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Open Networks Why? When? How? Ivan Dimitrov, BA Broadband Networks, Ericsson © Ericsson AB 2009 1 ASTEL annual conference May 2009 Agenda Broadband for all What is an Open Network? Why invest in Open Networks? When to start investing in Open Networks? How to invest/build Open Networks? Summary & Conclusions © Ericsson AB 2009 2 ASTEL annual conference May 2009 Broadband for all © Ericsson AB 2009 3 ASTEL annual conference May 2009 KPN Annual Event Brussels, 14 January 2008 Viviane REDING Member of the European Commission responsible for Information Society and Media "How we treat next generation access is (…) the single most important policy question in the telecoms sector today. We have to create incentives for investment whilst making sure that no-one (and I insist on this no-one), can be in a position to foreclose the market.” “Regulation will have a role to play to keep networks open and to guarantee progress, efficiency and choice “Point-to-point fibre deployment (...) is in fact the only fully future proof approach in terms of ability to deliver more and more capacity as techniques improve and as demand grows. Moreover it is the only approach to next generation access that permits a completely open access policy. “……….initiated by municipalities, in cities such as Stockholm” © Ericsson AB 2009 4 ASTEL annual conference May 2009 Addressing the needs for all….. Public Safety & Security Advanced services for citizens VoIP, Video & TV Health Services (e-health) Care for the elderly e-Government State-of-the-art ICT infrastructure for businesses Education (e-learning) Services for disabled citizens Broadband can help overcome the challenges © Ericsson AB 2009 5 ASTEL annual conference May 2009 ”A historical perspective” - Electricity Initial Market Development - Privately owned companies started deploying power plants in piecemeal fashion in late 1800s - Investments were mainly concentrated in profitable markets - Serving large cities, established businesses & wealthy homes - Large segments of the markets, especially rural and low income areas were left in the dark Consequences Eventual Industry Structure © Ericsson AB 2009 - High degree of market concentration in the hands of small number of vertically integrated companies ”monopolies” - Establishment of publicly owned municipal electric ultility companies 6 ASTEL annual conference May 2009 The Case for Municipal Broadband - The drivers 1- Failure on part of private companies to invest in specific geographic areas that do not meet the investment criteria of quicker ROIs Market Failure 2- Tendency towards ”natural monoply” due to high capital intensity and low marginal returns - Lower marginal cost, leads to low prices/profitability and eventual consolidation 1- Broadband, an essential public service and not a luxury 2- Sate-of-the-art broadband infrastructure, critical to improve community’s economic vitality - Attract/retain investments - Creation of jobs - Retain and attract new citizens - Foundation for knowledge based economy Economic Development 3- ”Eliminate” the ”digital divide” 4- Sustainability The drivers for municipal broadband today are the same as were for municipal electricity, a century ago © Ericsson AB 2009 7 ASTEL annual conference May 2009 What is an Open Network? © Ericsson AB 2009 8 ASTEL annual conference May 2009 Open Network definition: In telecommunications, Open Network, or Open Access to Communication resources, means that anyone, on equal conditions with a transparent relation between cost and pricing, can get access to and share communication resources on one level to provide value added services on another level in a layered communication system architecture. © Ericsson AB 2009 9 ASTEL annual conference May 2009 Generic Open Network Model Service cost Customer Com.operators Public sector Enterprise Other operators Telecom Operator Service Portfolio Property Property Network Network Property Property Network Open on service level Network 10 ASTEL annual conference Open on infrastructure level City Network © Ericsson AB 2009 May 2009 Open Networks - Why? © Ericsson AB 2009 11 ASTEL annual conference May 2009 Alternative Infrastructure Ownership Service SP SP Provider Service SP SP Provider Active Infrastructure Inf Owner Active Infrastructure Active Infrastructure Passive Infrastructure Passive Infrastructure Passive Infrastructure Pros: -Better asset utilization through sharing -Easier classification of assets based on risk class -Shift of competition from infrastructure to services Cons: - Need for open/common interfaces Pros: -Better asset utilization through sharing -Easier classification of assets based on risk class -Shift of competition from infrastructure to services Cons: - Need for open/common interfaces Pros: - Suitable for traditional commercial services Cons: -Infrastructure based competition - Not suitable for public and new type of commercial services © Ericsson AB 2009 Service SP SP Provider 12 ASTEL annual conference May 2009 Open Access Benefits Municipality owned fiber infrastructure used by different service providers – Deployment & operations cost split among different entities – Better utilization of assets/infrastructure through sharing Shift of competition from infrastructure to services – Consumers have access to competitive service offerings from various service providers – Higher service take-up No co-ordination problems – Same streets do not need to be digged every time a new telco enters the market – Fiber deployment is part of city planning, rather than Telco’s market strategy Open Access, a key enabler for municipal broadband © Ericsson AB 2009 13 ASTEL annual conference May 2009 Open Networks - When? Now! © Ericsson AB 2009 14 ASTEL annual conference May 2009 Critical success factors Demand Supply Infrastructure IS literacy Content and Services Modernized enterprises Prices (affordable) Modernized Public Administration © Ericsson AB 2009 15 ASTEL annual conference May 2009 Europe Commision Broadband performance index © Ericsson AB 2009 16 ASTEL annual conference May 2009 Open Networks - How? © Ericsson AB 2009 17 ASTEL annual conference May 2009 City networks in Sweden 153 City networks (of 290 munic) Most started as branches of munic owned power companies Today direct munic owned or separate companies 95 % offer dark fiber Lokala Bredbandsnät 2006 - Ägande 60 % of all fiber lease in Sweden through city network. Co-operate to provide crossover connections Saknar (114) Kommunalt(139) Privat (16) Blandat (21) Swedish City Networks Association © Ericsson AB 2009 18 ASTEL annual conference May 2009 Network levels © Ericsson AB 2009 19 ASTEL annual conference May 2009 Generic Open Network Model Service cost Customer Com.operators Public sector Enterprise Other operators Telecom Operator Service Portfolio Property Property Network Network Property Property Network Open on service level Network 20 ASTEL annual conference Open on infrastructure level City Network © Ericsson AB 2009 May 2009 Sweden leading the FTTx deployments in Europe © Ericsson AB 2009 21 ASTEL annual conference May 2009 A new perspective High Requires Government Intervention Commercially viable Cost/home passed Subsidies, infrastructure reuse, lower cost of capital, longer depreciation Loss Revenue/Home Connected Profit Deployment Cost Profit Cost/home passed Traditional Operators Low Structural funding available from EU/Local Public authorities* ”New operators” Municipalities, Utility companies, real estate etc High Low Population density People/Sq.km Municipalities are the key players in the value chain © Ericsson AB 2009 22 ASTEL annual conference May 2009 Available business models RSP RSP RSP RSP RSP RSP RSP RSP RSP C.O. C.O. C.O. C.O. N.O. N.O. RSP & C.O. Single Operator ”All-in-a-box” C.O. & N.O. N.O. RSP = Retail Service Provider, providing the services C.O. = Communication Operator, investing in and operating the active layer N.O. = Network Operator, investing in and operating the passive layer © Ericsson AB 2009 23 ASTEL annual conference May 2009 Business strategy and deployment strategy Penetration Services Provider FTTC FTTH Density Communication Provider + MBB FTTB Fiber Provider But how do we proceed © Ericsson AB 2009 24 ASTEL annual conference May 2009 Layered approach and nationwide deployment strategy Penetration Services Services Services Provider Provider Provider FTTH FTTH/FTTC FTTC FTTH Density Comm. Comm. Comm. Provider Provider Provider + MBB MBB FTTB FTTB/FTTH FiberFiber Fiber Provider Provider Provider © Ericsson AB 2009 25 ASTEL annual conference May 2009 Ericsson Managed Access Ericsson offerings Municipality/Investor jointly own infrastructure Private Investors/ Telcos SP#1 SP#3 SP#2 Business Consulting Services Entity Ericsson e-Health e-Gov e-Learning Public Service Portals/Servers Municipa lity Private Investor Ericsson HW/SW Services Infrastructure Entity Managed Services Technology/ Solutions - Bring in the investor partners - Setup Ericsson Services entity for managing operations - Develop applications/web portals for public services - Setup service contracts covering SLAs/KPIs to ensure quality on e2e connectivity - Provide uniform business processes/procedures for gaining access to network - Provide customized connectivity solutions to the Service Providers - Provide broadband technology & solutions - Provide Network design and turnkey roll-out services Ericsson facilitating for Neutral Governance © Ericsson AB 2009 26 ASTEL annual conference May 2009 Ericsson´s FTTH offerings Services Business Consulting Active solutions System Integration Managed Operations Home environment Access and site solutions Metro and IP edge Technology Consultation Passive solutions Micronet Ribbonet © Ericsson AB 2009 Deployment 27 ASTEL annual conference May 2009 Summary & Key take aways Broadband is no longer a luxury, but rather a utility Broadband is critical for the economic vitality of the communities and nations Deployment of broadband entails huge capital outlays with tendency for ”natural monopoly” Municipalities are therefore ideal entities for undertaking deployment of broadband infrastructure State-of-the-art infrastructure can help municipalities overcome their challenges by generating additional revenues, reducing their administrative costs and by better serving the citizens Municipal Broadband, a key enabler for driving economy © Ericsson AB 2009 28 ASTEL annual conference May 2009 © Ericsson AB 2009 29 ASTEL annual conference May 2009