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					 Economics and Methods to Provide
Optimal Access Network in Broadband
          Access Network




            Network Technology Laboratory
1   Introduction


2   KT’s Broadband Access Network


3   Optimal Equipment Provision Criteria


4   Modeling and Economics


5   Conclusion




                                           -2-
What is Broadband ?
   Narrowband
    • The highest speed modem used with a traditional telephone line, kn
      own as a 56K modem, offers a maximum data transmission rate of a
      bout 45,000 bits per second (bps).
    • For example, using a 56K modem connection to download a 10-min
      ute video or a large software file can be a lengthy and frustrating e
      xercise.
   Broadband
    • Broadband or high-speed Internet access is provided by a series of
      technologies that give users the ability to send and receive data at
      volumes and speeds far greater than current Internet access over tr
      aditional telephone lines. In addition to offering speed, broadband ac
      cess provides a continuous, “always on” connection (no need to dial
      -up) and a “two-way” capability, that is, the ability to both receive (
      download) and transmit (upload) data at high speeds.




                                                                            -3-
    Access Networks
    Access networks is part of a communications network which
     connects subscribers to their immediate service provider.
    Access networks provide broadband services over the last mile to
     homes and small offices
    We can classified access networks into two categories depending
     on the infrastructure
     •   Wireline infrastructure
         •   CATV networks
         •   xDSL technologies - Existing copper technologies (ADSL,VDSL,XDSL etc.)
         •   Fiber To the Home (FTTH) or to the Building (FTTB), to the Pole(FTTP)
     •   Wireless infrastructure
         •   Satellite
         •   WiFi and WiMAX, Wibro
         •   3G WCDMA and HSDPA
         •   ZigBee
         •   Bluetooth




                                                                                  -4-
Broadband Technologies Category
                                                                                      •CMTS : Cable Model Termination System
                                                                                      •ETTH : Ethernet to the Home
                                                                                      •OLT : Optical Line Termination
                                                                                      •ONU : Optical Network Unit
                                                                                      •ONT : Optical Network Termination
                                                                                      •TDM : Time Division Multiplexing
                                                                                      •CWDM : Coarse Wavelength Division Multiplexing
                                                                                      •DOCSIS : Data Over Cable Service Interface Specifications




           FTTC (Fiber to the Curb)                                  FTTH (Fiber to the Home)



   xDSL                HFC                  LAN               Home Run               AON                    PON
(Twist-pair)   (Hybrid Fiber Coaxial)   (UTP Cable)                                               ()
                                                           (Point-to-Point) (Active Optical NetworkPassive Optical Network)


                   DOCSIS 2.0
                                                                                                                            A/B-PON
   ADSL               40M               Fast Ethernet
    8M                                       100M       Directly connect between
                                         KT : Ntopia       OLT and ONU(ONT)




                                                                                                               TDM
                                                                  100M           Powered switch node                          E-PON
                   DOCSIS 2.0b                                                     UTP connection
   VDSL1              200M
    50M
                                                                              Fiber signal amplification
                                                                                      Speed low                               G-PON
                      ETTH                                                            High Cost
                      200M
   VDSL2                                                                                                                    DWDM-PON




                                                                                                               WDM
   100M
                   DOCSIS 3.0
                                                                                                                            CWDM-PON
                     200M



                                                                                                                                      -5-
1   Introduction


2   KT’s Broadband Access Network

3   Optimal Equipment Provision Criteria


4   Modeling and Economics


5   Conclusion




                                           -6-
 KT Broadband Network
               BackBone Network                                         Access Network                                     Home Network
                                 VDSLaggregator S/W
                                                      Copper



 IP-VDSL                                                                                   BBx                             MODEM
                                                                                                                Copper
                                                               Fiber     1000BFXVDSLaggregator S/W



                                                                                           GES                  FES
                                                                                                                           24 UTP
 Ntopia                                                        Fiber     1000BFX                      100BFX
                                                                                        APT 통신실                동단자함
            Metro-core S/W Ntopia S/W
              (RS38000)
                                                                                                 1
                                                                         32λ/1core                                         24 UTP
FTTP/FTTC                                                                                             100Mbps
                                                               Fiber     100Mbps/λ               32
                                        OLT                                                                     FNU(S/W)
                                                                                         RN(AWG)


                                                                                                 1                                  UTP
                                                                         32λ/1core                    100Mbps
  FTTH
                                                                                                 32                           ONT
(WDM-PON)                                                      Fiber    100Mbps/λ
                                        OLT
            Metro-core S/W Ntopia S/W                                                    RN(AWG)
              (RS38000)

                                                                                                 1                                  UTP

                                                                                                 32                           ONT
  FTTH                                                         Fiber   1.25Gbps/1Core
                                        OLT
 (E-PON)                                                                                RN(SPLITTER)




                                                                                                                                          -7-
 The Number of Subscribers and Equipments at KT
    85% of all subscribers at KT use Copper, especially 95% at single housing
    68.5% of all subscribers at KT use 20M below equipments
    In case of single housing , 20M below equipments occupied about 84%
    In case of APT complexes, 50M above equipments provided about 50%                           )2007 year

                    DSLAM              IP-VDSL   IP-VDSL   IP-VDSL
       구분                    IP-ADSL                                 NTOPIA    FTTP     FTTH        계
                     (8M)               (10M)     (20M)     (50M)
           No.
                   383,353      -      869,681   876,230   729,519 1,583,749     -        -      4,442,532
          equip.

 APT        user   236,497      -      564,662   590,678   524,630   903,618     -        -      2,820,085

          user%      8.4%       -       20%      20.9%     18.6%      32%        -        -        100%

           No.
                 3,450,179 877,494        -      154,629   729,519      -      68,861   25,076   5,305,758
          equip.
Single
            user   2,128,476 710,181      -      104,237   524,630      -      26,899   10,324   3,504,747
housing
          User%     60.7%    20.3%        -        3%       15%         -      0.8%     0.3%       100%

           No.
                 3,833,532 877,494     869,681 1,030,859 1,459,038 1,583,749   68,681   25,076   9,748,290
          equip.

 SUM        user   2,364,974 710,181   564,662   694,915 1,049,259 903,618     26,899   10,324   6,324,832

          user%     37.4%    11.2%      8.9%      11%      16.6%     14.3%     0.4%     0.2%       100%


                                                                                                          -8-
The Status of Equipment Provision at KT
 Current    Provision Basis
    • High Density Housing Area (Apartment)
           UTP possible : Ntopia
           UTP not possible : 100M VDSL
    • Low Density Housing Area (Single Housing)
           Densely populated area : BBx-50M-VDSL / FTTH
           Sparsely populated area : BBx-50M-VDSL / FTTH-P

                                                                Quality upgrade
                구    분                     Suppy Equip.
                                                                 requirement
                         Special class         FTTH                  FTTH
           New
                             UTP             Ntopia-E               Ntopia-E
          housing
  APT                         TP             50M-VDSL             100M-VDSL
            Old          Re-modeling         Ntopia-E               Ntopia-E
          housing    No Re-modeling          50M-VDSL             100M-VDSL
                Inside CO(1Km)               50M-VDSL              50M-VDSL
 Single                                                          BBx-50M-VDSL
           Outside       Densely Area      BBx-50M-VDSL
housin       CO                                                      FTTH
  g
           (1Km)      Sparsely Area        ADSL(Single)       BBx-50M-VDSL(Single)

                                                                                     -9-
1   Introduction


2   KT’s Broadband Access Network


3   Quality and Optimal Provision Criteria


    Modeling and Economics
4

5   Conclusion




                                             -10-
Transmission Rate depending on distance
   VDSL has distance problem
     • 50M VDSL : 500M longer, transmission rate attenuation
     • 100M VDSL : 300M longer, transmission rate attenuation
   FTTH provides constant transmission rate regardless of
    distance
                                            Transmission rate according to distance



                          120
    tra nsmission ra te




                          100

                          80                                                                        50M VDS L
          (Mbps)




                          60                                                                        100M VDS L/VDS L2

                          40                                                                        FTTH

                          20

                           0
                                100   500   900   1300      1700     2100   2500      2900
                                                   loop length (m)

                                                                                   * VDSL 50/100M downstream basis




                                                                                                                        -11-
Bandwidth according to Subscriber capacity rate
                  FTTH provides the constant bandwidth
                    • WDM-PON provides the constant bandwidth regardless of
                      subscriber capacity rate(for using wavelength)
                    • E-PON, Ntopia fluctuate according to subscriber capacity rate
                  VDSL E-PON, Ntopia fluctuate according to subscriber capacity
                   rate

                                             The bandwidth per subscriber

                   120

                   100
                                                                                        50M VDS L(100M)
          (Mbps)




                   80                                                                   100M VDS L/VDS L2(100M)
                                                                                        100M VDS L/VDS L2(1G)
ba ndwidth




                   60                                                                   E -P ON FTTH(1G)
                                                                                        WDM-P ON FTTH(3.2G)
                   40
                                                                                        Ntopia-E (100M)
                   20                                                                   유사 FTTH (100M)

                    0
                         1   6       11          16              21     26   31
                                          number of subscriber


                                                                             * VDSL 50/100M downstream basis

                                                                                                                  -12-
Fault-rate and Cause
   Ntopia solution lowest fault rate
     • No equipment in the customer’s premises
   VDSL(50M/100M) solution highest fault rate
     • Many connection node from backbone to access including modem or ONT
     • Copper line has copper deterioration
   FTTH has fault rate lower than VDSL, but higher than Ntopia
     • Because ONT fault in customer premises
                                                                           [number of fault/1000 users]

                                Fault rate( inquiry ex clusio n)

         250.0             233.9
                 215.6

         200.0                                                                    IP-VDSL
                                                                                  50M
                                                                                  IP-VDSL
         150.0                                                     141.3          100M
                                          123.9           126.0                   Ntopia-E

         100.0                                                                    유사FTTH

                                                                                  FTTH
          50.0


           0.0
                 IP-VDSL   IP-VDSL       Ntopia-E        유사FTTH    FTTH
                   50M       100M




                                                                                                          -13-
Network Requirement to provide TPS
   When TPS activated, Over 40+œ Mbps is required
     • When TPS started, 20+œ Mbps is required for servicing HDTV 1 channel,
       SDTV 1channel
     • When TPS activated, 40+ œ Mbps is required to provide 3 channels
        HDTV simultaneously



                                        Bandwidth when TPS       Bandwidth when TPS
        Applications and Services
                                             started                  activated
                  IPTV                       13 Mbps
                                                                      27 Mbps
    (HDTV 1channel X 9Mbps, MPEG 4)   (HDTV 1 channel 9Mbps,
                                                               (HDTV 1 channel 9Mbps)
       (SD TV 1channel X 4Mbps)       SDTV 1 channel 4Mbps)
              Online Game                    2 Mbps                   2 Mbps
                  VoIP                      0.3 Mbps                 0.3 Mbps
                  Data
                                             5 Mbps                   10 Mbps
       (HTML & Multimedia Data)
          Video Conferencing                 3 Mbps                   3 Mbps
                  Total                     23.3 Mbps                42.3 Mbps


                                                                                        -14-
Operation Quality Comparison
                                                           Good     Bad




                      100M VDSL   Ntopia   FTTH   FTTP/C   Hybrid FTTH
      Speed
   TPS possible
       QoS
       Fault
 competitiveness
 Cabling difficulty
   (suburban)
 Cabling difficulty
   (apartment)




                                                                          -15-
Optimal Access Network Topology (housing type)
Central office (backbone)                        [Densely populated housing]
                                                                                 RN
  KORNET                                                                                        Real-FTTH
                                                                                                     (Special Apt.)
   IP-Premimum                          OLT                                                                                   ONT
                   RS-38K                                  [Current Ntopia]                                 [Hybrid FTTH]
                                                                                                PON + Ntopia                UTP
                                                                                                  (Remodeling Apt.)FES
                                                           L3
                                                                               UTP
                            Ntopia-SW                           Ntopia(FES)                  Equipment
                                                                                               PON + VDSL2             Copper
                                                                                                (Remodeling impossible)
                                                                                                                  VDSL2 Modem
                                              Special class                                     FTTH
                                                                                                L3 + VDSL2            Copper
                             New
VDSL2                                               UTP                                    FTTH PON + FES
                                                                                               (Remodeling impossible)
                                                                                                                 VDSL2 Modem
                            housing
                                                     TP                                FTTH PON + VDSL2
            APT
[Non densely populated housing]
                            Re-modeling                                                    FTTH PON + FES
                               (Inside 900M )
                               Old
                            housing              No Re-
   Copper                                       modeling
                                                                      Copper           FTTH PON + VDSL2
                                                                              Modem
         Model
                                  Inside CO(1Km)
                                           In case of
                                                            VDSL2                               VDSL2
                                                reusable
           Single
        [Area inside CO]                      BBx supplied
                                                BBx
                                                                    [BBx of outside CO]
                                                                                                VDSL2
                             Outside                                                            Real-FTTH
         housing                                 BBx not                                       (Suburban housing)
                           CO (1Km )                                                  RN
                                                                                                FTTH                         ONT
                                                 supplied
                                        OLT
                                                                                               PON + Ntopia           UTP
                                                                                      (Remodeling impossible) FES
                                                                                                                 [Hybrid FTTH]


                                                                                                                                    -16-
     How to invest and Provide access network equipment
                                                                                      4
                                                                                           Analysis of investment
                                                                                          • Economical analysis as investment and
                                                                                            maintenance costs

                                                          3
                                                                Selection of wiring Size

                                                              • Choosing the number of line as
                                                                subscriber’s size and density

                                2
                                         Selection of network
                                               solution
                                    • Selection of access solution as housing type
                                    • Re-selection as economics and competitors


1      Selection of investment
            priority Area
    • Which area is firstly provided
    • Choosing Priority item
    • Choosing weight


                                                                                                                              -17-
Priority Selection for providing access technology
 Each items is calculated with weight
    - The item of comparing bandwidth with competitor and KT is the
      highest
 In case the total sum is many , priority is highest
    - The area of densely populated, apartment complex, equipment is
      inferior to competitor

 Priority Diagnosis Table

                       Number of           Provision                                                VOC(fault)/number
KT market share                           technology       Housing type          Price rate
                         people                                                                       of subscriber
    (15%)                                with competitor       (5%)                 (5%)
                         (25%)           and KT (45%)                                                      (5%)
 basis      Value     basis      Value   basis    Value    basis      Valu       basis        Val     basis       Value
                                                                       e                      ue
  35%        10      1000          10                       APT       10     competitor/KT    10     0.26104       10
 below               above                                                        <1                  above
35%~50%      8      501~1000       8                                                                 (top 5%)

51%~70%      5      301~500        6                       Rural       5     competitor/KT    1      0.04273~      5
                                           Next page                             =>1
71%~90%      4      101~300        4                        Area                                     0.26104

  91%        1        100          1                                                                 0.04273       1
 above                                                                                                below
                     below
                                                                                                     (low 5%)

                                                                                                                          -18-
Priority Selection for providing access technology
 Item of provision technology with competitor and KT

                         Competitor                                KT
                 basis                value             basis                value
                 100M                  10             10M below               10
                                                         10M                  8
                  20M                  5                 20M                  6
                  10M                  1                 50M                  4
                                                        100M                  1



  (numbr _ of _ subscriber  value)   (number_of
                                                   _subscribe  value) 
                                                            r
 Competitor  i                                                       
                                                                         1  KT _ market _ share 
                                        KT  i

                        total _ subscribers                           
                                                                      




                                                                                                        -19-
Priority Selection for providing access technology
(summary)
  KT Market
    share
                                              점유률 50% 이하
                                           KT KT 50% Below                                                         KT 50% above
  Number of
    people                     Low density                     High density                      Low density                       High density

 competitor/              Inferior                                                                                                          Superior
                            열세         Superior        Inferior         Superior            Inferior          Superior     Inferior
     KT


    price


   VOC rate           多 少 多 少 多 少 多 少 多 少 多 少 多 少 多 少 多 少 多 少                                             多 少 多 少 多 少 多 少 多 少 多 少




   APT                2    2   2   2   3   3   3   3   1   1    1   1   2   2   2   2   2    2   2   2    3    3   3   3   1   1    1   2   3   3   3   3
              ranking



   Rural              2    2   2   2   3   3   3   3   1   1    1   1   2   2   2   3   2    2   2   2    3    3   3   3   1   2    2   2   3   3   3   3
            ranking




                                                                                                                                        • 8p~10p : 1 ranking
           1 Ranking                                       2 Ranking                                     3 Ranking
                                                                                                                                        • 5p~8p : 2 ranking

• The area of densely                          • The area of sparsely                                                                   • 5p below: 3
                                                                                                 • The area of sparsely                 ranking
populated and equipment is                     populated and equipment is
                                                                                                 populated and equipment is
inferior to competitor                         inferior to competitor                            superior to competitor
                                               • The area of densely                             • The area of KT’s market
                                               populated and KT’s market                         share is high and
                                               share is high                                     equipment is superior to
                                                                                                                                                        -20-
1   Introduction


2   KT’s Broadband Access Network


3   Optimal Equipment Provision Criteria


4   Modeling and Economics


5   Conclusion




                                           -21-
 Analysis of Capital Efficiency (wiring cost)
 Densely        populated housing
   • Hybrid solution is 11% more than Ntopia
   • Hybrid solutions have provided good quality and bandwidth than Ntopia

 Sparsely       populated housing
   • FTTH solution is 8% more than BBx-VDSL
   • In the future, considering trenching costs, it is desirable to capitalize to
     competitive FTTH in one step, without undergoing other solutions
                           Densely populated                                sparsely populated
                                housing                                           housing

   Wiring cost                                            Wiring cost
    per sub.                                               per sub.
                                                                                             8%


                                                                             45%

                                        32%
                            11%




                  Ntopia      Hybrid   FTTH (special level)             VDSL      BBx-VDSL        FTTH
                                                                   (No using BBx)

                                                                                                         -22-
Modeling to analyze economics
   We define generic sets and objective functions
    • Optimal functions to maximize “income cost of revenues – capital
      expense “


   Revenue costs
                          tz
    i   * {Yt=1 +       Y      t 1   *   }
                          t 2

       , where t= year , z= target year,
         Y =the number of subscribers,
         =   rate of increasing subscribers
         i  Service usage cost of i technology per subscriber




                                                                         -23-
Modeling to analyze economics
   Capital costs
     •   A set of parameters

         Parameter                     Meaning                    Parameter                  Meaning
             i         Access technology                             r(i,j)   Average ground rental cost per BBx
             j         Housing type                                 Bx(i,j)   BBx count(p/q )
             p         Subscriber line count                        Po(i,j)   Electricity cost (monthly) per BBx
             q         Maximum line count per BBx                   As(i,j)   AS(After Service) cost for subscriber
           E(i,j)      Equipment cost per subscriber                Er(i,j)   Fault rate
           L(i,j)      Wiring cost per subscriber                     H       Labor cost per subscriber
           O(i,j)      Service opening cost per subscriber            Rt      Capital expense occurring at t year
           M(i,j)      Modem cost per subscriber                      Mt      Maintenance cost occurring at t year



                        p t * {E(i, j)  L(i, j)  O(i, j)  M(i, j)}
                     Line        Equipment          Wiring       Service      Modem
                     count at    cost               cost         opening      cost
                     t year                                      cost

                                                         , where i=Access technology, j= Housing type

                                                                                                                      -24-
Modeling to analyze economics
   Maintenance Costs
    • Rental costs
                 r (i, j ) * Bx (i, j )          Average ground rental cost per BBx * BBx count



    • Electricity costs

                12 * po (i, j ) * Bx (i, j )       Electricity cost (monthly) per BBx * BBx count


    • AS(After Service) costs

                 Er(i, j ) * As(i, j )             Fault rate
                                                     * AS(After Service) cost for subscriber

                     tz
                p t *  {  H }        , where H = Labor cost per subscriber
                     t 1                    p= Subscriber line count at t year




                                            tz
                                pt * {  H }
                                            t 1

                                                                                                      -25-
Modeling to analyze economics
   Optimal formula to minimize the capital costs and maximize the
    revenues


     Maximize               tz
       i   * {Yt=1 +       Y     t 1   * } -
                            t 2


                p t * {E(i, j)  L(i, j)  O(i, j)  M(i, j)} -
                     tz                           tz

            [        {  
                     t 1
                                          }+   p t *  {  H } ]
                                                   t 1




                                                                     -26-
Wiring Cost per one Subscriber (densely poluplated area)
                                 Ntopia      Hybrid Ntopia   FTTH
Capital cost
     Wiring cost                 W 162,190   W 181,912       W 396,702
Equipment cost                   W 29,190    W 106,791       W 23,388
Cabling cost                     W 102,000   W 142,705       W 214,250
Service Opening Cost
     Modem                       NA          NA              W 98,784
     Opening cost                W 31,000    W 49,121        W 60,280
BBx maintenance cost
     Ground rental cost          NA          NA              NA
     Electricity cost            NA          NA              NA
AS cost
     Fault rate                  2.0%        2.0%            2.3%
     AS cost per subscriber      W 17,895    W 17,895        W 17,895
     Labor cost per subscriber   W 25,780    W 25,780        W 25,780


Total Cost in densely Area       W 368,055   W 524,204       W 837,079

                                                                  ($1 = W 1,000)
                                                                                   -27-
Wiring Cost per one Subscriber (sparsely poluplated area)
                                 Inside CO VDSL   Hybrid VDSL   BBx VDSL
Capital cost
     Wiring cost                 W 196,238        W 310,788     W 366,022
Equipment cost                   W 121,200        W 143,045     W 121,200
Cabling cost                     NA               W 92,705      W 169,784
Service Opening Cost
     Modem                       W 44,048         W 44,048      W 44,048
     Opening cost                W 31,000         W 31,000      W 31,000
BBx maintenance cost
     Ground rental cost          NA               NA            W 3,500,000
     Electricity cost            NA               NA            W 62,220
AS cost
     Fault rate                  3%               2.5%          3.3%
     AS cost per subscriber      W 17,895         W 17,895      W 17,895
     Labor cost per subscriber   W 25,780         W 25,780      W 25,780


Total Cost in sparsely Area      W 412,961        W 665,918     W 4,337,949

                                                                   ($1 = W 1,000)
                                                                                    -28-
Modeling Results

    NPV(Net Present Value)
      > 0 : revenue occurs
      < 0 : revenue does not occur


   Assumption
      10 thousand lines are supplied at the first year.
      All equipments is newly deployed
      Comparing for 5 years
      Discount ratio = 9.81 %




                                                          -29-
Modeling Results(Densely populated housing)
   Capital expense and revenue result
                                                       Densely populated
    during Y+5 Year in densely populated                    housing

    housing                                                                        Ntopia
    •  Ntopia solution is the most economical                                      Hybrid Ntopia

      (at approximately Y+3)                 NPV
                                                                                   FTTH
    • FTTH solution is less economical than
        Notpia, Hybrid solutions
                                                                                       Year
                                                   Y   Y+1   Y+2 Y+3   Y+4   Y+5




                                                                                                   -30-
Modeling Results(sparsely populated housing)

Capital expense and revenue result during Y+5 Year in sparsely
populated housing
  VDSL solution inside the central office (CO) without BBx is the most economical (at
   approximately Y+3)                                 sparsely populated
                                                            housing
  VDSL solution using BBx is less       NPV

   economical than inside CO VDSL
   , Hybrid solutions
                                                                               Inside CO VDSL


                                                                               Hybrid VDSL


                                                                               BBX-VDSL

                                                                                   Year
                                               Y   Y+1   Y+2 Y+3   Y+4   Y+5




                                                                                                -31-
Conclusions
   Reviews economics and efficiencies comparing three different
    access technologies such as VDSL2, passive FTTH, fiber LAN
    of Ntopia


   FTTH appear to be the best candidate for the next-generation
    access network
    - Subscribers want to be provided high bandwidth
    - Broadband market shifts from ADSL to FTTH
   In the eyes of KT (network provider), it is impossible to convert
    all access networks at one time to an optical for the cost
    problem.


   We propose middle stage, Hybrid access network such as FTTH
    PON+Ntopia and FTTH PON+VDSL providing economical solution


                                                                    -32-
Thank You !
  jkchun00@naver.com




                       -33-

				
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