BROAD BAND FOR ALL Workshop on “Techno-Economic Feasibility”

1. BROAD BAND FOR ALLWorkshop on “Techno-Economic Feasibility” POTENTIAL NEW BUSINESS FOR THE CORE AND METRO NETWORKS Brussels, September 23rd 2005 Authors: Ángel Ferreiro (Telefonica. Contact: olivo@tid.es) Jesús F. Lobo (Telefonica. Contact: jflp@tid.es))

2. Outline • Global vision • Drivers and costs • Business models • Market agents • Network services and applications • Value chain • Migration scenarios • Strategies • New business and opportunities • Classification • Examples

3. User Operator • User data, may be: • ”raw” • Complete frames • Encrypted • Never visible/used/needed by Network/transport service Global vision • Main characteristics of NGN: • High capacity end to end • Transparency: • Automatic: • Flexible:

4. APPLICATIONS (e.g. Video, Grid, etc) ABSTRACT REQUESTS OF NETWORK SERVICES PROVISIONING OF NETWORK SERVICES LOGICAL NETWORK TO ACCESS VALUE-ADDED NETWORK SERVICES (e.g. L3-L2-L1 VPN-static and dynamic-, etc.) VANS ACCESS POINTS CUSTOMERS CONTROL OF VPN NETWORK ACCESS POINTS ACTIVATION OF NETWORK SERVICES REQUESTS OF ACTIVATION OF NETWORK SERVICES MULTI-SERVICE NETWORK INFRASTRUCTURE MANAGEMENT CONTROL NETWORK RESOURCES NOBEL reference model

5. End-to-end services (QoS) Management System Provisioning of dynamic services Bandwidth on Demand Multi-layer Traffic Engineering Multi-layer Restoration IP/MPLS IP/MPLS IP/MPLS NG-SDH Efficient switching and transport Efficient switching and transport DXC Efficient Traffic aggregation OXC IP Router Control Plane Distributed Intelligence Global vision

6. For ex.: Rings substituted by Applications like VoD mesh networks. genete traffic TRAFFIC ARCHITECTURE EVOLUTION MODIFICATIONS ADVANCED + NETWORK DEVICES CONTROL PLANE AVAILABI LITY DEVELOPEMENT ROADM, OxC, etc. More distributed intelligence Global vision • NOBEL has developed a Methodology to foresee NGN Drivers identified: • Clients demand • Internet, p2p applications • Multimedia applications • SAN, GRID, etc. • Technology development • NG-SDH, Ethernet, ROADM • GMPLS and VPN standard protocols • Market and Governments • End of monopolies • Convergence

7. Global vision • Costs • NOBEL methodology for CAPEX and OPEX calculation • Several practical applications prop0osed and analysed in the project • Plausible migration scenarios must balance demands and costs • Bandwidth growth sustainability depends on: • Bandwidth growth rate • Rate of bandwidth price decline • Revenue growth rate • Challenges for Network Operators: • Cost of bandwidth provision Under growth of revenues? • Price decline of electronic systems, fast enough? • Interfaces and protocols standardization, will allow independence of manufacturers? Source of figures: D. Payne, R. Davey & D. Nesset (BT)

8. Network services and applications • NOBEL analyses and classifies available services over NGN and their relationship with applications. • Old schemes based on specific networks must be transformed. • The whole transmission network becomes a simple resource for value added service providers (VASP) to make business.

9. Contents Providers NETWORK CARRIER #1 VoD Service PROVIDER #1 VoD Service PROVIDER #2 NETWORK CARRIER #2 VoD Service PROVIDER #3 The value chain • The established (vertical) value chain is being deconstructed. It is becoming a mesh as illustrated for the VoD business example: • Then generic roles are better to describe such a dynamic value chain with so many market agents Example: VoD business • “Old” Telco companies will have to change their structure • New agents are going to provide (value added) services over the NGN

10. Enterprise Network Internet Café Mail, games... End-user Service interface IP connectivity IP Servers: web, mail, VoIP ISP VPN provider RoW Duct, Copper plant DTM, Eth ATM, RPR, VLAN... Service operators IP Servers: web, mail, VoIP ISP... Leased Line provider RoW Tower, RadioSpectrum QPSK, PDH, SDH ATM IP Mobile voice, data Mobileoperator Seller Network operators Infrastructure provider RoW Duct, DarkFibre WDM, SDH, Eth VC-4 ATM, RPR, VLAN... IP Servers: web, mail, voice... Networkoperator, CLEC Buyer Infrastructure owners Telecom infra- structure ”Service Operator” Networkoperator, ILEC Infrastructure owner RoW ”Communicationoperator” Dedicated network OVPN Provider UtilitygridDCN Enterprise users Technical interface L -2 L-1 L0 L1- L1+ L2 L3 Service L. The value chain • NOBEL has analysed the telecom network layers(entity of the same kind) by levels and services (commercial transactions). They can be mapped to market agents:

11. The value chain Each box corresponds to an activity or a group of activities

12. 1970 1995 Today 20xx 20xx Copper (Analog) Copper(Digital) Optical Fibre Point to Point Transmission Optical Switching OBS (Optical burst switching) Transport Plane SDH Optical Transport Network (OTN) Centralized Management Distributed Control Plane (GMPLS) ?? Control and Management Plane Evolution Migration scenarios Source: Alcatel (NOBEL)

13. Migration scenarios • Strategies and fundamental considerations • Any technical interface can be Internal or Open, the difference being if a commercial Service is provided over the interface. • An operator generally carries out several activities (plays different roles). • Multioperator solution create an open market in which operators will be interconnected. • NGN provide high bandwidth capabilities; so less revenues per bit. • But they also provide new services based on their dynamic control plane: • Carriers can sell conectivity services of different quality. • Carriers can provide bandwidth on demand and even bandwidth based on applications for a better infrastructure commercial usage. • New speciallised market agents can emerge: ISP, Mobile communications, Service broker, virtual operator... • There must be some value-add in each layer to drive the business. • Collateral business will also appear for carriers as a consequence of new technologies implantation: Reduction of buildings required to host equipment, vgr.

14. New business and opportunities • Let us mention a few ones: • Improvements in network exploitation: • More revenues for dynamic connectivity provision • Adapted SLA for different QoS • More efficient resilience • Technologies convergence • New services: • BoD • L1 VPN and “carriers carrier” • Ethernet dynamic link provision and L2 VPN for Mobile Communication Companies. • SAN, GRID, etc. • Cooperative network control (carrier-customer) • VNO • Services broker • Buildings trade

15. Central Management CxC CxC CxC New business and opportunities • Opportunities for new services derived from NGN capabilities: • The distributed control plane, within a more simple architecture, allows • Mapping network resources (if appropriate permissions). • Faster connectivity provisioning. • Automatic routing (and restoration). • Dynamic definition of QoS for a given connectivity (end to end) service.

16. 500 450 155 Mbps 400 350 622 Mbps 300 250 revenue lost (K€) 200 150 100 50 0 1 4 7 10 13 16 19 40 70 Provision delay (days) New business and opportunities • Improvements in network exploitation • NGN allow for cheaper and faster upgrades (according to traffic demand). • Reduction of time to provide a connexion means revenue growing. • Establishing different QoS levels for connectivity services means added flexibility for SLAs • This possibility combined with the automatic restoration, allows no to overprovision. • Level 1 VPN (SDH or WDM) can lead to better organization of carriers. • Besides, BoD represents a new source of revenues. Source: Telefonica

17. New business and opportunities • Improvements in network exploitation • NGN allow for cheaper and faster upgrades (according to traffic demand). • Reduction of time to provide a connexion means revenue growing. • NOBEL studies on NGN deployment economic impact cover • P2mp versus p2p solutions • Analysis of Ethernet solutions for metro networks. • Ring versus mesh architectures. • Complete transparency versus hybrid solutions (CAPEX and OPEX). • Optimal SAN (Storage Area Networks) provisioning with NGN tools. • Other studies to perform concern GRID implementation by NGN, convergence of technologies…

18. New business and opportunities • NGN allow for implementing more dynamic and cheaper resilient strategies. • Strategies of partial liberation of backup resources for BoD or less QoS uses. • Customer active participation in network control (VPN) should generate mutual benefits. • This requires standard interfaces • Network topology is only partially offered to the customers. • SLA must explicit what level of integration (sharing power over the network elements).

19. New business and opportunities Incumbent Operator versus Virtual Operator • Parts of the value chain occupied by an incumbent network operator and a virtual operator • A virtual network operator has no real transport infrastructure: Its services rely on traditional carriers infrastructure (VoIP, VoD, and BoD reseller are good examples of VNO business).

20. New business and opportunities • Infrastructure trading and bandwidth leasing • VASP (Value Added Service Provider) can deal with different network providers • Carriers can set up VPN in cascade. • Brokers of communication services can make business. They appear as intermediate between the assets suppliers and customers

21. New Business and opportunities • One example: • A company that rents a L1 VPN can offer p2p connectivity services or L2 VPN services to others (like mobile communications companies, for instance).

22. New Business and opportunities • Other types: • Collateral source of revenues: Selling or renting buildings liberated by NGN equipments. • New equipments are smaller and need less cooling and DC generators extra-equipment. So a big amount of space is free for administrative use. • The following is a real example form a switching node building transformation in Barcelona, Spain: * Including reuse of old equipments.

23. New Business and opportunities • Other types: • Network operators and VASP companies can find their place based on • Content delivery schemes • Bandwidth adapted to applications • Specialization in accounting and billing. • Network topology and its resources knowledge. • Specialized services for SME (and other segments). • This specialization scheme can be translated into traditional network operators structure. • Leasing network infrastructures is the complementary business for traditional carriers with regards to VNO as well as connectivity service for VPN, LL (leased line) and capacity wholesale to ISP, multimedia distributors, etc.