Bitstream and multicast products on fixed networks

Project experience | Regulation and policy

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The problem

Denmark's National IT and Telecom Agency (NITA) wanted to upgrade its existing LRAIC model of fixed networks to enable calculation of the costs of various wholesale products, including:

  • broadband access on TDC's cable-TV network, following a decision regarding Market 5 obligating TDC to provide access to this network
  • broadband access on a fibre network in Copenhagen recently purchased by TDC from DONG Energy
  • fixed voice termination in accordance with the EC Recommendation on a new costing approach, issued in May 2009
  • multicast products over IP core networks.

NITA's requirements spanned services related to both access and core networks.

The solution

Analysys Mason has enhanced NITA's entire fixed network modelling system, rendering it capable of understanding the cost structures of not only copper and core networks, but also cable-TV and fibre networks.

We used our bespoke modelling approach in order to calculate the assets in the sub-national fibre/cable-TV networks in Denmark. The network designs accounted for the technical specificities of both networks including, for example:

  • both networks having sub-national, 'patchy' footprints whose service areas did not correspond at all to those of the copper network
  • cable-TV networks being a shared access medium
  • fibre networks using smaller 'exchange areas' than in the existing copper network
  • a NITA market decision relating to the pricing of final drops on the fibre network being released during the project, which had to be incorporated into the modelling
  • that in both networks, not all homes are passed, not all passed homes are connected and not all connected homes are subscribed.

Since the existing fibre network was only lightly utilised, a multi-year economic depreciation calculation was built to calculate the economic costs of fibre access to this network over several decades, assuming a forecast increase in take-up. This constitutes one of the few examples worldwide, as of 2011, of an economic depreciation calculation for an access network that has been used for regulatory price setting.

Separate geotypes were defined for the cable-TV and fibre networks in order to capture the geographic variations of the two networks. The cable-TV network geotypes required an innovative solution to account for the fact that a node could be remote from the buildings it served.

We also worked with NITA to design a wholesale product for access to the cable-TV network (the first of its kind in Europe), taking into account that wholesale access capacity to these networks was of a shared, rather than dedicated, nature.

A calculation for the pure LRIC of fixed termination was also implemented in the one-year core model, ready for use in future market decisions. The one-year core model was also upgraded to include a series of multicast products, allowing for injection of multicast traffic at every layer in the core network hierarchy.

The result

In April 2011, NITA published final pricing decisions for bitstream access in both cable-TV networks and fibre networks, as well as for a set of newly designed multicast products.

NITA can now implement its analyses/reviews of multiple regulated markets and make robust pricing decisions. Previously, it was reliant on a one-year model that only covered copper networks and, to a more limited extent, fibre-to-the-home.

A considerable amount of material has been put into the public domain on NITA's website.

This includes:

  • draft/final reference papers describing the model design
  • over 150 pages of comprehensive model documentation
  • numerous industry presentations
  • multiple iterations of the Excel models that have been developed during the project, with change logs documenting all revisions made to the model between releases.

This constitutes one of the few examples worldwide, as of 2011, of an economic depreciation calculation for an access network that has been used for regulatory price setting.

"Analysys Mason has worked closely over the past year, to both a challenging timetable and scope. They have provided significant support in the successful development of costing methodologies for a wide range of fixed network services, including fibre bitstream, cable-TV bitstream, multicast and wholesale voice termination."