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Saving money on FTTH: thanks a billion

Analysys Mason recently helped an incumbent telecommunications network operator optimise the design of its national fibre-to-the-home (FTTH) network and reduced its estimated costs by over 22%. 

Figure 1: Estimated national FTTH costs [Source: Analysys Mason]

 Figure 1: Estimated national FTTH costs [Source: Analysys Mason]

We achieved the billion dollar saving by undertaking a detailed design and cost review of the operator’s proposed passive access network, that is the physical network that connects the customer to the operator’s active core network. We proposed two alternative designs: a least-cost design and a flexible design. 

  • The least-cost design minimised total costs, but was constrained in its ability to meet potential regulatory and technology development requirements. 
  • The alternative, flexible design not only significantly reduced costs, but also accounted for potential developments in key active network technologies, and complied with potential regulatory obligations.

In determining the optimum, long-term, cost-effective solution we had to consider the differing needs of the market, the Government, regulation and, of course, our client.

There is a burgeoning demand for bandwidth by private individuals to access increasingly available high bandwidth content, and commercial enterprises to fully exploit ICT to ensure commercial success. However, the ageing copper-based networks that form the part of the network that connects subscribers to the Internet and alternative wireless technologies, represent a major bandwidth bottleneck. On paper there is a simple technical solution: deploy a next-generation access (NGA) network comprising fibre, a medium with almost unlimited bandwidth capability, to every subscriber premises. However, the cost of deploying hundreds of thousands of kilometres of fibre cable is huge. In Australia, for example, it is estimated that it will cost AU$43 billion to deploy an NGA network to around 8 million households.

Meeting bandwidth demand requires a substantial investment that operators may struggle to justify from a commercial point of view. On the other hand, Governments see bandwidth bottlenecks as potential constraints to national economic growth and social development, and are therefore encouraging the building of NGA networks through regulation and, in some cases, financial support. 

Minimising network costs is critical to enabling broadband deployment and the support of economic and social improvement, and re-use of some existing infrastructure is key to reducing costs.  Governments encourage network investment, but at the same time encourage fair market competition through National Regulatory Authorities (NRAs), such as Ofcom in the UK. Regulators may impose access by third parties on an equivalent wholesale basis - this can also happen as a consequence of State investment.

National broadband networks are a long-term investment, so long-term technology options must also be considered when deciding on the most cost-effective solution. During our design review we considered likely fibre-based broadband technology roadmaps up to 2025. There are two main technology families that can be used to deliver high-bandwidth services over fibre:

  • Passive Optical Network (PON)
  • Point-to-Point Ethernet (PTPE).

PON technology can provide high, but shared, bandwidth to many subscribers using shared physical infrastructure - in some cases making it more cost-effective than PTPE, since the latter needs an individual end-to-end connection for every subscriber. The shared nature of PON brings with it some constraints, however, including inconsistent levels of bandwidth - whereas a PTPE can always provide a high level of bandwidth. What is also important is that the physical infrastructure is flexible enough to support future technologies, for example, the potential future deployment of the next generation of PON equipment, such as WDM PON AWGs (splitters).

Open access at the physical layer and technology choice have significant implications for the design of the network and the associated costs. Our ‘fit and forget’, least-cost network achieved cost savings of over 20% compared with the original design. A ‘fit and forget’ design has the advantages of reduced capex and, in particular, reduced on-going opex costs. However it is not very flexible in terms of likely technology upgrades and does not provide easy open access. We therefore modified our design to establish a capital cost optimum physical network that was also flexible to account for current and future bandwidth and regulatory requirements (equal access by third parties), as well as future technologies, all of which also minimised operational expenditure.

Analysys Mason has extensive technical and regulatory expertise to assist network operators, governments and regulators to determine the optimum NGA network strategy and design, meeting the requirements of all stakeholders and minimising costs.