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U.S. DC Power Market Brief

U.S. DC Power Market Brief. December, 2003. Meet John Celentano. 30 years in telecom Involved with telecom power for 25 years Broad experience in carrier, supplier, and consulting environments Research/strategy consulting on public network infrastructure markets

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U.S. DC Power Market Brief

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  1. U.S. DC Power Market Brief December, 2003 skyline marketing

  2. Meet John Celentano • 30 years in telecom • Involved with telecom power for 25 years • Broad experience in carrier, supplier, and consulting environments • Research/strategy consulting on public network infrastructure markets • Supported clients through campaigns worth billions in sales • Advises equipment manufacturers, service providers, and investor groups worldwide • Publishes research reports and articles on DC power, and quoted often in business and trade press skyline marketing

  3. Discussion Format • Telecom Market Overview • DC Power Application Drivers • Telecom DC Power Market Outlook • Strategic Considerations skyline marketing

  4. DC Power Systems Secondary Distribution -48VDC Loads Primary Distribution -48 VDC out Other DC Loads System Control DC/DC Converter Utility AC in DC/AC Inverter AC Loads AC/DC Rectifiers Batteries skyline marketing

  5. U.S. Wireline/Wireless CapEx Source: CapEx Report™_2003 skyline marketing

  6. U.S. CapEx by Carrier Sector, 2002-2003e -15% -17% -28% -33% -5% -44% Source: CapEx Report™_2003 skyline marketing

  7. CapEx Concentration 2003 Aggregate CapEx = $52.5 B Source: CapEx Report™_2003 skyline marketing

  8. What We See … • Flat capex in 2004 • Telco response to cable/wireless threats • Receding network overcapacity • Carriers spending for ‘success-based’ demand • Consolidation happening slowly • Early stage of long-term technology shifts • Growth in telecom DC power skyline marketing

  9. End Equipment Bright Spots • Broadband Access • FTTP • C2P Migration • Wireless skyline marketing

  10. Broadband Access skyline marketing

  11. Access Network Infrastructure Central Office MTU or MDU Building Entrance Terminal Class 5 Switch F2 Service Terminal CO Loop Service Drop DLC (COT) MDF SAIC F1 “Feeder” Plant “Subscriber” Tandem (via IOF) F2 “Distribution” Plant F2 Service Terminal DLC (RT) T1 trunks on copper or fiber Service Drop ~ 296 M “Equipped” Loops in Major Telcos ~ 167 M “Working” Loops in Major Telcos “Subscriber” skyline marketing

  12. DLC Working Lines 24% 24% 25% 22% 18% 17% % = penetration of Total Working Lines Source: “An Excess of Access” report skyline marketing

  13. 6.0% 5.1% 4.4% 5.0% 3.8% 4.0% 3.0% 2.1% 2.0% 1.0% Annual Access Line Growth -3.1% -3.7% 0.0% -1.0% -2.0% -3.0% -4.0% 1997 1998 1999 2000 2001 2002 Growth ain’t what it used to be! skyline marketing

  14. No More POTS Growth…Ever! Source: Millennium-Skyline Project • POTS displaced by DSL • POTS lost to cable modem (and cable telephony!) • POTS lost to CLECs and wireless skyline marketing

  15. U.S. DLC Broadband Base 2002 Equipped DLC Lines = 85.2 million Source: “An Excess of Access” report skyline marketing

  16. Deploying Broadband • DSL over copper loops, and DLC • DLC designed for POTS, not Broadband • 198,000 remote terminals (RTs) in RBOCs • Average RT_ ~200 Working Lines • Must replace ~50% of DLC installed base to add broadband • Adding mini-DSLAMs in RTs means upgrading/replacing DC power skyline marketing

  17. Fiber-to-the-Premise (FTTP) skyline marketing

  18. FTTP Architecture Circuit/Packet Switch Optical Network Terminal (ONT) Residential Optical Line Terminal (OLT) ONT Splitter Central Office Ethernet N x POTS Upstream Data Rate = 155 Mbps Downstream Data Rate = 622 Mbps Separate Wavelength for Video = 1550 nm Small Office/ Home Office ONT skyline marketing

  19. Circuit-to-Packet (C2P) Migration skyline marketing

  20. RLC Data CO OSP CPE A LEC’s Network Proprietary • Host Switch (HEO) • Full Call Processing • OAM&P for Host & Remotes • Access Line Terminations • Remote Switch (REO) • Full Call Processing • ESA capability • Access Line Terminations • Stand-Alone Switch (SEO) • Remote Line Concentrator (RLC) • Access Line Terminations • No ESA • Intra-switching (option) • Proprietary interface to switch • CO (or OSP) environment • Digital Loop Carrier (DLC) • Access Line Terminations • CO or OSP environment • Open (TR-57/TR-08/ GR-303) interfaces to switch • Either copper-fed (CuDLC) or fiber-fed (FoDLC) REO IMT CuDLC T1 GR-303 COT Data HEO RDT/RT Data FoDLC GR-303 COT Data RDT/RT CuBB POTS DSL Data skyline marketing

  21. Soft Switching Class 4 or 5 Class 4 or 5 Fully-meshed, hard-wired circuit-switched network Logical star IP network C2P Media Gateway DC Power System skyline marketing

  22. C2P Drivers • IP traffic doubling every year • Better network utilization for multimedia traffic with “voice-over” technologies, e.g. VoIP, VoATM • Lower operating cost per bit (Moore’s Law) • High-speed transport_SONET, DWDM • Multiple Access technologies_Ethernet, IP, ATM, TDM • Long migration period_10-15 years • Different migration paths • DC power adds/upgrades needed at every EO skyline marketing

  23. déjà vu…All Over Again! Line Size Type 1984 (%) 2002 (%) Small EOs SXS 10,200 (47) 0 (0) XB 700 (3) 0 (0) ESS 3,600 (17) 14,400 (0) Large EOs SXS 500 (2) 0 (0) XB 2,300 (11) 0 (0) ESS 4,300 (20) 6,100 (30) Total 21,600 20,500 • US telcos replaced ~16,500 switches from 1984 to 2002 • Switch replacements drove 2x or 3x software and service revenue…and most of the profits! • Switch replacement drove purchase of >200,000 DLCs, RLCs Source: “A Switch to Packet” report skyline marketing

  24. EO Switch Market Segments Line Size EOs (%) Lines (%) Lines/EO 0-5,000 14,100 (69) 19.0M (10) 1,400 5-10,000 2,100 (10) 13.5M (7) 6,400 >10,000 4,300 (21) 154.0M (83) 36,000 Total 20,500 186.5M 9,100 • 70% of CO switches are “small” • 56% of “small” COs are in IOCs • 18% of small COs in VZ_GTE • RBOCs account for the rest • Nortel, Lucent dominant suppliers • Several secondary suppliers Source: “A Switch to Packet” report skyline marketing

  25. 25,000 22,142 20,000 14,796 14,022 13,148 15,000 11,729 10,500 Access Lines/Switch 9,258 10,000 3,820 5,000 0 4.7 5.0 3.6 4.0 3.4 3.3 3.2 3.1 2.9 2.7 3.0 Host:Remotes Ratio 2.0 1.0 0.0 Q BLS Avg VZ_BA VZ_GTE SBC_PT SBC_AIT SBC_SWB Major Telco Comparisons • No homogeneous market • SBC_PT switches > 2X national avg • VZ_GTE switches <40% national avg • SBC_SWB +38% more REOs/HEO than national avg skyline marketing Source: “A Switch to Packet” report

  26. Hosts/Remotes Dominate • 54% of all switches are remotes • >3 remotes for each host • 70% of all switches are in host/remote associations Source: “A Switch to Packet” report skyline marketing

  27. Wireless skyline marketing

  28. Global Wireless Penetration Source: RCR, at 2Q03 skyline marketing

  29. Minutes of Use (MOUs) Source: CTIA, Nortel Networks, Skyline est. skyline marketing

  30. 3G Deployment Patterns In-building Picocells Neighborhood/ Pedestrian Microcells Vehicular Macrocells skyline marketing

  31. U.S. Cell Sites & Towers Source: CTIA, Skyline est. skyline marketing

  32. DC Power Market skyline marketing

  33. Small System Market Customer Macro/Micro Power Plant (5-100 A) Serving Area Small Power Plant (150-800 A) CO/Hub Large Power Plant (2,000-10,000 A) CEVs, Huts, Cell Sites ONTs, Fiber Nodes, Micro/picocells “Power plant on a pole; power plant in a cabinet.” skyline marketing

  34. U.S. Telecom DC Power Market 2002-2007e CAGR = 5% skyline marketing

  35. Power Product/System Features • Energy efficiency_90-92+% • Power density_small size, weight • Ease of handling_installation, maintenance • Improved system intelligence • Short-interval provisioning/maintenance • Growing interest in alternate energy gear skyline marketing

  36. Key Decision Factors Criteria • High availability_“It just has to work” • Help improve financials_reduce CapEx/OpEx • Competitive first costs • Low maintenance costs • Low operating costs • Power system management imperative • Remote, hands-off operation • Supplier knowledge/experience dependency skyline marketing

  37. Strategic Considerations • Telecom/IT recovery showing signs of life • Follow the money • DC power is a replacement business • Focus on small/micro power plant “sweet spot” • Support moves to “Lights out network” • Offer Total Power Solutions = Equipment + Services • Sell on a “carrier-by-carrier” basis • Every carrier is different • Help carriers’ achieve their operating goals skyline marketing

  38. Skyline Marketing Groupwww.skylinemarketing.com We help you make your numbers!! skyline marketing

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