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Towards Technologically andCompetitively Neutral

Fiber to the Home (FTTH)

Infrastructure

Anupam Banerjee, Marvin Sirbu

Carnegie Mellon UniversityPittsburgh, PA 15213 USA

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Background

$Telecommunications Act of 1996

$Competition in the Last Mile

$

Broadband Access$Universal Access

$ In the context of FTTH, what does it take

to have competition in the last mile?

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Models of Competition in

Telecommunications$Facility Based Competition

Central Offices

ServiceProvider A

Service

Provider B

Home 2

Home 1

Data Link Layer Equipment

ATM, Gigabit Ethernet, SONET

Separate Networks

Network 1

Network 2

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Telecommunications$UNE Based Competition

Central Office

Service

Provider A

Service

Provider B

Home 2

Home 1

Data Link Layer EquipmentNetwork

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Telecommunications$Open Access Based Competition

Central Office

Service

Provider A

Service

Provider B

Home B

Home A

Common Data Link

Layer Equipment

Network

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FTTH Architectures

$Home Run

$Active Star$Passive Star (Passive Optical Network -

PON)

$Wavelength Division Multiplexed PassiveOptical Networks (WDM PON)

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Home Run Architecture

Shared InfrastructureShared InfrastructureBrief DescriptionBrief DescriptionArchitectureArchitecture

Central OfficeDedicated fiber from the Central Office to each HomeHome Run

Centra lOffice

Equipment

OLT Por t

O N U

Cen tra l Off ice Infra stru cture

Dedicated f iber to each Hom e

Fee der Loops tr ut o nL o o p

ON U Opt ica l Netwo rk Uni t

OLT Opt ica l L ine T erminat ion

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Active Star Architecture


From theCentral Office to the

Remote Node

Signals multiplexed at Remote Node that lies between

Central Office and Home

Active Star

Cent ra lOffice

E qu i pm entOLT

O N UCe ntral Office Infra stru cture

Sha red Feeder fiber

Fee der L oops tr u t o n

Loop

32

1

R em o te N ode w ithActive Electronics

E qu i pm ent

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Passive Star Architecture (PON)


From Central Officet to Remote

Node

Signals power optically split at Remote Node; Remote

Node not powered

Passive Star

Central

Office

EquipmentOLT

ON U

Cen tral Office Infra stru cture

Shared Feeder f iber

Fee der Lo opDis tribut ion

Loop

32

1

Pa ssive S plitter

Combiner

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WDM PON


From Central Officet to Remote

Node

Signals power optically split at Remote Node; Feeder

fiber carries multiple wavelengths

WDM PON

55

33

11

22

44

Central

Office

EquipmentOLT

ON U

Cen tral Office Infra stru cture

Shared Feeder f iber

Fee der Lo opDis tribut ion

Loop

32

1

Pa ssive S plitter

Combiner

1 ,1 , 2 ,2 , 3 ,3 , 4 ,4 , 5 . . .5 . . . 3 23 2

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Competition in FTTH

$Facility Based CompetitionCentral Offices

ServiceProvider A

Service

Provider B

Home 2

Home 1


ATM, Gigabit Ethernet, SONET

Separate Networks

FTTH Network 1

FTTH Network 2

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Non facilities based Competition in

Home Run Fiber$Individual Fiber can be rented out as a UNECentral Office

Service

Provider A

Service

Provider B

Home 2

Home 1


Network

= Home Run Fiber supports Competition atthe Data-Link layer and in Higher layersservices

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PONs and Active Star

Splitter

(Remote Node)

Central Office

Service

Provider A

Service

Provider B

Home 2

Home 1


Network

= PONs (and Active Star) do not supportCompetition at the Data-Link layer; theysupport Competition in Higher layers services

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WDM PONs

Splitter

Central Office

Service

Prov ider A

Service

Prov ider B

Home 2

Home 1


Network

AWG

11

22

11 22

= WDMPONs support Competition at theData-Link layer and in Higher layers services

=Individual Wavelength can be rented out as aUNE

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Architectures and Competition

Competition in Data Link

Layer Services

NeutralNeutral

Competition in Broadcast

Video

Competition in Voice, Data,

Digital Video

Cost per Home Served

PONsHome

Run

Active

Star

WDM

PONs

HardEasy Hard Easy

NeutralNeutral

HardEasy Hard Easy

?? ? ?

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Economic Feasibility of

Competition$General Perception:Home Run Fiber is more

expensive than PONs; WDM PONs are noteconomically feasible today

$Our arguments:Home Run Fiber enables Data-Link layer competition while PONs do not

$Research Questions:

$

By how much is Home Run Fiber more expensivethan PONs?

$Which forms of competition are EconomicallyFeasible?

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FTTH Engineering Cost Model

Deployment Homes persq. mile

Homesserved per

CO

Urban 3389 16,135Suburban 1602 16,201Small Town 217 10,184Rural 85 5,871

RemoteRural

20 3,018

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FTTH Engineering Cost Model

Architecture OLT Interface

Home Run 100 Mbps Fast Ethernet per HomeActive Star Gigabit Ethernet Interface per 32 Homes

PON Gigabit Ethernet Interface per 32 HomesWDM PON 100 Mbps Fast Ethernet per Home

ONU Interface

2 POTS ports, 10/100 Base T, RF

Video

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Capital Cost per Home Served

(Urban Deployment)Capital Cost per Home Served (Urban Deployment)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

0 20 40 60 80 100

Percent Penetration

FTTH

CapitalCostp

erH

Served

Home Run Fiber Active Star Passive Star (PON) WDM PON

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(PON Deployments)PON deployment in Urban, Suburban, Small Town, Ruraland Remote Rural Areas

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

0 20 40 60 80 100

Percent Penetration

F

TTH

CapitalCostperHomeS

Urban Suburban Small Town Rural Remote Rural

Urban

Remote Rural

Suburban

Rural

Small Town

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Capital Cost per Home ServedUrban and Rural Deployments

0

1000

2000

3000

4000

50006000

7000

8000

9000

10000

0 10 20 30 40 50 60 70 80 90 100

Percent Penetration

FTTH

CapitalCost

perHomeS

Home Run Fiber (Urban) PON (Urban) Home Run Fiber (Rural) PON (Rural)

UrbanDeployment

Rural

Deployment

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Competition in FTTH: Economic

Feasibilityn Facilities based Competition is unlikely as

FTTH is a decreasing cost industry

n Wavelength based competition is infeasible in the

near future

n Data Link Layer Competition (and competition

in Broadcast video) is easy in Home Run

architecture and hard in PONs; and thereforehas an economic premium

n Competition in Data, Voice and Switched Digital

Video is easy in all architectures

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The Cost of Data-Link layer

Competition..

Deployment Scenario Cost of Competition per Home Served ($) @ 100%penetration

Urban 270Suburban 350Small Town 510Rural 690Remote Rural 560

$Cost Difference (per Home) betweenHome Run Fiber and PON

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Towards Economically Efficient

and Competitive Neutral FTTHInfrastructure

$Home Run Fiber is Competitively Neutral..$But is it 'economically efficient'?

$Can we have Data-Link layer at a lower costthan Home Run Fiber?

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A Traditional PON Deployment

Splitter 1

Splitter 2

Central OfficeOLT Equipment

Central Office Infrastructure

PON1

PON2

Neighborhood 2

Neighborhood 1

en ra ce

OLT Equipment

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Lowering the Cost of Competition:

Home Run PON

Central Office

OLT Equipment

Central Office Infrastructure

PON1

PON2

Neighborhood 2

Neighborhood 1

Splitter 2

Splitter 1

Central Office

OLT Equipment

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Lowering the Cost of Competition:

Aggregation PON

Cen tral Office

OLT Equ ipment

Central Office Infra structure

PON1

PON2

Neighborhood 2

Neighborhood 1

Splitter 2

Splitter 1

AGGREGATIONof Splitters

Cen tral Office

OLT Equ ipment

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Real Option to Scale Bandwidth..

=In addition to foreclosing competitionat the Data-Link layer, PONs also impose

bandwidth sharing= Incremental Cost of Home Run fibermay be viewed as a Real Option tounlimited bandwidth (by scalingbandwidth independently of homessharing a feeder fiber in a PON / ActiveStar)

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Is it worth paying the economic

premium..

$.. Or should we achieve a Static Efficiency by

choosing the least cost alternative?$.. And thereby foreclose a possible Dynamic

Efficiency resulting from the innovation that isdriven by Competition that the Competitively

Neutral architecture enables?

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Competition in FTTH & depends

on

Community andMarket

Characteristics

Second Mile Costs

FTTH Architecture

Competition in

FTTH

Ownership andIndustry Structure

First Mile Costs

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The Second Mile Problem!!

$The viability of competition in the last milealso depends on:$The cost of bringing voice, video and data services

to a Central Office (The second mile costs) from aRegional Node

$The number of subscribers served by a CentralOffice

$

Distance between Central Offices$ Demand for Services

$ ..

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Non Facilities based Competition

Central Office

Service

Provider A

Service

Provider B

Home 2

Home 1


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Vertical Integration and

Anti-competitive Behavior ?

Central Office

Service

Provider A

Service

Provider B

Home 2

Home 1


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Industry Structure and Competition..

$Desired Industry Structure$Neutral Infrastructure owner providing non-discriminatory

access to Higher Layer Service providers

$Ownership Alternatives$Private Enterprise

$Subscriber (or Community Ownership)

$Local Government

$Jointly owned common carrier

$Power Utility

$Migration to Desired Industry Structure?

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Conclusion..$PON is the most economical infrastructure$Home Run Fiber is more expensive, but

Competitively Neutral

$ 'Home Run PON' and 'Aggregation PON'are Competitively Neutral and Economicallymore Efficient than Home Run

$A Competitively Neutral architecture is anecessary (but not sufficient) condition fordata link layer competition

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Contribution of this paper

$Defined taxonomy of competition in FTTH

$Clarified relation of architecture to Data Link layercompetition

$Understood the economics of FTTH architecturesin different deployment scenarios

$Estimated Cost of Data-Link layer Competition

$Devised compromise architectures to enablecompetition at lower first capital cost

$Identified institutional and economic issues forfurther study

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.. and Future Work$Continue to explore implications for

Competition of:

$Second Mile Costs

$Ownership options$Operations Costs

$Market Characteristics

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Engineering Cost

Model Assumptions andResults

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Engineering Cost Model

$Estimates Capital Cost per Home Passedand Capital Cost per Home Served forFOUR architectures and FIVE deploymentcontexts

$Aerial Fiber deployed on poles

$Sufficient Feeder and Distribution fiber for

the entire community installed regardless ofthe number homes that sign up for service

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Cost ModelCPE Cost

Central

Office Cost

Total FTTH

Capital Cost

FTTH Capital

Cost per

Home Served

AssumptionsLocal Loop

Cost

FTTH

Architecture

Deployment

Scenario

FTTH Loop

Infrastructure

Cost

FTTH Capital

Cost per

Home

Passed

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Local Loop Costs

T o t a l L o c a l

L o o p C o s t s

F e e d e r

L o o p C o s t s

D r o p L o o p

C o s t s

O t h e r

D e p l o y m e n t

C o s t s

O u t s i d e

P l a n t

E q u i p m e n t

D i s t r i b u t i o n

L o o p C o s t s

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Data from HAI Model 5.0 A

Cluster 1

Cluster 5

Cluster 6

Cluster 3

Cluster 2

Cluster 4

Central Office

R6

R5

R4

R2

R1

R3

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Data from HAI Model 5.0 A

Central Office (CLLI) No. ofClusters

Totalno. ofHomes

Housing Density(Homes/sq. mi.)

Average RadialDistance from COto each cluster (ft)

PITBPASQ (Urban) 23 16,135 3,389 4,730HMSTPAHO (Suburban) 23 16,201 1,603 9,089CHTTPACT (Small Town) 14 10,184 218 15,165TNVLPATA (Rural) 10 5,871 86 18,662CCHRPAXC (Remote Rural) 18 3,018 20 32,763

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Cost Model Assumptions

Deployment Homes persq. mile

Homesserved per

CO

Ave. FeederLoop length

(feet)

AverageDistributionLoop length

Drop Loop length

Urban 3389 16,135 6,960 377 Uniform(50,75)Suburban 1602 16,201 12,396 521 Uniform(75,150)Small Town 217 10,184 24,012 1,472 Uniform(100,200)Rural 85 5,871 37,054 2,434 Uniform(150,300)Remote

Rural

20 3,018 42,084 5,791 Uniform(200,600)

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Equipment and Costs

Architecture Central OfficeEquipment (per 32Homes)

Central OfficeEquipment (perHome)

Optical NetworkUnit (ONU)

Remote NodeEquipment (perHome)

Home Run $375 $550Active Star $800 $25 $550 $250PONs $2,375 $75 $650 $25

WDM PON $20,000 $1,500 $25

Architecture OLT Interface ONU Interface

Home Run 100 Mbps Fast Ethernet per Home 2 POTS, 10/100 Base T, RF VideoActive Star Gigabit Ethernet Interface per 32 Homes 2 POTS, 10/100 Base T, RF VideoPON Gigabit Ethernet Interface per 32 Homes 2 POTS, 10/100 Base T, RF VideoWDM PON 100 Mbps Fast Ethernet per Home 2 POTS, 10/100 Base T, RF Video

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Capital Cost per Home Passed

Capital Cost per Home Passed

8121119

2211

3483

6212

715940

1869

2954

5790

0

1000

2000

3000

4000

5000

6000

7000

Urban Suburban Small Town Rural Remote

Rural

Deployment Scenarios

USDperHome

Home Run Architecture

PON Architecture

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Fiber Loop Cost Breakdown (Home

Run Fiber)Capital Cost per Home Passed (Home Run Fiber)

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0


Rural

Deployment Scenario

USDperHome Feeder Loop

Distribution Loop

Central Office Building

Pole Make Ready Costs

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Fiber Loop Cost Breakdown (PON)

Capital Cost per Home Passed (Passive Optical Network)

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0


Rural

Deployment Scenarios

USDperHome

Feeder Loop

Distribution Loop

Central Office Building

Pole Make Ready Costs

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(Urban Deployment)Capital Cost per Home Served (Urban Deployment)

0

500

1000

1500

2000

2500

30003500

4000

4500

5000

0 20 40 60 80 100

Percent Penetration

FTTH

CapitalCostpe

rHome

Served


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(Suburban Deployment)Capital Cost per Home Served (Suburban Deployment)

0

500

1000

1500

2000

2500

30003500

4000

4500

5000

0 20 40 60 80 100

Percent Penetration

FTTH

CapitalCostperHome

Served


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(Small Town Deployment)Cap ital Cost per Home Served (Small Tow n D ep loyment)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

0 20 40 60 80 100

Percent Penetration

FTTH

CapitalCostperHom

eServed

Home Run Fiber Ac tive Star Passive Star (PON) WDM PON

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(Rural Deployment)

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(Remote Rural Deployment)

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