The need for IPTV is driving demand for FTTx, but as ever, cost remains a major issue, especially the opex. Managing those costs is partly a matter of selecting the right architecture and technology for the job, but it also means devising the right business model to cover the opex bill
With the ongoing quest for triple-play services driving higher bandwidth requirements in the local access loop, industry analysts are becoming increasingly bullish on the prospects of fiber access deployments. Rollouts have been ramping up both in markets that have been sluggish on the fiber front, and markets that have been at its vanguard.
Asia, for example, sports some of the most aggressive fiber buildouts in the world, particularly in Japan, Korea, China, Hong Kong and Australia, according to a January report from analyst firm In-Stat. Meanwhile, Europe - which has been slow to embrace FTTx - is now seen as the newest fiber hotbed because demand for video and sophisticated services is growing quickly, says Michael Arden, principal analyst of broadband and multimedia research at ABI Research.
'As demand for TV technology increases, so must the capacity and capabilities of the access technology,' Arden says. 'Operators and equipment vendors are increasingly interested in this market because they see IPTV starting to gain more and more traction.'
Indeed, support for IPTV is the chief driver in many markets. ADSL can easily handle the 4.5-Mbps bandwidth necessary to send a standard-definition MPEG-2 video stream to a set-top box (under the right line conditions), but IPTV in the future will be multiple high-definition streams on an access line that will also have to support heavy multimedia downloads and uploads, which will boost bandwidth requirements upwards into the symmetrical 40-Mbps range.
The catch is that fiber does not come cheap. The cost of the equipment itself isn't a problem so much as the cost of running the network, particularly in the backhaul, where bandwidth costs grow as traffic increases.
Interestingly, how big a barrier this is varies from market to market and carrier to carrier. Some carriers find FTTx very cost-effective to deploy, while others find it tremendously expensive. The regulatory environment is a factor in some cases, but it's also a matter of choosing the right technology and the right FTTx architecture for the job, as well as the right business model to cover the opex costs.
Hitting close to home
The basic choices operators face when shopping for an FTTx solution involve deciding how close they want to bring fiber to the user, and how much bandwidth they want to dedicate to each user.
For example, operators can roll out fiber directly to the home (FTTH), to the neighborhood/node (FTTN) or the curb (FTTC). Each has their own pros and cons, says Stefan Neidlinger, Siemens VP of solutions management for PON systems. For example, he says, FTTN shortens the loop lengths enough to allow DSL to connect the end-user at optimum speeds, which translates into cost savings by reusing existing infrastructure.
'FTTN allows you to reuse existing copper in the first mile, and share infrastructure such as ports in the second mile,' Neidlinger says.
'You can run fiber to the cabinet in most cases.'
The downside, he notes, is that you're still using DSL to connect the user, although newer, faster versions of DSL like ADSL2+ and VDSL2 can mitigate this. However, he adds, the amount of active equipment in the cabinet becomes an issue. 'When you put more equipment in the cabinet, you add on to existing issues like space, power supply, temperature range and maintenance.'
FTTH's pros include virtually unlimited bandwidth to users, no active equipment between the user and the cabinet and high security. The chief drawback is the exorbitant cost of rolling fiber to individual homes, the cost of maintaining high fiber counts in the second mile and supplying enough backhaul bandwidth to support a neighborhood where everyone has a 100-Mbps broadband connection.
Get the point (or multipoint)
Another way of evaluating this is considering the benefits of point-to-point (i.e. FTTH) vs point-to-multipoint (i.e. FTTN/C) architectures.
'Point-to-point makes sense with short loop lengths when the network resembles a hub and spoke configuration - the central office representing the hub with spokes of fiber feeding each subscriber,' says Nicolas Van Den Abeele, vice president of access network activities for Asia Pacific at Alcatel. 'It becomes less economical as loop lengths and the number of homes passed/collected along the fiber route increase.'
Point-to-multipoint, by contrast, involves a single fiber leaving the central office that is split into multiple fibers in an outside plant, with the subtending fibers connected to individual subscribers from the point of the split (which can be many kilometers away).
'This makes sense with average and long loop lengths and enables the cost of the central office termination to be shared among multiple subscribers,' says Van Den Abeele. 'It also enables subscribers to be connected along the path of the fiber route, given the linear nature of most routes.'
Which architecture is the most cost-effective is largely a matter of geographical distribution of subscribers, says In-Stat analyst Victor Liu.
'For example, in Australia, the cost of FTTx rollouts is very high because you have to cover a comparatively small population spread out across a wide geography. It's a different story in a market like Japan, which is more densely populated and you're rolling out to multiple-dwelling units.'
Choose your PON
Another decision operators have to make is what passive optical network (PON) technology to use. The two primary choices are the ITU-T's Gigabit PON (G-PON, which supports Ethernet, ATM and/or TDM flows to and from the optical network terminal [ONT] at the customer premises), and the IEEE's Ethernet PON (E-PON).
Neidlinger of Siemens says that based on the number of supported ONTs (which depends on the data rate budgeted for each subscriber), E-PON is suitable for smaller deployments with data speeds of up to 100 Mbps per subscriber, while G-PON is better for larger deployments where data speeds per sub could be as high as 1 Gbps.
However, Van Den Abeele warns that E-PON has its shortcomings, such as no standards-based operational support channel for monitoring, diagnosing and configuring ONTs.
This is crucial in terms of cost management for both FTTN and FTTH systems, he says.
'In both cases, there are sufficient network elements involved that diagnosing them quickly and accurately is imperative. Mechanisms, such as TR-069 for FTTN and OMCI for GPON are essential for minimizing operational costs,' Van Den Abeele says. 'In addition, subscriber self diagnostics and repair become more important as home networks become more complicated. These represent the most challenging aspects of deploying FTTN and FTTH.'
The cost issues of deploying FTTN or FTTH can perhaps best be illustrated by comparing fiber rollouts in China and Japan. In China, China Telecom, China Netcom and ISP Great Wall have been deploying FTTN/C + LAN architectures and have found it a very cost-effective option since they're chiefly targeting multiple-dwelling units, says In-Stat's Liu.
'With FTTC or FTTN, you're just rolling one fiber cable to a residential building and then using it to serve many subscribers in the same building, so the cost is not all that high,' he says.
The fact that it's shared bandwidth across a LAN in the building means additional cost savings, he adds. 'A service provider will claim that they are offering 10 Mbps or 100 Mbps, but in reality that will depend on how many users are online. That makes it easier to control their bandwidth costs, and it also allows them to offer the service at an affordable price, around $10 a month.'
In Japan, where operators are deploying FTTH, it's a different story, Liu says.
'FTTH is expensive because you have to dedicate bandwidth to each customer, but they have to do it anyway because competition for broadband service is so fierce that a service provider has to be able to provide 100 Mbps if it wants to be competitive,' he explains. 'That makes it harder to keep the costs down.'
That said, Liu notes, Japanese players have the advantage of the Japanese government's initiatives to connect the entire country with fiber before the end of the decade. 'They offer a no-interest loan subsidy to service providers for network construction. That's why they can afford to roll out a more expensive network.'
Governments are playing an important part in driving fiber in other markets as well, such as South Korea and several European markets. But even in markets where regulators are neutral about technology, some service providers are opting for fiber regardless of the cost because of the competitive differentiation.
'In Hong Kong, PCCW has been quite aggressive with DSL and IPTV, so the other service providers must follow them but be able to compete against them, and FTTx is a way to do that. But they have to bear the cost of FTTx,' Liu says.
New revenues needed
That raises the question of how sustainable such expensive rollouts will be - hence the emphasis on keeping opex costs down as much as possible. However, that will be tricky as bandwidth demand - and thus the cost of provisioning it - continues to climb. As such, says Liu, FTTx operators will have to make up the difference with revenue-generating value-added services to cover their expenses.
'In South Korea, for example, they are providing things like online games and e-business portals and VOD. The object is to provide content that the users will pay more for,' Liu says.
This is less of an issue in China, where users chiefly use the Net for Web surfing and email, but this also means competing on price, which will have to change once operators start adding services like IPTV.
In any case, he notes, broadband providers regardless of access technology face the same issue, and will be unable to rely solely on cutting costs to stay profitable.
'Broadband service providers will have to bundle value-added services to increase their revenues, and shift to a tiered pricing model rather than the all-you-can-eat access model. Maybe they can do this on their own or maybe they'll need to cooperate with a VAS provider. But at the end of the day, you need a proper business model to charge enough money to cover the cost of that bandwidth.'