The next-generation access network : transition from copper to fiber optics
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1 GRUPPO TELECOM ITALIA Access network between technology and regulation The next-generation access network : transition from copper to fiber optics L'Aquila January 19th 2011 Gianfranco Ciccarella
2 Index NGAN Drivers Challenges in the deployment process Telecom Italia Approach Final Remarks Telecom Italia
3 Bandwidth demand for Services ADSL Web surfing Video communication HQ SDTV VoD Peer-to-peer, File sharing Video communication HD xdsl evolution 1.y SDTV Live Gaming, Distance learning Web Hosting E-Health Remote Storage Next Generation 3D TV Mobile Backhauling HDTV NGAN Upstream Mbit/s Downstream Gianfranco Ciccarella 3
4 Bandwidth demand for Mobile The backhauling rule : Ultra Ultra-BB mobile services require Ultra-BB fixed network LTE & HSDPA Multicarrier HSDPA MIMO up to 28 Mbps Gigabit Ethernet N G A N Copper access network HSDPA 64 QAM up to 21 Mbps HSDPA up to 14.4 Mbps HSDPA up to 7.2 Mbps HSDPA up to 3.6 Mbps UMTS up to 384 kbps 1-2 E1 4 E1 8 E1 Gianfranco Ciccarella 4
5 3-Zeros Network Telecom Services Third Party Services SERVIZI Ecosystem of Services Service Provider Zero Faults CONSUMER ELECTRONICS MAN NAGED Services Zero CAPEX Overlays of automatic virtualized components Service Enabler General Control and Management (Zero Touch) Access Wireless Wired (Fiber) Zero OPEX IP Platform Optical Platform Aggregation Edge Core Other resources / networks/ terminals Bit Carrier Gianfranco Ciccarella 5 5
6 Traffic / Costs / Revenues Trends 180 Price index (Italy) Voice Dominant Traffic Diverging trend 60 Revenue 1995 Year 2008 FOOD & DRINKS CLOTHES & SHOES FURNITURE TRANSPORTATION SPORT, CULTURE, RECREATION HOTEL & RESTORANTS ALCHOOL & TOBACCO HOUSING HEALTH TELECOMMUNICATION SCHOOL OTHERS Data Dominant Flat Rates Time Gianfranco Ciccarella 6
7 Index NGAN Drivers Challenges in the deployment process Telecom Italia Approach Final Remarks Telecom Italia
8 The Fiber dilemma Fiber access network is the evolutionary path, but Investment and costs Services Regulation Focus on sustainable deployment Gianfranco Ciccarella 8
9 Investment and costs Very huge effort Geographical differentiation Long term investment on Access Network High impact on processes, personnel skills and Systems High cost of In-Building Cabling Investments and costs Services Regulation Gianfranco Ciccarella 9
10 Different costs for different urban area Black Areas High Competition Grey Areas Reduced Competition White Areas No Competition 1300 k HH /U.I. > 1000 /U.I. 450 /U.I. Capex per HH 120k HH. 35 k HH 10 k HH 1 town Urban Density 13 towns 64 towns 138 towns 8100 municipalities Gianfranco Ciccarella 10
11 Services New Ultra BB services Investments and costs Services Regulation Demand Uncertainty Low Delta ARPU expected Huge investments Emulation? Simulation Substitution Very Long term ROI expected Old services Migration Gianfranco Ciccarella 11
12 Regulation Clear regulatory rules are required Services Investments and costs Regulation Infrastructure competition and co-investment Geographical differentiation of obligation and pricing Symmetrical obligation for access to passive infrastructure Telecom Italia Positioning on regulatory aspect is consistent with EC Recommendation on NGAN Gianfranco Ciccarella 12
13 Index NGAN Drivers Challenges in the deployment process Telecom Italia Approach Final Remarks Telecom Italia
14 Copper and fiber will co-exist Broadband evolution Ultra broadband evolution Capacity Capacity NG PON 2 >40 Gbps down/up Up to 40 km Vectoring DSL Quality Management Re-transmission More xdsl efficiency stability GPON 2.5 Gbps down, 1.25 Gbps up Up to 20 Km XG-PON 10 Gbps down, 2.5 Gbps up Up to 40km Year Year Copper: increase performance and robustness Fiber: from 100 Mbps to symmetric Gbps Gianfranco Ciccarella 14
15 Mobile Access: from BB to UBB Mobile Broadband 30 Mps 100 Mps LTE 14 Mps HSPA ev. 7 Mps HSPA 2 MOBILE BROADBAND 3 Mps HSPA 1 MOBILE INTERNET 300 kps 100 kps UMTS MOBILE TV 10 kps EDGE GSM Time Gianfranco Ciccarella 15 15
16 Reference Architecture and Technology VERY DENSE AREAS FTTH Central Office Primary Network Cabinet Secondary Network LESS DENSE AREAS GPON technology Cabinet FTTC Central Office Primary Network Secondary Network Gianfranco Ciccarella 16
17 Black Areas IEEE Italy Chapter Deployment Sustainability High Competition Level Grey Areas Reduced Competition White Areas No Competition Payback Payback vs. Revenue 1300 k HH. 450 /U.I /U.I. > 1000 /U.I. Low density areas Capex per HH 120k HH. 35 k HH 10 k HH 1 town Urban Density 13 towns 64 towns 138 towns 8100 municipalities Medium density areas Traffic Voice Dominant Diverging trend Revenue Data Dominant Flat Rates Time Regulation World Economy High density areas Revenue per user Willingness to pay Service Attractiveness Gianfranco Ciccarella 17
18 Telecom Italia NGAN Deployment Fiber Copper FTTH 0,1 1 Gb DOWN 0,1 1 Gbps UP 13 town Startdeploymentin13townsbythe2012: FTTC Mb DOWN 5 20 Mbps UP VDSL2 125 town Startdeploymentin125townsbythe2018: ADSL FTTE 3 20 Mb DOWN 0,2 1 Mbps UP municipalities EndofDigitalDivide UBBMobilesolutions Gianfranco Ciccarella 18
19 P2P vs GPON GPON Central Office P2P vs GPON P2P users 200 fibers 200 fibers T-ODF Central Office Splitter CAPEX Increase (Passive Infrastructure only) in the range +35%- 55% users fibers fibers Users Space requirements: ~34x of GPON MWh: ~ 16x of GPON X-ODF CAPEX Increase (Passive Infrastructure and Equip.) in the range % Gianfranco Ciccarella 19
20 Home Networking More than one new Home Component Indoor installation sometimes not so easy Old Installation Bedroom Rj Kitchen Pc Presa RJ Office HN STB Tv Presa RJ NTR NTRi Presa RJ Pc AG ONT ONT AG Living Room Bedroom Bath room Rj Optical Fiber HN is a very complicated issue to solve for broadband customers and a real challenge to solve for narrowband customers. Gianfranco Ciccarella 20
21 Index NGAN Drivers Challenges in the deployment process Telecom Italia Approach Final Remarks Telecom Italia
22 CAPEX intensity vs. revenue growth 20% 16% 12% 8% 4% Revenues Growth CAGR Onliine Services Revenue growth remains modest due to competition/regulation mix Connectivity For connectivity CAPEX intensity remains high driven by usage growth but revenues is stable due to severe price competition and high levels of penetration Online Services are expected to see high revenue growth driven by video contents. 0% 0% 2% 4% 6% 8% 30% 32% 34% 36% 2009 Capex / Revenues Bloomberg; A.T. Kearney and TI analysis Gianfranco Ciccarella 22
23 Focus on sustainable deployment Investments and costs For each SERVICE Services Regulation Seamless Availability Peak bit/rate Average bit/rate Customer the right Customer Customer End-User Content Brand Provider Advertiser Quality the right Quality Security Error Rate Latency Backwards Compatibility OTT Provider a possibility Price the right Price Two-sided Market Models Needs Regulation Competition Evolution Gianfranco Ciccarella 23
24 Internet Access Business Model: a two-sided market A right balance for the sustainability The Quality Must OTT Service Provider Є NETWORK PROVIDER Є END-USER Є ADV... Fourth Party Huge Costs Developer Content Source Є Gianfranco Ciccarella 24
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