENTIAL 19

20 Clarity Access can be confusing Some contributions to help Demand and the future Wireline technology Wireless technology

21 Wireless reality check Wireless System Spectral Efficiency and Range PROPRIETARY & CONFIDENTIAL 21

22 It pays to inspect capacity claims carefully Lies, Damned Lies, and Spectral Efficiency The starting point: a figure relevant to operator economics, i.e. field-proven aggregate net user throughput per sector in a multi-cell, fully-loaded (interferencelimited) network From there, an enterprising vendor can... Measure a single sector in isolation Include system bits and airlink overhead Measure with only one user active in the sector Exclude one half of an FDD (paired) allocation Exclude guard bands within the allocation Count only higher-efficiency downlink, not aggregate throughput Measure with subscriber device at zero base station range Measure with a subscriber device antenna configuration and/or power consumption impractical for operator s business model Discuss lab measurements that cannot be replicated in field conditions Highlight underlying chip or symbol rates that sound good but have a loose connection to user data bit rates Allow marketing to improvise, since no hardware needs to back up the claim yet Overstatement Seen in Practice 2 4x 30 40% 30 40% 2x 20% 30 40% 30 40% >50% 20 30% 2x very large PROPRIETARY & CONFIDENTIAL 22

23 Spectrum is a big challenge in the US Wireless network range and coverage cost as a function of operating frequency 15 Rural Range 10 Cell radius, km (left axis) Benchmark wireless network cost, US$k per km² (right axis) Weighted average cost Suburban Urban 0 Operating frequency, MHz 500 1,500 1,000 2,500 2,000 3,500 3,000 4,500 4,000 5, Most attractive frequencies already in use for mobile voice, public safety, paging, etc. PROPRIETARY & CONFIDENTIAL 23

24 An interesting tool for municipal applications Capex per Site Capex per Mbps Capex per km² Mobile WiMAX (802.16e) Zhone Wi-Fi $80k $1, $80k PROPRIETARY & CONFIDENTIAL 24

25 Wide-area Wi-Fi Applications Fully isolated Public and City Government networks Secure Video Server location (Telco Central Office) Centralized battery backup Public IP Network IP Digital Video Recorder City Gov t IP Network Head End Indoor repeater unit 100% remotely powered high definition cameras & Wi-Fi Access Points PROPRIETARY & CONFIDENTIAL 25

26 Zhone-enabled Video Surveillance CCTV resolution is 640 x 480, using analog cameras Pan-Tilt-Zoom cameras enable close-up shots, but operator must adjust PTZ in real time to capture the targeted field of view In this city, the same CCTV staff that are used to actively monitor in-building cameras (in the courthouse, city buildings, etc.) are also monitoring the external surveillance cameras PROPRIETARY & CONFIDENTIAL 26

27 In Sum Access technology holds great promise for economic development and service innovation There are many choices, best made carefully The better solutions provide flexibility, support evolution We and our partners are here to help PROPRIETARY & CONFIDENTIAL 27

28 Thank You For more info, come see us in booth 36/37