Open Networks Why? When? How?

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© Ericsson AB 2009 ASTEL annual conference May 20091

Open NetworksWhy? When? How?

Ivan Dimitrov,BA Broadband Networks, Ericsson


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Agenda

Broadband for all What is an Open Network? Why invest in Open Networks? When to start investing in Open Networks? How to invest/build Open Networks? Summary & Conclusions


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Broadband for all


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Viviane REDINGMember of the European Commission responsible

for InformationSociety and Media

KPN Annual EventBrussels, 14 January 2008

"How we treat next generation access is (…) the single most important policy question in the telecoms sector today. We have to create incentives for investment whilst making sure that no-one (and I insist on this no-one), can be in a position to foreclose the market.”

“Regulation will have a role to play to keep networks open and to guarantee progress, efficiencyand choice

“Point-to-point fibre deployment (...) is in fact the only fully future proof approach in terms of ability to deliver more and more capacity as techniques improve and as demand grows. Moreover it is the only approach to next generation access that permits a completely open access policy.

“……….initiated by municipalities, in cities such as Stockholm”


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Addressing the needs for all…..

Care for theelderly

PublicSafety &Security

Servicesfor disabled

citizens

Advanced servicesfor citizens

VoIP, Video & TV

State-of-the-artICT infrastructure

for businesses

HealthServices(e-health)

e-Government

Education(e-learning)

Broadband can help overcome the challenges


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”A historical perspective”- Electricity

- Privately owned companies started deploying power plants in piecemeal fashion in late 1800s

- Investments were mainly concentrated in profitable markets- Serving large cities, established businesses & wealthy homes

Initial MarketDevelopment

Consequences

- Large segments of the markets, especially rural and low income areas wereleft in the dark

- High degree of market concentration in the hands of small number ofvertically integrated companies ”monopolies”

EventualIndustry Structure

- Establishment of publicly owned municipal electric ultility companies


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The Case for Municipal Broadband - The drivers

MarketFailure

EconomicDevelopment

The drivers for municipal broadband today are the same as were for municipal electricity, a century ago

1- Failure on part of private companies to invest in specific geographic areas that do not meet the investment criteria of quicker ROIs

2- Tendency towards ”natural monoply” due to high capital intensityand low marginal returns

- Lower marginal cost, leads to low prices/profitability and eventual consolidation

1- Broadband, an essential public service and not a luxury

2- Sate-of-the-art broadband infrastructure, critical to improve community’s economic vitality

- Attract/retain investments- Creation of jobs- Retain and attract new citizens- Foundation for knowledge based economy

3- ”Eliminate” the ”digital divide”

4- Sustainability


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What is an Open Network?


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In telecommunications, Open Network, or Open Access to Communication resources, means that anyone, on equal conditions with a transparent relation between cost and pricing, can get access to and share communication resources on one level to provide value added services on another level in a layered communication system architecture.

Open Network definition:


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Generic Open Network Model

City Network

Customer

Service cost

PropertyNetworkProperty

Network

ServicePortfolio


Network

Pub

lic s

ecto

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Ent

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Tel

ecom

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tors

Open on infrastructure level

Open on service levelC

om.o

pera

tors


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Open Networks - Why?


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Alternative Infrastructure OwnershipSPSPServiceProvider

SPSPServiceProvider

SPSPServiceProvider

Active Infrastructure

Passive Infrastructure





Inf Owner

Pros:- Suitable for traditional commercial servicesCons:-Infrastructure based competition- Not suitable for public and new type of commercial services

Pros:-Better asset utilization through sharing-Easier classification of assets based on risk class-Shift of competition from infrastructure to servicesCons:- Need for open/common interfaces

Pros:-Better asset utilization through sharing-Easier classification of assets based on risk class-Shift of competition from infrastructure to servicesCons: - Need for open/common interfaces


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Open Access Benefits

Municipality owned fiber infrastructure used by different service providers

– Deployment & operations cost split among different entities– Better utilization of assets/infrastructure through sharing

Shift of competition from infrastructure to services– Consumers have access to competitive service offerings

from various service providers– Higher service take-up

No co-ordination problems– Same streets do not need to be digged every time a new

telco enters the market– Fiber deployment is part of city planning, rather than

Telco’s market strategy

Open Access, a key enabler for municipal broadband


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Open Networks - When?

Now!


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Infrastructure

Content and Services

Prices (affordable)

Supply Demand

Modernized enterprises

Modernized Public Administration

IS literacy

Critical success factors


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EuropeCommision Broadband performance index


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Open Networks - How?


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City networks in Sweden

Lokala Bredbandsnät2006 - Ägande

Saknar (114)Kommunalt (139)Privat (16)Blandat (21)

Swedish City Networks Association

153 City networks (of 290 munic)

Most started as branches of munic owned power companies

Today direct munic owned or separate companies

95 % offer dark fiber

60 % of all fiber lease in Sweden through city network.

Co-operate to provide crossover connections


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Network levels


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Generic Open Network Model

City Network

Customer

Service cost


Network

ServicePortfolio


Network

Pub

lic s

ecto

r

Ent

erpr

ise

Tel

ecom

Ope

rato

r

Oth

er o

pera

tors

Open on infrastructure level

Open on service levelC

om.o

pera

tors


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Swedenleading the FTTx deployments in Europe


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A new perspective

Population densityPeople/Sq.km

Revenue/HomeConnected

Cost/home passed

High Low

DeploymentCost

Low

High Commerciallyviable

Requires GovernmentIntervention

Traditional Operators

”New operators”Municipalities, Utility companies,

real estate etc

Structural fundingavailable from EU/Local

Public authorities*

Subsidies, infrastructure re-use, lower cost

of capital, longer depreciation

Municipalities are the key players in the value chain

Cost/home passed

Profit

Loss

Profit


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Available business models

RSP = Retail Service Provider, providing the services C.O. = Communication Operator, investing in and operating the active layer N.O. = Network Operator, investing in and operating the passive layer

SingleOperator

”All-in-a-box”

C.O. & N.O.

RSP RSP RSP

N.O.

RSP RSP RSP

C.O. C.O. C.O.

N.O.

RSP & C.O.

RSP RSP RSP

N.O.

C.O.


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Services Provider

Services Provider

FiberProvider

FiberProvider

Communication Provider

Communication Provider

FTTC FTTH

MBB FTTB

FTTC FTTH

MBB FTTB

Density

Penetration

+

Business strategy and deployment strategy

But how do we proceed


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Services Provider

Services Provider

FiberProvider

FiberProvider

Comm. Provider

Comm. Provider

FTTC FTTH

MBB FTTB

FTTC FTTH

MBB FTTB

Density

Penetration

+

Layered approach and nationwide deployment strategy

FTTH

Services Provider

Services Provider

Services Provider

Services Provider

Comm. Provider

Comm. Provider

Comm. Provider

Comm. Provider

FiberProvider

FiberProvider

FiberProvider

FiberProvider

FTTH/FTTC

FTTB/FTTHMBB


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SP#3

Ericsson Managed Access

BusinessConsulting

Managed Services

Technology/Solutions

Municipality/Investor jointly own infrastructure

SP#2SP#1

Ericsson offerings

Ericsson facilitating for Neutral Governance

Municipality

Ericsson

Ericsson HW/SWServices

ServicesEntity

PrivateInvestors/Telcos

PrivateInvestor

InfrastructureEntity

- Bring in the investor partners- Setup Ericsson Services entity for managing

operations- Develop applications/web portals for public services - Setup service contracts covering SLAs/KPIs to

ensure quality on e2e connectivity- Provide uniform business processes/procedures for

gaining access to network- Provide customized connectivity solutions to the

Service Providers- Provide broadband technology & solutions- Provide Network design and turnkey roll-out services

e-Health e-Gov e-Learning

Public Service Portals/Servers


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Ericsson´s FTTH offerings

Passive solutions Micronet Ribbonet

v

v

Rack

Central Node

Active solutions

Home environment Access and site solutions Metro and IP edge


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Commercial in confidence Deep Fiber Business Case Workshop Teaser 2007-09-178

Service insights and revenue scenarios

Service Roadmap

Customer Interest

Revenue impact

Revenue Distribution

0

5 000 000

10 000 000

15 000 000

20 000 000

25 000 000

30 000 000

35 000 000

40 000 000

45 000 000

50 000 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Years

EU

RO

Ancillary services

Invoicing

VoIP

IPTV

Monthly fees BB

Access fees BB

”Andersons”

3 x HDTV's 24 Mbit/s

P2P downloading 5 Mbit/s

Browsing 5 Mbit/s

Online gaming 2 Mbit/s

Voice 0.1 Mbit/s

Total Needed 36 Mbit/s

Application Needed

Speed Requirements Traffic volume requirements

NeededAverage User…

…without video11,6

Gbyte/month

…with video23

Gbyte/month

…with video1 & streaming IPTV3

51 Gbyte/month

…with video1 & streaming HDTV3

? Gbyte/month

100 000 subscribers 4 different housing types Closed Network

Services

TechnologyConsultation

Deployment

System Integration

Business Consulting

Managed Operations


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Summary & Key take aways

Broadband is no longer a luxury, but rather a utility Broadband is critical for the economic vitality of the

communities and nations Deployment of broadband entails huge capital outlays

with tendency for ”natural monopoly” Municipalities are therefore ideal entities for

undertaking deployment of broadband infrastructure State-of-the-art infrastructure can help municipalities

overcome their challenges by generating additional revenues, reducing their administrative costs and by better serving the citizens

Municipal Broadband, a key enabler for driving economy


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Open Networks Why? When? How?

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