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Building a

Sustainable and
Fibre-intensive
F t
Future
12 Feb 2009

Paolo Campoli
pcampoli@cisco com
pcampoli@cisco.com

pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 1
FTTH in Europe - Overview: Global
Figures
X June 2008
2008, more than 11.3
3 Million FTTH/B
subscribers in the EU 31 and around 8.8 Million
Homes Passed

XA growth of 52% in terms of subscribers and 129%


in terms of Homes Passed compared to June 2007
Subscribers Homes/Buildings passed
Europe Europe
June 2007 June 2008 Growth June 2007 June 2008 Growth
Total without VDSL, FTTN/C/LA 878 139 1 332 331 52% Total without VDSL, FTTN/C/LA 3 863 589 8 840 890 129%
Total FTTx + VSL + FTTLA 1 065 189 1 877 074 76% Total FTTx + VSL + FTTLA 14 975 639 23 564 155 57%

Source: IDATE for FTTH Council Europe


p

© 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 2


Bandwidth growth is not slowing down
10000000

1000000

100000

10000

1000

100

DSL Limit
10

1
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

"High-speed connection," actual


Straight line extrapolation assuming acceleration from 2004
Straight line extrapolation
Source: Heavy Reading report “FTTH Worldwide Market & Technology Forecast, 2006-2011”
© 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 3
EURO-IX member IXP exponential traffic
growth 2005 - 2009

Year 2008

Source: EURO-IX

© 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 4


Fiber optics – EU principles
More regulatory clarity

ƒ E
Expected
t d Recommendation
R d ti in i Q1 2009
ƒ Basic principle: Regulators should provide
access to the networks of dominant operators
at the lowest possible level
ƒ A “must” : regulated access to ducts of
incumbents
ƒ Other obligations if access to ducts not
technically or economically feasible (e.g. dark
fibre)
ƒ Access to "bitstream" shall be maintained
provided lower level remedies do not
sufficiently address distortions of competition
ƒ Regulated prices but with a “risk premium”
ƒ Migration path required

pcampoli © 2008
2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential
Cisco Confidential 55
Fiber Optics - National approaches
Country Key principles FIBER WHOLE Indoor
DUCTS UNBUND. SALE cabling
• Ofcom is still considering ducts access
Based
and SLU
• Ofcom supports industry-led ? Ethernet
development of Ethernet based active bitstream
line access product
• Current regulatory obligations do not cover
Dark Only if
VDSL – DT expected to announce bitstream
fiber VDSL
over VDSL at Cebit MDF to substitute
• Cooperation
C ti agreements t ffor deploying
d l i FTTC cabinet to ADSL
and VDSL SLU
• Regulated access to ducts
Only up
• Wholesale regulation on NGA only up to
30 Mbps √ NO
to 30
Mbps

• Symmetrical indoor cabling regulation
• Assymetrical Ducts Regulation


Right to fibre
Symmetrical indoor cabling regulation
√ NO NO

• Sharing point still undecided

Dark
• TI equal access undertaking for duct
access and dark fiber √ fiber Ethernet
based
• Ethernet based bitstream over NGA bitstream
© 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 6
P2P vs PON: the Capex approach

ƒ Ethernet technology is very cost-


effective due to high volume
manufacturing
ƒ Modern Ethernet switches provide
high port density
ƒ Fiber is cheap
ƒ Very dense fiber management
solutions reduce space requirements
ƒ Only ports for paying subscribers
need to be installed
=> take rate!
ƒ Cost difference to PON only
significant where existing ducts are Source: Corning & FTTH Council Europe
“just big enough” for PON
=> civil
i il works
k ffor p2p
2

pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 7
Project cost comparison

pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 8
Why such a minimal difference

Step 2: Connect the building Step 3:


Connect the
~35%
35% of capex customer
t
~50% of capex

Step
p 1: Roll out in the region
g
~15% of capex

Only for step 1 there are any differences resulting from


access network architectures
Source: Cisco IBSG
pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 9
High FTTH density drives demand for symmetrical services
((JAPAN))

Number of High/Ultra-High-Speed Internet Service Users


16 000
16,000,000
000

March 2006
DSL 14,013,248
14,000,000 14,013,248

March 2007

12,000,000 March 2008:


Total broadband subscriber: 28.7 million

10 000
10,000,000
000
FTTH
8,803,898
8,803,898 13.47%
8,000,000
42.27%

6,000,000
CATV
3,609,625
44.21%

4,000,000
3,609,625 Source: Ministry of Internal Affairs and Communications

2,000,000
FWA
11,632
11 632
11,632
0
3
6
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07/
00/

01/

02/

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06/

Copyright © 2008 Cisco Systems, Inc. All rights reserved. Internet Business Solutions Group 10 10
UltraBroadband (UBB) Service

Honk Kong: 100Mbit/s


100Mbit/s+ services achieve strong
revenue profile and meaningful market share

Interview with PCCW (Hong-Kong), September 2008

ƒ PCCW Ultra BB infrastructure is a Metro Ethernet FTTx network


targeted to high density residential areas of Hong-Kong.
ƒ UltraBB was launched by PCCW in 2008 as a defense move
ƒ Use of P2P services, symmetric capabilities, and very fast
Internet surfing are the two main reason to get UltraBB
ƒ While UltraBB services (above 100Mbit/s) are considered
expensive in Hong-Kong
Hong Kong (2x-3x
(2x 3x traditional BB and flat rate price
with no consumption quota), they have reached ~ 5% market
share in 1 year

Copyright © 2008 Cisco Systems, Inc. All rights reserved. Internet Business Solutions Group 11
UltraBroadband (UBB) Service

Korea: UltraBB initially a residential service,


service
moving to Soho and SMB
Interview with Korea Telecom, September 2008

ƒ UBB service was launched to the consumer segment


originally, but are now available to Soho and SMBs
ƒ Priced as flat fee with no boundaries on traffic
consumption
ƒ As of September 2008,
2008 UBB,
UBB defined as ≥50Mbit/s
downlink, has ~70% market share.
UBB market share decreases to 30% if we consider only
100Mbit/s service

Copyright © 2008 Cisco Systems, Inc. All rights reserved. Internet Business Solutions Group 12
UltraBroadband (UBB) Service

Korea: Customers value symmetric


service, where available
Interview with Korea Telecom, September 2008
ƒ Symmetric service is valued by customers for:
Peer-to-Peer applications
User-Generated-Content: upload of videos and broadcasting to the
Web
Storage services

ƒ IPTV with High


High-Definition
Definition and Multiroom
ƒ UBB marketing communication focused on:
Actual speed (in advertising)
Stability of BB service (always working)
Additi
Additional
l VAS available
il bl on-top
t such
h as Parental
P t l Control
C t l

Copyright © 2008 Cisco Systems, Inc. All rights reserved. Internet Business Solutions Group 13
UltraBroadband (UBB) Service

Korea: UltraBB had a positive impact on churn


rate at introduction and on profitability
I t i
Interview with
ith Korea
K Telecom,
T l September
S t b 2008
ƒ Churn rate initially reduced by 10% from the introduction of
UltraBB (churn rate has reverted to original levels with additional
competition)
ƒ Ultra BB price premium (about 30%) sustained over time since
launch
ƒ Introduction of Ultra BB had a positive impact on profitability thanks
to the reduction of maintenance cost (over fibre infrastructure) and
of churn rate
ƒ Suggestions for the launch of UltraBB:
Keep the price premium between Ultra BB and traditional BB
Do not launch immediately Ultra BB at top technical speed but keep
increasing speed over time

Copyright © 2008 Cisco Systems, Inc. All rights reserved. Internet Business Solutions Group 14
Web 2.0-Enabled Services
Example of Web 2.0 enabled services: Personal
B
Broadcasting
d ti in
i Korea
K

Af
Afreeca web
b site
i service
i
ƒ Share instant and live information
ƒ Use a camcorder & connected laptop
p p
ƒ Internet connection thru Broadband
Wimax access
ƒ Relayy live scenes over the web
ƒ « Web quality » video
ƒ Popular items: live scenes in the
streets,, protests,
p , on-line g
game
competitions
ƒ Users have access to a mosaic
channels list and can see what’s
available right now in live streaming
ƒ “Instant aspect” creates audience
traction: users and connected time,
increasingg advertising
g revenues

Copyright © 2008 Cisco Systems, Inc. All rights reserved. Internet Business Solutions Group 15
FTTH financials
Financials, P2P, Differentiated retail Financials, GPON, Base case
80 80

60 60

40 40
on

on
20 20
€ millio

€ millio
0 0
008

010

012

014

016

018

020

022

008

010

012

014

016

018

020

022
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
-20
20 -20
20

-40 -40

-60 Revenues EBITDA -60 Revenues EBITDA


Capex Cum. DCF Capex Cum. DCF

Note: Scenarios represent a challenger deploying in a single European city


Source: IBSG Economics Practice
pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 16
NPV differences

pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 17
One Glance at the Impact of Broadband

“For
For every dollar invested in broadband
broadband,
the economy sees a tenfold return on
that investment.”

Memo on Stimulus Plans, U.S. Congress


January 2009

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The “expanded” business case:
Smart Work Center

“A SSmartt W
Work kC
Center
t (SWC) iis an office
ffi
center within a close proximity of a residential
community, y, that allows workers to be
positioned centrally and pervasively within the
context of their work, their peer work groups
and relevant work processes with the help of
innovative IT solutions and high-end
connectivity, and offers them flexible work
stations embedded in a socially conducive
service setting. By doing so, workers can
benefit by avoiding physical traffic, which in
t
turn means ffewer Co2
C 2 emissions
i i andd a more
efficient use of time and resources.”

pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 19
CUD Vision:
a Network of Smart Work Centers for Amsterdam
Region: physical traffic substituted through virtual
presence & e-work by means of a network of SWCs

Purmerend

Almere
Haarlem
Amsterdam

Utrecht/A2
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Smart Work Center Concept

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pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 22
SWC ICTArchitecture
Broadband Provisioning for Telepresence and high-end Internet Connectivity

Almere Other SWCs, TP


f S iliti
W C and
facilities d
connected
organizations

Fiber, 100 MB
Fiber
Connection,
Provisioned by UNET

pcampoli © 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 23
A Viable 21st Century Community

Greatest Access for All


to Education, Healthcare,
Work and Information
Work,

Connected and Connected and Viable


Sustainable Sustainable Smart Energy Environment for
Mobility Buildings, Homes, Networks New Business
Ecosystem and Offices and Innovation

Internet of People – Internet of Things

Broadband Platform
IP-enabled Homes and Offices, Roads, Utilities, Workplace Design
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Broadband: Projected Impact

GDP increase : 10x value of total of broadband investments

1% increase in broadband in a state = employment increase by


0.2 to 0.3% per year

New jobs: 1.000.000 on a 30 billion investment

Smart grid: electricity transport loss: -30%, 250.000 jobs

31% productivity increase in private sector

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Speed & Symmetry / Functionality
Research Applications,
1 10 Gbps
1-10 Gb Live Event Digital
(NLR, I2)
Cinema Streaming,
Remote Supercomputing

100 – 1Gbps
p HD Telemedicine,
Telemedicine
(Residential Offering
in Hong Kong)
Immersion Gaming, Full
IPTV Channel Support

10 -100 Mbps
Telemedicine, Broadcast
Symmetric Video, High quality video
(Residential Offering communications, Smart
in Lafayette, LA)
Bldg Control
5 -10 Mbps, Telecommuting, Video
S
Symmetric
ti on Demand, HD Video
Downloading, Gaming

1 to 5 Mbps Web Browsing,


(Standard DSL Remote Surveillance,,
Offering in US) Modest File Sharing
<1 Mbps,
VoIP, SMS,
Asymmetric Basic Email,
((FCC Standard) Streamingg Music

Functionality
Source: California Broadband Task Force Final Report
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© 2009 Cisco Systems, Inc. All rights reserved. Cisco Confidential 27