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Regional Workshop on Assistance to the Arab Region for the implementation of Next Generation Networks (NGN) Convergence Opportunities and Technology Leapfrogging Cairo (Egypt), 15-16 December 2009. Oscar González Soto ITU Consultant Expert Spain [email protected] Agenda.

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Regional workshop on assistance to the arab region for the implementation of

Regional Workshop on Assistance to the Arab Region for the implementation of

Next Generation Networks (NGN)

Convergence Opportunities and Technology LeapfroggingCairo (Egypt), 15-16 December 2009

Oscar González Soto

ITU Consultant Expert

Spain

[email protected]


Agenda

Agenda

  • Convergence

    • Convergence related questions

    • Dimensions and profiles

    • Key factors: Economies of scale

  • Market and Business trends per category

  • Technology and Business Leapfrogging


Regional workshop on assistance to the arab region for the implementation of

Convergence related questions

  • Does convergence refer only to Fixed and Mobile?

  • Does convergence matter only to developed countries?

  • Is convergence more expensive?

  • What benefits may be addressed by convergence?

  • How convergence may help developing countries?

  • Others…………?


Regional workshop on assistance to the arab region for the implementation of

Convergence dimensions

Convergence is taking place at several domains

At Network domain

  • One network for all service types: NGN, IMS

    At Service domain

  • Fixed, Nomadic, Mobile, Interactive and Broadcasting, Content, etc.

    At radio Access domain

  • DECT, WiMax, 3G, LTE, etc.

    At Operational and Business domain

  • OSS, Billing, etc, for all customer classes

    At Terminal domain

  • 2G, 3G, PDA, iPhone, etc.


Regional workshop on assistance to the arab region for the implementation of

Level of convergence

Convergence Domain

Separated

Implementation

Low level convergence

Medium level convergence

Full convergence

Network

Services

Access

Operations

Terminals

Present Mode of Operation

Convergence profiles

Initial status: Separated networks, services and operations


Regional workshop on assistance to the arab region for the implementation of

Level of convergence

Convergence Domain

Separated

Implementation

Low level convergence

Medium level convergence

Full convergence

Network

Services

Access

Operations

Terminals

Present Mode of Operation

Partial

Convergence Profile

Convergence profiles

Example of convergence today by representative operators


Regional workshop on assistance to the arab region for the implementation of

Level of convergence

Convergence profiles

Convergence Domain

Separated

Implementation

Low level convergence

Medium level convergence

Full convergence

Network

Services

Access

Operations

Terminals

Present Mode of Operation

Partial

Convergence Profile

Ambitious

Convergence Profile

Future profile driven by: Initial status, Market development, Economy of scale and Operator Strategy


Regional workshop on assistance to the arab region for the implementation of

Key Factors: Economies of scale

Economies of scale (EoS) are an inherent characteristic to the telecom technologies that impact on solutions, efficiency and cost reduction

The five dimensions of the economy of scale:

  • By Size of the systems

  • By Technology capabilities

  • By Traffic efficiency with the occupancy

  • By customers Density

  • By Volume of purchasing

  • Benefits per dimension

  • Cost reduction per unit (i.e.: 10% to 30%)

  • New technologies with higher productivity (i.e.: x10)

  • Better utilization for a given GoS when larger systems (i.e.: +20%)

  • Quadratic decrease with coverage radio increase

  • Discount per volume in log scale (i.e.: up to 40%)


Economy of scale per system size

Economy of scale per system size

u

B

/ S

u = a +

1

1

1

1

Cost per unit

u = a +

B

/ S

u

2

2

2

2

Equipment size

m

X

M

M

m

1

1

2

2

t = a S + B

1

1

1

t

2

Full capacity cost

t = a S + B

2

2

2

t

1

Equipment size

m

m

X

M

M

1

1

2

2

Cost reduction as function of size and occupancy


Cost reduction per technology evolution example for ethernet ports

Cost reduction per technology evolution. Example for Ethernet ports

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000

$500

$0

1997 1998 1999 2000 2001 2002 2003 2004

Source: Dell’Oro Group


Economy of scale per traffic efficiency

Economy of scale per traffic efficiency

0.9

0.8

0.7

0.6

Resource Efficiency

0.5

0.4

P = 0.02

0.3

0.2

0.1

5

10

15

20

25

30

35

40

Offered Traffic

Impact on efficiency increase for a given quality with traffic and group size (non-linear effect)


Agenda1

Agenda

  • Convergence

    • Convergence related questions

    • Dimensions and profiles

    • Key factors: Economies of scale

  • Market and Business trends per category

  • Technology and Business Leapfrogging


Business domains and trends

Business domains and trends

Local Access

Metropolitan

network

Network nucleus

Applications and Services

Edge

  • Acquisition/merging of service providers

  • Development of new access loops and Unbundling

Application Service Providers

Backbone Service Providers (BSPs)

Agreements and

merging

Internet Service Providers (ISPs)

  • Agreements with

  • content providers

  • and e-commerce

  • Agreements with

  • wholesale operators

Access Providers (CAPs)

  • Agreements with content providers

Mobile Service Providers (MSPs)

  • New multi-service development

  • Agreements with content and application service providers

Established Service Providers (ESPs)

  • FMC

Example of Value Added chain and operators movements to gain economy of scale and market


Regional workshop on assistance to the arab region for the implementation of

Business Planning case

Evaluations to be based on robust techno-economical tools due to high number of alternatives and complexity

Case study performed for medium size country with mixes of customer classes and services domains:

  • Multiservice IP Network with integrated operation available

  • Three service categories: Voice, Data/Internet, Video distribution

  • Modeling demands, multiservice traffic flows, dimensioning, network

    resources, CAPEX, OPEX and financial results for different levels of competition

  • Evaluate differential future Cash-flows, NPV, IRR, etc. for a 10 years period


Regional workshop on assistance to the arab region for the implementation of

8e+08

7e+08

6e+08

SOHO and

Small

5e+08

Enterprise

All

4e+08

Segments

Euro

(reference)

3e+08

Residential

2e+08

1e+08

Y0

Y1

Y2

Y3

Y4

Y5

Y6

Y7

Y8

Y9

Y10

0e+08

-1e+08

Year

Business Planning case

Effects of the mix of customers on Reference Scenario: Low competition level Network NPV

  • SME and SOHO with quicker recovery but less NPV and company value at medium term

  • “All customer segments” case with much better behavior


Regional workshop on assistance to the arab region for the implementation of

7e+08

6e+08

Internet

5e+08

4e+08

Internet &

VoDSL

3e+08

Euro

Internet &

Video

2e+08

All

1e+08

Services

(reference)

Y0

Y1

Y2

Y3

Y4

Y5

Y6

Y7

Y8

Y9

Y10

0e+08

-1e+08

-2e+08

Year

Business Planning case

Effects of the mix of services on Reference Scenario: Low competition level Network NPV

  • Major impact of service classes on NPV and company survivability

  • Single service classes without future

  • High benefit of “all services” case


Regional workshop on assistance to the arab region for the implementation of

5e+08

4e+08

Internet

3e+08

Internet &

VoDSL

2e+08

Euro

Internet &

Video

1e+08

All

Services

Y0

Y1

Y2

Y3

Y4

Y5

Y6

Y7

Y8

Y9

Y10

(reference)

0e+08

-1e+08

-2e+08

Year

Business Planning case

Effects of the mix of services on typical scenario: Medium competition level Network NPV

  • Increase of competition level amplifies the previous effects on feasibility: big differences between service mixes

  • Data only or single service classes without feasibility at medium term

  • Very robust behavior for the “all services” case


Agenda2

Agenda

  • Convergence

    • Convergence related questions

    • Dimensions and profiles

    • Key factors: Economies of scale

  • Market and Business trends per category

  • Technology and Business Leapfrogging


Regional workshop on assistance to the arab region for the implementation of

Scenario A

Circuit based

Scenario B

Packet based

Ethernet ptp

Multiservice

ATM/FR/IP

ATM VPN, IP VPN

Internet

Gbit access

IP VPN

Managed

LAN to LAN

connection

Dark

Fiber

Lambda

Bandwidth

IP

GigE,10/100BT

Ficon,Escon,

ATM/FR

IP Routing

Fibre Ch..

Optical switching

SDH

Ethernet

DWDM equipment

GigE

Optical fiber

Physical Infrastructure

Technological alternatives at core


Network architecture towards ngn trends in wll technologies for bandwidth and mobility

Network Architecture towards NGNTrends in WLL technologies for Bandwidth and Mobility

Convergence of different radio systems towards the integration of solutions and services at the IMT advanced


Network architecture towards ngn trends in umts solutions for higher capacity and performance

Network Architecture towards NGNTrends in UMTS solutions for higher capacity and performance

Evolution of the 3G and 3,5G versions towards 4G with increasing speeds and decreasing latency time


Regional workshop on assistance to the arab region for the implementation of

Grow for Bandwidth

Cost decreaseper bit

NGN full IMS

NGN pre-IMS

NGN-SWST

ATM/FR/SDH

ISDN

PSTN Digital

Steps by developed countries

PSTN Analog

Technology timed evolution

Network Architecture towards NGNFixed network steps/leapfrogging

Historical migration steps for fixed network operators with early development and services deployment


Regional workshop on assistance to the arab region for the implementation of

Grow for Bandwidth

Cost decreaseper bit

Example of Leapfrog for developing countries

NGN full IMS

NGN pre-IMS

NGN-SWST

ATM/FR/SDH

ISDN

PSTN Digital

Steps by developed countries

PSTN Analog

Technology timed evolution

Network Architecture towards NGNFixed network steps/leapfrogging

Migration strategy is strongly dependent on country

opportunity, infrastructure and service maturity


Regional workshop on assistance to the arab region for the implementation of

Grow for Bandwidth

Cost decreaseper bit

FTTH

FTTB

VDSL

ADSL2+

ADSL

Modem 128

Steps by developed countries

Modem 64

Technology timed evolution

Network Architecture towards NGNFixed Access network steps/leapfrogging

Historical migration steps for internet access operators with early development and services deployment


Regional workshop on assistance to the arab region for the implementation of

Network Architecture towards NGNFixed Access network steps/leapfrogging

Grow for Bandwidth

Cost decreaseper bit

Example of Leapfrog for developing countries

FTTH

FTTB

VDSL

ADSL2+

ADSL

Modem 128

Steps by developed countries

Modem 64

Technology timed evolution

Migration strategy is strongly dependent on country

opportunity, infrastructure and service maturity


Regional workshop on assistance to the arab region for the implementation of

Grow for Bandwidth

Cost decreaseper bit

LTE

HSPA+

UMTS

GSM/EDGE

GSM/GPRS

Steps by developed countries

GSM

Technology timed evolution

NMT

Network Architecture towards NGNMobile network steps/leapfrogging

Historical migration steps for mobile operators with early development and services deployment


Regional workshop on assistance to the arab region for the implementation of

HSPA+

UMTS

GSM

NMT

Network Architecture towards NGNMobile network steps/leapfrogging

Grow for Bandwidth

Cost decreaseper bit

Example of Leapfrog for developing countries

LTE

GSM/EDGE

GSM/GPRS

Steps by developed countries

Technology timed evolution

Migration strategy is strongly dependent on country

opportunity, infrastructure and service maturity


Regional workshop on assistance to the arab region for the implementation of

Extension for new

customer types

Upgraded Telcos

Customers for

connectivity

Classic Telcos

Extension for new

services domains

+ Services of IN,

VPN and Mobile

Conventional voice

and data services

Business Migration Leaps

“staircase” for leading growing alternatives


Regional workshop on assistance to the arab region for the implementation of

Extension for new

customer types

+ Customers for

new services

Extended Telcos

Upgraded Telcos

Customers for

connectivity

Classic Telcos

Extension for new

services domains

Conventional voice

and data services

+ Internet and video

Distribution (triple play)

+ Services of IN,

VPN and Mobile

Business Migration Leaps

“staircase” for leading growing alternatives


Regional workshop on assistance to the arab region for the implementation of

Business Migration Leaps

“staircase” for New Universal Telcos

+ Customers for

end applications

New Universal

Telcos

ASPs

Extension for new

customer types

Network

Virtualization

ISPs

+ Customers for

new services

Extended Telcos

Upgraded Telcos

Customers for

connectivity

Classic Telcos

Extension for new

services domains

+ e-applications,

Hosting,

Virtualization

Conventional voice

and data services

+ Services of IN,

VPN and Mobile

+ Internet and video

distribution (triple play)

Specific migration and timeframe to be optimized for the country context and regulatory conditions


Regional workshop on assistance to the arab region for the implementation of

Revenue level

(ARPU)

ASP

Video and multiservice

voice revenues

IN and data

Time and Extension for new

services domains

+ e-applications

and Hosting

Conventional voice

and data services

+ Services of IN,

VPN and Mobile

+ Internet and video

distribution (triple play)

Convergence strategy is fundamental to grow in a competitive environment

Business Migration Leaps

Evolution of revenues with service domains


Conclusions

Conclusions

  • Recent higher capacity technologies take benefit of economies of scale and are cheaper per communication unit

  • Skipping intermediate development steps will reduce transition and operational costs

  • Selection of Leaps per country is a function of initial maturity stage, country size and demand growing rate

  • Developing countries may benefit from a business staircase strategy based on the experiences at developed ones


Recommendations

Recommendations

  • Take benefit of experiences, benchmarking and proper modeling of key techno-economical factors

  • Focus on consolidated migration steps and technologies with multiple services domains

  • Take benefit of all economies of scale

  • !! Which convergence will happen ? Combination Driven by Market, Economy of scale and Competition !!


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