fftx learnings from west european and emerging

8/6/2019 FFTx Learnings From West European and Emerging

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Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications

COST IS0605 Econ@TelCOST IS0605 Econ@TelUniversity of Athens

FFTx:Learnings fromWestEuropeanandEmergingMarkets

Dr.DimitrisKatsianisTheodorosRokkas,Vagia Kyriakidou,Aris Chipouras,ThomasKamalakis,

Dimitris

Varoutas

and

Thomas

Sphicopoulos

DepartmentofInformaticsandTelecommunications,

UniversityofAthens,Greece

PresentedatCostISO605Econ@Tel

Seville24April2008


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Abstract

In this presentation, a techno-economic evaluation of thebusiness prospects of a wide scale deployment of FTTx as a last-mile solution is carried out. The evaluation is based on a Techno-

Economic (TE) tool which, taking into account network topology,area characteristics, service demand and price evolutionforecasting estimates key economic figure-of-merits.

Part A. The analyzed scenarios (Fiber-to-the-Home/Office or

Fiber-to-the-Cabinet) for the European market is driven fromseveral parameters and have less favorable business prospectswhere the duct availability is limited.

Part B. In addition technical, business and economic aspects ofthe case Greece will be presented concerning the development of

the municipal networks in order to arise some issues about theFTTH future development in emerging markets.


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Themotivationfor

technoeconomicevaluation

Market

StrategyTechnology

DemandWillingness to pay

User behaviour

Where?

When?How?

Technology variety

Open provisioningService integration


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ECOSYS/TONICTool Methodology

Volume Class

OA&M Class

Cost Evolution

ComponentsDatabase

Operators

Suppliers

Standardization

body

Other

Market

Size

Tariffs

Policy

User inputs

Operators

Surveys

Decision

Index

calculation(NPV, IRR,

Payback period)

Decision

Index


Payback period)

Fin

ancialM

odel

Revenues

Cash Flows

Profits

Investments

Year nYear n

Revenues

Cash Flows

Profits

Investments

. . .. . .

Revenues

Cash Flows

Profits

Investments

Year 2Year 2

Revenues

Cash Flows

Profits

Investments

Year 1Year 1

Geometrical Model

Architectures

ServicesServices


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ECOSYS/TONICTool Methodology

Volume Class

OA&M Class

Cost Evolution

ComponentsDatabase

Operators

Suppliers

Standardization

body

Other

Market

Size

Tariffs

Policy

User inputs

Operators

Surveys

Decision

Index


Payback period)

Decision

Index


Payback period)

Fin

ancialM

odel

Revenues

Cash Flows

Profits

Investments

Year nYear n

Revenues

Cash Flows

Profits

Investments

. . .. . .

Revenues

Cash Flows

Profits

Investments

Year 2Year 2

Revenues

Cash Flows

Profits

Investments

Year 1Year 1

Geometrical Model

Architectures

ServicesServices

Competition

Model

Real Options


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StepsinNetworkEvaluation

Definition of service basket

Network scenariosFirst Simulations Main Financial

results

Sensitivity and Risk AnalysisEvaluation Recommendation and

Guidelines


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TheTool

Based on Office 2003 platform Excel & Access

Automatic sensitivity analysis Compatibility with Risk

Analysis Tool(s)


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Thetool&itsdatabase


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MainFinancialResults

Net Present Value, NPV

Internal Rate of Return, IRR

Payback Period Financial indicators

Investments

Running Costs

Revenues Cash Flows

Depreciation

Profits

Taxes Retained Cash Flows

Cash Balance

Rest Value


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0,68 0,74 0,80 0,86 0,92

Component Price

Service Penetration

1,09 1,54 2,00 2,46 2,91

Revenue per customer

0,55 0,78 1,00 1,23 1,45

Frequency Chart

kE

,000

,007

,013

,020

,027

0

67,25

134,5

201,7

269

-3000 -1000 1000 3000 5000

10 000 Trials 52 OutliersNPV

Probabilit

yFrequency

Statistical Variation of theinput parameters

Using Monte Carlo Simulation

Results: probabilitydistribution, risk profile of thebusiness case

Extended basis for investmentdecisions

RiskAnalysis


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RiskAnalysis NPV

Frequency Chart

Certainty is 82,10% from 0 to +Infinity

,000

,010

,019

,029

,038

0

9,5

19

28,5

38

-317.277.492 -86.334.971 144.607.551 375.550.072 606.492.594

1.000 Trials 988 Displayed

Forecast: NPV


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RequirementsforTEstudyBP

Services Scenarios Dimensioning

Commercial Network Architectures . For these services

Database Serving areas

T-E Model Constructions

Study period (5 years?)

Potential market Market Shares (e.g operator)

Pricing

RunsRuns-- ResultsResults

Sensitivity and Risk AnalysisSensitivity and Risk Analysis Evaluation of the resultsEvaluation of the results Recommendation andRecommendation and

GuidelinesGuidelines -- CCommercialommercial viabilityviability


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ExampleModelsforEuropeanCases

a) FTTx and duct availability

b) Application to TDM-PON and

WDM-PON Access Networks


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TheworldofOptics

OpticaltechnologiescurrentlyallowthetransmissionofTb/sbitratesusingWavelengthDivisionMultiplexing(WDM)onthemetropolitanareandcorenetwork.

However,thereisyetnotechnologyofchoiceintheaccessnetworkcapableofdeliveringGb/s accessatanaffordableprice(Thisisthelastmileproblem).

Installingfiberuptothecustomerpremiseshasquestionablebusinessprospects:Fiberinstallationmaycostasmuchas80,000/Km(!)

ADSLandRFtechnologieseventuallyrunoutofbandwidth


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Canweputfibereverywhere(FTTH/O)?

`

Customer Floor Building CabinetBranching

Box #2

Local

Exchange

(LEx)

Branching

Box #1Central

Exchange

(CEx)

1:11:41:81:81:4

1:161:4

1143225610241638465536

Passive Optical Network (PON)

200m 1200m 5200m

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

-350

-300

-250

-200

-150

-100

-50

0

FTTH NPV vs Duct Availibility

NPVM

Duct Availability

DenseUrban

Urban

Suburban


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Canweputfibernearlyeverywhere(FTTC)?

`

Customer Floor Building CabinetBranching

Box #2

Local

Exchange

(LEx)

Branching

Box #1Central

Exchange

(CEx)

1:11:41:81:81:4

1:161:4

1143225610241638465536

Passive Optical Network (PON)

200m 1200m 5200m

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

-60

-40

-20

0

20

40

NPVM

Duct Availability

DenseUrban

Urban

Suburban

FTTC NPV vs Duct Availability


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Whydoweevenbother?

Installingopticalfibersinvolvesdigginguptrenchesandhencecostlycivilworks!Theprospectsoftheinvestmentlargelydependontheductavailability(da).InlargeWesternEuropeancountriestheductavailability

is70%sotheprospectsofFTTCarequitegoodindenseurbanareasFTTH/OandFTTCprospectsseverelydegradeastheductavailabilitydecreases!


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UpClose:FiberuptotheCabinet

2006 2007 2008 2009 2010 2011 2012 2013

-15

-10

-5

0

5

10

15

(M)

Revenues

Running Costs

Investments (Fiber)

Investments (Other)Cash Flows

Cumulative Cash Flows

Cost Breakdown

0, M

5, M

10, M

15, M

20, M

25, M

30, M

35, M

40, M

FTTC

Cabling

Digging & Ducting

Inhouse Infrastructure

CPE EquipmentCabinet Equipment

LEx Equipment

CEx Equipment


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Conclusions(a)

FTTC and FTTH/O are undermined

when the duct availability isreduced!

Other solutions could beinvestigated (next session)

Public authorities could increase

the duct availability


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TDMvs PONcases Architectures


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ServicesClassesandTrafficAssumptions

10GbE0.21501500Gold Business

GbE0.21001000Silver Business

GbE0.0550500Basic Business

GbE

0.0530300Gold Residential

FastE / GbE0.0510100Silver Residential

Example InterfaceCtUmax

(Mb/s)

Dmax

(Mb/s)

Area


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2007 2008 2009 2010 2011 2012 2013 2014

-20

-18

-16

-14

-12

-10

-8

NPV

M

Year of first installation

TDM PON

WDM PON

NPVoftheTDM/PONandWDM/PONsolution

depending

on

the

initial

year

of

installation


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SensitivityanalysisoftheNPVoftheTDM/PONandWDM/PONwithrespecttotheinitialpriceofthe

optolectronic components

50% 60% 70% 80% 90% 100%110%120%130%140%150%-26

-24

-22

-20

-18

-16

-14

-12

-10

NPVM

PON Components Price

TDM PON

WDM PON


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SensitivityanalysisontheNPVoftheTDM/PONand

WDM/PON

with

respect

to

O&A

costs

50% 60% 70% 80% 90%100%110%120%130%140%150%-180

-160

-140

-120

-100-80

-60

-40

-20

0

20

NPV

M

OA costs

TDM PON

WDM PON

U i it f Ath


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ImpactofTariffReductionsintheNPVofthe

WDM/PON

and

TDM/PON

solutions.

50% 60% 70% 80% 90% 100%

-45

-40

-35

-30

-25

-20

-15

-10 WDM/PONTDM/PON

NPV

Rate Reduction

University of Athens


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Conclusions(b)

TDM/PON and WDM/PON are

attractive especially for maturemarkets

WDM/PON Technology is crucial

affected by the price of theoptoelectronic components

WDM could be the driver for

Europe (for high demand regions)


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Municipalities NetworksMunicipalities Networks

In Greece

University of Athens


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.

.

Metropolitan Area

Networks (MANs)

Municipalities

Source: www.infosoc.gr

Information Society

lUniversity of Athens


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MANs Details

Constriction of MANs in 75 Cities (12 main regions)

Total Budget > 62 M

750 Km 2800 points of Public Interest

Current Citation (Nov 2007)Current Citation (Nov 2007)

7722 RFP have been assignedRFP have been assigned

60 municipalities have a contract60 municipalities have a contract

More than 30 municipalities have ongoing constructionMore than 30 municipalities have ongoing construction

projectsprojects

COST IS0605 E @T lUniversity of Athens


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COST IS0605 Econ@TelCOST IS0605 Econ@Tely

MainAdditionalActions

Wireless Networks to the rest of the

public interest points (smallestMunicipalities)

Broadband (mainly xDSL) access to the

90% (geographical coverage) of Greece( 210 M) including 3500 KM of opticalNetwork

COST IS0605 E @T lCOST IS0605 Econ@TelUniversity of Athens


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COST IS0605 Econ@TelCOST IS0605 Econ@Tel

LayersinanOpticalNetwork

Services and ContentProviders

Operation Active

Infrastructure

Owner -Passive (Dark

Fiber)

COST IS0605 E @T lCOST IS0605 Econ@TelUniversity of Athens


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Service & Content ProvidersService & Content Providers

Active Net BActive Net B

Maintenance and Administration of Access

Active Net AActive Net A

Routers, Switches, Access Points

Physical I nfrastructurePhysical I nfrastructure

Buildings etc.



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KeyPointsforOperations

Concrete Business Plan for all

players involved



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BPlans proposed

Municipality Private

Public

Private

Partnership

(PPP)

Neutral Operator

ProposedModelsNetwork

LayersS1 S2 S3 S4

Content&Services

Administration

( Access&

Maintenance

)Active

Passive

Network

Network



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QualitativeEvaluation

20+, 3-

+

+++

+++

+++

+++

--

+++

+

-

+++

Public

Ownership-

Outsource

Administration

(S1)

16+, 3-20+, 2-13+, 4-TOTAL

++++++++Break-through

Participation

+++++Functionality

++++++Competition

+++++Expected

Performance

+++++Time

Scaling

-----Risk & Required

Investments

+++++++

Total

Value of

Networks

++++++++Transparency

----Complexity

+++++Easy Decision

Making

PPP in

Infra

Structure (S4)

Private

initiative in

Active Layer (S3)

PPP in

Active

Layer (S2)



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TechnoeconomicResults

Cash Flows

-4.000.000

-3.500.000

-3.000.000

-2.500.000

-2.000.000

-1.500.000

-1.000.000

-500.000

0

Euro

Cash Flows MAN (individual) -1.089.783 -2.487.641 -3.591.035 -3.679.727 -3.422.065 -2.938.941

Cash Flow s MAN (Unif ied) -898.863 -2.055.493 -2.758.608 -2.519.109 -1.947.588 -1.126.404

2008 2009 2010 2011 2012 2013



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COST IS0605 Econ@TelCOS S0605 co @ e

Subsidization Scenario B

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

Operators

Euro

0,61 0,30 0,20 0,15

0,22 0,11 0,07 0,05

0,50 0,25 0,17 0,13

0,42 0,21 0,14 0,10

0,63 0,32 0,21 0,16

1 2 3 4

W/O Subsidization Scenario B

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

Operators

Euro

0,86 0,43 0,29 0,22

0,32 0,16 0,11 0,08

0,74 0,37 0,25 0,19

0,63 0,32 0,21 0,16

1,03 0,52 0,34 0,26

1 2 3 4



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COST IS0605 Econ@Tel@

IntegrationofTariffPolicy

MAN administrations in regions (8-

10 MANs) could:Reduce rental cost for the Operators

per KM per duct or fiber

Reduce administrations complexity Increase the negotiation ability of

Passive network owners



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@

Conclusions(PublicMANs)

Private initiative in Active Layer (S3) isthe most attractive scenario followingby the Public Ownership-OutsourceAdministration (S1)

Integration of MAN administration couldreduce the yearly costs in collaborationwith private schemes


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Time for Questions & Answers

[email protected]

Time for Questions & Answers

[email protected]

fftx learnings from west european and emerging

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