Date 27/03/2013 1

Searching for the £100k VDSL2 Cabinet

And £Million(s) investment per exchange.

As per Openreach statement on rural Next Generation Access costs on Strike Up Broadband BBC Radio 4 – Dec 13th/16th 2012.

Mike KielyThe Bit Commons

mkiely@thebitcomms.com

Date 27/03/2013 2

Scope, Purpose and Intent

• Seeking to provide communities and Local Authority NGA roll out managers details on the incremental costs of an FTTC rollout from publicly sourced data, costs derived from first principles and contributions from NGA suppliers .

• Encourage more openness and transparency on FTTC costs so UK public investment of c£1.4bn for rural areas can bring NGA services deep into the last 10% of premises.

• Seek peer review and encourage others to develop independently sourced costs, and contribute detail to assist state aid auditors.

• Put a body of evidence in a public space which can be added too and developed by those benchmarking costs and auditing state aid payments.

• The Numbers are not by their nature definitive, and exclude exceptional build costs for power, re-arranging copper and new duct. They are a guide only and are set out so they can be used and improved.

• This presentation is not saying there are not unique instances where £100k would be spent on a Cabinet/path, but they look to be the exception rather than the norm. Evidence may emerge to prove this assertion incorrect, at which time I will be happy to correct.

• Above all this is part of on-going plea for transparency in costs, so those with a passion for connectivity, can lobby for Government policy changes supporting additional investment in fibre transition activity. To lobby effectively, the rural programme must visibly deliver value for money. This is less than clear from the publicly available data as of March 2013 .

• It is appreciated that BT will have wholesale obligations to Fujitsu on the BDUK Framework so has some need to be cautious on these matters.

Mike Kiely, Founder, The Bit Commons, March 2013.mkiely@thebitcommons.com

Date 27/03/2013 3

Incremental Costs VersusModels based on Forward Looking Economic Costs

This analysis sticks to incremental costs for;1. Simplicity2. State aid is dependent on calculations based on incremental capital.3. BT offer of ‘up to £1bn’ to match the rural investment for the final third does not appear to

be a contractual offer. If it was you could minus c£125 (£1bn/8m premises) per premise past in a forward looking economic cost model to calculate the additional aid needed. This analysis while confidential could be viewed in the same manner US communities can engage with the Connect America Cost Model – (CQBAT for the Broadband element), managed by the FCC, where the contribution of the access companies is part of the aid calculation.

4. In the UK the contractual announcements the question must be asked to who is gap funding whom? Without BT’s contractual commitment to invest it looks like BT is gap funding the government.

5. If it is the Governments model being gap funded, then there is no particular reason for it not to be published and open to public scrutiny and value for money assessments.

Date 27/03/2013 4

The components under Reviewsource: BT presentation – no copyright.

Date 27/03/2013 5

GEA - FTTC architecture

-Source BT presentation – no copyright

Voice and Legacy services supplied from the exchange.

Broadband product provided as GEA over FTTCab

D-Side Copper

Head EndHOCP1

CPn

Direct fibre

Hand-Over Node

Multiple GigE links

VDSL2 modem

End User Premises

GEA Data PortNTE 5 & SSFP

Baseband Voice & Legacy Services

Existing Copper E-side Network from DLE

240Vac

PCPVDSL2DSLAM

GEA Product

Date 27/03/2013 6

Added : BT has a slick process and efficient

Supply chain.

Commercial roll out – 18 months ahead

Comfortably under the £2.5bn budget.

Network Engineering Journey (NEJ)

- a key enabler for NGA Plan & BuildBenefit examples:• Planning efficiency

• Strategic and Detailed• Planning process benefits• Better Quality FTTC & FTTP network

plans• Engineering support e.g.

reduced time for Line Loss calculations

• Reduced network costs• Better cost estimates and

reduced recording costs

• Improved support to targeted marketing

• Trouble-To-Resolve (T2R) benefit enablers

Source BT Slide –no copyright marking

Date 27/03/2013 7

Cabinet arrivalHuawei Smart AxM56xx

ECI Hi-FOCuS 5

Date 27/03/2013 8

The PlynthQuotes ranging from £400 - £1200

Diary of FTTC installation – points to combined three hours work

The cabinet was installed in 1 hour 9 minutes using Polybase Polylid has now been approved by Openreach for use on its network and is currently being installed nationally on the NGA, (Next Generation Access), programme – providing faster broadband across the UK.

Date 27/03/2013 9

The Cabinet

Xx48 Port cards - 1 port per connected customer(Ikanos or Broadcom (?)chip sets - VDSL)MSAN –electronics and 1Gbps (could be 10Gbps) connectivity back to handover point.IDC-Blocks to terminate copper.Fibre TerminationBatteryPower SupplyChassis with GPS locator

In gathering data from VDSL suppliers and small operators, Calix/Zhone/Keymile/ECI/Huawei/Zylex

Low volume estimate £12k-£16kHigh Volume estimate <£8k based on compilation of quotes for 600 units.Nation provider could negotiate <£6k

Date 27/03/2013 10

Power

• Biggest variable, cost £300 (EON) to £3,000k but typically seeing £800.

• Exceptions at £25k cab be managed on that basis.

Date 27/03/2013 11

The Handover Point• c12-14 in county of 100 exchanges.• Up to c25Km from cabinets • In typical rural rollout estimated 45 cabinets glassing through native exchange

through to handover point.• Racking for fibre distribution to/from Metro nodes and to/from VDSL2 Street

Cabinets.• Layer 2 Ethernet Switches for layer 2 capability to VDSL cabs and routing back to

Metro node.• Optical Line termination (OLT) and WDM capability assumed to be at Metro node.

Date 27/03/2013 12

Handover Point – common costs Status: for peer review

• Derived from EAD pricing /SLU pricing.

SLU Costs in Rural areas average over c30 contractual quotes.

Slu Providers using BT

Wholesale prices for single

Layer 2 HO service

Estimated incremental BT Layer 2 costs to support 45 cabs

Estimated BT incremental cost per

VDSL Cabinet for illustrative purposes

Handover Costs

Capital (L2 , OLT ,routing and racking) £7,732 £20,876 £463.92

Connection Set UP £1,586.00 £4,282 £95.16

Enabling connectivity to Metro Node, includes some ECCs. £2,500.00 £6,750 £150.00

Sub Total £11,818 £31,909 £709

• Assistance needed in reconciling to the £million(s) costs per exchange.

Date 27/03/2013 13

Handover Point to VDSL Cabinet quantities

HO PointExchange VDSL x9

Exchange x4

VDSL Cabs x9

BT Metro Node

Avge 2.3Km/1.2km

Avge 2.3/1.2Km

Up to c20km fibre path

BT 21CN Exists

Significant numbers existFrom commercial roll out.

Glassing Through Local exchanges.

10 Hopa + 450 cabinets

780km Fibre paths

Ratios average out so estimates are possible

In most cases fibre exists

In many cases fibre path exists

Date 27/03/2013 14

Openreach fibre network (Wales)source: BT Wales slide deck – no copyright marking.

Date 27/03/2013 15

Connectivity to VDSL Cabinet/PCPHOP Exchange

PCP

VDSL

Handover to VDSL Cabinet/PCP SLU Provider Est. for BT Incremental

Connectivity provision £1,950.00 £585.00

Extra construction charges £3,277.00 £983.10

PCP to Cab - connections £3,120.00 £936.00

Sub total £8,347.00 £2,504.10

• These estimates would include an allowance for duct repair, but not new duct.• PCP re-shelling included where needed but not copper re-arrangement for new PCP• No aluminium replacement costs included.

• BT NI reported about £4k worth of labour for each cab installed, this included all planning and sales time. (120k hours applied cost to 1100 cabinets)• Cable/fibre and laying in existing duct has been reported at £1.20m at £1,500 percabinet installed. This includes BT ‘up to’ investment.

Derived using SLU costs

Other checks

Date 27/03/2013 16

What should the benchmark subsidy be for single Cabinet Fibre path? Subject to Peer Review.

SLU Costs in Rural Areas anomyised over c50 contractual quotes.

Slu Providers using BT

Wholesale prices for single Layer 2

HO service

Estimated incremental BT Layer 2 costs to support 45 cabs

Estimated BT incremental cost per VDSL Cabinet for

illustrative purposes

Handover Costs

Capital (L2 and racking) £7,732 £20,876 £463.92

Connection Set UP £1,586.00 £4,282 £95.16

Enabling connectivity to Metro Node, includes some ECCs. £2,500.00 £6,750 £150.00

Sub Total £11,818 £31,909 £709Handover to VDSL Cabinet/PCP SLU Provider Est. for BT IncrementalConnectivity provision £1,950.00 £585.00Extra construction charges £3,277.00 £983.10PCP to Cab - connections £3,120.00 £936.00Sub total £8,347.00 £2,504.10CabinetPlanning £350.00 £350.00Plynth £1,200.00 £400.00Power £1,000.00 £1,000.00

DSLAM/Chassis/battery £12,000.00 £5,320.00

Total cost for SLU Operator £34,715.00

Estimated Incremental Cost per cabinet and path for BT

£10,283.18

BT Management fee 20% £2,056.64Total cost £12,339.82

BT investment per home connected Y1+Y2 £100.00 £2,000.00

Example subsidy payable to BT per path and Cabinet install £10,339.82

Subsidy paid if 100 customers attached to PCP £103.40Subsidy paid if 200 customers attached to PCP £51.70

Date 27/03/2013 17

Conclusion for peer review!

• For reaching 90%-95% it is difficult to reconcile the idea of a £100k VDSL path/cab with itemised incremental costs. Excluding exceptional costs point to < £15k of incremental costs which includes a contribution to establishing Handover Point costs, and completing duct repairs and linking to PCP cabinets.

• Most rural exchanges will be glassed through on route to handover point, little marginal costs, although very small exchanges will need access lines re-arranged for VDSL install.

• Where substantial costs emerge then comparison with Fixed Wireless access would be conducted on a case by case example.

• If verified, then this should leave LA substantial headroom to begin FTTP transition work, helping to reduce the long term costs of the access network.

• End.