Open Networks Why? When? How?

1. Open NetworksWhy? When? How? Ivan Dimitrov, BA Broadband Networks, Ericsson

2. 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

3. Broadband for all

4. 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”

5. 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

6. ”A historical perspective”- Electricity • 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 Initial Market Development • Large segments of the markets, especially rural and low income areas were • left in the dark • High degree of market concentration in the hands of small number of • vertically integrated companies ”monopolies” Consequences Eventual Industry Structure • Establishment of publicly owned municipal electric ultility companies

7. 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 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 Market Failure 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 3- ”Eliminate” the ”digital divide” 4- Sustainability Economic Development The drivers for municipal broadband today are the same as were for municipal electricity, a century ago

8. What is an Open Network?

9. 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.

10. Enterprise Telecom Operator Public sector Other operators Com.operators Property Network Property Network Property Network Property Network Generic Open Network Model Service cost Service Portfolio Customer Open on service level Open on infrastructure level City Network

11. Open Networks - Why?

12. Alternative Infrastructure Ownership SP SP SP SP SP SP Service Provider Service Provider Service Provider Active Infrastructure Active Infrastructure Active Infrastructure Inf Owner Passive Infrastructure Passive Infrastructure Passive Infrastructure • Pros: • - Suitable for traditional commercial services • Cons: • Infrastructure based competition • Not suitable for public and new type of commercial services • 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

13. 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

14. Open Networks - When?Now!

15. Demand Supply Infrastructure IS literacy Modernized enterprises Content and Services Prices (affordable) Modernized Public Administration Critical success factors

16. EuropeCommision Broadband performance index

17. Open Networks - How?

18. Lokala Bredbandsnät 2006 - Ägande Saknar (114) Kommunalt (139) Privat (16) Blandat (21) 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 • 60 % of all fiber lease in Sweden through city network. • Co-operate to provide crossover connections Swedish City Networks Association

19. Network levels

20. Enterprise Telecom Operator Public sector Other operators Com.operators Property Network Property Network Property Network Property Network Generic Open Network Model Service cost Service Portfolio Customer Open on service level Open on infrastructure level City Network

21. Swedenleading the FTTx deployments in Europe

22. A new perspective Requires Government Intervention Commercially viable Loss Subsidies, infrastructure re-use, lower cost of capital, longer depreciation Cost/home passed High Profit Profit Revenue/Home Connected Deployment Cost Structural funding available from EU/Local Public authorities* Cost/home passed ”New operators” Municipalities, Utility companies, real estate etc Traditional Operators Low Low High Population density People/Sq.km Municipalities are the key players in the value chain

23. Single Operator ”All-in-a-box” RSP RSP RSP RSP RSP RSP RSP RSP RSP RSP & C.O. C.O. C.O. C.O. C.O. C.O. & N.O. N.O. N.O. N.O. Available business models • 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

24. FTTC FTTH MBB FTTB Business strategy and deployment strategy Services Provider Penetration Communication Provider Density + Fiber Provider But how do we proceed

25. FTTC FTTH MBB FTTB Layered approach and nationwide deployment strategy Services Provider Services Provider Services Provider Penetration FTTH FTTH/FTTC Comm. Provider Comm. Provider Comm. Provider Density + MBB FTTB/FTTH Fiber Provider Fiber Provider Fiber Provider

26. Ericsson Managed Access Ericsson offerings Municipality/Investor jointly own infrastructure Business Consulting Managed Services Technology/ Solutions Private Investors/ Telcos SP#3 SP#1 SP#2 Services Entity Ericsson • - 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 e-Gov e-Learning e-Health Public Service Portals/Servers Ericsson HW/SW Services Municipality Infrastructure Entity Private Investor Ericsson facilitating for Neutral Governance

27. Services Business Consulting Active solutions System Integration Managed Operations Access and site solutions Metro and IP edge Home environment Technology Consultation Deployment • Passive solutions • Micronet • Ribbonet Ericsson´s FTTH offerings

28. 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