1

KT’s FTTH Service ScenarioKT’s FTTH Service Scenario

September 4, 2006

Jong-Lok Yoon

2

ContentsContents

TelcoTelco’’s Threat & Opportunitys Threat & Opportunity

TelcoTelco’’s Challenge to Crisis (C2C)s Challenge to Crisis (C2C)

Service Mega Trends & Service Mega Trends & KTKT’’ss Service EvolutionService Evolution

System & Network StrategySystem & Network Strategy

Pilot ProjectsPilot Projects

Concluding RemarkConcluding Remark

II

IIII

IIIIII

IVIV

VV

VIVI

2

TelcoTelco’’s Threat & Opportunitys Threat & OpportunityII

4

Limitless Competition [1]Limitless Competition [1]

Internet service

Broadband Internet penetration rate in Korea

158.8

52.9

27.2

0.252.34

3.5

(Cents/Mbps)

Internet connection fee per 1Mb/s

1994 1996 1998 2000 20022000 2001 2002 2003 2004 2005 2006. 7

0%

20%

40%

60%

80%

100%

Bro

adb

and

pen

etr

ati

on

rate

(3,870)

(10,410)

(13,720)83%

∗

: Number of household [thousand]∗

23%

47%

67%

(11,920)

73%72%

63%

3

5

Limitless Competition [2]Limitless Competition [2]

(unit: thousands)

* MIC (Ministry of Information and Communication)

WirelessInternet

CableModem

DialModem

W-LANISDNxDSL WirelessInternet

CableModem

DialModem

W-LANISDNxDSL WirelessInternet

CableModem

DialModem

W-LANISDNxDSL

(unit: %)

* NIDA (National Internet Development Agency of Korea)

Fixed Line/Mobile subscribers in Korea Types of Internet connection

Mobile subscribers surpass fixed line

6

Biz Boundary Collapse [1]Biz Boundary Collapse [1]

Competition beyond the traditional value chain boundary

Producing Brokering Delivery Service Providing

Future

Competition within the same value chain boundary

4

7

Biz Boundary Collapse [2]Biz Boundary Collapse [2]

IIC(Inter Industrial Collaboration)

Intra-IndustryConvergence

Inter-IndustryCollaboration

Stand-Alone Convergence/Fusion

Next Growth EngineNext Growth EngineCurrent Growth EngineCurrent Growth Engine

Semi-Conductor

Oil & Chemical

ICT

Vehicles

ShipsRemoteMedical

CareU-Vehicles

Network PC

Home Robot

Nano ITDNA

Computer

Bio-ITBio

Sensor

ICT: Information & Communication Technology, BT;BioTech., NT:Nano Tech.ET: Environment Tech.ST:Space Tech., CT:Culture Tech.

ICT,BT

NT,ET

ST,CT

ICT,BT

NT,ET

ST,CT

Based on ICT & Networks

8

Asymmetric Regulations in KoreaAsymmetric Regulations in Korea

Telecommunication-Broadcasting convergence services

The law and regime of Telecom/broadcasting convergence services are not yet fixed in Korea

Internet/VoIP of SO/MSO is permitted by law

IPTV of Telco is prohibited by law

Dominant market leader regulation

Definition of dominant market leader

Single company which has more than 50% of market share

Less than three companies which have more than 75% of market share

Regulation

Ban of bundle services

Permission of price & agreement of services by government

LLU

5

9

Network NeutralityNetwork Neutrality

Definition

“All Internet sites and traffic must be treated equally”

3 basic principles

Non discrimination

Interconnection: Right & obligation for mutual interconnection

Access: Connection between end-users(human/modem/switch/device)

Key issues (Telco’s view points)

Net neutrality will retard the network innovation

Net neutrality will collapse the free competition system (Different service & priority, different price)

The latest news

The USA Senate rejected the net neutrality (06/27/2006)

10

TelcoTelco’’s Challenge to Crisiss Challenge to CrisisIIII

6

11

Market Value of Traditional TelcoMarket Value of Traditional Telco

Google (16.2)

0.5

1.0

0.0

1.5

2.0

3.0

4.0

5.0

>10.0Yahoo (7.9)

Value in-flow

Value out-flow

High

Low

High Low

Market ValueSales

Value dragging

Operating Profit Growth

Microsoft(5.2)

Disney (2.0)

KT (1.4)KTF (1.4)

Brokering or Service Providing

Delivery(Traditional Comm.domain)

Ebay (9.5)

Verizon (1.8)

12

Premium Services [1]Premium Services [1]

• Free/cheap, Unstable Quality, Unmanaged, Insecure

• Fee-based, Guaranteed Quality,

• Managed, Secure

Strategic

Direction

Differentiated services on differentiated infrastructure

step 1: basic application services over the premium infra

step 2: innovative ICT-based life/work application services

over the consolidated premium infrastructure

Analogy From plain seaside to water park

Quality-guaranteed, secure IP network

Quality-guaranteed, secure IP networkBest Effort InternetBest Effort Internet

7

13

Premium services [2]Premium services [2]

Premium Services through the Premium N/W

Service differentiation by network differentiation

Premium network with the high level of QoS & availability

• Strengthen bandwidth control of wire & wireless networks

• Offer 99.99 ~ 99.999% of availability for broadcasting service

BestEffort

Services

PCNon-PC Edge Router

Best effortNetwork

PremiumNetwork

Access Network

(wire/wireless)

Premium Services IP-TV,

Video-Conferencing,Video-Learning,

etc..

RGW

14

Importance of TPS (Triple Play Service)

Incremental revenue Restraining churn-out

Benefit of TPS for customer

Convenience: single bill, single A/S call number, etc

Economy: discounted price (bundle effect)

Incremental Revenue

Video

Data

Voice

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

Cable + Data Cable + Phone Data + Phone Cable + Data+ Phone

Total Service ProviderTotal Service Provider

0

2

4

6

8

10

12

2004E 2005E 2006E 2007E 2008E 2009E 2010E

Retained Voice High-Speed Date Video

Video

Source : 2005, Telcordia

Data

Voice

0.9 %

1.0 %

1.2 %

0.7 %

Source : 2005, Cox

8

15

Harmonizing the Free & Charged ServicesHarmonizing the Free & Charged Services

Free services round up customers and extend the market size

Examples: UCC, P2P, On-demand services (free & best-effort)

Charged services differentiate the services from the competitor’s and increase the revenue

Examples: IPTV, VoIP, Video telephony, On-demand services (charged & premium)

16

Service Mega Trends & Service Mega Trends & KTKT’’ss Service EvolutionService EvolutionIIIIII

9

17

Visitors (per million)Visitors (per million) New York TimesNew York Times

You TubeYou Tube

Personalization & ParticipationPersonalization & Participation

Personal Broadcasting, Video Blog

Exceed 4.8 Million Channels just in 10 months

Afreeca Personal Broadcasting TV in Korea

18

Source : BBCSource : BBC

On Demand Broadcasting (VoD casting)On Demand Broadcasting (VoD casting)

10

19

UCC: User Created Contents

Potential of VoD Casting in News ServicePotential of VoD Casting in News Service

Pseudo Real timePseudo Real time comparing to Conventional VoD

Simple & EasySimple & Easy comparing to Web surfing

Quality SelectiveQuality Selective comparing to IPTV or UCC

Deep & DetailDeep & Detail comparing to IPTV or UCC

Personalization Personalization comparing to Conventional TV

20

KT Vision 2010KT Vision 2010

Vision2010

VisionVision201020102004 2005

NewGrowthBase

NewNewGrowthGrowthBaseBase

GrowthEngineGrowthGrowthEngineEngine

UbiquitousSociety

UbiquitousSociety

2006

2010

WiBroWiBroIP TVIP TV

ContentsContents

MediaMedia

IT ServiceIT Service

Convergence Voice & Date

ConvergenceWire & Wilreless

FTTH, BcN, IPv6, All IP Network

ConvergenceCommunication & Broadcasting

VendorVenture

Carrier

11

21

KT 2.0 [1]KT 2.0 [1]

ICT Mega Trends

Blue OceanBlue Ocean

Solution ProviderSolution Provider

Venture SpiritVenture Spirit

CreativenessCreativeness

Mix-Match IndustryMix-Match Industry

Dynamic IdentityDynamic Identity

Red OceanRed Ocean

Network ProviderNetwork Provider

Labor-intensiveLabor-intensive

Traditional ILECTraditional ILEC

Unity & Reconciliation Unity & Reconciliation

Public CompanyPublic Company

Telco 1.0 Telco 2.0

Network

Technology

Convergence

Voice Data Computing Power

Bandwidth Security Intelligence

Service Convergence Inter-Industry Collaboration

Technological and Industrial Trends requires Telco to shift to Telco 2.0 Management Paradigm.

Tech & Industry Trends

Management Paradigm Shift

22

KT 2.0 [2]KT 2.0 [2]

Network provider Solution provider

Telco will be transformed into “total solution provider”through the new business paradigm shift.

As-Is

Mid-term

Communication Service Provider

Multimedia Service Aggregator

TotalSolution Provider

Communication/Broadband Biz

Cultural Complex Biz

Contents Biz

Computing Power Biz

S/W Solution Biz

Knowledge Consulting Biz

New Growth Engine

To-Be Model Potential Partner

12

23

KT 2.0 [3]KT 2.0 [3]

Open R&D and IIC Strategy

Tech. Environment

Value Value IntegrationIntegration

LeaderLeaderKT Lab@Research

KT Lab@Industry

SearchTech.

TradeTech.

SellTech.

DevelopTech.

ObtainTech.

KT Lab@Univ.

KT is seeking more cooperative relationships for core technology & New Biz. with Open R&D & IIC Strategy.

u-Construction

u-Auto Mobileu-Hospital

u-Environment

KT

Open R&D IIC : Inter-Industry Collaboration

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Format : H.264Middleware : ACAPSecurity : CAS

Service Provider

StableNetwork

Security

SeamlessService

RobustSystem

Customer

Economics

Variety of Services

High Quality Service

KT IPTV Services [1]KT IPTV Services [1]

Service & Technical Requirement

13

25

11

Real VoD

Subscription VoD

Near VoD(PPV)

33

Terrestrial Channels

Program Provider

PPC (Pay per Channel)

T-information

T-Commerce

T-Entertainment22

T-Communication

T-Learning

KT IPTV Service [2]KT IPTV Service [2]

Service Classification

Conventional TVConventional TV

VOD ServicesVOD Services

Bidirectional ServicesBidirectional ServicesShopping, Banking, Delivery etc.

Weather, Traffic News etc.

Game, Karaoke etc.

SMS, Messenger

Language school etc.

26

System & Network StrategySystem & Network StrategyIVIV

A drawing of the first Ethernet system by Bob Metcalfe

14

27

Why FTTH ?Why FTTH ?

QoS / Bandwidth

To provide minimum bandwidth guarantee regarding to user traffic

Service Availability

Availability required for broadcasting service :

~99.999% 0.4min/month of service discontinuity

OPEX Saving

More than 50% reduction effect for RBOC (2005. Telcordia)

10% failure rate reduction effect for KT

45% operation cost down effect for KT

28

System requirementsSystem requirements

FTTH SystemRequirements

•Beyond the Bandwidth• QoS manageability•High Availability

•Beyond the Bandwidth• QoS manageability•High Availability

•To setup reasonable trade off between complexity vs cost by using mass producible components

•To promote system development in worldwide

•To setup reasonable trade off between complexity vs cost by using mass producible components

•To promote system development in worldwide

•Long Life cycle•Easy management•Minimized Inventory cost

•Long Life cycle•Easy management•Minimized Inventory cost

•Green/Brown field•Easy connection using the existing customer premise infrastructure

•Green/Brown field•Easy connection using the existing customer premise infrastructure

OPEX saving technology

TPS platform

Deployable in any field

Standardized technology

15

29

Commercial FTTH Deployment StatusCommercial FTTH Deployment Status

Massive deployment in the metropolitan, single dwelling unit area

20 thousands subscribers already connected at the end of 2005

About 120 thousands subscribers more to be connected by the end of 2006

Internet & on demand services

Massive deployment in the apartment area

To provide FTTH service in the newly built / remodeled / existing MDU

Multicasting(IP-TV…) / symmetric(VoIP…) / personalized services

NOW

Future

30

KT’s WDM-PONKT’s WDM-PON

CPE box

basementMDF

RNFx/UTP

/TP

1.25Gbps

CO

OLTONU

λ1· · · λ32

1.25Gbps×32 ch

32 split

1.25Gbps

MDU solution

OLTONTRN

M/H

SDU solution

λ1· · · λ32

100Mbps×32 ch100Mbps

100M WDM-PON

1G WDM-PON

Development project group

• Multiple vendors are participating in this development project group

Joint development

2003~2005

• Joint development bet KT & NoveraOptics Korea

2006~

16

31

SDUSDU

MDUMDU

FTTH RoadmapFTTH Roadmap

2005-20062005-200620102010

Seoul

(20,000)

Gwangju

(2,000)

SDUSDU

MDUMDU

FTTC + UTP/VD니

Internet Access

FTTH

Triple Play Service

AONAON

WDMWDM--PONPON

EE--PONPONNationwideNationwideNationwide

32

Pilot ProjectPilot ProjectVV

17

33

FTTH Pilot Project in Gwangju City FTTH Pilot Project in Gwangju City

Outline

Title : FTTH(Fiber to the Home) Service Development Pilot Project

Period : Y2005 ~ Y2009 (5 years)

Total Budget : 119.4 Billion Won ($119.4 Million)

Goals

Deploying FTTH infra to 20 thousand subscribers in 5 years

Providing Convergence Services through 100Mb/s Optical Pipe

Technical Evaluation of FTTH based Service Platform

34

FTTH ServiceFTTH Service

KT Megapass (FTTH)Internet Access

KT HomeN VoD (Movie, TV Drama, Animation, Kids Education, Sports, Health, etc)

Video on Demand

Electronic Program Guide Service (EPG)

Network-based Personal Video Recorder (N-PVR)

Network-based Time-shifted TV Service

Network-based Video Recording Service

Value Added Service

IP TV : over 22 channelsBroadcasting

Service Main Screen

EPG, IPTV

N-PVR

VOD

IP STB for FTTH Service

Services Details

18

35

FTTH Deployment in GwangjuFTTH Deployment in Gwangju

FTTH Service CenterHead-End, Server Farm,

Routers, Monitoring System

KT North Gwangju BranchWDM-PON OLT

KT South Kwangju BranchWDM-PON OLT

KT Sang-MuBranch

WDM-PON OLT

WDM-PON based

FTTH Area

36

FTTH Service PlatformFTTH Service Platform

KT HomeNVOD DB Srv

KT HomeNVoD Srv.

TV UI N-PVR Srv

Firewall

App. Srv(EPG)

IP TV Monitoring System

IP-TV HEIP-TV HE

KORNETKORNET

TV UI Server/N-PVR Server FarmAAA Server Farm

EPON OLT Internet

POTS

IP TV

IP STB

OLT FDF

RN(1:32)- WDM-PON : AWG- E-PON : Splitter

IDF

IDF

ONT

Central Office FTTH Feeder & Distribution Line Home

MDU USE

SDU UseDistribution

Fiber

DistributionFiber

OpticaOutlet

IDF OpticalOutlet

UTPWDM-PONOLT

Drop Cable

OJC

ONT

In-DoorCable

OJC……

1

32

1

32

1

1FeederCable

IPTV Head End System

KT HomeNAuthentication Server

19

37

National BcN Pilot ProjectNational BcN Pilot Project

Incheon

(200)

Area

5 Big Cities (Seoul, Incheon, Daejeon, Daegu, Gwangju)

Services

Voice and Data Convergence

• Video Phone, Video Messaging

• High quality Voice Phone

Wire and Wired Convergence

• WCDMA Connected

Communication and Broadcasting Convergence

• T-Commerce, TV Portal

U-Service

• U-Learning, U-Farm

Daejeon(200)

Gwangju

(200)

Seoul(200)

Outline Y2005-2006 Deployment

BcN : Broadband Convergence Network

( ) Number of Subscribers

Daegu(150)

38

National BcN InfrastructureNational BcN Infrastructure

메시징서버

Open Service G/W

Media Server

SSW(POTS,MMS)

L3 SwitchFirewall

Open Service Application

Server

Shared Platform

PLS/IM

Hub

IP-TV

SIPVideo Phone

WGW

Wireless

KTF

SIP Video Phone

PC

SIP Video Phone

VDSL

PC

PONONU PON OLT

Seoul

Gwangju

SSW(MMS)

L3 SwitchFirewall

AAA

BcN Backbone

Contents

VDSL

Daejeon

WibroOther

Consortium N/W

KOREN

Hub PONONU PON OLT

VDSLPC

Connection Control Platform

Access&ControlPlatform

NumberingVDSL

PC

PC

VDSL

PSTN

SIP Video Phone

20

39

Concluding RemarksConcluding Remarks

Business boundary has already collapsed

Telco should leap up to change from network provider to total solution provider

Growth Strategy

Service differentiation through FTTH

Service migration for PC to TV and portable devices

Strengthen the IIC(Inter-Industrial Collaboration)

40

Thank You!