Towards Technologically and Competitively Neutral Fiber to the Home (FTTH) Infrastructure

Anupam Banerjee, Marvin Sirbu Carnegie Mellon University Pittsburgh, PA 15213 USA
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Background
$ Telecommunications
$ Competition

Act of 1996

in the Last Mile $ Broadband Access $ Universal Access

In the context of FTTH, what does it take to have competition in the last mile?

Models of Competition in Telecommunications

$ Facility
Home 1 Network 1
Service Provider A

Based Competition

Central Offices

Home 2

Separate Networks Network 2

Service Provider B

Data Link Layer Equipment ATM, Gigabit Ethernet, SONET

Models of Competition in Telecommunications

$ UNE

Based Competition
Central Office

Home 1

Service Provider A

Network

Data Link Layer Equipment

Service Provider B

Home 2

Models of Competition in Telecommunications

$ Open

Access Based Competition

Central Office

Home A
Service Provider A

Network

Home B

Common Data Link Layer Equipment

Service Provider B

FTTH Architectures
Run $ Active Star $ Passive Star (Passive Optical Network PON) $ Wavelength Division Multiplexed Passive Optical Networks (WDM PON)
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$ Home

Home Run Architecture

ONU C e n tra l O ffice I n fra stru cture D e d i c a te d fib e r to e a c h H o m e

C e n tra l O ffice Equipm e nt O L T P o rt O N U O p tica l N e tw o r k U n i t O L T O p tica l L i n e T e r m i n a t i o n

Dis tr ibu t io n L o op

Fee der L o o p

Architecture Home Run

Brief Description Dedicated fiber from the Central Office to each Home

Shared Infrastructure Central Office

Active Star Architecture

ONU C e n tra l O ffice I n fra stru ctu r e 1 S h a r e d Fe e de r fib e r

C e n tra l O ffice Equipm e nt OLT 32 R e m o te N o d e w ith A c ti v e E l e c t r o n i c s Equipm e nt

Dis tr ibu t io n L o op

Fee der L o o p

Architecture Active Star

Brief Description Signals multiplexed at Remote Node that lies between Central Office and Home

Shared Infrastructure From theCentral Office to the Remote Node

Passive Star Architecture (PON)

ONU C e n tra l Office Infra stru cture

S h a r e d Fe e de r fib e r

C e n tra l O ffice Equipm e n t OLT

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P a ssive S plitte r Com b i n e r

Dis tr ibu t io n L o op

Fee der L o op

Architecture Passive Star

Brief Description Signals power optically split at Remote Node; Remote Node not powered

Shared Infrastructure From Central Officet to Remote Node

WDM PON
ONU C e n tra l Office Infra stru cture
1 2

S h a r e d Fe e de r fib e r

1, 2, 3, 4, 5

...

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3 4 5

C e n tra l O ffice Equipm e n t

OLT 32 P a ssive S plitte r Com b i n e r

Dis tr ibu t io n L o op

Fee der L o op

Architecture WDM PON

Brief Description Signals power optically split at Remote Node; Feeder fiber carries multiple wavelengths

Shared Infrastructure From Central Officet to Remote Node

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Competition in FTTH
$ Facility
Home 1 FTTH Network 1
Service Provider A

Based Competition

Central Offices

Home 2

Separate Networks FTTH Network 2

Service Provider B

Data Link Layer Equipment ATM, Gigabit Ethernet, SONET

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Non facilities based Competition in Home Run Fiber

$ Individual
Home 1 Network Central Office
Service Provider A

Fiber can be rented out as a UNE

Data Link Layer Equipment

Service Provider B

Home 2

= Home Run Fiber supports Competition at

the Data-Link layer and in Higher layers services

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Non facilities based Competition in PONs and Active Star

Central Office Home 1 Network Data Link Layer Equipment
Service Provider B Service Provider A

Home 2

Splitter (Remote Node)

= PONs (and Active Star) do not support

Competition at the Data-Link layer; they support Competition in Higher layers services
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Non facilities based Competition in WDM PONs

= Individual Wavelength can be rented out as a

UNE
Hom e 1 1 Network 1 2

Centra l Office
Service Provider A

Data Link Layer Equipment 2 Splitte r Hom e 2 AWG

Service Provider B

= WDM PONs support Competition at the

Data-Link layer and in Higher layers services

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What do we mean by Competition in the Last Fiber Mile?

Voice
Traditional Open Access can

Network & Higher Layers

Video Data

support competition for Voice and Data and Switched Digital Video
Broadcast Video is most

economically delivered using a wavelength running Multiplexed Multichannel Video

Competitors can choose different

Data Link Layer

ATM Ethernet SONET AM for Analog Video Multiple

data link layer technologies to run over a particular fiber (or a particular lambda) rented out as a UNE Competitors can use different wavelengths to provide service
Competitors use different Fibers;

Optical Layer Physical Medium

Wavelengths

Multiple Fibers

Multiple fibers running to the home

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Architectures and Competition

Home Run Competition in Data Link Layer Services Competition in Voice, Data, Digital Video Competition in Broadcast Video Cost per Home Served Easy PONs Hard Active Star Hard WDM PONs Easy

Neutral Neutral Neutral Neutral Easy Hard Hard Easy

?
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Economic Feasibility of Competition

$ General

Perception: Home Run Fiber is more

expensive than PONs; WDM PONs are not economically feasible today
$ Our

arguments: Home Run Fiber enables DataQuestions:

Link layer competition while PONs do not

$ Research
$ By

how much is Home Run Fiber more expensive than PONs? $ Which forms of competition are Economically Feasible?
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FTTH Engineering Cost Model

Deployment Urban Suburban Small Town Rural Remote Rural Homes per sq. mile 3389 1602 217 85 20 Homes served per CO 16,135 16,201 10,184 5,871 3,018

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FTTH Engineering Cost Model

Architecture Home Run Active Star PON WDM PON OLT Interface 100 Mbps Fast Ethernet per Home Gigabit Ethernet Interface per 32 Homes Gigabit Ethernet Interface per 32 Homes 100 Mbps Fast Ethernet per Home

ONU Interface 2 POTS ports, 10/100 Base T, RF Video 19

Capital Cost per Home Served (Urban Deployment)

Capital Cost per Home Served (Urban Deployment)
FTTH Capital Cost per Home Served 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 0 20 40 60 80 100 Percent Penetration Home Run Fiber Active Star Passive Star (PON) WDM PON

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Capital Cost per Home Served (PON Deployments)

PON deployment in Urban, Suburban, Small Town, Rural and Remote Rural Areas
FTTH Capital Cost per Home Served 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 0 20 40 60 80 100 Percent Penetration Urban Suburban Small Town Rural Remote Rural

Remote Rural Rural Small Town Suburban Urban

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Capital Cost per Home Served

Urban and Rural Deployments
FTTH Capital Cost per Home Served 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 0 10 20 30 40 50 60 70 80 90 100 Percent Penetration Home Run Fiber (Urban) PON (Urban) Home Run Fiber (Rural) PON (Rural)
Urban Deployment Rural Deployment

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Competition in FTTH: Economic Feasibility

n n

Facilities based Competition is unlikely as FTTH is a decreasing cost industry Wavelength based competition is infeasible in the near future Data Link Layer Competition (and competition in Broadcast video) is easy in Home Run architecture and hard in PONs; and therefore has an economic premium Competition in Data, Voice and Switched Digital Video is easy in all architectures
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The Cost of Data-Link layer Competition..

$ Cost Difference (per Home) between

Home Run Fiber and PON

Deployment Scenario Urban Suburban Small Town Rural Remote Rural Cost of Competition per Home Served ($) @ 100% penetration 270 350 510 690 560

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Towards Economically Efficient and Competitive Neutral FTTH Infrastructure

$ Home

Run Fiber is Competitively Neutral.. $ But is it 'economically efficient'? $ Can we have Data-Link layer at a lower cost than Home Run Fiber?

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A Traditional PON Deployment

Neighborhood 1 Splitter 1 Central Office Infra structure

PON1

Central Office OLT Equipment

PON2

Central Office OLT Equipment

Splitter 2 Neighborhood 2

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Lowering the Cost of Competition: Home Run PON

Neighborhood 1 Central Office Infra structure Splitter 1 PON1
Central Office OLT Equipment

Central Office OLT Equipment

Splitter 2

PON2

Neighborhood 2

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Lowering the Cost of Competition: Aggregation PON

Neighborhood 1 Splitte r 1 PON1
Central Office OLT Equipment

Centra l Office Infra structure

Central Office OLT Equipment

PON2 Splitte r 2 Neighborhood 2

AGGREGATION of Splitters

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Capital Cost premium for an architecture that enables Data-Link layer Competition
Home Run PON vs. Traditional PON
Deploym ent Scenario Cost of Competition per Home Monthly Cost of Competition @ Served (Capital Cost) ($) 20% discount rate ($/Month) Penetration Penetration 100% 65% 30% 100% 65% 30% 100 180 480 2 3 9 180 260 670 2 4 12 340 530 1140 6 9 19 530 730 1460 9 12 24 420 660 1570 7 12 26

Urban Suburban Small Town Rural Remote Rural

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Real Option to Scale Bandwidth..

= In addition to foreclosing competition

at the Data-Link layer, PONs also impose bandwidth sharing

= Incremental Cost of Home Run fiber

may be viewed as a Real Option to unlimited bandwidth (by scaling bandwidth independently of homes sharing a feeder fiber in a PON / Active Star)
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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 is driven by Competition that the Competitively Neutral architecture enables?
$

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Competition in FTTH & depends on

FTTH Architecture Ownership and Industry Structure

First Mile Costs

Community and Market Characteristics

Competition in FTTH
Second Mile Costs

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The Second Mile Problem!!

$ The

viability of competition in the last mile also depends on:

$ The

cost of bringing voice, video and data services to a Central Office (The second mile costs) from a Regional Node $ The number of subscribers served by a Central Office $ Distance between Central Offices $ Demand for Services $ ..
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Non Facilities based Competition

Central Office Home 1

Service Provider A

Network

Data Link Layer Equipment

Service Provider B

Home 2

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Vertical Integration and Anti-competitive Behavior ?

Central Office Home 1

Service Provider A

Network

Data Link Layer Equipment

Service Provider B

Home 2

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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 Economically more Efficient than Home Run $ A Competitively Neutral architecture is a necessary (but not sufficient) condition for data link layer competition
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Contribution of this paper

$ Defined

taxonomy of competition in FTTH $ Clarified relation of architecture to Data Link layer competition $ Understood the economics of FTTH architectures in different deployment scenarios $ Estimated Cost of Data-Link layer Competition $ Devised compromise architectures to enable competition at lower first capital cost $ Identified institutional and economic issues for further 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 and

Results

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Engineering Cost Model

$ Estimates

Capital Cost per Home Passed and Capital Cost per Home Served for FOUR architectures and FIVE deployment contexts $ Aerial Fiber deployed on poles $ Sufficient Feeder and Distribution fiber for the entire community installed regardless of the number homes that sign up for service
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Cost Model
CPE Cost FTTH Capital Cost per Home Passed FTTH Loop Infrastructure Cost Local Loop Cost FTTH Capital Cost per Home Served

Assumptions

Total FTTH Capital Cost

Central Office Cost FTTH Architecture Deployment Scenario

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Local Loop Costs

F e e d e r L o o p C o sts D istrib u ti o n L o o p C o sts

D ro p L o o p C o sts O th e r D e p lo y m e n t C o sts

Total Local L o o p C o s ts

O u tsid e P la n t E q u ip m e n t

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Data from HAI Model 5.0 A

Cluster 5 Cluster 4 R5 Cluster 6 R6 R4 Central Office R1 R2 Cluster 2 R3 Cluster 3

Cluster 1

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Data from HAI Model 5.0 A

Central Office (CLLI) No. of Clusters 23 23 14 10 18 Total no. of Homes 16,135 16,201 10,184 5,871 3,018 Housing Density (Homes/sq. mi.) 3,389 1,603 218 86 20 Average Radial Distance from CO to each cluster (ft) 4,730 9,089 15,165 18,662 32,763

PITBPASQ (Urban) HMSTPAHO (Suburban) CHTTPACT (Small Town) TNVLPATA (Rural) CCHRPAXC (Rem ote Rural)

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Cost Model Assumptions

Deployment Urban Suburban Small Town Rural Remote Rural Homes per sq. mile 3389 1602 217 85 20 Homes served per CO 16,135 16,201 10,184 5,871 3,018 Ave. Feeder Loop length (feet) 6,960 12,396 24,012 37,054 42,084 Average Distribution Loop length 377 521 1,472 2,434 5,791 Drop Loop length Uniform(50,75) Uniform(75,150) Uniform(100,200) Uniform(150,300) Uniform(200,600)

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Equipment and Costs

Architecture Home Run Active Star PON WDM PON
Architecture Home Run Active Star PONs WDM PON

OLT Interface 100 Mbps Fast Ethernet per Home Gigabit Ethernet Interface per 32 Homes Gigabit Ethernet Interface per 32 Homes 100 Mbps Fast Ethernet per Home
Central Office Central Office Equipment (per 32 Equipment (per Homes) Home) $375 $800 $25 $2,375 $75 $20,000

ONU Interface 2 POTS, 10/100 Base T, RF Video 2 POTS, 10/100 Base T, RF Video 2 POTS, 10/100 Base T, RF Video 2 POTS, 10/100 Base T, RF Video
Optical Network Remote Node Unit (ONU) Equipment (per Home) $550 $550 $250 $650 $25 $1,500 $25

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Capital Cost per Home Passed

Capital Cost per Home Passed
7000 6000 USD per Home 5000 4000 3000 2000 1000 0 Urban Suburban Small Town Rural Remote Rural 812 715 1119 940 2211 1869 3483 2954 Home Run Architecture PON Architecture 6212 5790

Deployment Scenarios

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Fiber Loop Cost Breakdown (Home Run Fiber)

Capital Cost per Home Passed (Home Run Fiber)
6000.0 5000.0 USD per Home 4000.0 3000.0 2000.0 1000.0 0.0 Urban Suburban Small Town Rural Remote Rural Feeder Loop Distribution Loop Central Office Building Pole Make Ready Costs

Deployment Scenario

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Fiber Loop Cost Breakdown (PON)

Capital Cost per Home Passed (Passive Optical Network)
6000.0 5000.0 USD per Home 4000.0 3000.0 2000.0 1000.0 0.0 Urban Suburban Small Town Rural Remote Rural Feeder Loop Distribution Loop Central Office Building Pole Make Ready Costs

Deployment Scenarios

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Capital Cost per Home Served (Urban Deployment)

Capital Cost per Home Served (Urban Deployment)
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 0 20 40 60 80 100 Percent Penetration Home Run Fiber A c tive Star Passive Star (P O N) WDM PON FTTH Capital Cost per Home Served

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Capital Cost per Home Served (Suburban Deployment)

Capital Cost per Home Served (Suburban Deployment)
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 0 20 40 60 80 100 Percent Penetration Home Run Fiber Active Star Passive Star (PON) WDM PON FTTH Capital Cost per Home Served

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Capital Cost per Home Served (Small Town Deployment)

C a p ital Cost per Home Served (Small T o w n D e p loyment)
FTTH Capital Cost per Home Served 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 0 20 40 60 80 100 Percent Penetration Home Run Fiber A c tive Star P a s s ive Star (P O N) WDM PON

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Capital Cost per Home Served (Rural Deployment)

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Capital Cost per Home Served (Remote Rural Deployment)

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