FTTP Networks: Topology and Competition - OECD.org - … · FTTP Networks: Topology and Competition...

© 2008 Marvin A. Sirbu 1

CarnegieMellon

FTTP Networks: Topology and Competition

Marvin A. SirbuDepartment of Engineering and Public Policy

Carnegie Mellon University

[email protected]://www.andrew.cmu.edu/user/sirbu/


CarnegieMellon Conclusions Up Front

FTTP networks have significant economies of scalefacilities-based competition is unlikely to be

sustainableService-level competition can exist over shared network infrastructure

Sharing possible at different levelsSharing of dark fiber requires attention to fiber layout

There is great variety in the models of sharing which can be found today


CarnegieMellon Outline

Models of Competition in FTTPAlternative FTTP architectures: impact on competitionEconomics of FTTP





CarnegieMellon

Facilities based competition – each competitor builds FTTP network

Central Offices

ServiceProvider A

ServiceProvider B

Home 2

Home 1

Data Link Layer EquipmentATM, Gigabit Ethernet, SONET

Separate Networks

Network 1

Network 2


CarnegieMellon UNE based Competition in FTTP

Dark fiber based – network owner wholesales dark fiberWavelength based – network owner wholesales wavelengths

Central Office

ServiceProvider A

ServiceProvider B

Home 2

Home 1

Data Link Layer EquipmentNetwork


CarnegieMellon

Open Access based competition – network owner wholesales transport capacity

Central Office

ServiceProvider A

ServiceProvider B

Home B

Home A

Common Data LinkLayer Equipment

Network


CarnegieMellon

Sharing Network Infrastructure: Summary

Layer: Shared Infrastructure…

0 Conduit and collocation facilities.

1 (Physical Layer Unbundling)

Dark fiber leasing, or perhaps, Optical Layerunbundling (CWDM or DWDM in PONs)

2 (Data Link Layer Unbundling)

Dark fiber and link-layer electronics at eachend. For example, Ethernet-based VLAN,or ATM-based PVCs.

3 (Network Layer Unbundling)

Basic network service provided. Forexample, IP Layer 3 service over cableusing policy-based routing to multipleISPs





CarnegieMellon Home Run Architecture

Central Office

Equipment

OLT Port

ONU Central Office Infrastructure

Dedicated fiber to each Home

Feeder Loop Distribution

Loop

ONU Optical Network Unit OLT Optical Line Termination

Implications for Competition

Physical layer unbundling possible– wholesaler can sell individual fiber

Also supports open access


CarnegieMellon

Central Office

EquipmentOLT


Shared Feeder fiber


Loop

N

1

Remote Node with Active Electronics Equipment

Active Star Architecture


Physical layer unbundling is difficult

requires competitors to collocate electronics at remote nodeMust provide feeder fibers for each competitor

Logical layer unbundling possible - supports open access


CarnegieMellon Curb side Passive Star Architecture (PON)

Central Office

Equipment OLT


Shared Feeder fiber


Loop

32

1

Curbside Passive Splitter – Combiner

λ

λ

λ

λ

λ

λ


Physical layer unbundling not possible

Logical layer unbundling possible - supports open access

Separate λ’s may be used forData and video


CarnegieMellon WDM PON

λ5

λ3

λ1

λ2

λ4

CentralOffice

EquipmentOLT

ONUCentral Office Infrastructure

Shared Feeder fiber

Feeder LoopDistribution

Loop

32

1

Passive Splitter –Combiner

λ1, λ2, λ3, λ4, λ5 ... λ32


Physical layer unbundling not possible Optical layer unbundling possible –wholesaler can sell wavelengthsAlso supports open access


CarnegieMellon

Design Considerations in a PON: A Curb-side PON

Splitter 1

Splitter 2

Central OfficeOLT Equipment

Central Office Infrastructure

PON1

PON2

Neighborhood 2

Neighborhood 1


Both OLTs needed if only one home in each splitter group subscribes


CarnegieMellon Design Considerations in a PON:

A Fiber Aggregation Point (FAP) PON



Neighborhood 2

Neighborhood 1

Splitter 2

Splitter 1

Aggregation

Fiber Aggregation Point PON supports all models of competition


CarnegieMellon

How many homes should be aggregated at an Optimal FAP?

OFAP allows deferring investment in OLTs until penetration requires it


CarnegieMellon

OFAP as a Real Option to Phase-in New Technologies

GPON CO OLTEquipment


Neighborhood 2

Neighborhood 1

Splitter 1BPON

Splitter 1GPON

BPON CO OLTEquipment

Aggregation•OFAP also supports flexibilityin future split ratios- 10 Gbps GPON, GEPON- WDM PONs


CarnegieMellon

OFAP Benefits withan Active Star Architecture

•Higher utilization of RT and OLT ports•Neighboring homes can be served by different technology generations

Central Office OLT Equipment


Neighborhood 2

Neighborhood 1

Feeder 2

Feeder 1

Central Office OLT Equipment

Aggregation point

RT & OLT tobe deployed as needed

•Larger serving area


CarnegieMellon Sharing in the “Second Mile”

As video becomes dominated by unicast Video on Demand (VOD) metro aggregation network costs soarIn smaller communities, access to regional transport to a Tier 1 ISP is a major barrier to entryRetail service providers sharing an FTTH access network may also need to share at the metro/regional level in order to be economically viable.There is a tradeoff with distributed video servers

Sharing a content delivery network (e.g. Akamai) may be an alternative.

– This requires distributed colo space and interconnection

See Han, S. et al “IPTV Transport Architecture Alternatives and Economic Considerations,” IEEE Comm Mag, Feb 2008Lamb L., forthcoming.NSP, “A Business Case Comparison of Carrier Ethernet Designs for Triple Play Networks,”


CarnegieMellon Regulatory Implications

If regulators want to be able to require dark fiber unbundling, they need to require compatible fiber layout

OFAP PON vs curb-side PONEven larger OFAP for competitive active star

– Need for additional feeder fibersAll architectures support logical layer (“bitstream”) unbundling

IPTV unbundling possible at bitstream layerIf video distributed over a separate wavelength, issues of access to RF multiplex.





CarnegieMellon

Simple FTTH Economics: FTTH Includes Fixed Plus Variable Costs

e.g. for Verizon YE06Fixed=$850Variable=$880

Source: http://investor.verizon.com/news/20060927/20060927.pdf

$

Take Rate(R = customers / homes passed)

100%0%

Fixed costs

Cost = Fixed + R * Variable

Adapted from Friogo, et.al.http://ieeexplore.ieee.org/iel5/35/29269/01321382.pdf


CarnegieMellon Cost Per Subscriber vs Take Rate

0

1000

2000

3000

4000

5000

6000

7000

8000

0% 20% 40% 60% 80% 100%Take Rate

Variable Cost Total Cost/Sub

$1730


CarnegieMellon How Much Revenue to Support FTTH?

One operator estimates $90/month per subscriber$40 for ongoing services cost

$50/month to cover capital costsAssume an average of 10 year lifetime, 5% cost of capital

Fiber lasts 40 yearsElectronics lasts five years

$50/month can amortize $4700What if Average Revenue Per User (ARPU) is less?$30/month can amortize $2800



0

1000

2000

3000

4000

5000

6000

7000

8000

0 0.2 0.4 0.6 0.8 1

Take Rate

Cos

t/Sub

scrib

er

Variable Cost Total Cost/Sub Capital at $50/mo Capital at $30/mo

Percent take rate needed to break even

Capital that can be amortized with $50/mo/sub

Capital at $30/mo/sub

Adapted from Frigo et. al.



0

1000

2000

3000

4000

5000

6000

7000

8000

0 0.2 0.4 0.6 0.8 1

Take Rate

Cos

t/Sub

scrib

er Capital that can be amortized with $50/mo/sub

Adapted from Frigo et. al.

Consumers

Competition

Take Rate


CarnegieMellon Economic Implications:

If revenue available to amortize plant is only $30/month, must reach penetration of > 45%

room for at most 2 facilities-based providersThis analysis understates the problem

No customer acquisition (marketing/sales) cost included– Customer acquisition drives up Fixed costs pushing

breakeven penetration higherUnlikely to see >90% total penetration


CarnegieMellon Regulatory Implications

Facilities-based competition among fiber network providers is unlikely

Economies of scaleRegulators should be cautious of waiving open access requirements in return for investment in fiber

Could lead to remonopolizationAt best duopoly competition

If service competition limited to ISPs which own facilities greatly reduced service level competition

Operators will have Significant Market Power (SMP)Reduced service-level competition raises Network Neutrality issue


CarnegieMellon

Central Offices

Service Provider A

Service Provider B

Home 2

Home 1

Data Link Layer Equipment

Separate Networks

Network 1

Network 2

Net Neutrality

Can third parties compete with vertically Integrated ISPs?

Apps+

Con-tent

Apps+

Con-tent

Apps+

Con-tent


CarnegieMellon Conclusion

What are the different models of competition in FTTP? Facilities basedService level (over shared network infrastructure)

Fiber layout affects options for competitionOFAP supports fiber unbundling even for PONsMore feeder fibers required for competition

FTTP networks have significant economies of scaleUnlikely to support multiple facilities-based providers“Second Mile” sharing also important


CarnegieMellon For Further Information

http://www.andrew.cmu.edu/user/sirbu/pubs/Banerjee_Sirbu.pdfhttp://web.si.umich.edu/tprc/papers/2006/648/Banerjee_Sirbu%20TPRC_2006.pdfhttp://cfp.mit.edu/groups/broadband/muni_bb_pp.html

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