Trimming the costs of FTTH

Verizon has provided an update on the CAPEX per home for its PON-based FiOS service. The cost for Verizon is now below $2000 per home

At the end of 2006, it is on track to achieve the following:

• CAPEX per home passed: $850
  
• CAPEX to connect a home: $880
• A total CAPEX per home of $1730
  

Verizon is projecting that for 2010 the costs will be:

• CAPEX per home passed: $700
• CAPEX to connect: $650
• A total CAPEX per home of $1350 *
  

That equates to a 22 per cent cost saving over the next 4 years. Not brilliant but any drop reduces the overall time it takes for end user revenues to cover the construction costs.

* Thanks to Frank Marum, senior analyst, The Diffusion Group for the figures

Optical components - an industry report

The weather at this week's ECOC, held at the French resort of Cannes, reflected the recent fortunes of the optical component industry: it started stunningly bright (1999 to 2000), suffered a prolonged torrential downpour (till 2003), before returning to clear blue skies.

The "clear blue skies" assessment may raise some eyebrows but the good news is that since 3Q 2003, the component industry has experienced growth. "It is now a U.S. $3.4 billion dollar-a-year industry with 20 percent year-on-year growth," says Daryl Inniss, vice president and practice leader, communications components at Ovum RHK. The market figures include optical modules and discrete components for the wide area network, datacom, and access.

Inniss also agrees that there are still too many component companies and not enough consolidation. And yet component makers are finding it difficult to meet growing demand.

"Every supplier is at capacity or ramp-limited," says Inniss. These include components such as tunable lasers and reconfigurable optical add/drop multiplexers - used for upgrading WDM networks - as well as 10Gbit/s transceivers (XFPs) and even thin-film filters, a fundamental optical building block used to separate light paths. Component makers see the growing demand but turning up capacity takes time - six to nine months - and money, and component players are cautious. "They remember the past," says Inniss.

So what was hot at ECOC? WDM-PON, which is surprising given that the basic passive optical network (PON) flavours of Ethernet PON (EPON) and Gigabit PON (GPON) are still in their infancy.

There was also plenty of discussion about 100Gbit/s Ethernet. All recognise there will be considerable challenges before 100G is deployed, as well as concerns about how best to implement it. Will it be 10 channels at 10Gbit/s, 4 at 25G, 5 at 20G or even a 50Gbit/s symbol rate and modulation? There was even speculation that it could limit the 40Gbit/s opportunity.

Overall though ECOC was about incremental improvements rather than radical developments: many component announcements reduced power consumption or reduced cost, operated over extended temperature ranges or fitted into smaller-sized modules.

So where were the innovative products? "Why is it important to have new things?" says Sando Anoff, marketing manager for Europe at optical component company, Opnext. "Why expect revolution when it is steady evolution."

This is an industry that has not forgotten what it is like to get rained on.

Europe falters in the dash to FTTH

Europe is being left in the dust when it comes to fibre-to-the-home (FTTH) deployments. Japan is installing close to 300,000 lines a month. Europe, meanwhile, has put in 100,000 in the last year.

According to market research firm IDATE, Europe had 650 000 FTTH lines installed by mid-2005, a number that has risen to 750 000 by mid 2006. Japan is installing every seven working days what it takes Europe to do in a year.

Are European incumbents smart to avoid the huge deployment costs of FTTH due to the expected poor returns or will they pay dearly for the delay?

Soundbites: ECOC

“I first started working on passive optical networks in 1978.”

Dave Payne, Head of Future Networks team at BT Adastral Park, pointing out that optical networking has always taken time to develop.

“Everyone got fooled when WDM came on. There was a clear need but it didn’t change the architecture: one fibre now looked like 16. Now carriers are re-architecting the network, with all the software and control.”

Ferris Lipscomb, vice president of marketing at optical component company, NeoPhotonics, explaining why the agile components that made optical the hottest high-tech sector in 1999 and 2000 are only now being deployed.

Time for carrier investment in components

Carriers and system vendors will return to investing in core technologies that make no sense for the venture world but will give them a competitive edge. So believes Ian Jenks, general partner at venture firm, Crescendo Networks, speaking at the ONE 2006 conference at ECOC.

Summarising the optical landscape today, he stresses there are no IPOs, few buyers with shallow pockets only, and average technology exits of U.S. $83m. "Bleak but maybe getting better," says Jenks.

He argues that one consequence of convergence will be to bring people together. "People deliver services collect $3 trillion a year, equipment makers $14 billion and optical components makers $2 billion." And with bandwidth demand greatly outstripping supply he expects users will become increasingly frustrated with the slow responsiveness of getting and delivering content. "It [demand for bandwidth] has never been linear, its always been boom and bust."

He thus sees a requirement for new investment in core optical technologies which he foresees coming from carriers and vendors, not VCs, that will give them a competitive edge. "They will rediscover the reasons for their success," he says.

Are carriers and equipment vendors missing out by not working more closely - and funding - innovative optical component start-ups?

What next for the network ... more comment

"Rapid growth in mobile TV services will have a major impact on mobile networks over the next five years as mobile operators are faced with the need to deliver large volumes of high quality mobile TV and video content to the mass market, cost effectively. Dedicated broadcasting technologies, such as DVB-H, DMB and TDtv will be essential to cope with the most popular content, while operators will also need to bolster the capacity of their 3G networks to deliver personalised video-on-demand services, which will be more valuable than simple broadcasting, for example using W-CDMA LTE and CDMA2000 evolution."

Alastair Brydon, CEO, Sound Partners.

“Forget IMS, don't even mention A-IMS, the most dramatic change will only take two letters "IM". The "next generation" users - todays teens and twenties - are already relying on mobile phones and IM, and as IM evolves to include voice and video on an ever more ubiquitous broadband base, the enhanced user experience of presence will make traditional voice a thing of the past. It won’t be complete in five years, but the writing is on the wall.”

Frank Marum, senior analyst, The Diffusion Group.

ECOC and the economics of FTTH

I'm off to the European Conference on Optical Communication (ECOC 2006). I hope to talk to several leading optical component players to understand their areas of focus in the next 12 to 18 months, their thoughts on 100 Gbit/s Ethernet and what key technologies they believe will be needed in optical networks in the next few years.

I will be taking part in the Optical Network Europe 2006 event at ECOC. The session will be on fibre-to-the-home (FTTH) deployment in Europe and in particular whether the economics of FTTH is still the sticking point. If you will be attending, do please come and introduce yourself.

For a copy of the talk: "Is the economics of FTTH still the sticking point for Europe's service providers?", please click here

Roy Rubenstein

Soundbite: THUS on IMS

"The introduction of IMS will not be as a big bang but phased. Ideally customers won't even need to know about IMS, but will be able to take advantage of the continual evolution of services and solutions."

Richard McCallum, development director at service provider, THUS

Intel's silicon sees the light

Yesterday’s announcement by Intel and the University of California, Santa Barbara of an electrically pumped, hybrid laser adds another key component to silicon’s growing toolbox that could make the technology the platform of choice for integrated photonics.

The research work combines the light-emitting properties of Indium Phosphide (InP) - used for telecom and datacom lasers - with the economies of scale and ease of processing of silicon wafers. Bonding the silicon and InP wafers together combines the two materials, with the InP providing the light trigger to cause lasing in the silicon optical wave guide. This promises cheaper wavelength division multiplexing (WDM) lasers, and arrays of lasers.

Complete optical systems-on-chip become possible by combining the laser with other optical building blocks developed in silicon, such as 1 Gbit/s and 10 Gbit/s modulators, wavelength multiplexers and photo-detectors. Intel expects the technology to reach the market in five to ten years’ time. Target applications are those that already use high-speed electrical interfaces such as rack-to-rack and chip-to-chip communications.

One particular application is high-end servers, that will increasingly use multi-core microprocessors packed densely on line cards. Such confined computing will need the terabit/s data rates and lower power consumption optical interfaces deliver. Thus the first application of the technology will likely be within large data centres.

But Intel does not rule out the laser being used for existing optical telecom applications, from fibre-to-the-home (FTTH) to ultra long haul dense WDM. Indeed, Mario Paniccia, director of Intel’s Photonics Technology Lab, believes cheaper optical transceivers for FTTH could result from the technology.

"We believe this success bodes well for rapid progress in active silicon optics though commercial application is years away," says Karen Liu, Ovum-RHK's vice president, communication components.

For more details regarding the Intel-UCSB announcement, click here

What next for the network, continued

"The end-to-end nature of the original incarnation of the Internet assumed that both ends were trusted, known entities. Typically they were true network participants - engineers who, if their intended application failed, could diagnose and resolve the network problem. Important elements in this - they were trusted, and they were logical peers to at least some elements of the network (the latter meaning they were not excluded by hierarchical dictate from signalling to network elements). These, fundamental points in the architecture of the Internet now have devastating impact, because - clearly - many users abuse the trust and use the logical peer relationship with bad intent (e.g. spam, phishing, Distributed Denial of Service attacks).

Today, these can be resolved only partially, by patching the Internet as we have it. What's interesting and important is that there is growing momentum to consider a clean-start approach to the future, really broadband Internet. It's implausible to imagine that any such clean-start approach would not have network security and rigorous user authentication at its core."

John Ryan, Monitor Group

"The biggest network impact over the next three to five years will be the ongoing transition to a common IP based fixed/mobile network. Separating transport, service control and applications allows network operators to deploy a greater range of new services with significantly less time and effort than is possible on today's service specific legacy networks, providing a large upside for service innovation.

It remains to be seen how much and under what conditions network operators will be required to open the service platforms to third parties and how exposed we will be to the large downside for re-monopolisation."

Craig Skinner, senior consultant, Ovum Consulting

And coming…
Monolithic integration [of optical components] in Indium Phosphide.

Fixed mobile divergence

Telecom Italia’s announcement that it will separate its fixed-line and mobile phone businesses has surprised an industry with convergence firmly in its sights.

Merging fixed and wireless operations is seen as a necessary development, especially as carriers look to separate transport from service control. One only has to look at the strategies of carriers such as France Telecom, KPN and Vodafone, with its fixed broadband deal with BT.

Indeed, Telecom Italia’s announcement that it will split its businesses into three (fixed access network, fixed retail and content, and mobile) is a reversal of its own recent strategy.

"Completely bizarre," was one wireless analyst's response. He recalls speaking to two executives from Telecom Italia and Telecom Italia Mobile (TIM) last November after they announced details of a new integrated business. “Every other word from both of them was convergence,” he says.

Investment and telecom analysts are split as to what is behind Telecom Italia’s decision. Goldman Sachs and JPMorgan believe it is due to the regulatory environment in Italy.

“The regulatory burden in Italy has become so heavy that Telecom Italia has decided to separate its businesses,” says the JPMorgan report. “Telecom Italia said that such a structure increases its financial flexibility, which we interpret to mean that any of the three assets could be sold.”

Goldman Sachs believes the sale of TIM is risky since Telecom Italia would limit is options and “lose any upside should 3G become more popular in its later generations or should the market consolidate.”

Telecom analysts, meanwhile, have seized on the cost of convergence and the carrier’s debt. “This is not an industry vision just financial engineering,” says Lars Godell, principal analyst, European telecoms at Forrester Research.

Ovum also believes it has little to do with strategic considerations or meeting regulatory requirements. “The main reason seems to be the massive debt that has been accumulated and which is now becoming a real burden,” it says.

“The challenges of integrating the services, networks and organisations of two such large - and largely independent - entities is massive,” adds the wireless analyst. “Perhaps it is simple as TI deciding that the benefits are not worth the cost and pain involved, once it looked at the scale of the challenge.”

Dean Bubley, founder of Disruptive Analysis, believes the issue is financial and not convergence. “Even on the most optimistic forecasts, the majority of mobile customers will be non-FMC for at least the next 5 years, especially if like Italy they are in very pre-pay centric markets.”

Is this a unique carrier issue or the first question mark regarding the wisdom of convergence?

KPN's IMS plans gather pace

Royal KPN NV will start IP Multimedia Subsystem-based (IMS) voice services over broadband from early 2007. The development is part of KPN’s €1bn-1.5bn spend on its all-IP network, to be completed by 2010.

“Our NGN network will consist of a broadband VDSL/FTTH-based network and IP-based platforms on top of it,” Paul Hendriks, general manager broadband services and of the all-IP programme at KPN, told Next Generation Networks. “In this way we are able to bring new IP high bandwidth broadband services to the customer and switch off legacy networks.”

IMS is central to KPN’s plans. “Once the IMS core platform is in place we will start deploying other types of IP-based communication services, both fixed and mobile,” says Hendriks. Using IMS, KPN will shut down central offices and offer all sorts of new communication services. It will start with simple voice services and move to VoIP-based ones such as IP Centrex, wireless virtual PBX and messaging services.

Ovum research director, Dan Bieler, believes KPN has to embrace IMS. “If you are thinking about a NGN, there is no alternative.” Meanwhile, the latest announcement surrounding KPN’s NGN is no more than an indicator that progress is being made, he says (see Ovum's take). KPN first announced its NGN plans two years ago.

The NGN was save KPN hundreds of millions of Euros a year in reduced network maintenance costs. “It will require between a quarter and a third of the staff needed for [maintaining] current networks,” says Bieler.

The ability to introduce new services rapidly, coupled with significant OPEX savings sounds a winning combination. Yet Bieler has reservations.

First, there is regulatory confusion as to how a VoIP call is classified and charged for. “There is a great deal of confusion here: is it voice, is it data?” While not a big part of the revenue stream now, in five years’ time the issue could impact profits significantly, he warns

Second, a key obstacle facing NGNs remains the issue of net neutrality and IP interconnect. Bieler admits that the issue of who gets paid for what when an incumbent shares its network with third party service providers has not stopped NGN investments such as KPN’s. But he warns that if not resolved, net neutrality could slow down the overall pace of NGN adoption.

Do you believe net neutrality is a threat to NGN roll-outs?

See Total Telecom’s NGN poll

A career in telecom

The latest issue of Business Week (Sept 18th) reviews the best 50 work places for graduates to launch a career. Two telecommunications firms, Verizon (ranked 11) and AT&T (26), are in the top 50.

Comments include the launch by Verizon Wireless of a trainee programme where a participant may work at up to three locations over two years, while at AT&T free health care is provided, and for certain workers the opportunity for overtime. Average pay at Verizon is $35,000 to $40,000, at AT&T it is not listed.

Disney (1), Lockheed Martin, Deloitte & Touche and Goldman Sachs are ranked as the four leading companies to work for.

Google, classed under technology, is ranked 13th. “Free gourmet lunches, an on-site masseuse, and the freedom to spend one day a week on your own project. What’s not to love?” asks Business Week.

The new new: super-high-definition-TV

Next Generation Networks spoke recently with Hartwig Tauber, president of the FTTH Council Europe, the organisation promoting fibre-to-the-home deployment in Europe. He had just given a talk in Japan about FTTH in Europe.

What would interest Japan about FTTH in Europe, he was asked politely, given Japan’s lead in FTTH (5.4 m subscribers by Q1, 2006 compared to some 0.75 m in Europe). They are very interested in the open access model, he said, referring to the public-private business model enabling municipalities such as Amsterdam and Vienna to deploy fibre.

What impressions did he come away with? They are already talking about super-high-definition-TV, the next step on from HDTV. “Using the best compression, it requires 40Mbit/s per channel,” he said ruefully.

• See the most recent Total Telecom Roundtable on optical access use in Europe which included FTTH Council Europe board member, Rami Houbby.

O2 Germany adds fixed alongside wireless

O2 Germany has embraced DSL technology to provide its customers with integrated mobile and fixed DSL broadband services. The services, to be available from late October, can be viewed as the latest example of fixed mobile convergence.

But given the operator already offers Surf@Home, a box integrating 3G and wireless LAN technologies for fast internet access without the need for a fixed line, it confirms the view that wireless will always be chasing fixed in terms of access performance. (See 4G post below.)

What will 4G be used for?

Samsung Electronics has lined up what it calls a 4G mobile technology demonstrator as part of its 4G Forum yearly event. The demonstration involves cell-to-cell handover of 100 Mbit/s data streams while the equipment (housed in a bus) travels at 60 km per hour. One gigabit per second data links within the forum venue is another part of the demonstration. Such figures match 4G’s performance targets.

Technical detail as to how Samsung achieves such performance is sparse. But Samsung has said it would be using 8x8 MIMO (multi-input multi-output) technology as part of a 3.5Gbit/s data transfer demo. Such a MIMO configuration uses a transmitter and receiver arrangement, each with eight antennas, for multi-path transmissions.

The 3GPP standards development organisation has said it will begin work on 4G only after it has completed the 3G Long Term Evolution (LTE) standard. Accordingly, 4G will likely reach the market from 2012 at the earliest.

Projecting fixed bandwidth speeds starting from 1995, 100Mbit/s will be the standard high-speed wireline connection rate around 2011. What will 100Mbit/s wireless data rates enable? And once in service, will such a wireless capability tip the balance between fixed and wireless broadband?

Wireless consultancy and market research firm, Sound Partners Ltd, believes not. Sound Partners has looked at future 3G developments and 4G, and thinks there will be three main service uses.

• VoIP over wireless, which 3G LTE will go a long way to resolve. At present 3G cannot deliver the quality of service needed. Such a development will enable operators to flip over to an IP core for fixed and mobile in a cost effective way
• Mobile TV, which will grow very quickly. However, still to be resolved is how much will be transmitted over a separate broadcast network and how much will be sent point-to-point
• Broadband access: multimedia content and applications sent to a mobile

Alastair Brydon, Sound Partners’ CEO, believes fixed broadband will always be ahead of wireless. “If there is a single user then fine, but with lots of users in a cell, signal quality will be variable and performance mixed,” he says.

Meanwhile, expect some frenetic wireless activity before 4G's arrival. Wireless developments include the High-Speed Packet Access (HSPA) and Multimedia Broadcast and Multicast Service (MBMS) enhancements to 3G, WiMAX and the DVB-H mobile TV standard. These will be followed by the 3G Long Term Evolution (LTE) standard that could be in service by 2009. 3G LTE addresses many of the shortfalls of 3G when it comes to delivering broadcast TV services and broadband access.

Some views on what makes a NGN

The definition of next-generation networks, as described by the Wikipedia entry, captures many of the core elements. Packets, quality of service (QoS), softswitches, the Session Initiation Protocol (SIP) and IP Multimedia Subsystem (IMS), all get a mention.But it’s clunky and has the feel of a serially-edited, multiple-contributed entry.

The International Telecommunications Union’s (ITU) definition is more concise: The “difference between NGNs and today's network is the switch from current circuit-switched networks to packet-based systems”.

Italy’s regulator, AGCOM, adds a further layer of detail. An NGN is “a packet-based network able to provide telecommunication services and able to make use of multiple broadband, QoS-enabled transport technologies, and in which service-related functions are independent from underlying transport-related technologies.”

Market research firm, Ovum, defines the NGN as follows: “The NGN essence lies in the convergence of fixed and mobile, voice and data, data and content, and - most importantly - IT and telecommunications.”

Since NGNs are linked to technologies, any definition will inevitably change with time. This is not surprising. Carriers have made significant investments in their networks and at different stages. Consequently they will undertake NGN upgrades at different stages in the future, once they deem their existing networks to have depreciated. Royal KPN NV started discussing its NGN in 2004, some two to three years after BT began its 21CN plans. Now Deutsche Telekom is starting on its NGN.

It is these network transitions, the rise of particular networking technologies, and the new services they enable that Next Generation Networks will chart.

Meanwhile, if you have a more rigorous NGN definition, we’d love to hear it.