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					     Alternatives for extending
   broadband coverage to under-
served EU regions, in the context of
      the Digital Divide Forum

             October 2004




                  -1-
                             LEGAL NOTICE

Neither the European Commission nor any person acting on behalf of the
Commission is responsible for the use which might be made of the following
information



                                  EC Contact

Paulo de Sousa
Head of Sector
DG Information Society
Email: paulo.desousa@cec.eu.int




                                       -2-
Table of contents
1.     Executive summary ..........................................................................................................................5

     1.1.     Background and objectives.......................................................................................................5

     1.2.     The rural broadband problem ...................................................................................................5

     1.3.     The costs of rural broadband ....................................................................................................6

     1.4.     Overview of technologies.........................................................................................................6

     1.5.     Broadband services...................................................................................................................8

     1.6.     Scenario cost-benefit model .....................................................................................................9

     1.7.     General conclusions................................................................................................................10

     1.8.     Isolated scenario conclusions .................................................................................................12

     1.9.     Scattered scenario conclusions ...............................................................................................13

     1.10.       Small town scenario conclusions........................................................................................15

2.     Introduction, background and objectives........................................................................................16

     2.1.     Broadband and the rural environment ....................................................................................16

     2.2.     Importance of broadband communications.............................................................................17

     2.3.     Provision of rural broadband services ....................................................................................17

     2.4.     Background to the report ........................................................................................................18

     2.5.     Options for rural communities................................................................................................19

     2.6.     Report methodology ...............................................................................................................19

     2.7.     Cost data in this study.............................................................................................................19

3.     Broadband services.........................................................................................................................20

     3.1.     What is broadband? ................................................................................................................20

     3.2.     Broadband service parameters................................................................................................20

     3.3.     Applications and their requirements .......................................................................................20

4.     Applicable technologies .................................................................................................................21

     4.1.     Solutions using legacy infrastructure......................................................................................21

     4.2.     Solutions using brand new fixed infrastructure ......................................................................22

     4.3.     Terrestrial wireless solutions ..................................................................................................22



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     4.4.      Satellite solutions....................................................................................................................22

     4.5.      Broadcasting-based solutions .................................................................................................23

     4.6.      Futuristic technologies............................................................................................................23

     4.7.      Backhaul technologies............................................................................................................23

5.      Technology review .........................................................................................................................24

     5.1.      ADSL and the DSL family .....................................................................................................24

     5.2.      Cable TV networks: co-axial and hybrid-fibre-co-axial (HFC)..............................................27

     5.3.      Fibre to the user (FTTU) ........................................................................................................29

     5.4. Fibre for secondary backhaul in hybrid solutions: fibre to the building (FTTB), fibre to the
     cabinet (FTTC) ...................................................................................................................................30

     5.5.      Powerline communications (PLC)..........................................................................................31

     5.6.      Broadband wireless local loop (B-WLL)................................................................................33

     5.7.      Cellular radio technologies .....................................................................................................35

     5.8.      Wireless local area networks (W-LANs)................................................................................37

     5.9.      Satellite access........................................................................................................................39

     5.10.         Broadcasting based solutions..............................................................................................41

     5.11.         High altitude platforms .......................................................................................................42

     5.12.         Mesh radio: technical overview and basic features ............................................................43

     5.13.         Backhaul technologies........................................................................................................43

6.      Cost-benefit analysis ......................................................................................................................45

     6.1.      Methodology and description of model ..................................................................................45

     6.2.      Regional scenarios..................................................................................................................47

     6.3.      Technical solutions .................................................................................................................48

7.      References and acknowledgements ................................................................................................52

     7.1.      References ..............................................................................................................................52

8.      Appendix: modelling results...........................................................................................................54




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    1. Executive summary
         1.1. Background and objectives
The principal objective of this report is to provide a top-level analysis, with quantified costs and
benefits where possible, of the options for rural broadband. Targeting a readership of non-specialist
decision makers, its purpose is to give clear and straightforward information to communities and
policy-makers at all levels to help them understand the choices they have for rural broadband. This
information is at an overview level, and costs are by their nature “ball-park” costs. This report,
therefore, should be viewed as a signpost or a route-map. It will help individual communities or
decision-making bodies to find the way, though each will need to pursue more detailed investigations
in the light of its own circumstances.

The report is a compilation from a number of existing and authoritative reports and sources. These
include the IST 6th Framework research and development projects under the “Broadband for All” and
other strategic objectives. Where these projects have recently published results that add to the overview
conclusions, and to the extent that we are aware of them, the report takes them into account.

The EU Directorates G (Information Society) and D (Research) have commissioned this report. Their
aim was to add to existing material a new report that:

    •    is brief and straightforward

    •    is genuinely technology-neutral

    •    incorporates latest research and market findings

    •    provides clear details of choices

    •    if and where appropriate, guides policy and recommends actions.

         1.2. The rural broadband problem
The conventional view today is that rural broadband is a problem. This arises from three commonly
held propositions.

    •    Rural broadband is necessarily more expensive than in urban areas

If this is true, then these costs are likely to put off consumers and business, causing them to purchase
only in small numbers. Fear of low demand may reduce investor and service provider confidence,
deterring them from entering the market.

    •    The market will not of itself meet the need

If the market fails of itself to serve the need for rural broadband, then this will perpetuate the mounting
“digital divide” between rural and urban communities.

    •    Some form of subsidy or other intervention is required.

If intervention is indeed necessary, then it may take various possible forms. A measure of non-
commercial, that is subsidised, provision is one approach. Innovative use of public-private partnerships
is another. A potential strategy for public sector broadband users is “demand aggregation”. Public
sector actors promote broadband services through their own concerted and co-ordinated demand,




                                                   -5-
instead of fragmented, go-it-alone approaches. All schemes obviously depend on well-informed policy
for their economy, efficiency and fairness.

The last twenty years has shown convincingly the power of markets to deliver services and good value-
for-money in the telecommunications services industry. It is essential, therefore, that the market be not
ignored. Non-commercial and interventionist approaches should be undertaken only where necessary,
and even then non-commercial provision should exploit markets where possible.

         1.3. The costs of rural broadband
Rural broadband is generally believed to be more expensive than urban broadband for three reasons:
distance, remoteness and scale economies. Nonetheless, it is worth bearing in mind the power of
technological development to contest all these.

Rural dwellings and businesses are normally further away from the point of supply of a utility service
than their urban counterparts. The point of supply for rural broadband, or “point of presence”, is
typically a local exchange building or radio base station. Many solutions and especially the cheapest
operate only up to modest distances. Limited reaches preclude application for many rural customers.

Broadband services depend not only on the “last mile” supply, the access to the customer, but also on
interconnection from the local point of presence to a high-capacity backbone optical network. While
backbone networks provide plentiful high bandwidths and provide it very cheaply, they are only cheap
when their capacity is filled. Such networks, therefore, naturally serve continents, countries and cities,
but rarely visit rural areas. Remote communities must, therefore, bear extra costs for distant connection
between the local point of presence and a backbone network. This linkage to a main network node is
known as backhaul or the “middle mile”. The cost of backhaul increases with remoteness, but is small
or minimal in the urban environment.

Finally, broadband technologies frequently depend on platforms having high basic costs but a
capability to serve many, perhaps a few hundred or more, connections. There is thus often a scale
economy that cannot be realised in a rural community, raising unit costs. Technology can play a major
role here, since it may succeed over time in reducing the minimum operational size of a platform. This
shifts the scale economy, making the technology available to a wider customer base.

         1.4. Overview of technologies
Table 1 below gives a qualitative glance at the technologies available for broadband access delivery.
Table 2 provides a reference list of commonly used acronyms, while the technologies are explained in
detail in sections 4 and 5.
Table 1 Overview of technology solutions

                                           Near-reach            Middle reach          Unlimited reach
                                           <10 km                10 – 100 km
Fixed                New                                         HFC
transmission         infrastructure
                                                                 Optical fibre
medium
                                                                 (FTTU)
                     Legacy                ADSL, HDSL,           HFC
                     infrastructure        VDSL
                                                                 PLC (medium and
                                           PLC (low voltage      high-voltage
                                           network)              networks)
Non-fixed                                  B-WLL                 B-WLL 2-10 GHz        Satellite
transmission                               unlicensed            (MMDS)
                                                                                       HAP
medium
                                           B-WLL 10-40           3G Cellular radio
                                           GHz (LMDS)
                                                                 WiMax W-LAN



                                                   -6-
                                           W-LAN
Table 2 Acronym list for broadband technologies

Acronym              Explanation
2G                   Second-generation (cellular radio)
3G                   Third-generation (cellular radio), also known as UMTS
ADSL                 Asymmetric DSL
B-WLL                Broadband WLL
CATV                 Cable television
DSL                  Digital subscriber loop (family of technologies ADSL, HDSL and VDSL)
FTTB                 (Optical) fibre to the building
FTTC                 (Optical) fibre to the cabinet
FTTU                 (Optical) fibre to the user
HAP                  High altitude platform
HDSL                 High bit-rate DSL
HFC                  Hybrid fibre-coaxial cable (a CATV distribution system)
LAN                  Local area network
LMDS                 Local multipoint distribution system
MMDS                 Multipoint multichannel distribution service
PLC                  Powerline communications
UMTS                 Universal Mobile Telecommunication Systems
VDSL                 Very high speed DSL
W-LAN                Wireless LAN
WLL                  Wireless local loop

Two principal features break down the technologies. The first (shown by rows) is their need of fixed
transmission infrastructure.

     •   Some methods of transmission rely on a fixed, physical medium such as copper wire, co-axial
         cable, electric power supply line or optical fibre between each user and the point of presence.
         This medium may have to be constructed anew. Sometimes legacy (existing) infrastructure
         will suffice.

     •   Other methods do not rely on a physical medium of transmission. These are overwhelmingly
         radio-based solutions.

The second feature (shown by columns) is the distance between the user and point of presence over
which the technology is operable. In some cases it is possible to extend the reach of a technology by
positioning remote supply points with means of interconnection (“secondary backhaul”) between the
remote supply points and main point of presence.

     •   Near-reach technologies work over a few kilometres. These will be applicable to some users
         in the rural environment, but will be mostly inapplicable in isolated communities.

     •   Middle-reach technologies work typically over a few tens of kilometres. These are applicable
         to large segments of the rural environment, though they can be rendered inoperable by terrain




                                                   -7-
         if, as an example, radio propagation needs a line of sight path that is unobstructed by hills and
         forests.

    •    Unlimited reach technologies are fundamentally distance-independent and so can serve almost
         any user. These include satellite and high altitude platform (HAP) solutions

         1.5. Broadband services
There are various definitions of broadband, and it is worth noting that working definitions have
changed and are changing with both time and place. A simple notion is anything perceptibly better than
a basic ISDN line. This implies a rate around or exceeding 256 kbps, although customers may accept
less if this is the best available to them. A common current understanding is “a service that is always
on, and can scale up to at least 2 Mbps” [1]. The eEurope Advisory Group, Working Group 1, suggests
[2] that “by 2008, Europe should aim to achieve bit rates ranging from a minimum of 2 Mbps upwards
with an evolution of up to four times higher as new applications, services and usage develop. In some
cases, 512 kbps may be sufficient as a starting speed to reach isolated users.”

It is useful to examine the user services that become possible with “broadband”, however it is defined.
It is these, and not theoretical technical definitions, that drive consumer demand. The number of
services is unbounded, and each has its own peculiar technical requirements. Nonetheless, it possible in
broad terms to identify a ladder of service types such that the most basic broadband service supports
only the first while the highest offering supports them all. In the interests of cost saving and financial
realism, a rural community may decide it can afford some but not all classes of service.

Class 1: simple messaging services

These include simple e-mail, instant text messaging, remote login, simple web and internet access,
electronic shopping and business, electronic government and chat. These services can operate at the
lowest bandwidths such as 256 or 512 kbps, although they are considerably more convenient and
enjoyable when enriched by higher bandwidths. Most users receive more data than they send, so these
services are compatible with asymmetric broadband (higher downstream than upstream capacity).
These services can tolerate latency. This is time delay to respond, and is typical of satellite links
because of the long distance the signals must travel.

Class 2: large file transfer services

These services are similar to messaging, but the messages contain larger quantities of data, perhaps
100’s kilobytes or megabytes as opposed to the tens of kilobytes envisaged for simple messaging. They
may be extended simple messaging services, for example rich-content internet surfing, electronic
catalogue shopping, remote healthcare, home working, remote working and business virtual private
networks (VPNs). Large-scale file transfer services include downloading of games, software,
educational material, films and other entertainment content. These services ideally require 1-2 Mbps or
higher, if the user is not to be kept waiting too long. As with class 1, class 2 services are compatible
with asymmetric links and can tolerate latency.

Class 3: unidirectional real time services

These are mainly broadcast services such as audio and video streaming, and radio and television
broadcasting. These services typically require high (at least 1.5 Mbps for video) or very high
bandwidths, and are inherently asymmetric. They can tolerate high latency as the data flow is one way
only.

Class 4: interactive real time messaging

These messaging services operate between users who are interacting one with another, for example for
interactive gaming, tele-education and tele-presence. These services ideally require 1-2 Mbps or higher,
need to be symmetric and cannot tolerate latency.




                                                   -8-
Class 5: bi-directional real time services include, video-conferencing, interactive video, interactive
gaming, integrated business telecommunications services supplied over a broadband link and wide area
networks for businesses. These typically require high or very high symmetric bandwidths. They cannot
tolerate latency.

Some broadband service delivery platforms have a dedicated channel to each user (for example ADSL
and fibre-to-the-user), while others have a shared channel that goes to many users. A feature of this
second type of system is contention for the bandwidth, because it is shared. In this type of system the
maximum instantaneous bandwidth obtainable exceeds by a large margin the average bandwidth a user
enjoys. Class 3 and 5 services cannot tolerate contention. Other classes can accept contention because
each user’s peak bandwidth requirement exceeds the mean, always provided the network has been
designed with enough overall capacity to meet consumer demands and patterns of usage.

         1.6. Scenario cost-benefit model
This study considers the cost factors of a number of single technology and hybrid technology
broadband solutions, and applies them in three rural community scenarios. These are an isolated
scenario, a scattered scenario and a small town scenario. This trio of base scenarios has been proposed
elsewhere, for example in [2], here representing typical but hypothetical micro-communities. The
results of this report show what such a community would have to pay for each solution. The model
does not try to generate cumulated and averaged results over whole regions or countries, but
concentrates on the decision factors faced in the community.

These scenarios are not accurate models of any particular location or European region, but simple
vehicles for technology comparison. Any real community must consider its situation in finer detail,
applying the model to its own unique characteristics. Terrain features may be very important. Some
radio solutions demand a line-of-sight path, obtainable perhaps in flatlands but not hilly regions.
Digging for physical infrastructure is much cheaper in soft ground than in rock, or where the local
water level calls for special protection.

Table 3 below shows the reference scenarios.
Table 3 Definition of reference community scenarios

                                          SMALL TOWN               SCATTERED           ISOLATED

Backhaul distance from point of           10                       25                  60
presence to main network node (km)

Mean loop length from point of            1.5                      4.5                 15
presence to user (km)

Number of user dwellings taking the       80                       40                  20
service

    •    The small town scenario is a clustered community in a rural area 10 km from a larger town,
         where 80 users take service and a majority are within the near-reach distance of the point of
         presence

    •    The scattered scenario is a more scattered community 25 km from a larger town, where 40
         users take service. Some are within the near-reach distance of the point of presence but
         perhaps half or more of them are not.

    •    The isolated scenario is a wilderness area with isolated dwellings whose centre is some 60
         km from a large town. 20 users take service. None (or hardly any) are within the near-reach
         distance of the point of presence, though most are within the middle-reach distance.




                                                  -9-
         1.7. General conclusions
This report presents data for choice and policy-making, and does not recommend any one technology
for rural broadband. In fact, it is not possible to do this. Regional situations are very disparate. More
fundamentally, the market is immature and growing rapidly, while technology is undergoing rapid
evolution. Broadband is developing in a liberalised market, rolling out more quickly than did cellular
mobile telephony in 1980’s before it was liberalised [3]. These factors should discourage us from
seeking centrally articulated master plans, unless the evidence was conclusive.

The main findings of this report are qualitative. Technology is moving quickly, impacting base factor
costs and scale economies as it does so. Some solutions on the near horizon, notably Powerline
Communications (PLC) and the WiMax version of Wireless LAN (W-LAN) technology, appear to be
potential disrupters in this market. The rural broadband market may be a minority of the total
broadband market, but it is still a large market attracting development focus. The scale economy, for
example, that made ADSL economic only when supplied to a large customer base of thousands is not a
fundamental one, but one that is yielding to scaled-down base station products.

Good quality cost data is very scarce. Section 2.7 provides more comment and detail on this point. The
data we have is approximate, summarised “broad brush” data that inevitably cannot take account of
every detail or development. Any figures quoted will be subject to challenge and debate, bearing in
mind that some of them will embody volume assumptions and technology projections. It is regrettable
that we do not have comparable data for HAPs and futuristic technologies. Data quoted for PLC
technology are very limited, and it has seemed right to quote two different costs for W-LAN (WiMax)
technologies to reflect divergent inputs.

Be very wary of trying to decide the answer now

A major recommendation of this report is that now is a very difficult time to develop a master plan for
rural broadband. While the cost data obtained in this report and presented in the appendix support
conventional wisdom that rural broadband will be more expensive than in towns, the vitality of
competitive provision suggests that the free market may be finding ways of serving the rural broadband
market. Despite the common perception that rural broadband will be a limited market that providers
may choose not to enter, competitive provision at prices comparing favourably with urban rates,
suggest that something very different may be starting to happen within the market [3]. Some of the
technologies being deployed, notably but by no means only WiMax, are at an early point on their cost
curves with costs falling more quickly than well-established technology.

Will rural broadband be more expensive than in towns?

The grounds for this belief are in section 1.3 above. Three things are contesting it. Firstly, the scale
economies dictating that broadband platforms must serve large numbers of customers are non-
fundamental. They may to some extent reflect little more than the fact that manufacturers started, as
one might expect, by attacking the urban market. The availability of ADSL platforms serving 16 or 10
customers cost-effectively, the “pizza-box DSLAMs” trialled in Australia and the USA [3], is a sign
that development can beneficially target the rural environment.

The second reason is the advent of improved wireless LAN technology, where the WiMax (IEEE
802.16) standard, still in course of development and standardisation, it is a potential disrupter. It offers
shared bandwidths up to 70 Mbps at as much as 50 km without requiring line of sight paths. Apart from
this, other medium reach radio technologies are much more expensive than the near-reach technologies
applicable in towns and clustered communities. Cost relativities are changing, and projects such as
BROADWAN [4] will be monitoring and taking part in developments carefully.

Thirdly, Powerline Communications (PLC) is a potential disrupter. Currently, PLC may be classified as
a very near-reach technology and so limited to towns. In that environment it appears to be cost-
competitive with the favourite ADSL technology while offering evolution potential to higher
bandwidths approaching 100 Mbps shared. The use of PLC transmission over the medium voltage layer
of the electricity network may extend this benefit out into the medium reach, addressing scattered and




                                                   - 10 -
maybe even isolated communities. Projects such as OPERA [5] will be carefully monitoring and taking
part in developments.

Will there be a limited market, and will providers choose not to enter that market?

Take-up figures, as shown in [3], [6] and elsewhere, suggest that user take-up of broadband in rural
areas where it is available does not lag urban areas but often matches and even exceeds them. Many
vigorous start-ups are entering the rural broadband market using ADSL and wireless solutions [3].
Incumbents, challenged by competing service providers, are planning to serve rural areas rather than
see them captured by innovative market entrants. This is a sound strategy for a competitive market,
since broadband links do far more than support new broadband services. They can offer traditional
voice and business network services in attractive packages that may be cheaper than traditional
equivalents. Broadband can imperil mature markets, and the wise incumbent reacts proactively to the
threat.

We must, therefore, critically assess the notion that some measure of subsidy or non-commercial
provision is appropriate or inevitable.

In general, competitive provision has been shown over the past twenty years to serve markets better
than monopolistic provision, or centrally controlled provision under the terms of service obligations. Of
course, governments may need to act to ensure that competition can operate effectively

Two arguments in favour of non-commercial provision need to be weighed very seriously. The first is
that demand aggregation may be a helpful policy. If public actors co-ordinate their actions, they will
seed markets with firmer demand than would have occurred under fragmented, go-it-alone
procurement. The second is that the cost of rural broadband, like many things, will be lower the more
volume economies the suppliers can exploit. The argument runs that a public commitment to a chosen
solution will underwrite those volumes. It might be valid to pursue this approach, were the marketplace
showing no signs of activity on its own.

Satellites and other solutions

Satellite solutions appear to some people to be the inevitable solution to the rural broadband problem.
In the recent past, satellite solutions have been the only choice for users unserved by DSL and cable
platforms. There will always be some locations that can probably be served in no other way.
Nonetheless, satellite solutions are expensive and limited in their performance and evolution potential,
while their costs rise very steeply if richer services are required. A 2 Mbps both way satellite service at
a five-year cost of €140,000 will appeal only to very specialised customers. Key issues in the
consideration of satellite broadband will be the cost trends for satellite services themselves, and the
likelihood that newer technologies will challenge satellite for providing cost-effective services in rural
areas. Industry sources (for example, [7]) claim that volume manufacture will give satellite solutions a
much more attractive price positioning. Taking as an example the “Satellite (2)” service in the model,
an asymmetric service at 512 kbps to the user and 128 kbps from the user, the present value of the costs
of five years’ service are currently €13,500 per user but would fall to €3,000 given a volume of
300,000 units. This looks very respectable against other possibilities in the isolated scenario, though
there are other options in a similar price range in the scattered scenario, and significantly cheaper
options in the small town scenario. On the other hand, the role of satellite as a backhaul medium and
even as a secondary backhaul medium within hybrid solutions with ADSL, PLC and B-WLL is quite
common in everyday services and trials. This is surprising in the light of our cost figures below, which
show radio as a substantially cheaper backhaul solution than satellite, and this leads one to wonder how
valid those base figures about satellite backhaul are.

Reference [2], a major input to the Digital Divide Forum’s deliberations, contains graphs showing
satellite solutions as the cheapest option in the isolated but not other scenarios. This agrees with the
general thrust of the conclusions of this report. It is interesting that another study in reference [8] does
not refer specifically to satellite amongst the options it recommends for further study. It leans to radio
and W-LAN solutions for areas lacking fixed infrastructure, suggesting also that PLC solutions will
serve mainly cities.




                                                    - 11 -
Backhaul

The backhaul solutions shown in the model are expensive, and would appear at first sight to condemn
rural broadband to a high-cost profile. New and existing radio technologies offer a prospect of relief,
perhaps by halving current costs. B-WLL and W-LAN technologies are sometimes claimed to be
“self-backhauling”. This does not, of course, imply that they avoid the need for backhaul, but rather
that they may themselves be the means of providing it. This does not make the backhaul free of cost,
but if it shares the same infrastructure as a low cost access platform, it may offer some promise of
challenging current costs.

Fixed infrastructure

The cost model shows that solutions such as FTTU and new HFC, involving new build of fixed
infrastructure, are prohibitively expensive. This is probably genuinely the case in rural areas. However,
while the same cost figures would also rule out these solutions in the urban environment, viable trails
and services using FTTU have been reported for example in Italy. It might, therefore, not be right
completely to rule out these solutions in the small town scenario. In these cases, and depending on the
physical layout of dwellings, it may be possible to reuse the same civil works to serve many customers’
premises so achieving lower costs than calculated.

           1.8. Isolated scenario conclusions
Table 4 and Table 5 summarise the five-year per user present values, at a 5% test discount rate, of
access solutions (including secondary backhaul where used) and backhaul solutions respectively. These
tables summarise data presented in the appendix in Table 18 and Table 19. All access solutions require
backhaul except where shown by an asterisk. To assist comparisons, the last column of Table 4 shows
the cost of the solution with the cheapest form of backhaul from Table 5 added wherever backhaul is
necessary. The currency unit is the euro. All cost comparisons in the text refer to these five-year
present values.

Table 4 Isolated scenario: access solutions, five-year per user present values
                                                                                          Per user 5-year
                                                                  Per user 5-year         PV with primary
                                                                  PV without              backhaul where
Solution                                                          backhaul                required
Power Line Communication                                                          3,550          Unknown
Satellite: 512 kbps downstream / 128 kbps upstream under                                             3,008
hypothetical high volume pricing assumption*                                      3,008
Satellite: downstream only at 512 kbps with PSTN for                                                 3,532
upstream*                                                                         3,532
WiMax (2nd costing)                                                               1,890              7,799
WiMax (1st costing)                                                               5,482             11,391
B-WLL 2-10 GHz licensed spectrum, (like MMDS)                                     5,482             11,391
Satellite: 512 kbps downstream / 128 kbps upstream*                              13,465             13,465
2G/3G cellular                                                                   38,230             44,139
Satellite: 2 Mbps both way *                                                 140,579               140,579
New build fibre-to-the-user                                                1,575,000             1,582,000
New build hybrid fibre coaxial CATV network                                2,401,241             2,407,150
High altitude platform*                                                Unknown               Unknown




                                                 - 12 -
Table 5 Isolated scenario: backhaul solutions, five-year per user present values

Solution                                            Per user 5 year PV
Point-to-point radio                                                      5,909
Satellite link at 2 Mbps both way                                        34,545
Satellite link at 10 Mbps both way                                      138,879
SDH over new build optical fibre                                        454,137

The isolated scenario is the least tractable as the distance of most users from the point of presence
excludes many cheaper solutions.

    •      ADSL and variants, unlicensed B-WLL and LMDS have insufficient reach.

    •      HFC upgrade is excluded for practical reasons, as isolated areas do not normally have
           established CATV systems.

Clearly, new build physical infrastructure solutions (HFC and FTTU) require digging to isolated
properties and are prohibitively expensive.

All solutions except satellite, HFC and HAP (and maybe PLC) require backhaul. The apparently
cheapest backhaul solution above, point-to-point radio, adds €6,000 per user over five years. According
to [9], mesh radio might offer half the costs quoted for point-to-point radio, while self-backhauling
with WiMax when available may also offer a much cheaper solution. Accordingly, R&D projects
deserve careful attention to see when and whether these solutions are likely to prove viable. The use of
satellite backhaul solutions in many trials and in the marketplace, leads one to question whether the
forbidding costs obtained from our sources are actually the case.

The cheapest solutions are PLC at €3,550 and the minimal, one-way 512 kbps satellite solution at
€3,532 including the added cost of PSTN for secondary solution for providing upstream connectivity.
The PLC figure is a highly conjectural estimate and assumes (and of this we are unsure) that backhaul
in the medium voltage layer is included in the price. The price of the satellite solution is on firmer
ground, though it is, of course, hardly a broadband service at all. The next level satellite solution, still a
very limiting one (512 kbps down, 128 kbps up with contention) with low evolution potential, is
currently much more expensive at €13,465 than WiMax (lower cost estimate) with radio backhaul at
€7,800, a point-to-point B-WLL solution (MMDS) with radio backhaul at €11,390. WiMax would have
the same cost as MMDS should its upper cost estimate be right. If WiMax self-backhauling were to
reduce the cost of backhaul to the extent sometimes claimed, one might optimistically imagine a total
of €4,000 - €5,000 for the WiMax solution. If it proves viable, this gives a much more evolutionary
solution than satellite on account of its higher bandwidth delivered to each user at much lower cost.
Nonetheless, the satellite solution promises to become attractive at €3,008 were it deployed in large
numbers. Though the 2G/3G cellular solution looks expensive, remember that if this solution is
available, then its real cost for broadband will be lower because there are other revenue streams that
will contribute to costs.

HAP solutions are likely to be cost-comparable with satellites, offering more functionality and
evolution potential. However, neither detailed costs nor deployment plans have come to light at
present.

           1.9. Scattered scenario conclusions
Table 6 and Table 7 summarise the five-year per user present values, at a 5% test discount rate, of
access solutions (including secondary backhaul where used) and backhaul solutions respectively. These
tables summarise data presented in the appendix in Table 20 and Table 21. All access solutions require
backhaul except where shown by an asterisk. To assist comparisons, the last column of Table 6 shows
the cost of the solution with the cheapest form of backhaul from Table 7 added wherever backhaul is




                                                    - 13 -
necessary. The currency unit is the euro. All cost comparisons in the text refer to these five-year
present values.
Table 6 Scattered scenario: access solutions, five-year per user present values



                                                                                        Per user 5-year
                                                                 Per user 5-year        PV with primary
                                                                 PV without             backhaul where
Solution                                                         backhaul               required
Power Line Communication                                                        3,550       Unknown
Upgraded hybrid fibre coaxial CATV network*                                     2,041                  2,041
Satellite: 512 kbps downstream / 128 kbps upstream under                                               3,008
hypothetical high volume pricing assumption*                                    3,008
Satellite: downstream only at 512 kbps with PSTN for                                                   3,532
upstream*                                                                       3,532
WiMax (2nd costing)                                                               710                  3,665
ADSL                                                                              741                  3,696
Remote ADSL with SHDSL secondary backhaul                                       1,066                  4,021
B-WLL 2-10 GHz unlicensed spectrum                                              1,560                  4,515
New build hybrid fibre coaxial CATV network                                     3,241                  6,196
           st
WiMax (1 costing)                                                               3,709                  6,664
B-WLL 2-10 GHz licensed spectrum, (like MMDS)                                   3,709                  6,664
B-WLL 10 – 40 GHz licensed spectrum, (like LMDS)                                7,800                 10,755
Satellite: 512 kbps downstream / 128 kbps upstream*                           13,465                  13,465
2G/3G cellular                                                                19,365                  22,320
Satellite: 2 Mbps both way *                                                 140,579              140,579
New build fibre-to-the-user                                                  472,500              475,455
High altitude platform*                                               Unknown               Unknown



Table 7 Scattered scenario: backhaul solutions, five-year per user present values

Solution                                                    Per user 5 year PV
Point-to-point radio                                                               2,955
Satellite link at 2 Mbps both way                                               17,272
Satellite link at 10 Mbps both way                                              69,439
SDH over new build optical fibre                                                95,818

The scattered scenario consists of clustered and isolated users within an area whose radius brings some
though not all users within range of the cheaper “near-reach” solutions. Great care is necessary in
interpreting the results of this scenario, since a real community may in practice need to consider its
users in two groups. These would be a clustered group able to enjoy near-reach solutions, and the other
group more like the isolated scenario. The community must then decide whether to adopt a single
platform solution or a split platform solution.



                                                  - 14 -
Backhaul is a significant issue for the scattered community, adding a five-year per user cost of €2,955
for solutions except satellite, HAP and HFC if applicable. The figure is cheaper than in our isolated
scenario because the backhaul platform is spread over more users. The remarks about backhaul under
the isolated scenario above apply here also, noting that cheaper solutions using WiMax or mesh radio
may be available or about to emerge.

As in the isolated scenario, the minimal one-way 512 kbps satellite solution with PSTN for non-
broadband upstream path at €3,532 is the cheapest option, remembering that the near-reach solutions
must add backhaul. However, it is only marginally less expensive than WiMax (if its lower cost
estimate is right) and ADSL with radio backhaul. Bearing in mind the promise of WiMax-based
backhaul in future, better and significantly cheaper solutions may be in prospect in the near or medium
future. PLC is cost-comparable with this group of these solutions, but only provided (and of this we
are unsure) that the given cost includes the backhauling requirement over medium voltage power lines.
Offering much higher bandwidths than ADSL, PLC may, depending on research and trials, provide a
disruptive offering in the scattered scenario. The fuller function satellite solution (512 kbps down, 128
kbps up with contention) promises to come down from its €13,465 to €3,008 given volume supply.

The near-reach technologies of ADSL, remote ADSL and unlicensed spectrum 2 GHz B-WLL show
prices of €741, €1,066 and €1,560 respectively, to which €2,955 backhaul must be added. Note that in a
scenario where only half (20) the users could use these solutions, then the corresponding prices would
become €1,096, €1,746 and €2,057 respectively with backhaul to be added. These three solutions use
base platforms with a higher capacity than that being used, and technology promises to relieve the
adverse scale economy. HFC upgrade is a tempting solution if available, though it will not be an option
in many communities.

Radio access and WiMax at its upper cost estimate, both €6,664 including backhaul, look unlikely
choices for users eligible for near-reach solutions, although as in the isolated scenario they offer better
functionality and cost than the both way satellite solution (512 kbps down, 128 kbps up with
contention). However, WiMax at its lower cost estimate and with self-backhauling promises a very
attractive radio solution if it proves viable. HAPs would be relevant in the scattered scenario, although
we do not currently have costs or deployment plans.

           1.10. Small town scenario conclusions
Table 8 and Table 9 summarise the five-year per user present values, at a 5% test discount rate, of
access solutions (including secondary backhaul where used) and backhaul solutions respectively. These
tables summarise data presented in the appendix in Table 22 and Table 23. All access solutions require
backhaul except where shown by an asterisk. To assist comparisons, the last column of Table 8 shows
the cost of the solution with the cheapest form of backhaul from Table 9 added wherever backhaul is
necessary. The currency unit is the euro. All cost comparisons in the text refer to these five-year
present values.
Table 8 Small town scenario: access solutions, five-year per user present values

                                                                                 Per user 5-year PV
                                                                                 with primary
                                                              Per user 5-year PV backhaul where
Solution                                                      without backhaul required
Power Line Communication                                                       3,550       Unknown
ADSL                                                                             564                  2,041
Upgraded hybrid fibre coaxial CATV network*                                    2,041                  2,041
WiMax (2nd costing)                                                              710                  2,187
Remote ADSL with SHDSL secondary backhaul                                        726                  2,203
B-WLL 2-10 GHz unlicensed spectrum                                             1,312                  2,789
Satellite: 512 kbps downstream / 128 kbps upstream under                       3,008                  3,008



                                                   - 15 -
hypothetical high volume pricing assumption*

Satellite: downstream only at 512 kbps with PSTN for                                             3,532
upstream*                                                                  3,532
WiMax (1st costing)                                                        2,823                 4,300
B-WLL 2-10 GHz licensed spectrum, (like MMDS)                              2,823                 4,300
New build hybrid fibre coaxial CATV network*                               3,241                 4,718
B-WLL 10 – 40 GHz licensed spectrum, (like LMDS)                           6,028                 7,505
2G/3G cellular                                                             9,932                11,409
Satellite: 512 kbps downstream / 128 kbps upstream*                       13,465                13,465
Satellite: 2 Mbps both way *                                             140,579               140,579
New build fibre-to-the-user                                              157,500               158,977
High altitude platform*                                          Unknown               Unknown


Table 9 Small town scenario: backhaul solutions, five-year per user present values

Solution                                                      Per user 5 year PV
Point-to-point radio                                                           1,477
Satellite link at 2 Mbps both way                                              8,636
Satellite link at 10 Mbps both way                                            19,784
SDH over new build optical fibre                                              34,720

The small town scenario more nearly resembles the urban scenario in that the near-reach technologies
of ADSL and unlicensed radio will be applicable to a majority of users. Where this scenario fails to
resemble the urban environment is in its backhaul requirement, as a major network node is still more
distant at 10 km than would be the case in a city or large town. Backhaul adds €1,477 per user in its
cheapest form (a point-to point radio solution), though we may expect cheaper technologies such as
mesh radio and WiMax to contest this shortly.

Nonetheless, the lowest cost access solutions, ADSL at €2,041 and remote ADSL at €2,203 including
backhaul, prove cheaper than the extremely limited unidirectional satellite offering. The small town
scenario promises to be an extremely interesting battleground for emerging technologies, with WiMax,
PLC and small-platform ADSL all promising lower prices in the near future.

Although new build infrastructure solutions still look too expensive in this as in the other scenarios,
new-build HFC is not prohibitive. Depending on the exact layout of dwellings, which will determine
how much the cableways can serve multiple users, this may be a practical option in some communities.

    2. Introduction, background and objectives
           2.1. Broadband and the rural environment
The purpose of this report is to outline the available options for provision of broadband
communications services in rural areas of the European Union, and to provide information, quantified
where feasible, to assist policy makers in their decisions about the best platforms to adopt. “Rural
areas” may loosely be defined as areas of population density below 100 households per square
kilometre. They make up 83% of the land area of the EU, and contain 51 million (or 23%) of the
households [10].




                                                 - 16 -
         2.2. Importance of broadband communications
The importance of state-of-the-art communications facilities for all of Europe’s citizens and businesses
has been underlined in many places. They are considered vital if Europe is to maintain its position as a
leading economy in an age when manufacturing is increasingly moving offshore. The availability of
modern telecommunications and information facilities and services may be likened to the arrival of the
railways in the 19th century: they are essential if community, nation and the Union are to keep their
places in the modern service, information and knowledge economy.

Broadband services for all are central to the eEurope vision. The Lisbon European Council in 2000
agreed a strategic goal of making the European Union the most competitive and dynamic knowledge-
based society in the world by 2010. One of the key tools to achieve the Lisbon objective was a strong
information society and R&D (quoted in [2]). The eEurope 2005 Action Plan was launched at the
Seville European Council in June 2002 and endorsed by the Council of Ministers in the eEurope
Resolution of January 2003. It aims to develop modern public services and a dynamic environment for
e-business through widespread availability of broadband access at competitive prices and a secure
information infrastructure [11], [12].

Current experience [6] of broadband service in the EU and elsewhere shows low or limited availability
for households and businesses in rural areas. It appears, then, that rural areas are suffering from a
“digital divide” that may exclude their citizens and businesses from full participation in the information
economy. It is important to address and remove the digital divide in rural areas for three reasons:

    •    they comprise a substantial minority of EU citizens who ought not to be excluded from full
         participation in society

    •    they contain human beings, whose productive contribution to the European economy is
         important

    •    the costs of delivering citizen services, such as education, healthcare, government and access
         to government processes, will be much more economical if supported by modern ICT
         infrastructure

It is worth noting at this point that rural areas are not the only sectors of the EU that may be
disadvantaged by a digital divide. Low-income groups and cultural minorities in urban areas may
similarly suffer, and their positions should be also be considered when considering policies to face the
digital divide. This report, however, concentrates on rural areas. Their relative priority when compared
with other less favoured segments of society needs to be weighed, but in another place.

         2.3. Provision of rural broadband services
There are two possible approaches to the provision of rural broadband services, and the perceived
threat of a digital divide. The first is a market and competition based approach. 51M households is a
substantial opportunity that a free, competitive market, may find technical and commercial means of
serving. The other is an interventionist approach. This says, and these are commonly held beliefs, that:

    •    rural broadband must necessarily be more expensive than in urban areas

    •    the market will not of itself meet the need

    •    some form of subsidy or other intervention is required.

If non-commercial provision is truly necessary in the supply of rural broadband services, it is important
that such provision is undertaken in the fairest and most economical way. Competition, embedded in
the 2003 Regulatory Package for electronic communications services, is normally the best way of
securing economic efficiency, always supposing that it is possible to obtain a competitive market.




                                                  - 17 -
To decide whether and in what manner non-commercial provision is appropriate, policy makers must
be equipped to make well-informed decisions in developing an optimum road map towards the
broadband economy. This applies at all levels of government, ranging from the grand strategies at
Union level that may assign millions of Euros of structural funding, through national and regional
governments down to local communities. It is that last group that will have to assess the best modes of
provision for themselves, before they meet service providers or place their cases before funding
authorities.

         2.4. Background to the report
This report adds to existing work on rural broadband provision in the following ways.

    •    It is technologically neutral.

    •    It summarises comparative information about the technologies, emphasising the features of
         greatest interest to policy-makers.

    •    It articulates choices without recommending specific solutions.

    •    Rather than giving averaged cost figures, it provides a simple model for cost comparisons in
         typical, real-life rural community scenarios.

    •    It incorporates the latest results from the 5th and 6th Framework funded R&D projects and
         elsewhere where relevant and known to us

This report aims to present the technologies in a way that highlights the most important technical and
non-technical features for decision makers. These include besides obvious performance measures like
bandwidth, characteristics such as scalability, flexibility, access to lower-price “light” versions, risks of
premature commitment and evolution potential to future technologies over the horizon. A wise
community might sacrifice bandwidth or time to service for a more favourable profile in another
dimension.

It is most important to understand that there is no one solution for rural broadband provision. This
report does not attempt to recommend a solution or set of solutions. It lists viable solutions, outlines the
salient characteristics of each, and sets a benchmark cost for each in different rural scenarios. Regional
decision makers will, in very many cases, have a choice of solution, and that choice may well be
impacted by regional differences such as terrain, topography, population distribution, existing links and
infrastructure and the local skill mix.

This report tackles costs through the eyes an individual community. For each potential solution, it seeks
to answer the following questions they will ask when deciding to purchase.

    •    How much do we invest to get started?

    •    What is the marginal cost per added user?

    •    What will be our average per user cost, based on our knowledge and assumptions about likely
         take-up?

    •    What will be the recurring annual charges?

This report does not try to generate averaged cost-benefit figures for specific regions. Averaged
demographic data, even when in sophisticated detail and at high geographic resolution, may not capture
the unevenness in real populations nor capture the drivers that influence individual communities’
decisions to purchase. Assumptions about supply volume and service take-up need to be tested
critically, yet are easily obscured in an averaging process.

Finally, the flood of development is challenging conventional views technical limits and scale
economies. With each month that passes, new solutions are postulated and tried. Powerline


                                                   - 18 -
Communication (PLC) and WiMax technology are potentially disruptive. The IST 6th Framework R&D
programme is now in full swing, and the projects are generating new insights all the time. This report
makes some attempt to acknowledge and incorporate latest findings of EU-funded research.

         2.5. Options for rural communities
A rural community will take into account a number of factors when approaching the provision of
broadband service in its locality.

    •    What technologies are viable options in this place?

    •    What are their cost profiles, in terms of entry price, average price per user, marginal cost per
         new user, and annual running costs?

    •    Are cheaper versions available by sacrificing performance? If so, what services may be lost or
         reduced in effectiveness?

    •    Is the solution scaleable, flexible and evolvable?

    •    Is the solution future-proofed?

         2.6. Report methodology
This report has three stages.

Firstly, it lists and describes solutions based on the various technologies, giving for each its salient
technical and non-technical characteristics. Information about the various technologies is drawn from
many sources, though a particularly comprehensive source from IST project BREAD, reference [13], is
acknowledged. In simple cases, a solution and a technology may be one and the same thing, but this is
not true in all cases. A useful solution may be made up:

    •    by selecting a particular operating mode of a technology, such as a high bandwidth or low
         bandwidth mode or deploying an extension option

    •    by creating a hybrid platform incorporating more than one basic technology

Secondly, the cost parameters of each solution are obtained to the maximum accuracy available, broken
down into fixed costs, per user costs, capacity costs and per kilometre costs where appropriate.

Thirdly, the report presents a set of three regional scenarios. These are descriptions of three
hypothetical communities, a small town community, a scattered community, and an isolated
community. Applying the solution cost figures to the definition of each scenario allows us to calculate
the key price drivers for each solution in each scenario.

         2.7. Cost data in this study
A major source of outline cost data at a very broad-brush level is [9]. Similar data may be found in [1]
but quoted in US dollars, and while these agree with [9], the agreement is approximate in some cases.
Project TONIC in [14] provides some extremely detailed data about the costs of individual broadband
components. Where analysed, the data is roughly comparable with [9]. References are made in section
5 made to further cost sources relating to specific technologies, though these are few. Some documents
compare the costs of different technologies graphically, for example [2] and [7], though without
revealing the underlying assumptions by which they calculate these costs. There may be good reasons
for this, if costs or sales volume assumptions are commercially confidential. However, this report
cannot use data from non-transparent sources such as these (apart from very specific observations), as
it seems insufficiently robust. Of course, no cost data can be treated as final or precise, but are valuable
as “ball-park” amounts. Because there is a rapid pace of development, and since costs are sensitive to
volume assumptions, almost any figure will be open to challenge and discussion.



                                                   - 19 -
    3. Broadband services
         3.1. What is broadband?
The true market for broadband communications is a market for applications, services and solutions to
problems. Nobody buys broadband, but many people and businesses will willingly pay for the things
broadband can do for them. To think clearly about broadband, or even define it, it is necessary to
consider what it gives to customers.

“Broadband” means different things to different people. One possible working definition is a
communications service of greater bandwidth than a basic ISDN line, that is, anything over 144 kbps.
In practice, to be perceptibly different from the ISDN service this means a rate of 256 kbps or more. In
some rural areas, customers may accept less as a “broadband” service if this is the best available to
them. More generally, a common understanding of broadband is “a service that has the capability for
always being on, and can scale up to at least 2 Mbps in the future as customers’ requirements increase”
[1]. Other people would regard this as a very timid definition, and look towards 1 Gbps or more as their
ultimate objective, although most would admit that rates as high as this are long-term aspirations.

The eEurope Advisory Group, Working Group 1 [2], suggests that “by 2008, Europe should aim to
achieve bit rates ranging from a minimum of 2 Mbps upwards with an evolution of up to four times
higher as new applications, services and usage develop. In some cases, 512 kbps may be sufficient as a
starting speed to reach isolated users.”

         3.2. Broadband service parameters
The outline characteristics of a broadband service are defined not by one but by four basic technical
parameters. These are:

    •    bandwidth, so many kilobits or megabits per second

    •    contention ratio, a ratio of so many to one

    •    latency, the speed of response in milliseconds or seconds

    •    asymmetry, the difference in bandwidth available between the downstream direction (data
         received by the user) and the upstream direction (data sent by the user)

Contention arises because some broadband delivery solutions use shared bandwidth, where a high
capacity channel is distributed to and pooled between users. Since the services used by many
broadband consumers have “bursty” data requirements, that is they need fast transmission but only
occasionally, contention systems can be highly effective solutions. If 2 Mbps is shared between, say, 50
users (that is a contention ratio of 50:1), then while users get 2 Mbps peak bandwidth when
instantaneously needed, the average rate is only a fiftieth of this, about 40 kbps. It is arguable that
provided the network capacity matches patterns of usage, and evolves when they change, then
contention does not matter to users. However, comparisons between solutions will be misleading
without taking note of contention.

Systems with long propagation paths, notably satellites, introduce the concept of latency: the user may
have a high bandwidth channel but face a time delay for the data to arrive. A channel with a high
contention ratio might cause latency, were the total bandwidth insufficient and users forced to queue
for channel capacity. While latency is probably no problem for file transfer, it could frustrate internet
surfing, and might completely defeat interactive services such as electronic games and
videoconferencing.

         3.3. Applications and their requirements
The range of applications and services based on broadband communications is unbounded, each having
unique characteristics. It is possible to identify five broad categories.


                                                  - 20 -
    •    Simple messaging

    •    Large file transfer

    •    Unidirectional real time data

    •    Interactive real-time messaging

    •    Bi-directional real-time data

The technical requirements for a given service are often imprecisely defined. In very few cases is it
possible simply to say that a service has a minimum bandwidth or latency such that the service works
perfectly with it and fails completely without it. Users can and do adapt to inferior service where
necessity exceeds convenience. Many users, once happy to surf the internet at dial-up modem speed
(56 kbps), later assert that broadband speeds are not negotiable. Nonetheless, where services work in an
impaired form over channels not having the ideal characteristics, there must be a minimum point at
which users judge the service inoperable for normal purposes. Defining that point will often be a matter
of intuition, conjecture, operating experience and market judgement.

Simple messaging services include simple e-mail, instant text messaging, remote login, simple web
and internet access, electronic shopping and business, electronic government and chat. These services
can operate at the lowest bandwidths such as 256 kbps or 512 kbps, although they are considerably
more convenient and enjoyable when enriched by higher bandwidths. Most users receive more than
they send, so these services are compatible with asymmetric broadband (higher downstream than
upstream capacity). These services can tolerate latency: this is time delay to respond, and is typical of
satellite links because of the long distance the signals must travel.

Large file transfer services are similar to messaging, but the messages contain larger quantities of
data, perhaps 100’s kilobytes or megabytes as opposed to the tens of kilobytes envisaged for simple
messaging. They may be extensions of simple messaging services that need larger messages, for
example rich-content internet surfing, electronic catalogue shopping, remote healthcare, home working,
remote working and business virtual private networks (VPNs). Large-scale file transfer services include
downloading of games, software, educational material, films and other entertainment content. These
services ideally require 1-2 Mbps or higher, if the user is not to be kept waiting too long. Large file
transfer services are compatible with asymmetric links and can tolerate latency.

Unidirectional real time services are mainly broadcast services such as audio and video streaming,
and radio and television broadcasting. These services typically require high (at least 1.5 Mbps for
video) or very high bandwidths, and are inherently asymmetric. They can tolerate high latency as the
data flow is one way only. For video on demand, downstream contention is not acceptable as the high
bit rate is constant. For broadcast services, there is no problem in sharing bandwidth between all the
people receiving the same thing.

Interactive real time messaging services operate between users who are communicating in real time
one with another, for example for interactive gaming, tele-education and tele-presence. These services
ideally require 1-2 Mbps or higher, need to be symmetric and cannot tolerate latency.

Bi-directional real time services include video-conferencing, interactive video, interactive gaming,
integrated business telecommunications services supplied over a broadband link and wide area
networks for businesses. These typically require high or very high symmetric bandwidths. They cannot
tolerate latency.

    4. Applicable technologies
         4.1. Solutions using legacy infrastructure
Some delivery solutions make use of current infrastructure, so saving the need for new build. However,
some of the solutions may need investment to upgrade the existing plant.



                                                  - 21 -
    •    The DSL (Digital Subscriber Loop) family of technologies transmits high bandwidth signals
         over the ubiquitous copper pairs of the traditional switched telephone network.

    •    Co-axial cable delivery transmits high bandwidth data signals in the space assigned to one or
         more TV channels in the tree-and-branch network of a cable TV (CATV) system. Historic
         systems may require upgrading for bi-directional transmission.

    •    Hybrid-fibre-coaxial (HFC) systems make use of existing CATV networks, but improve the
         overall bandwidth delivered to users by way of optical fibre down to the street or
         neighbourhood nodes of a tree-and-branch system.

    •    Powerline communications (PLC) solutions transmit high bandwidth signals over the
         ubiquitous electrical power distribution network.

         4.2. Solutions using brand new fixed infrastructure
It is possible to achieve broadband communications by constructing brand new access infrastructure to
every user’s home or business premises.

    •    Hybrid-fibre-coaxial (HFC) CATV systems may be installed as a brand new solution to
         broadcast service distribution and broadband communications.

    •    Fibre-to-the-user (FTTU) is the providing of an optical fibre direct to each and every user.

    •    Variations on the optical fibre approach include fibre-to-the-building (FTTB) and fibre-to-
         the- (roadside) cabinet (FTTC), where fibre provides a high bandwidth signal to a point
         short of the individual user. FTTB and FTTC necessarily form part of hybrid (composite)
         solutions, since in both cases, onward distribution from the termination of the fibre to users
         requires another solution. This might be based on new or legacy copper or co-axial wiring, or
         a wireless solution.

         4.3. Terrestrial wireless solutions
Terrestrial radio-based solutions use radio as the transmission medium to every user. Although this
needs no physical path, these solutions are not exactly infrastructure-free, since they do need a network
of transmitter and receiver sites, sometimes known as “base stations”. Depending on the radio
frequencies employed, some solutions may demand an unbroken line-of-sight path between the user’s
site and the base station, while others may have a signal that “goes round corners”.

    •    Broadband wireless local loop (B-WLL) solutions provide a separate bi-directional wireless
         path between every user and a base station.

    •    Cellular solutions rely on the radio cells already established or being established for “second
         generation” and “third generation” mobile communications. Designed initially to serve the
         needs of mobile users, including while they are on the move, these networks can be employed
         to deliver service to fixed users.

    •    Wireless local area networks (W-LAN) provide a shared access bi-directional carrier over a
         limited area that can provide a service to any suitably equipped user terminal within reach of
         the signal.

         4.4. Satellite solutions
Satellites promise a ubiquitous delivery platform for broadcast and broadband services over any part of
the earth’s surface, except where cover or terrain obscures the line-of-sight path to the satellite.




                                                  - 22 -
    •    Unidirectional satellite delivery platforms provide broadband communication in the
         downstream direction (that is, to the user). However, these solutions must be combined with
         another solution for the upstream (that is, from the user) direction.

    •    Bi-directional satellite delivery platforms provide both upstream and downstream
         communications over a satellite link

         4.5. Broadcasting-based solutions
With broadcasting services increasingly migrating from historical analogue to digital formats, it is
possible to consider digital broadcasting infrastructures to provide broadband communications.

    •    DVB-T is a transmission standard for digital data and broadcasting over terrestrial television
         channels

    •    DVB-RCS is a transmission standard for digital broadcasting from satellites

         4.6. Futuristic technologies
A number of potential solutions are at the stage of “good ideas”, being investigated in research and
development projects. On the one hand, it is necessary to be cautious about these. There is a danger in
putting one’s faith in an “ideal” future solution, especially if it causes one to give up a lesser but
available solution. While promoters of new technology are enthusiastic and rightly so, the eventual
benefits are unproven and probably further in the future than predicted. On the other hand, one should
think about futuristic technologies, lest adopting a present-day solution made it difficult to take
advantage of better solutions when they became available.

    •    Fourth-generation cellular mobile technologies are targeted at providing many megabits per
         second to mobile users and users on the move.

    •    Mesh radio platforms do not have designated base stations as with B-WLL, W-LAN and
         cellular radio systems, but depend an ad-hoc networks where each user’s transmitter and
         receiver may communicate with any other site within reach, building up network connectivity
         over the most convenient paths.

    •    Adaptive and self-configuring networks. In the simplest form, mesh radio networks are
         configured by human intervention and left in a stable form to operate. Reconfiguration then
         happens infrequently, for example when new users join the network, or when there is failure
         of a path. However, adaptive networks discover themselves autonomously. They set up, and
         reset as necessary, the best configurations for themselves.

    •    Self-configuring inhomogeneous networks are not restricted to one type of link or one
         technology, but may integrate fixed, wireless and satellite links of varying bandwidths as
         though a coherently managed single network platform.

    •    High altitude platforms are airborne vehicles like aircraft or balloons, operating in the
         stratosphere at altitudes up to 22 km.

         4.7. Backhaul technologies
Delivery of a broadband service to customers depends not only on the broadband access network, the
so-called “last mile”, but also on a means of connection to the mainline or backbone networks that
form part of national and international data transmission networks. This connection, shown in the upper
part of Figure 1, is known as backhaul and has been called the “middle mile”. Backhaul is a significant
issue, since high-capacity networks are normally found in large towns, and obtaining connection to
them is a substantial factor in the cost of rural broadband services. Backhaul to the nearest available
main network node can be addressed by a variety of technologies.




                                                  - 23 -
    •   Optical fibre

    •   DSL-family technologies over copper circuits

    •   Radio links

    •   Satellite links



Figure 1 Broadband access and backhaul

Main data    Backhaul to                    Broadband access
network      main network

                              Local                                   Customer
                            exchange                                  premises




Main data    Backhaul to               Secondary                  Broadband
network      main network              backhaul                   access

                              Local                  Remote                   Customer
                            exchange               distribution               premises
                                                      point


Secondary backhaul is necessary for hybrid broadband access solutions. This occurs where for any
reason such as cost or technology limitation, the broadband access (“last mile”) is provided from a
point or points remotely scattered from the local exchange building (or point of presence). This,
illustrated in the lower part of Figure 1, creates a hybrid technical solution using one method of
broadband access from the remote distribution point, but relying on another for secondary backhaul
between the local exchange and remote distribution point.

    5. Technology review
        5.1. ADSL and the DSL family
             5.1.1.         Technical overview and basic features
The DSL (Digital Subscriber Loop) family of technologies is the major medium for broadband
provision in urban areas. It carries the broadband signal over the copper pairs of the traditional,
ubiquitous, telephony access network. The service may be provided by the incumbent telco owning the
copper, or by another provider using the copper loops in an unbundled form.

There are three major variations within the DSL family:

    •   ADSL (Asymmetric DSL) provides in practice up to 1.5 Mbps downstream and 500 kbps
        upstream, although the achieved performance depends on the line length and may be much
        less over long lines. ADSL can co-exist with continued and simultaneous use of the telephone
        for ordinary voice calls. This is the most widely used flavour of DSL for providing urban
        broadband

    •   HDSL (High bit rate DSL) provides typically up to 2 Mbps both way bandwidth over one or
        two pairs, but precludes the use of the line or lines for ordinary telephony. It is commonly
        used for providing private circuits and data links for businesses

    •   VDSL (Very high speed DSL) achieves very high asymmetric bandwidths, up to 50 Mbps
        downstream and 2 Mbps upstream. It can do this only over very short distances, up to 300



                                                          - 24 -
          metres, however, and so would normally be used as a hybrid solution in conjunction with a
          secondary backhaul technology such as fibre-to-the-cabinet (FTTC), satellite or wireless.

This section concentrates on the most widely used variation, ADSL. New versions of ADSL (ADSL2
and READSL) are under development.

The cost factors sections below employ data from [9], representing a very conventional view of DSL,
since the scale economy inherent in platforms that serve 5,000 or 200 subscribers is being contested by
new technology evolution quoted in [3]. This draws attention to platforms offering similar per user
costs with as little as 16 or 10 users.

               5.1.2.      Technical and performance review: ADSL

Time horizon            Available now

Use of legacy           Uses existing telephony access network, usually without need for major
infrastructure          upgrade

Bandwidth               The bandwidth offered by ADSL reduces with line length, and a typically
                        standard offering is 1 Mbps downstream and 128 kbps upstream over local
                        loops of 5 – 6 km in length. However, some operators are beginning to offer
                        greater reaches of 8 – 9 km based on revised planning rules and technical
                        developments (see below).

Contention              None: each user has a dedicated channel. However, contention will probably
                        exist in the backhaul channel.

Latency                 None

Asymmetry               Highly asymmetric. Suitable for simple messaging, interactive messaging and
                        video-on-demand broadcasting, but limited for telephony, videoconferencing
                        and large-scale upstream file transfer

Backhaul                Needs backhaul from the local exchange to the backbone network.
requirements

               5.1.3. Flexibility, scalability and future development:
                   ADSL

Flexibility             This technology does not work effectively over longer lines. Planning rules
                        designed to manage customer expectations and save wasted installation effort
                        are likely to cause service refusal over marginal lines that might have worked if
                        tried. Higher rates up to 8 Mbps are theoretically available over shorter lines,
                        though these may not be offered in practice, to make a uniform product
                        offering.

Scalability             In the early days, this technology was difficult to deploy economically on a
                        small scale because the exchange termination equipment (the DSL access
                        multiplexer, or DSLAM) supported 5,000 lines. However, smaller versions
                        with a minimum size of 200 lines are available, while rapid development is
                        promising economic DSLAMs for as few as 10 or 16 users. The model uses the
                        costs of 200-line platforms.

Extension options       Extension of reach is possible by providing a small DSLAM out at a remote
                        cabinet. This is a hybrid solution, needing secondary backhaul to the exchange.
                        In the example in section 5.1.6 below, the secondary backhaul uses SHDSL
                        over two or four copper pairs (to achieve the necessary bandwidth), or it is
                        possible to use other means of secondary backhaul.


                                                 - 25 -
Availability of        Practical reduced versions are not currently available
reduced versions

Future developments    A new version of the standard, ADSL2, offers improved data rates to 12 Mbps
                       downstream and 3 Mbps upstream, while at the same extending the reach of the
                       standard ADSL service by 500 – 1,000m [15]. It is backwards compatible with
                       ordinary ADSL: ADSL and ADSL2 can work together on different pairs in the
                       same cable, while an ADSL2 DSLAM can work with ADSL customer
                       premises equipment.

                       Range-extended ADSL (READSL) aims to increase the increase the ADSL
                       range by 1 km using active spectrum management, where the DSLAM actively
                       chooses the optimum frequency bands to transmit and receive data [16]

Evolution potential    ADSL does not offer the potential to make large increases in its bandwidth
                       capability. The VDSL member of the family, however, offers 28 Mbps when
                       combined in hybrid with fibre secondary backhaul. DSL cannot be considered
                       for evolution towards gigabit broadband.

             5.1.4.       Strengths and weaknesses: ADSL

Strengths                                           Weaknesses

Readily available solution, where workable          A short-reach technology, limited to shorter lines
                                                    up to about 6 km (though current developments
                                                    are raising this towards 8 or 9 km)

                                                    Limited evolution: cannot support much higher
                                                    bandwidths

             5.1.5. Cost factors, 1st solution: for exchange based
                 DSLAM

One-off equipment      For 200-line DSLAM, €6,000
costs

Per user costs         Line termination card per user, €100

                       CPE cost, ADSL modem, €150 per user

Distance related       None
costs

Annual running         Based on 30% of Capex: €1,800 + €30 per user per annum
costs




                                                - 26 -
             5.1.6.  Cost factors, 2nd (hybrid) solution: for remotely
                 based DSLAM with SHDSL secondary backhaul

One-off equipment      For 200-line remotely based DSLAM including cabinet facilities, €10,000
costs
                       SHDSL equipment for backhaul to exchange, using pair bonding, €1,500. More
                       will be required for repeaters if needed. Other backhaul solutions to the local
                       exchange (optical fibre, mesh radio or satellite) are very much more expensive,
                       by an order or magnitude and more.

                       An assumption is made here that there is only one remotely based DSLAM
                       cabinet. If more or needed to serve diverse customer clusters, then extra
                       SHDSL equipments as above must be added be remote DSLAM cabinet.

Per user costs         Line termination card per user, €100

                       CPE cost, ADSL modem, €150 per user

Distance related       None
costs

Annual running         Based on 30% of Capex: €3,450 + €30 per user per annum
costs

         5.2. Cable TV networks: co-axial and hybrid-fibre-co-
             axial (HFC)
             5.2.1.        Technical overview and basic features
A cable TV (CATV) network consists of a “head end” which sends broadcast TV signals down a co-
axial cable, which splits and branches so that every connected home and business receives the signal.
Its name, a “tree and branch” network, reflects the physical structure by which every termination is
connected ultimately to the data flow from the main head-end. Traditional cable networks have used
analogue transmission, and, having around 860 MHz of analogue bandwidth, were able to support
around 100 channels each of 6 MHz bandwidth. Quadrature amplitude modulation schemes such as
QAM-64 and QAM-256 are able to realise something like 5 or 6 bps of digital capacity per Hz of
analogue bandwidth. Converting the an entire spectrum of a cable to digital might yield therefore about
4 Gbps of downstream bandwidth and 200 Mbps of upstream bandwidth. Since a digital TV channel
requires a fluctuating bandwidth averaging about 4 Mbps, a cable network can support many channels
and still have plenty of room for broadband delivery.

Historic CATV coaxial networks typically require some upgrade for digital and for broadband working
for two reasons. The first is an upgrade to bi-directionality, as the old systems had no requirement for
upstream transmission and hence had only unidirectional amplifiers and repeaters. Secondly, a CATV
network is a shared data medium, and it is necessary to segment systems to reduce the degree of data
sharing amongst users. Because the old systems handled only broadcast material, it was satisfactory to
distribute the same signal to thousands or tens of thousands of users. For broadband working, it is more
usual to allocate perhaps 30 Mbps for downstream data and about 10 Mbps for upstream, sharing it
between a hundred or less users. This means distributing the data signals by fibre to nodes, or mini
“head ends”, distributed throughout the entire system.

CATV systems are very popular in the urban environment and support 40% of the world’s residential
users of broadband [13].




                                                 - 27 -
              5.2.2.      Technical and performance review: HFC

Time horizon           Cable networks are currently in service today

Use of legacy          Broadband service can be provided over a legacy CATV infrastructure where it
infrastructure         exists. If the CATV system has already been upgraded for digital TV, then it
                       may be ready for broadband. Traditional, unidirectional tree-and-branch
                       networks will require some upgrade investment.

Use of other scarce    New cable infrastructure will require way leaves and digging
resources

Bandwidth              A downstream bandwidth of about 30 Mbps is available per 6 MHz analogue
                       TV channel slot, or 4 Gbps for the entire cable including of course the capacity
                       that has to be assigned to broadcast services. An upstream bandwidth of up to
                       200 Mbps is theoretically available, although maybe as little 25% of this may
                       be realised on legacy systems, as the upstream data is carried in a noisy part of
                       the spectrum where more robust but less efficient modulation systems have to
                       be deployed.

                       Think in terms therefore, of a peak user downstream bandwidth of 10 – 30
                       Mbps, and a peak upstream bandwidth of 10 Mbps.

Contention             A cable is a shared medium, so contention ratios of up to 100:1 may be
                       encountered

Latency                There is no latency due to propagation, though an overloaded system might
                       have problems due to contention for bandwidth.

Asymmetry              Cable networks are basically asymmetric, although the high peak upstream
                       bandwidth available can allow a reasonable number of users to enjoy
                       symmetric services such as voice telephony or compressed video.

Backhaul               CATV networks generally do not require additional backhaul capacity to
requirements           network nodes. The head end will usually coincide with a major network node.

              5.2.3.  Flexibility, scalability and future development:
                  HFC

Flexibility            Cable networks are very flexible within a total (but high) bandwidth limit. A
                       given system may face conflict for capacity between broadcast entertainment
                       and broadband communications. This may be acute when a legacy system has
                       to continue to support analogue TV channels.

Scalability            CATV networks can scale to any size, while segmenting the networks into
                       smaller domains can reduce contention ratios. Each domain needs its own fibre
                       from the head end.

Evolution potential    This is a mature technology that cannot evolve to gigabit broadband for the
                       individual user.

              5.2.4.      Strengths and weaknesses: HFC

Strengths                                             Weaknesses

Provides a powerful platform for high bandwidth       It will be very expensive to create new
broadcast and broadband services, using legacy        infrastructure, especially in areas of low



                                                  - 28 -
infrastructure if it exists.                             population density.

Provides a very high bandwidth, 10’s Mbps,
although this is shared.

               5.2.5.          Cost factors: HFC

One-off equipment          If upgrading an existing network, about €200 - €400 per home passed.
costs
                           If building a new network, think in terms of the higher of €1,000 per home
                           passed, or of €100 per metre of dig in good ground conditions.

Per user costs             Per-user system costs are marginal.

                           CPE costs, for cable modem, about €150 per user

Distance related           See above
costs

Annual running             Not significant for civil engineering element. Based on 30% of capital
costs                      equipment cost, about €120 per home passed per year.

          5.3. Fibre to the user (FTTU)
               5.3.1.          Technical overview and basic features
An optical fibre based access network offers of all available technologies by far the highest speed and
so can support an unlimited set of services. It would thus be a future-proof access solution offering
maximum evolution potential. It is, of course, extremely expensive, due to the high cost of installing
brand-new physical infrastructure and equipment. Falling equipment costs may make composite
offerings using fibre delivery to the building or cabinet and some other delivery mechanism to the user
a more attractive proposition. A more cost-effective solution is a combination of a fibre optic
secondary backhaul network with a traditional copper pair or co-axial access network (HFC) or a
wireless access network as described in the next section.

A fibre access network can use different technologies. One option is to provide a point-to-point
connection from the exchange to every user, like the traditional copper pair. This may use space
division multiplexing (a fibre for each circuit) or wavelength division multiplexing (different signals
carried over different wavelengths on one fibre). This configuration can achieve up to 10 Gbps at up to
40 km reach. A second option is point-to-multipoint connections, deploying a passive optical network
that distributes the signal to many users. These configurations can typically achieve up to 2.5 Gbps at
up to 20 km reach.

               5.3.2.          Technical and performance review: FTTU

Time horizon               Available today: in service in operational and trial situations

Use of legacy              This solution requires brand new infrastructure
infrastructure

Use of other scarce        Digging and way leaves are necessary for the construction of new fibre routes,
resources                  although it might be possible to share the duct ways of existing
                           telecommunications or CATV networks

Bandwidth                  Up to 10 Gbps for point-to-point or 2.5 Gbps for passive networks

Contention                 There is no contention in point to point networks. Although passive network



                                                     - 29 -
                        bandwidth is theoretically shared, in practice the total bandwidth is very high,
                        so that high bit rate channels can be devoted exclusively to individual users

Latency                 None

Asymmetry               Optical networks support symmetric bandwidth

Backhaul                Backhaul is required from the local exchange to the main network
requirements

             5.3.3.  Flexibility, scalability and future development:
                 FTTU

Flexibility and         Optical networks possess the flexibility and scalability to meet all requirements
scalability

Evolution potential     Optical networks offer the highest bandwidths available and may be considered
                        to be most future-proofed networks

             5.3.4.        Strengths and weaknesses: FTTU

Strengths                                             Weaknesses

Very high bandwidth, sufficient to satisfy all        Very high cost
conceivable services

The most future-proofed of all the solutions

             5.3.5.        Cost factors: fibre to the user

One-off equipment       One-off equipment costs are not available
costs

Per user costs          Per user equipment costs are not available

Distance related        The cost of constructing the optical access network is €80-240 per metre for
costs                   digging and ducting plus €2,000 - €6,000 per km for fibre installation. This will
                        depend on the type of terrain and exact network technique used, and at worst
                        could be double this amount.

Annual running          Annual equipment costs not available. The running costs of fixed passive
costs                   infrastructure are not high.

For the costs of fibre when used as a backhaul technology in conjunction with another access platform,
see next section.

          5.4. Fibre for secondary backhaul in hybrid solutions:
              fibre to the building (FTTB), fibre to the cabinet
              (FTTC)
             5.4.1.        Technical overview and basic features
The general remarks about optical fibre in the previous section are applicable, which see. When used as
a backhaul technology from a remote access point to the local exchange point of presence, optical fibre
offers a very high symmetric bandwidth with low latency and low contention. As such, the service



                                                  - 30 -
quality offered to the user will be determined by the characteristics of the end-user access technology,
the fibre backhaul adding no further impairment. Fibre backhaul is the most future-proofed form of
backhaul.

             5.4.2.   Cost factors: fibre used for backhaul from remote
                 locations to point of presence

One-off equipment       Head end equipment €40,000 at the local exchange plus cabinet optical network
costs                   units €2,500 per cabinet or building

Per user costs          Not applicable

Distance related        If fibre does not exist already, then the cost of constructing the optical backhaul
costs                   network is about €80-240 per metre for digging and ducting, plus €2,000 -
                        €6,000 per km for fibre installation. This will depend on the type of terrain and
                        exact network technique used, and at worst could be double this amount.

Annual running          Based on 30% of non-civil engineering capex, this is €12,000 + €750 per
costs                   cabinet, per annum

         5.5. Powerline communications (PLC)
             5.5.1.        Technical overview and basic features
Powerline communications (PLC) transmit both way broadband signals over the ubiquitous electricity
distribution network, and therefore promise cost-effective broadband delivery over legacy
infrastructure. On the other hand, PLC is technically problematical, as there are real worries about
potential disruption of the short-wave radio bands, since PLC will give rise to stray radiation in these
bands.

Some people see PLC as a major solution to Broadband for All, ready to become cost-competitive with
ADSL as the technology matures and equipment manufacturing volumes grow. Others take a much
more cautious view, seeing the technology as experimental and fraught with problems.

All present trials of PLC technology transmit the broadband signal (about 20 Mbps) over one
transformer section of the shared low voltage network. This covers about 20 homes over a reach of 100
m or so. Rapidly developing technology foresees data rates as high as 250 Mbps eventually. To give
service in scattered and isolated communities, PLC needs to address its short reach, and the approach
being addressed in R&D projects such as OPERA [5] is by way of power-line based communication
over medium voltage lines.

             5.5.2.        Technical and performance review: PLC

Time horizon            The technology is not yet fully standardised, nor have regulatory positions
                        stabilised. Trials of high-speed internet access (at up to 2 Mbps) are proceeding
                        in Germany, Austria, and elsewhere in Europe, not only in the urban
                        environment.

Use of legacy           Uses the existing electricity distribution network
infrastructure

Use of other scarce     None
resources

Bandwidth               About 20 Mbps distributed over the low voltage (220 v) network downstream
                        of a transformer station. This covers about 20 homes and a reach of about 100
                        metres.



                                                  - 31 -
Contention              There is contention of up to 100:1

Latency                 There is no latency, apart from that of possibly waiting for capacity on heavily
                        loaded systems

Asymmetry               PLC systems are usually configured for symmetric broadband services

Backhaul                PLC requires the installation of backhaul capacity from neighbourhood
requirements            transformers (where the signal is injected onto the power lines). This may be
                        provided by optical fibre, by PLC systems operating over higher voltage lines,
                        or by other methods. Although the use of optical fibre for backhaul and
                        secondary backhaul may require new fibre build, this may be much cheaper
                        alongside existing power cables as it may avoid the need for fresh digging.

              5.5.3.  Flexibility, scalability and future development:
                  PLC

Flexibility             PLC systems are flexible and scaleable to cover all dwellings within a few
                        hundred meters of a local transformer station.

Future                  The theoretical capacity of the PLC system has been set at 45 – 250 Mbps, and
developments            new chipsets are addressing these higher ranges

Evolution potential     PLC is a very new technology which can expect to see both capacity growth
                        and cost reductions if it takes off

              5.5.4.       Strengths and weaknesses: PLC

Strengths                                              Weaknesses

A potentially strong competitor for broadband          It still needs to establish confidence and achieve
access in urban, denser and possibly other rural       regulatory stability
areas

              5.5.5.       Cost factors: PLC
Cost data comparable with other technologies are, unfortunately, not available. The user pricing of
trials, quoted for example in [17], is hardly a robust proxy. They do, however, indicate that costs may
be comparable with ADSL. If, as some claim, costs comparable with urban ADSL appear to be in
prospect for rural PLC served over medium voltage secondary backhaul, then PLC would disrupt the
landscape for rural broadband.

Reference [18] quotes a cost figure of €170 per user. The context appears to suggest that this is capex
for CPE only, though it is difficult to be sure what is meant. An unpublished source has said by word of
mouth that PLC might cost €1,500 per user, though again we have no basis for what is covered by that
figure. Reference [2] gives “above €1,000” for the per user capex for PLC. For the purposes of our
model, we assume capex of €1,500 per user and 30% annual charges (of €450) in all scenarios. We are
unsure whether this includes provision for backhaul over the medium voltage layer.




                                                   - 32 -
          5.6. Broadband wireless local loop (B-WLL)
             5.6.1.        Technical overview and basic features
Broadband wireless local loop (B-WLL) solutions aim to provide the broadband connection to and
from the customer’s premises by radio. Because these do not require any physical infrastructure, they
are potentially very flexible, scaleable and quick to deploy.

A variety of systems operate in different frequency bands, providing different bandwidths and reach. In
each case a central base station, usually attached to the local telephone exchange (network point of
presence) provides a both-way radio link with aerials at customers’ premises.

Systems operating below 10 GHz do not require a clear line-of-sight path between base station and
customer premises, and so can reach distances as long as 35 km, a clear advantage in the rural
environment, with data rates from 1 – 10 Mbps. One established system, multi-channel multipoint
distribution service (MMDS) originally designed for TV distribution but now upgraded for bi-
directional working, supports up to 1.5 Mbps asymmetric over a 55 km cell. Some systems use
unlicensed spectrum in the 2.5 – 5 GHz frequency bands, though the lower transmit powers they must
use constrain the system performance to about 900 kbps at up to 3 km.

The higher frequency bands from 10 GHz up to 40 GHz permit much higher bandwidths, though their
reach is constrained by the need for a line of sight path. Especially at the higher frequencies, system
performance is sensitive to rain and bad weather, lowering the overall system reach and availability. An
established system, local multipoint distribution system (LMDS) supports symmetric point-to-point or
point-to-multipoint (i.e. shared) bandwidths of 1.5 Mbps to 45 Mbps over 8 km cells.

             5.6.2.        Technical and performance review: B-WLL

Time horizon           Systems are in service and working now

Use of legacy          Not applicable
infrastructure

Use of other scarce    These solutions use radio spectrum for which licence fees may be payable
resources

Bandwidth              Varies with system.

                       MMDS: 1.5 Mbps asymmetric shared at up to 55 km

                       2.5 – 10 GHz system using licensed spectrum: 1 – 10 Mbps up to 35 km

                       2.5 – 10 GHz system using unlicensed spectrum: 900 kbps up to 3 km

                       LMDS: 1.5 – 45 Mbps symmetric in shared and exclusive configurations at up
                       to about 10 km

Contention             Depending on degree of sharing if any

Latency                Radio systems have no latency besides that inherent in bandwidth contention

Asymmetry              Symmetric and asymmetric versions are possible

Backhaul               Backhaul is required from the local exchange (point of presence) to the main
requirements           network, and also secondary backhaul from the base station to the local
                       exchange if it is not located there.




                                                 - 33 -
              5.6.3.  Flexibility, scalability and future development: B-
                  WLL

Flexibility            B-WLL solutions are flexible and scaleable and may be provided as required.
                       Present day solutions use large base stations capable of supporting 100’s or
                       1,000’s of users. This scale factor makes the solution expensive for few users.
                       Rapid technology developments are, however, aggressively attacking this and
                       providing small-scale options. Once operating, the inertia from having to
                       support existing users makes it difficult (and in practice costly) to change to a
                       different system

Scalability            See above

Future                 Higher bandwidths are in prospect with the exploration of higher frequencies
developments           towards 60 GHz, although line-of-sight and atmospheric attenuation will
                       constrain the reach of these systems

Evolution potential    A radio system once installed cannot readily be extended to take advantage of a
                       higher frequency or different system.

              5.6.4.      Strengths and weaknesses: B-WLL

Strengths                                             Weaknesses

Flexible, scaleable and quick to deploy without       Relatively expensive, especially where there are
needing fixed infrastructure                          few users.

Long reaches available on some systems

              5.6.5.  Cost factors, 1st solution: MMDS or 2 – 10 GHz
                  system using licensed bandwidth

One-off equipment      €30,000 (able to support 4,000 users)
costs

Per user costs         €800 for receiver

Distance related       Not applicable
costs

Annual running         Based on 30% of Capex, €9,000 + €250 per user, per annum
costs

              5.6.6.  Cost factors, 2nd solution: 2 – 10 GHz system
                  using unlicensed bandwidth

One-off equipment      €8,500 (able to support 1,000 users)
costs

Per user costs         €450 for receiver

Distance related       Not applicable
costs

Annual running         Based on 30% of Capex, €2,500 + €135 per user, per annum



                                                  - 34 -
costs

             5.6.7.  Cost factors, 3rd solution: LMDS or 10 – 40 GHz
                 system

One-off equipment       €60,000 (able to support 1,000 users)
costs

Per user costs          €1,800 for receiver

Distance related        Not applicable
costs

Annual running          Based on 30% of Capex, €18,000 + €540 per user, per annum
costs

An alternative source of cost data is [19], showing costs for customer premises equipment roughly
comparable with [9] though showing much higher base station costs. The above data follows [9].

         5.7. Cellular radio technologies
             5.7.1.        Technical overview and basic features
The cellular radio (mobile) networks are primarily designed for radio network access by mobile
terminals. Nonetheless, fixed terminals can use these networks, these thus providing a potential access
medium for broadband data. Cellular mobile networks can be divided into three types.

The current mobile networks, notably the ubiquitous GSM networks found throughout Europe, are
known as second generation mobile systems. The largely abandoned analogue networks of the 1980’s
formed the so-called “first generation”. The GSM system in its normal mode supports data
communication at around 9.6 kbps, which hardly comes within the definition of broadband. Extensions
of GSM, notably EDGE, offer a shared data channel of up to 384 kbps and so provide a means of
broadband mobile communications.

Third generation mobile (3G) systems, sometimes known as Universal Mobile Telecommunication
Systems (UMTS), provide much higher bandwidths in a spectrally efficient way. They are theoretically
capable of up to 2 Mbps, although this is only under ideal conditions. It is probably more realistic to
think in terms of internet access speeds at of 384 kbps. 3G mobile operators are beginning to roll out
networks for voice and data applications services, starting as one might expect in high-density urban
locations.

Fourth generation mobile (4G) systems currently represent an aspiration to develop and standardise
means of supporting mobile wireless access at speeds approaching 10 Mbps. The form in which 4G
will emerge is unclear. Some people imagine it as another radio interface with vastly superior capacity,
while others envisage a layered system utilising different technologies in different domains, for
example Bluetooth for the “personal area”, wireless LAN (W-LAN) for the immediate area, UMTS for
the wide area, with satellites as the last resort for global coverage. We must for the time being view 4G
as a futuristic technology without a clearly visible role in the short or medium terms for rural
broadband.

Mobile networks, offering service “on the move”, will always attract a premium price for broadband
data communications and other services, so it is difficult to see them as a major platform for rural
broadband. They may have application in special situations such as tourist areas and areas containing
second homes, where the users might prefer a premium-priced mobile service to a fixed annual
subscription. The prices shown below for cellular service are based on the costs of a 3G base station.
They are total costs not taking account of the apportioned costs of the cellular and other services using
the platform. They therefore overstate the cost of fixed broadband by cellular technology.




                                                  - 35 -
              5.7.2.      Technical and performance review: cellular

Time horizon           2G is current; 3G is starting installation but mainly in dense areas. 4G is
                       futuristic technology with no clear time to deployment.

Use of legacy          Where a 2G or 3G mobile network exists already, then broadband builds on top
infrastructure         of that infrastructure. Its introduction may call for network expansion in base
                       station capacity, backhaul capacity and main network provision.

Use of other scarce    Mobile networks use scarce radio spectrum. Base station sites may be difficult
resources              to obtain in built-up areas and in conservation areas of high natural beauty.

Bandwidth              384 kbps

Contention             Mobile data systems typically have contention, maybe 20:1 depending on the
                       number of users simultaneously accessing the service

Latency                There is no latency besides that inherent in contention

Asymmetry              2G systems are typically asymmetric, offering high rates only in the
                       downstream direction. 3G may operate in symmetric or asymmetric modes.

Backhaul               Mobile systems require backhaul from base station to main network
requirements

              5.7.3.   Flexibility, scalability and future development:
                  cellular

Flexibility            Mobile networks are in principle flexible and scaleable by means of adding
                       more base stations, and after that by “segmentation”. This means re-using
                       frequencies by having different cells in different directions from the base
                       station.

Evolution potential    2G and 3G will always be intrinsically limited to their present working
                       bandwidth ranges.

              5.7.4.      Strengths and weaknesses: cellular

Strengths                                            Weaknesses

Can provide broadband service relatively easily in   It is a heavyweight solution to install a cellular
an area that already has cellular coverage           network where there was none, purely as a means
                                                     of installing broadband.

An installed network will have other applications    Networks will charge for data by volume, and this
besides broadband.                                   will always be a “premium” solution

                                                     Bandwidths are limited

              5.7.5.      Cost factors: cellular

One-off equipment      A 3G base station costs about €300,000
costs

Per user costs         These are terminal costs, for which we suggest €500




                                                 - 36 -
Distance related        None
costs

Annual running          Based on 30% of capex, €100,000 per annum
costs

         5.8. Wireless local area networks (W-LANs)
             5.8.1.        Technical overview and basic features
A wireless local area network is based on a shared access radio signal covering a designated area. The
“base” or “head end” transmitter can address data to any terminal within reach, while terminals send
upstream data in free timeslots. These networks’ functionality is intermediate between the dedicated
link in the broadband wireless local loop (B-WLL), and the shared channels of a cellular network that
are managed to support full terminal mobility. Wireless LAN solutions offer high bandwidth (though
contended) over a limited reach, and promise a cheaper solution than B-WLL since the base station has
only the one, shared channel to manage. W-LANs have become a very popular method of providing
broadband wireless access to terminals in localised hot spots like airports, hotel and motorway service
areas.

There are many different standards or “flavours” of W-LAN technology [20]. Some of them support
very short ranges and address mainly the wireless interconnection of neighbouring pieces of equipment.
These are:

    •    Bluetooth: in the 2.4 GHz band, offering 720 kbps up to 10m

    •    Home RF: in the 2.4 GHz band, offering 1.6 Mbps up to 45m

    •    Ultra wide band (UWB): spread spectrum, offering 500 Mbps up to 10m

Hot-spot W-LAN technologies, mainly in the IEEE 802.11 family of standards, include the following.
Literature references are surprisingly silent on the range that may be obtained, though current
applications suggest that we should think in terms of 50 – 100 m. Base stations might be expected to
cost €1,500 (£1,000, [21]), though requiring of a secondary backhaul solution.

    •    Wireless fidelity (Wi-fi): in the 2.4 GHz band, offering 11 Mbps shared

    •    Wi-Fi5: in the 5 GHz band, offering 54 Mbps shared

    •    Hiperlan 2: in the 5 GHz band, offering 42 Mbps shared

The low range of all these technologies would make W-LAN a merely theoretical solution for the rural
broadband environment, save for the emergence of the WiMax (Worldwide interoperability for
microwave access) technology.

WiMax is a potentially disruptive technology for the rural environment. WiMax is an interoperable
family of wireless standards under IEEE 802.16, covering licensed and unlicensed spectrum from 2
GHz up to 66 GHz [22]. Bandwidths up to 70 Mbps in shared or point-to-point modes at up to 50 km
have been claimed, though there may be a degree of hype in the market at present. The IEEE 802.16a
variant is perhaps of most interest for rural broadband, as this operates in the 2-11 GHz bands and does
not require a line of sight path (as do the higher frequencies). These and other solutions are under
active investigation in IST 6th Framework project BROADWAN [4], [23]. Innovative applications of
these technologies in rural areas, often by new companies, are quoted in [3]. Cheap hybrid WiMax
solutions combined with satellite secondary backhaul offer a potential solution for small clusters even
in isolated areas.




                                                 - 37 -
              5.8.2.       Technical and performance review: W-LAN

Time horizon            Wi-fi solutions, which are of very limited range, are available now although a
                        proliferation of operating standards has caused severe interoperability problems
                        between different Wi-fi means of access

                        WiMax solutions appear much more appropriate and are a promising and
                        disruptive technology. They are still in course of innovation, trial and
                        standardisation. Trials may be expected in 2005 and deployment in 2006.

Use of legacy           W-LAN does not use nor require and fixed legacy infrastructure
infrastructure

Use of other scarce     Most W-LAN solutions use unlicensed radio spectrum. Operation in reserved
resources               bands may be necessary for reliable wide area operation

Bandwidth               Up to 70 Mbps

Contention              This is a shared medium, with user contention

Latency                 There is no latency other than that inherent in contention

Asymmetry               Symmetric and asymmetric implementations are possible

Backhaul                W-LAN solutions require backhaul. They can be the means of providing that
requirements            backhaul.

              5.8.3.  Flexibility, scalability and future development: W-
                  LAN

Flexibility             W-LAN solutions are flexible and scaleable as capacity can be increased, as
                        with cellular networks , by decreasing the size and increasing the number of
                        areas served by one base transmitter

Future                  Technical development is currently rapid
developments

Evolution potential     High bandwidth applications versions of WiMax appear to support service
                        evolution beyond 10 Mbps

              5.8.4.       Strengths and weaknesses: W-LAN

Strengths                                             Weaknesses

A disruptive versatile solution to wireless           The technology is immature, and standards are
broadband over wide areas                             under development

              5.8.5.       Cost factors
WiMax is an emerging technology, and available cost data is limited. The sources we have used
present two divergent views on the costs of W-LAN technology, and lacking a sound basis for
choosing the one rather than the other, the report exposes both.

Reference [9] brackets B-WLL and W-LAN together and, without elaboration, gives undifferentiated
costs figures as applying to both. Although this identity of prices seems doubtful, given the superior
economics of W-LAN systems, it has been confirmed in unpublished correspondence with a contact in



                                                 - 38 -
one of the 6th Framework projects. Our first cost estimate of WiMax W-LAN solutions is therefore
taken to be the same as for MMDS-like B-WLL solutions.

Reference [2] presents a more optimistic view, of €800 per user capex for the isolated scenario, and
€350 for both scattered and small town scenarios. These do not decompose the figure into platform and
per user components, so giving limited understanding of the underlying costs. Our second cost estimate
for WiMax W-LAN’s is based on these figures. A graph in [2] shows a downward cost gradient,
reducing those prices to €300 and €200 respectively by 2010.

          5.9. Satellite access
             5.9.1.        Technical overview and basic features
Satellite systems can provide broadband connectivity to almost any place on the planet, regardless of
whether rural or urban. They are, however, more limited in bandwidth than other media for economic
solutions, and have a problem of latency because of the long paths that signals must traverse between
the earth station, satellite and back again.

Satellites orbit the earth, and three classes of system may be identified depending on their height of
orbit. Geosynchronous (or geostationary) earth orbit (GEO) satellites are at 36,000 km above the
earth. This is the height where the time to complete one orbit is the same as the earth’s rotation period
of one day, so the satellite stays in the same place relative to the earth’s surface. Low earth orbit
(LEO) satellites are much nearer, 500 – 1,500 km, while medium earth orbit (MEO) satellites circle at
7,000 – 12,000 km. GEO satellites have the largest terrestrial coverage. Their distance limits the
bandwidth that can be sent for a given power, with the result that GEO satellites need high power
transmitters and elaborate, aligned antenna systems (satellite dishes). LEO satellites were aimed at
global mobile telephony, where user terminals had limited power and could not accommodate
accurately aligned dish aerials. LEO satellites describe moving orbits relative to the earth, so that
complete coverage requires large constellations of them (the Iridium system had 77). Complex
management procedures switch terminals from channel to channel, depending on which satellite is in
reach at the time. MEO satellite systems take a compromise position between the features of GEO and
LEO. Fixed broadband provision is invariably supported from GEO satellite platforms.

A small volume of rural broadband provision can be accomplished with existing satellites. However,
widespread delivery by satellite would imply the launching of new satellites. Satellite technology is
generally considered to be expensive, if ubiquitous. However, sources such as [7] and [9] draw
attention to the volume economies that would accrue if satellite solutions to rural broadband became
widespread.

             5.9.2.        Technical and performance review: satellite

Time horizon            Satellite access is available now in all locations

Use of legacy           Individual users can connect to an existing satellite system on demand,
infrastructure          although rapid growth of satellite access would require the launch of new
                        systems

Use of other scarce     Satellites use licensed radio spectrum.
resources

Bandwidth               Satellites support very high bandwidth channels such as 155 Mbps for
                        broadcasting and telecommunications operators, though cost factors practically
                        limit consumer bandwidths to 2 Mbps, and will confine many users below 512
                        kbps

Contention              Most satellite systems use shared links with contention up to 50:1

Latency                 GEO satellites have high latency (a second or more). This precludes their use



                                                  - 39 -
                         on interactive real-time services, and can restrict the internet surfing experience

Asymmetry                Symmetric and asymmetric forms of service are offered at most bit rates

Backhaul                 Satellite system have no backhaul requirement
requirements

              5.9.3.   Flexibility, scalability and future development:
                  satellite

Flexibility              Satellite systems are scaleable to large numbers of users regardless of their
                         geographical spread or location

Scalability              See above

Extension options        None

Availability of          A very wide range of options is available at very different prices. For example
reduced versions         512 kbps downstream with 128 kbps upstream is obtainable at a tenth of the
                         cost of 2 Mbps symmetric.

                         Unidirectional options (with no upstream service) reduce costs greatly,
                         although the user must find some other way to establish the upstream link.
                         Many will accept this as a non-broadband link, for example PSTN modem dial-
                         up, so constructing an extremely asymmetric form of hybrid broadband service.

Evolution potential      These systems do not possess potential for evolution to higher speeds. They are
                         at the low end of broadband. Consumer premises equipment, once purchased, is
                         service-specific and might need full replacement were the user to upgrade to a
                         different service.

              5.9.4.        Strengths and weaknesses: satellite

Strengths                                                Weaknesses

Available everywhere immediately                         Very high annual costs

Little specific up-front capital cost to establish       Limited bandwidth
service in a given place

                                                         Latency precludes highly interactive services

              5.9.5.        Cost factors: satellite
Because a satellite services thousands of users over very large areas, it is difficult to identify a specific
capital cost to establish service in a particular rural community. However, satellites are not free, and a
transponder, capable of giving service to 5,000 to 10,000 widely scattered users has annualised charges
of about €2.5M per annum. These are subsumed in rental costs for the purposes of this model, thus
presenting satellite solutions as low-capital but high annual cost solutions. This reflects quite accurately
to the cost factors a typical rural community will face at its decision to purchase. There are per-user
capex costs, however, for the modem and satellite dish each user must purchase. Costs are shown for
three solutions together with a reduced cost scenario [7] for one of them under high supply volume
assumptions.

    •    Service 1 is 2 Mbps both way symmetric with 4:1 contention

    •    Service 2 is 512 kbps downstream, 128 kbps upstream, with 40:1 contention



                                                     - 40 -
    •    Service 3 is 512 kbps downstream only, with 50:1 contention

The costs of Service 3 include the cost of a fixed exchange line to provide the upstream link, priced at
BT’s £11 per month. Without this, the service is not an always-on broadband service; even with it, this
simple service stretches the definition of broadband as the upstream link is at PSTN modem speeds.
Other solutions such as B-WLL for the upstream link are not relevant, as these options also provide a
downstream link, remove the need for the satellite and so completely change the solution.



One-off equipment       None
costs

Per user costs               •   Service 1: €4,200

                             •   Service 2: €2,100

                             •   Service 2 with high volume economies: €280

                             •   Service 3: €250 for satellite equipment and €100 for PSTN modem

Distance related        None
costs

Annual running               •   Service 1: €30,000 pa
costs
                             •   Service 2: €2,500 pa

                             •   Service 2 with high volume economies: €600 pa

                             •   Service 3: €500 pa plus €200 pa for fixed line subscription

The “high volume” service costs approximately one third the cost of the basic service, and applies at a
threshold unit volume of 300,000 users. More, though only modestly more, savings are envisaged for
even greater volumes.

         5.10. Broadcasting based solutions
Although the requirements of the communications and broadcasting sectors are very different, the
widespread advent of digital broadcasting presents a prospect of unified delivery platforms. These may
offer valuable avenues to address broadband for all goals for two reasons. Firstly, a lot of the consumer
demand for broadband communication is for broadcast material, albeit personalised broadcast material.
Secondly, the relative ubiquity of entertainment broadcast channels makes them conceivable candidates
for solving some of the problems of broadband access.

Typical broadcast channels send megabits or tens of megabits per second in a shared and unidirectional
mode. Bi-directional operation is typically achieved through a subsystem of cell main nodes. These
have two main purposes. The first is to receive the broadcast signal, for example from a satellite, and
distribute it to user terminals requesting it via an access medium such as ADSL, B-WLL, W-LAN or
cellular communications. Such a broadcast solution is essentially a hybrid solution using a main access
solution and the broadcast medium for secondary and primary backhaul. In some situations, it may be
convenient and cost effective for the terminals to receive the un-personalised broadcast signals directly,
for example where the broadcast is by digital terrestrial television. The second purpose of the cell main
node is to handle upstream communications from the user terminals. Some of this communication may,
where appropriate, be multiplexed via the central broadcasting point into the broadcast data stream for
other terminals to retrieve, although one suspects that more of it may be retained and processed by the
information service provider directly.




                                                  - 41 -
These technologies are being addressed by the IST 6th Framework project ATHENA. Some systems of
this type have appeared on the market. As an example, Alcatel’s “DSL in the Sky” project relies on
satellite distribution using DVB-RCS, and ADSL for local access [24]. This system supports 45 Mbps
downstream and 2 Mbps upstream (no information is available on the contention factor), and is
marketed as a broadband access product. Another proposal, outlined in reference [25], is for the
distribution of multimedia broadcast content to suitably equipped 3G cellular terminals. While this
obviously addresses some of the user broadband requirement, for unidirectional personalised audio,
video and textual content, it is doubtful whether it caters for all classes of broadband services.

We have no comparative cost data for any of these solutions.

          5.11. High altitude platforms
             5.11.1.       Technical overview and basic features
High altitude platforms are airborne vehicles at altitudes between 17 km and 22 km. This part of the
stratosphere is relatively free of winds and turbulence, is well below the altitude of even the nearest
low earth orbit satellites yet is safely clear of aviation lanes. HAPs take two basic forms. Airship HAPs
are static objects, although they need power since some steering is necessary to maintain their
stationary position over the earth. They can stay in place for years. Vehicular HAPs are like aircraft and
may be manned or unmanned. Manned HAPs typically have operating shifts of eight hours. They offer
a potentially attractive solution to broadband in isolated areas, since they are much nearer the earth than
satellites and so can offer high bandwidths, more focussed coverage without the costs and transmit
powers associated with the long propagation paths in satellite systems.

HAP solutions are in the development if not the research phase, being addressed in projects such the
IST programme’s CAPANINA [26].

An HAP operating in the 47/48 GHz bands could illuminate over 100 10 km cells, delivering a shared
bandwidth of 25 Mbps both ways per cell and so supporting individual data rates from 2 Mbps to 25
Mbps or higher [27]. Costs are difficult to estimate. A large development effort is necessary, and this
requires both commercial confidence that this is a worthwhile market and regulatory action to allocate
spectrum. [27] suggests that the capital cost of one HAP may be €50M, which compares with €200M
for a GEO satellite and €9B for a LEO constellation.

             5.11.2.       Technical and performance review: HAP

Time horizon            Currently uncertain. Promoters talk in terms of 2008.

Use of legacy           HAPs do not use or require existing infrastructure
infrastructure

Use of other scarce     HAPs are potentially energy-efficient. They require allocations of radio
resources               spectrum.

Bandwidth               2 – 25 Mbps both way per user, with a maximum of perhaps 155 Mbps

Contention              Systems, especially those supplying high rates, may involve shared channels
                        with contention

Latency                 Latency is minimal, apart from contention latency

Asymmetry               Symmetric and asymmetric systems may be equipped

Backhaul                No backhaul required
requirements




                                                  - 42 -
              5.11.3. Flexibility, scalability and future development:
                  HAP

Flexibility             Unlike satellites, the time to deploy is short. Onboard capacity, using
                        configurable aerials, can be assigned and brought into service quickly, making
                        this a flexible and scaleable solution

Evolution potential     There is high evolution potential as these are wide bandwidth channels. HAPs
                        can be returned to earth for augmentation and evolution

              5.11.4.      Strengths and weaknesses: HAP

Strengths                                               Weaknesses

A powerful, flexible and persuasive solution            Costs are unknown

                                                        It is uncertain how this solution will fare
                                                        commercially in the face of other available
                                                        solutions, and whether it can “take off”

              5.11.5.      Cost factors: HAP
Cost factors are not available for HAP solutions.

         5.12. Mesh radio: technical overview and basic features
Mesh radio creates wireless broadband connectivity between users and local exchange base stations in
an ad-hoc way, making up the needed logical connections between individual users and the local
exchange point of presence by chaining capacity from user site to user site. The underlying radio
transmission may use point-to-point B-WLL, point-to-multipoint B-WLL, or W-LAN technologies.

The advantage of mesh radio solutions is that they avoid the need for a base station in contact with all
users, as with B-WLL or W-LAN. This may make for a cheaper solution or a longer reach solution. On
the other hand, the user stations become more complex and so more expensive, since they have to
switch “through traffic” on behalf of other users. Finally, the network needs careful capacity
management to avoid points of excessive or unexpected contention (bottlenecks) and ensure that users
really get the bandwidth they think they are getting. A mesh network could prove fragile, if many users
were exposed to poor performance or breakdown at strategic points. BT’s experience on a recent Welsh
trial confirmed that network planning requires a very high level of expertise defying automatic
resolution; this may prove impractical for widespread deployment.

Automatic self-configuration of such networks remains a research topic, being addressed in IST project
BROADWAN [4] and elsewhere. Such projects address not only homogeneous networks, that is,
consisting of the same type of radio technology on each link, but also inhomogeneous networks
utilising and joining different types of radio, satellite, cellular and fixed links.

Mesh radio should be viewed as a futuristic technology offering as yet uncertain promise.

         5.13. Backhaul technologies
As outlined in section 4.7, there are a variety of backhaul solutions available from the local exchange to
the main network (primary backhaul), as shown in Table 10. Other options besides these are available
for secondary backhaul, as shown in Table 11.



Table 10 List of backhaul technologies with their costs



                                                    - 43 -
Primary backhaul technology        One-off link costs                 Per kilometre costs

Point-to-point radio               €50,000                            None

Synchronous digital hierarchy      €10,000 - €60,000 depending on     €80 - €240 per metre depending
(SDH) over fibre                   bandwidth required                 on terrain, say €150,000 per km
                                                                      (if no fibre already available)

Satellite link                     Depends critically on required     None
                                   bandwidth:

                                   €9,000 for 2 Mbps

                                   €50,000 for 10 Mbps

                                   €100,000 for 45 Mbps

                                   €300,000 for 155 Mbps


Table 11 List of secondary backhaul technologies and their costs

Secondary backhaul technology      Off-off link costs                 Per kilometre costs

Point-to-point radio               €50,000                            None

Passive optical network            €42,500                            €80 - €240 per metre depending
                                                                      on terrain, say €150,000 per km
                                                                      (if no fibre already available)

Mesh radio                         Minimum €24,000, plus              None
                                   €12,000 per repeater if required

Gigabit Ethernet                   €10,000                            €80 - €240 per metre depending
                                                                      on terrain, say €150,000 per km
                                                                      (if no fibre already available)

HDSL / SHDSL with pair             €500 - €1,500 per device (two      None, always assuming that the
bonding                            required) depending on             copper pairs are available
                                   bandwidth required

Satellite link                     Depends critically on required     None
                                   bandwidth:

                                   €9,000 for 2 Mbps

                                   €50,000 for 10 Mbps

                                   €100,000 for 45 Mbps

                                   €300,000 for 155 Mbps

For annual costs, assume a maintenance and depreciation allowance of about 30% of the one-off capital
cost per annum. Additionally, satellite solutions imply the payment of an annual rental for capacity as
follows.

    •    for 2 Mbps:      €150,000



                                                 - 44 -
    •    for 10 Mbps:      €600,000

    •    for 45 Mbps:      €2.5M

    •    for 155 Mbps:     €5M

    6. Cost-benefit analysis
         6.1. Methodology and description of model
             6.1.1.        Overview
The purpose of this section is to provide a brief and simple cost-benefit model for applying different
technical solutions to various rural community scenarios, and then comparing their costs. This, it must
be stressed, follows a very simple approach and so generates only “ball-park” costs, for comparative
purposes only. Though these figures will give a good idea which solutions are worth considering in a
given context, fully fledged business plans will require much more detailed modelling. Other studies
containing detailed cost-benefit approaches, for example references [9], [28], [29], [30], generate
averaged conclusions for whole regions. These still leave open the need for detailed modelling of
specific locations, and may not highlight the factors impacting decision-making in the local
community.

There are two stages to this model:

    •    development of a set of technical solutions and the data-filling of a cost model for each

    •    characterising a set of regional community scenarios

             6.1.2.        Solution cost models
Section 6.3 below summarises the access solutions, while section 5 above describes them in more
detail. The cost model of an access solution consists of the following unit costs.

    •    One-off capex for service platform (a)

    •    Marginal per user capex for service platform (b)

    •    Marginal per-user capex for access transmission and customer premises equipment (c)

    •    Distance related per user capex for access transmission (d)

    •    One-off capex for secondary backhaul platform(s) (e)

    •    Distance related capex for secondary backhaul platform (f)

    •    Marginal per user capex for secondary backhaul (g)

    •    Annual running costs of platform and secondary backhaul (not per user) (h)

    •    Annual per user running costs of platform (i)

Backhaul solutions have a simplified cost model as follows.

    •    One-off capex for backhaul platform (k)

    •    Distance related capex for backhaul (l)



                                                   - 45 -
    •    Annual running costs of backhaul (not per user) (m)

Annual running costs are intended, in principle, to cover maintenance and operating costs. It is possible
or likely that in practice some of the values used are incomplete, due to the simplicity both of the
model and its input data. This study does not incorporate a micro-model of service operation. Some of
annual charges used in the solution cost models derive as a percentage of the capital cost of the
equipment being used, as detailed in section 5.

The cost data for solutions employing using legacy infrastructure do not include any costs arising from
the maintenance and management of that plant itself, excepting that for added plant and upgrades
incurred wholly for broadband services. This simplification contains the implicit assumption that the
broadband application is truly incremental and that the existing usages of the plant are capable of
sustaining its cost. This is probably a valid approach for decision makers when tackling broadband
provision, although it understates the costs of legacy plant solutions. It should be reviewed if a solution
employing legacy plant showed small or only marginal cost advantage over other solutions.

              6.1.3.       Regional scenario models
Regional scenarios are developed for three contexts: a small town, a scattered area and an isolated
community. These are shown in section 6.2 below.

The regional scenarios do not relate to any specific region or location, but are considered values
representative of these types of community. Obviously, a real community or region would take into
account more specific and detailed factors when making its own plans and decisions.

The regional scenario characteristics modelled are the following.

    •    The number of dwellings or premises taking service (P)

    •    The mean loop length from the base station of network point of access (R).

    •    The assumed backhaul distance to the nearest main network point of presence (S).

              6.1.4.        Presentation of results
The modelling results are in the Appendix.

The cost of a solution in a given community scenario is simply obtained by adding up the one off, per
user and per kilometre costs, multiplied where appropriate by the number of users and the distances in
the scenario. The costs of primary backhaul solutions and access (“last mile”) solutions are
separated to allow readers to make up their own combinations. Where an access solution is a hybrid
solution employing a secondary backhaul technology, the combined costs of access and secondary
backhaul are combined as the total access costs of the solution. The solution costs results are expressed
in terms of the following. The means of calculation are shown in Table 12.

    •    Capex: one-off, marginal per user, average total per user

    •    Per annum running costs: flat (user-independent), marginal per user, average total per user

    •    Present value of establishment costs and five years’ running costs. For simplicity, the annual
         costs are assumed not to change, and the test discount rate is 5%.
Table 12 Calculation of results

Note: APn is the present value of one unit per annum for n years at a test discount rate of 5%, where the
payment takes place at the end of each year. AP5 = 4.546




                                                   - 46 -
Value                              Formula: access solutions           Formula: backhaul solutions
Capex: one-off                     C1 = a + e + f                      CB1 = k + lS
Capex: marginal per user           C2 = b + c + dR + g
Capex: average total per user      C3 =(C1 + C2P )/P                   CB2 = CB1 / P
Annual costs: flat                 A1 = h                              AB1 = m
Annual costs: marginal per user    A2 = i
Annual costs: average total per    A3 =(A1 + A2P )/P                   AB2 = AB1 / P
user
Present value of capex and five    PV5 = C3 + AP5A3                    PVB5 = CB2 + AP5 AB2
years’ running costs per user



         6.2. Regional scenarios
Table 13 below defines the background characteristics and the specific parameters.
Table 13 Characteristics of reference regional scenarios

Scenario model             SMALL TOWN                SCATTERED                   ISOLATED
parameters

Backhaul distance to       10                        25                          60
point of presence
(km)

Mean loop length           1.5                       4.5                         15
(km)

Number of user             80                        40                          20
dwellings

    •    The small town scenario is a clustered community in a rural area 10 km from a larger town,
         where 80 users take service and a majority are within the near-reach distance of the point of
         presence

    •    The scattered scenario is a more scattered community 25 km from a larger town, where 40
         users take service. Some are within the near-reach distance of the point of presence but
         perhaps half or more of them are not.

    •    The isolated scenario is a wilderness area with isolated dwellings whose centre is some 60
         km from a large town. 20 users take service. None (or hardly any) are within the near-reach
         distance of the point of presence, though most are within the middle-reach distance.




                                                 - 47 -
        6.3. Technical solutions
Table 14 below lists and describes the access solutions, while Table 15 shows the assumed cost factors for each. All access solutions require a primary backhaul solution
except where otherwise stated and marked with an asterisk. Blank cells denote zero or unknown values. Some table entries refer to notes shown below.

Table 16 and Table 17 respectively list primary backhaul solutions, and the cost data for them. Secondary backhaul solutions referred to above are not included, but modelled
where used in the hybrid access solutions that use them.
Table 14 Access technical solutions

Index     Solution          Details
1         ADSL              ADSL at 1 – 1.5 Mbps within its permitted operating reach around 5 km
2         Rem ADSL          Hybrid solution of ADSL access at 1 – 1.5 Mbps with one secondary backhaul system using SHDSL over bunched copper pairs
3         HFC upg*          Upgraded existing CATV system. Will probably not require backhaul to main network.
4         HFC new*          New build bi-directional CATV system. Will probably not require backhaul to main network.
5         FTTU              New build optical fibre to the user
6         MMDS              Medium reach WLL solution using licensed 2 – 10 GHz spectrum
7         Unlic WLL         Short reach WLL solution using unlicensed 2 – 10 GHz spectrum
8         LMDS              Short reach WLL solution using licensed 10 – 40 GHz spectrum
9         2G/3G             Service using extended 2G or 3G infrastructure
10        Sat (1)           Satellite service at 2 Mbps symmetric. Does not require backhaul to main network.
11        Sat (2)           Satellite service at 512 kbps down, 128 kbps up. Does not require backhaul to main network.
12        Sat (3)           One-way satellite service at 128 kbps down. Cost includes a normal PSTN line for upstream connection.
13        Sat (2) HV        As Sat (2), a satellite service at 512 kbps down, 128 kbps up, but making assumptions about high volume cost reductions for a market
                            volume of 300,000 units. Does not require backhaul to main network.
14        WiMax             WiMax W-LAN solution, second cost estimate. (The MMDS figure above applies for the first cost estimate)




                                                                                    - 48 -
15        PLC                 Power Line Communications


Table 15 Cost factors for access technical solutions

See Note 3 for WiMax solution, and Note 4 for Power Line Communications
Cost parameter in Euros        ADSL         Rem ADSL HFC upg          HFC new      FTTU        MMDS       Unlic WLL LMDS           2G/3G         Sat (1)      Sat (2)      Sat 3     Sat (2) HV
Platform capex (a)                 6,000        10,000       Note 1       Note 1      Note 2     30,000         8,500     60,000     300,000
Per user platform capex (b)           100         100                                               800           450      1,800
Per user transmission / CPE
capex (c)                             150         150           150          150                                                           500        4,200        2,100       350           280
Per user per km transmission
capex (d)                                                                           105,000
Secondary backhaul capex
(e)                                              1,500
Per km secondary backhaul
capex (f)
Per user secondary backhaul
capex (g)
Annual background costs (h)        1,800         3,450       Note 1       Note 1                  9,000         2,500     18,000     100,000
Per user annual costs (i)              30          30                                               250           135        540                     30,000        2,500       700           600

Note 1

For hybrid-fibre co-axial (HFC) solutions, costs are incurred per home passed rather than per subscribing user. For upgrade solutions¸ the one-off installation cost is taken as
€400 per home passed, and the homes passed as double the number of subscribing users. For new build solutions in the scattered and small town scenarios, the one-off
installation cost has been taken as €1,000 per home passed, and as before, the homes passed as double the number of subscribing users. For new build in the isolated scenario,
every subscriber loop (mean 15 km) has been taken as new dig at €80 per metre, resulted in a mean cost figure of €1.2M per subscriber. Because one would not in practice




                                                                                     - 49 -
install one subscriber at a time, the cost has been multiplied by twice the number of subscribing users and taken as a one-off cost. Running costs are taken as €120 per home
passed (i.e. twice the subscribing users) and again modelled as a user-independent annual charge.

Note 2

Inadequate cost data is available to fully model fibre-to-the-user (FTTU) solutions. Assuming that new dig and installation is required, a single figure of €100 per metre
(€100,000 per km) for dig and €5,000 per km for fibre installation, totalling €105,000 per km, are used. This is applied to the mean loop length, and shows as a per user, per
kilometre cost.

Note 3

WiMax solutions are not shown in the above table because we have no base data independent of the scenarios. They are shown directly in the results tables (Table 18, Table
20, Table 22) using data drawn from section 5.8.5.

Note 4

PLC solutions are not shown in the above table because only very limited data. They are shown directly in the results tables (Table 18, Table 20, Table 22) using data drawn
from section 5.5.5.
Table 16 Primary backhaul technical solutions

Index     Solution          Details
1         Radio             Point-to-point radio, detailed technology unspecified
2         SDH               SDH over fibre, including the costs of new build fibre
3         Sat (1)           Satellite link at 2 Mbps bothway
4         Sat (2)           Satellite link at 10 Mbps bothway


Table 17 Cost factors for backhaul technical solutions

Cost parameter in Euros                             Radio                SDH                   Sat (1)           Sat (2)
One-off capex (k)                                               50,000               35,000              9,000             50,000




                                                                                      - 50 -
Distance related capex (per km) (l)           0    150,000         0         0
Annual running costs (not per user) (m)   15,000    10,500    150,000   600,000




                                                     - 51 -
     7. References and acknowledgements
       7.1. References

1     “Broadband technologies and rural areas”, M Philpott, Journal of The Communications
      Network, Vol 2 Part 1, January 2003, pp 9-16
2     “Digital divide and broadband territorial coverage”, written recommendations of Working
      Group 1 of the eEurope Advisory Group, June 2004
3     “The development of broadband access in rural and remote areas”, OECD report from the
      Working Party on telecommunication and information services policies”,
      DSTI/ICCP/TISP(2003)7/FINAL, May 2004
4     IST 6th Framework project BROADWAN. www.telenor.no/broadwan/
5     IST 6th Framework project OPERA. www.ist-opera.org
6     “Development of Broadband Access in Europe: Final Results, Second survey”, IDATE, DG
      INFSO, December 31, 2003
7     “Satellite broadband access: crossing the digital divide”, European Satellite Operators
      Association (ESOA), May 2004
8     “Development of broadband access technologies 1995-2010”, Kommunikationsministeriet
      (Finnish Ministry of Transport and Communications), September 2004 (in Finnish with
      English abstract)
9     Technical Note 4 of “The economic benefits of broadband to Europe: ESA broadband benefit
      study”, Price Waterhouse Coopers confidential report to the EC and ESA, July 2004.
10    Source: Analysys Consulting Ltd, quoted in “Satellite broadband access: crossing the digital
      divide”, European Satellite Operators Association (ESOA), May 2004
11    See http://europa.eu.int/information_society/eeurope/2005/index_en.htm
12    Council Resolution on the implementation of the eEurope 2005 Action Plan, 5197/03,
      Brussels, 28 January 2003
13    “Broadband in Europe for all: a multidisciplinary approach”, Deliverable of 6th Framework
      Project BREAD, April 2004
14    “Final results on economic viability of broadband services in non-competitive areas”, IST 5th
      Framework project TONIC, Deliverable 13, October 2002
15    “ADSL2: a sequel better than the original?”, IEE Communications Engineer, June 2004, pp
      22-27
16    “The first step of long reach ADSL: small DSL technology, READSL”, F Ouyang et al, IEEE
      Communications Magazine, Vol 41 No 9, September 2003
17    “White paper on Power Line Communications (PLC) and its impact on the development of
      broadband in Europe”, Arthur D Little, November 2002
18    “Power Broadband: The new broadband. PLC Market and opportunities”, F de la Peña,
      unpublished consultant’s report, Madrid, September 2003
19    “Investigations of Economics of 40 GHz Broadband Fixed Wireless Services”, K O Kalhage et
      al, from IST 6th Framework project TONIC and others. It is uncertain where or when this paper
      was published.
20    “Radio local area networks – an enabler of the European broadband perspective”, I
      Chochliouros et al, Journal of The Communications Network, Vol 3 Part 1, Jan 2004, pp 59-65
21    “Wireless LANs – present and future”, L Burness et al, BT Technology Journal, Vol 21 No 3,
      July 2003, pp 32-47



                                               - 52 -
22   “WiMax in depth”, P Piggin, IEE Communications Engineer, Vol 2 Iss 5, October 2004, pp 36-
     39
23   “User and service requirements”, Project BROADWAN deliverable D6
24   Alcatel Press Release dated 10 September 2004
25   “Satellite Digital Multimedia Broadcasting for 3G and beyond 3G systems”, N Chuberre et al.
     This originates from IST 6th Framework project maestro, though it is uncertain where or when
     this paper was published.
26   IST 6th Framework project CAPANINA. www.capanina.org
27   “High altitude platforms for wireless communications”, T C Tozer and D Grace, IEE
     Electronics and Communication Engineering Journal, Vol 13 No 3, June 2001, pp 127-137
28   “Provision of broadband services in non-competitive areas in western European countries”, K
     O Kalhage & B T Olsen. Published by Project TONIC on http://www-nrc.nokia.com/tonic/ and
     submitted to 14th International Symposium on Services and Local Access (ISSLS), Seoul,
     Korea, 14-17 April 2002.
29   “Broadband deployment in rural and non-competitive areas: the European perspective”, N K
     Elnegaard, B T Olsen & K Stordahl, Proceedings of the 2003 FITCE Congress, Berlin,
     September 2003, pp 51-54
30   “Crossing the digital divide: cost-effective broadband access for rural & remote areas”, M
     Zhang & R S Wolff, IEEE Communications Magazine, Vol 42 No 2, Feb 2004, pp 99-105




                                             - 53 -
    8. Appendix: modelling results
The results of the model may be found in the tables below.
Table 18 Cost results: isolated scenario without backhaul costs

Note that are two cost estimates for WiMax. One is the same as MMDS, and the other is shown as “WiMax” below.
Solution            Capex                                                                Annual costs                                                      PV over period
                    Base                  Marginal               Tot per user            Base                   Marginal           Tot per user            PV per user
HFC new                     48,000,000                    150             2,400,150                     4,800                 0                     240                     2,401,241
FTTU                                  0              1,575,000            1,575,000                         0                 0                       0                     1,575,000
MMDS                             30,000                   800                    2,300                  9,000               250                     700                        5,482
2G/3G                          300,000                    500                   15,500               100,000                  0                    5,000                      38,230
Sat (1)                               0                 4,200                    4,200                      0          30,000                     30,000                     140,579
Sat (2)                               0                 2,100                    2,100                      0              2,500                   2,500                      13,465
Sat (3)                               0                   350                     350                       0               700                     700                        3,532
Sat (2) HV                            0                   280                     280                       0               600                     600                        3,008
WiMax                                 0                      0                    800                                                               240                        1,890
PLC                                                                              1500                                                               450                        3,550



Table 19 Cost results: isolated scenario, main backhaul costs

Solution            Capex                                                   Annual                                            PV over period
                    Base                     Tot per user                   Base                     Tot per user             PV




                                                                                            - 54 -
Radio                              50,000                     2,500              15,000                    750                       5,909
SDH                             9,035,000                  451,750               10,500                    525                     454,137
Sat 2M                              9,000                        450            150,000                   7,500                     34,545
Sat 10M                            50,000                     2,500             600,000                  30,000                    138,879



Table 20 Cost results: scattered scenario without backhaul costs

Note that are two cost estimates for WiMax. One is the same as MMDS, and the other is shown as “WiMax” below.
Solution             Capex                                                                Annual costs                                                            PV over period
                     Base                   Marginal             Tot per user             Base                        Marginal            Tot per user            PV per user
ADSL                                6,000                  250                      400                     1,800                   30                      75                        741
Rem ADSL                           11,500                  250                      538                     3,450                   30                     116                       1,066
HFC upg                            32,000                  150                      950                     9,600                    0                     240                       2,041
HFC new                            80,000                  150                    2,150                     9,600                    0                     240                       3,241
FTTU                                    0              472,500                  472,500                           0                  0                       0                     472,500
MMDS                               30,000                  800                    1,550                     9,000                  250                     475                       3,709
Unlic WLL                           8,500                  450                      663                     2,500                  135                     198                       1,560
LMDS                               60,000                1,800                    3,300                   18,000                   540                     990                       7,800
2G/3G                             300,000                  500                    8,000                  100,000                     0                    2,500                     19,365
Sat (1)                                 0                4,200                    4,200                           0              30,000                  30,000                    140,579
Sat (2)                                 0                2,100                    2,100                           0               2,500                   2,500                     13,465
Sat (3)                                 0                  350                      350                           0                700                     700                       3,532




                                                                                - 55 -
Sat (2) HV                                0                     280                            280                             0                      600                     600              3,008
WiMax                                     0                        0                           300                             0                          0                       90            710
PLC                                                                                           1,500                                                                           450              3,550



Table 21 Cost results: scattered scenario, main backhaul costs

Solution           Capex                                                Annual                                             PV over period
                   Base                       Tot per user              Base                       Tot per user            PV per user
Radio                               50,000                      1,250                   15,000                      375                           2,955
SDH                              3,785,000                     94,625                   10,500                      263                         95,818
Sat 2M                               9,000                        225                  150,000                     3,750                        17,272
Sat 10M                             50,000                      1,250                  600,000                    15,000                        69,439



Table 22 Cost results: small town scenario without backhaul costs

Note that are two cost estimates for WiMax. One is the same as MMDS, and the other is shown as “WiMax” below.
Solution           Capex                                                               Annual costs                                                                 PV over period
                   Base                   Marginal            Tot per user             Base                       Marginal                   Tot per user           PV per user
ADSL                              6,000                 250                     325                       1,800                     30                        53                        564
Rem ADSL                         11,500                 250                     394                       3,450                     30                        73                        726
HFC upg                          64,000                 150                     950                      19,200                          0                    240                      2,041
HFC new                         160,000                 150                    2,150                     19,200                          0                    240                      3,241




                                                                                          - 56 -
FTTU                                  0           157,500                    157,500                      0                       0           0    157,500
MMDS                             30,000                800                     1,175                 9,000                   250            363      2,823
Unlic WLL                         8,500                450                      556                  2,500                   135            166      1,312
LMDS                             60,000              1,800                     2,550                18,000                   540            765      6,028
2G/3G                          300,000                 500                     4,250               100,000                        0        1,250     9,932
Sat (1)                               0              4,200                     4,200                      0               30,000          30,000   140,579
Sat (2)                               0              2,100                     2,100                      0                2,500           2,500    13,465
Sat (3)                               0                350                      350                       0                  700            700      3,532
Sat (2) HV                            0                280                      280                       0                  600            600      3,008
WiMax                                 0                     0                   300                       0                       0          90       710
PLC                                                                            1,500                                                        450      3,550


Table 23 Cost results: small town scenario, main backhaul costs

Solution           Capex                                              Annual
                   Base                      Tot per user             Base                Tot per user           PV over period
Radio                               50,000                      625              15,000                   188                     1,477
SDH                              1,535,000                  19,188               10,500                   131                 19,784
Sat 2M                               9,000                      113             150,000                  1,875                    8,636
Sat 10M                             50,000                      625             600,000                  7,500                34,720




                                                                                       - 57 -

				
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