NBN Co plans to duplicate its FTTH product set for its FTTN/B network but will not guarantee minimum download speeds above 25 Mbps or upload speeds above 1 Mbps, CommsDay can reveal.
According to a discussion paper intended for circulation to its product development forum, NBN Co will offer similar speed tiers across both FTTH and FTTN/B networks, with the caveat that the latter will offer “up to” speed tiers at the 50 and 100Mbps download mark and 5/10/20 and 40 Mbps upload mark. The FTTH platform offers these as minimum speed tiers, subject to the limitations of contended backhaul.
Although the discussion paper emphasises harmony between FTTH and FTTN/B product sets, it also canvasses some significant differences for its copper offering which may raise substantial industry discussion.
For example, while NBN Co provides and installs a network termination device in the home as part of its FTTH offer, it will not provide a VDSL modem and voice splitter for FTTN. The onus will instead be on the retailer to provide and install the modem. A user self-installation option will also be offered, on condition that NBN Co waives its liability for any resulting under-performance.
However, NBN Co does envisage it will offer a “professional” installation service on behalf of RSPs and users for a commercial fee.
More controversially, NBN Co also seeks to waive responsibility for individual line speed evaluation on its FTTN network. It says “selecting the correct speed tier will be the responsibility of the end user and the provider.”
“NBN Co does not intend to prevent end users and/or providers from ordering the ‘Up To 100Mbps’ speed tier for a service that would typically experience speeds of less than 50 Mbps,” NBN Co says in the paper.
NBN Co says it considered waiving speed tiers for its FTTN product set but, on balance, wants to retain them so retailers can charge a premium for higher speed services.
According to the paper, NBN Co also wants to extend its existing four traffic classes of service to FTTN, which includes a guaranteed throughput for voice services, as well as the charging mechanisms for access circuits, connectivity virtual circuits and network-to-network interfaces that characterise its existing FTTH pricing. However, in view of the special nature of VDSL it also proposes to add “stability” profiles, for example which reward high speed and low jitter in favour of stability and data quality or the opposite for lines of low quality.
It also proposes that the existing PSTN environment be retained side by side with FTTN for at least 18 months.
Multicast functionality would also be offered over FTTN, while higher speed business services over the platform could also be facilitated by copper bonding of two lines. NBN Co says it is actively considering this option.
The paper implies that NBN Co favours serving 200 premises per node. With NBN Co planning to roll out FTTN to nearly half the national fixed line footprint, this suggests a network requirement of up to 30,000 nodes. The paper is seeking industry feedback through May with a view to a issuing response by that month’s end.
NBN Co could be liable to pay over $98 billion in total nominal pre-tax payments to Telstra over 55 years, according to advice provided for NBN Co’s board by Goldman Sachs in May last year.
CommsDay can reveal that the advice was sought by NBN Co following the release of the then-Opposition Coalition’s alternative broadband policy in April 2013.
The confidential “working draft” advice, sighted by CommsDay, puts a number on NBN Co’s nominal long term commitments to Telstra for the first time: previously NBN Co’s liability had been generally expressed in terms of its post-tax net present value to Telstra.
Goldman Sachs said that based on the then-latest corporate plan of NBN Co, the firm would be obliged to pay out $98.159 billion in nominal pre-tax payments to Telstra between FY2011 and FY2067. The bulk of this—some $88 billion—would be for infrastructure leases covering ducts, dark fibre, rack space and conduits.
As the NBN Co footprint expands to cover all of the Telstra copper footprint, these payments would rise: from A$400m annually this financial year, to $1 billion in FY2019 and to $1.6b a year by FY2042. By 2067, NBN Co would be paying Telstra some $2.9 billion a year in lease commitments.
According to Goldman Sachs, the net present post-tax value to Telstra from the definitive agreement with NBN Co was worth $11.72b in May last year. Analysis of what was known then of the Coalition’s policy estimated that it would add $2.4b or 20% to the value of the agreement to Telstra if the then-Opposition could implement its plans in government. This uplift was based largely on Telstra’s increased value from its ability to retain and operate its HFC network for broadband services, although this would be highly sensitive to ARPUs and market share. NBN Co is currently negotiating new terms with Telstra.
LAZARD ANALYSIS: In a separate analysis for Federal Cabinet two years earlier in mid-2011, global advisory firm Lazard provided its own confidential take on NBN Co’s definitive agreement with Telstra, calculating that NBN Co had a $52 billion nominal liability before time discounting to Telstra over 35 years. At the time, Lazard estimated that if the NBN rollout was to be terminated in FY2014, NBN Co still faced a $22.2 billion “nominal” ongoing commitment to Telstra. This rises as high as $36.5 billion in 2020.
Lazard warned Cabinet that “if the Commonwealth was seeking to exit this project, we believe Telstra is likely to be the only private sector buyer of NBN Co’s assets due to the long term take-or-pay liabilities and would likely argue that the Commonwealth’s liability should be valued at a Commonwealth discount rate… in other words, a larger liability.”
Cabinet was also warned by Lazard that NBN Co’s business plan was highly dependent on two assumptions: that it could double its ARPU in ten years and that wireless-only premises would remain at a static 13.5% of the total beyond 2021 out to 2041. On these assumptions, NBN Co’s projections resulted in an expectation that it would generate EBITDA of 77% by 2031 and 79% by 2041. Lazard said “this would place margins above infrastructure businesses which are proven natural monopolies, which own their own assets and operate in more stable markets than NBN Co.”
Federal Cabinet was warned as long ago as June 2011 that NBN Co’s business case was vulnerable to cherry-picking in the short term and to competition from Telstra in the longer term when their non-compete agreement lapsed, CommsDay can reveal.
The warning was contained in confidential advice prepared by global financial advisory firm Lazard for Federal Cabinet on 20 June 2011, several months after watered-down ‘cherry picking’ amendments to the Telecommunications Act were released and just days ahead of the signing of the definitive agreement between NBN Co and Telstra.
The advice warned that the policy preference for uniform pricing created strong incentives for cherry picking in “high value areas”. It warned that the only “realistic opportunity” to enact anti-cherry picking legislation “is at the commencement of the NBN project.”
“The risk of significant cherry picking behaviour has not, in our view, been adequately addressed,” warned Lazard in its advice.
Three months earlier, the Federal Government had released its amendments to anti-cherry picking rules in the Telecommunications Act, which allowed exemptions for networks targeting enterprise, backhaul and government customers as well as an exemption for “extensions” to networks built before 1 January 2011 not more than 1km in length. Subsequently, in late 2013, TPG has announced its intention to exploit this so-called “loophole” to build FTTB networks to 500,000 apartments across Australia. Telstra and Optus are rumoured to be considering competitive responses.
TELSTRA COMPETITION THREAT: Lazard also warned that a 20 year non-compete clause in the Telstra-NBN Co definitive agreement would come to an end some two years earlier than NBN Co was scheduled to recover its investment or seven years if financing costs were included.
In its advice to Cabinet on 20 June 2011, Lazard said NBN Co had not reflected any “value impact” for this in its financial projections and apparently viewed it as an “acceptable risk.”
But Lazard took a contrary view saying “take or pay liabilities to Telstra are 50% of NBN Co’s ongoing costs post rollout and Telstra is likely to be NBN Co’s largest retail customer.”
“A further demerger of Telstra into Network Co and Retail Co would mean Network Co can re-enter fixed line competition against NBN Co in 20 years’ time and in Lazard’s view would have a strong incentive to do so,” it continued. “This mismatch is not a risk profile we believe a commercial entity would assume, especially since all of the investor’s returns are projected to accrue after the network preference/non compete expires.”
PRIVATE DEBT WARNING: Lazard also warned on NBN Co’s expectation that it could raise private borrowings ahead of generating positive net cashflows from the project. “NBN Co’s assumptions mean the Commonwealth recoups all its equity before the lenders are repaid and before the end of the Telstra network preference/non-compete commitment… in our experience lenders often discount projections that assume future price increases not guaranteed by contract, and want to be able to be repaid before equity, especially if there is a significant prospective market change pending before debit is repaid such as the end of a non-compete.”
Lazard said that if this “conservative” scenario came to pass, the government’s maximum equity commitment would swell from $29 billion to $41 billion.
WARNINGS CAME 9 MONTHS EARLIER: Although Lazard’s advice to Cabinet was only proffered a mere three days before the definitive agreement between Telstra and NBN Co was announced on 23 June 2011, the firm had made similar warnings the previous October.
In advice offered to the communications department after reviewing the draft agreement between Telstra and NBN Co announced in mid-2010, Lazard has also warned on the potential for Telstra to compete against NBN Co after 20 years and calculated that the draft terms announced at the time had a “net negative” value to the Commonwealth of between $25 billion and $31 billion.
Bevan Slattery’s Megaport claims his company is being blocked from using Pipe Networks facilities he sold to TPG and is moving to test his claims with industry arbitrators. TPG’s stance could potentially heavily backfire on the firm and retard its own planned FTTB network.
According to Slattery, Megaport has had to suspend accepting new orders in TPG/PIPE’s datacentres – despite “orders for numerous services” – after TPG blocked Megaport from actually establishing connections to clients within those facilities. “TPG Telecom… claims that PIPE’s customers are not ‘occupiers’ of the datacentre and accordingly Megaport cannot use its statutory powers under Schedule 3 to the Telecommunications Act 1997 to provide services to them,” said the Megaport CEO. That part of the Act allows carriers to access buildings to provide services to occupants, without requiring permission from land or building owners.
“If accepted, this argument would mean that PIPE’s datacentres could become ‘competition-free zones’, and TPG can (and evidently will) prevent PIPE’s telehousing customers from ordering services from competitive carriers such as Megaport.”
“We view TPG/PIPE’s objection as without merit and preventing PIPE’s customers from acquiring telecommunications services from a competitor of PIPE. At TPG’s request the matter has now been referred to the Telecommunications Industry Ombudsman for determination,” added Slattery. “In order to avoid causing further inconvenience to our customers, we have suspended accepting new orders for services in PIPE Networks’ datacentres until such time as the current impasse with PIPE/TPG is resolved. The TIO is currently considering PIPE’s objection and this process may take several months to complete.”
MUTUALLY ASSURED DISRUPTION: But if TPG’s objections are upheld, it could be making a rod for its own back. PIPE, as a carrier itself, also connects into a large number of facilities around the country – and is thought to have done so by issuing hundreds of its own land access and activity notices under the Act, up to this point a fairly normal procedure.
In another ironic twist, PIPE itself – more than ten years ago, before Slattery sold it to TPG – fought and won a similar access case against Soul, another TPG subsidiary, when it used such a notice to connect services into Soul’s Sydney datacentre.
And TPG, for its part, is also embarking on an FTTB build which would also require extensive building access.
If the Ombudsman were to find that a carrier such as Megaport could not use its Schedule 3 powers to provide services to data centre customers, that could in turn have retrospective and future ramifications for the building access rights of both PIPE and TPG – risking a catastrophic own goal. Further, if the precedent is set that datacentre clients are not ‘occupiers’ under the Act, it could give the upper hand to landowners in their not infrequent struggles with telcos over Schedule 3 access rights.
In another facet of the rapidly escalating access battle, Megaport has also gone to the Australian Communications and Media Authority to protest PIPE and Soul, another TPG subsidiary, refusing to provide information about underground duct facilities, required under a different part of the Telecommunications Act.
“These developments are disappointing and should be a cause for concern not only for TPG/PIPE Networks colocation customers, but also AAPT customers considering TPG’s pending acquisition of AAPT. It also raises alarm for the industry,” concluded Slattery. “AAPT and PIPE are the leading providers of infrastructure-based competitive wholesale services in the Australian market.”
TPG has been invited to comment.
Merry Christmas & Happy New Year from the CommsDay team. We take a break from daily publishing over the
holiday and resume regular publication on Tuesday 14 January with interim breaking news updates & summaries as required. The Decisive Publishing office is closed from today until Monday 13 January. Thanks to all readers for your support in 2013 and we look forward to reporting the news in 2014, our 20th anniversary. Grahame Lynch, Founder
Vodafone Australia CEO Bill Morrow is to be the next CEO of NBN Co, sources close to the company revealed just as CommsDay went to press overnight.
CommsDay has learned that Morrow has been picked for the role at least partly because of his strength as a turnaround specialist. The strategic review of the NBN, due to be released later this morning, is set to reveal some sobering facts around the likelihood of tens of billions of dollars of cost blowouts under the FTTP model championed by the previous government.
Morrow has been heading up Vodafone’s local operations since March last year, when he was brought on board by joint venture partners Hutchison Whampoa and the Vodafone Group to lead the number three telco in its efforts to regain market share.
Though the firm has continued to bleed subscribers since, it has attributed that to the continuing effects of the worst of its network outage issues two years previously, as affected users come off contract, and is forecasting a return to growth next year.
Moreover, under Morrow, it has also slowed its rate of revenue decline, and gone on the front foot with a number of key initiatives – including a precedent-setting fixed-rate international roaming plan, a 4G launch, aggressive activity on the regulatory front, and ongoing network investment.
Morrow himself has ample experience leading network-owning telecoms companies and major infrastructure providers. He has previously served as chief executive of Clearwire and of the Pacific Gas and Electric Company. He has also headed up the European, Japanese and UK operations of the Vodafone Group.
NBN Co executive chairman Ziggy Switkowski has been acting as interim CEO for NBN Co while a permanent replacement is found.
A previous draft of the strategic review was provided to communications minister Malcolm Turnbull at the start of last week, but NBN Co has been doing some fine-tuning before the publication of the document later this morning. NBN Co corporate and commercial head Kevin Brown told the Senate committee that, following an NBN Co board meeting, there had been some adjustments to calculations required before the public release. The review has been prepared by a team within NBN Co headed by outgoing chief commercial officer Tim Ebbeck.
Shadow communications minister Jason Clare has said that the review will have “failed” unless it provides full data on the cost to both remediate and maintain Telstra’s copper network for its proposed use in FTTN.
CommsDay will be reporting from the launch of the review later today.
Grahame Lynch and Petroc Wilton
SubPartners has unveiled radical plans to build a submarine sensor network atop its planned APX-East cable, intended to link Sydney to the US.
The concept of such a network has been hotly debated amongst the submarine industry for years, and at one stage was even considered in conjunction with the defunct Pacific Fibre project. Now, thanks to a newly forged memorandum of understanding with TE SubCom as exclusive supplier for APX-East, SubPartners looks set to revive the concept – via an array of externally tethered marine sensors mounted on APX-East repeaters to form what’s been dubbed the ‘Oceania Sensor Network’.
Most of SubPartners’ public focus to date has been on its Perth-Singapore APX-West cable, but at present the much longer eastern system – envisaged as a 12,500km route with 4 pairs, 140 repeaters and 48 wavelengths per pair – is nevertheless still expected to be ready for service by Q4 2015.
It will link Sydney with California’s Hermosa Beach, with additional branches to Hawaii and potentially some of the Pacific Islands.
“APX-West has had a lot more movement, obviously, with the iiNet MoU being signed and a few other customers – and the actual formal contract that we signed with SubCom for West, as well,” SubPartners CFO Raj Sharan told CommsDay. “That’s probably what brought SubCom into the picture… [and] one thing that we’ve locked away with this MoU to some extent on the east route is exclusive access to TE SubCom’s sensor [port] technology.”
“With this sensor network, we’ve got an opportunity to change what submarine cable systems are actually viewed as being used for. Traditionally, it’s just massive data capacity, and obviously a current-generation system will give you current-generation tech… which means you get the chance to realise the maximum amount of capacity,” he continued. “But what SubCom provides on its repeaters is a standard port that can be connected to a vast array of marine sensors… you can have seabed monitoring sensors, [seismic sensors], temperature sensors and so on… and all of this stuff connects into the repeater and also actually uses the capacity on the system. But it uses a capacity that’s outside the standard range.”
That’s important because in SubPartners’ model for both APX-West and East, clients buy portions of the fibre pairs themselves rather than fixed amount of capacity at fixed rates.
“[Because] this sensor tech actually uses bandwidth outside the normal range, you don’t have the downside of losing capacity on a pair of fibres, and you have the upside of this sensor technology being able to report this data to whatever landing station – and then from there, carried on to wherever it needs to be,” said Sharan. “If you look at the route… it pretty much cuts the Pacific in half, and that means we’re potentially going to have the largest subsea sensor array for early detection of natural disasters, tsunamis and so on… as well as just general monitoring of the underwater environment in the region. From a research perspective, it’s going to be quite useful; I think some of the educational institutions are going to really want to get on top of this, if we can actually make the business case work.”
“But for us, this isn’t so much a leasing play or [something] to make money out of for general consumption; it’s not something that our business case hinges on, it’s just part of the overall value that we’ll provide. It was a way for us to take our system and make it different for the market; certainly, I think it will make our system more attractive to educational and research institutions, and particularly government entities as well – who see not only the ability to get the lowest-latency capacity, but also this added side benefit of monitoring of the Pacific and the region in general.”
REGULATORY CHALLENGES: TE SubCom has been talking about its sensor port tech for the last couple of years – and had even been working with now-defunct Pacific Fibre on the opportunity to add sensors to the latter’s planned Australia-New Zealand-US route. However, others – including Wiltshire and Grannis LLP partner and veteran submarine cable lawyer Kent Bressie – have long warned of potential legal and regulatory cross-border complexities around cable-mounted sensor nets. It’s an issue that SubPartners is very much aware of.
“I think anything with any kind of tech that Team Telecom [the group of lawyers from the FBI and US Departments of Defense, Justice and Homeland Security which, among other functions, carries out security reviews on new telecom infrastructure which traverses US territory] don’t like, we’ll know about pretty quickly,” said Sharan. “While I won’t say that we have any kind of approval, the idea has been floated… and no-one completely baulked. It was the usual response you get from those kinds of people: ‘we’ll wait to see the specifications and what it can do’.”
“I’m sure you can imagine that if you’ve got deep-sea sensors in the middle of the Pacific there are some concerns as to what else they could be used for!”
Meanwhile, key SubPartners execs are busy courting potential customers for the eastern route. “We’re talking to multiple parties on an ongoing basis; [founder] Bevan [Slattery] and [commercial director] Carlos [Trujillo], along with our new sales director Hamish Lee, are all in America at the moment, going through a roadshow,” said Sharan. “And we expect to be announcing some more MoUs on APX-East; I’d say at least a couple before Christmas.”
CommsDay held the latest edition of its annual Melbourne congress this week. We make available many of the powerpoints here. Where some speakers’ powerpoints are not available, it is either because the speaker has requested we not publish it or we have not yet been able to upload the specific file for technical or time reasons.
Operators around the world – as well as some governments – are on the brink of giving their old copper networks a new lease of life via a noise reduction technology known as vectoring. But what’s the real extent of the commercial commitments in play, and when and where will the tech actually see service? Petroc Wilton reports.
Thirty years of telecoms history, says Dr John Cioffi (pictured)– known as the ‘father of DSL’ – has consistently shown that one size does not fit all, at least in fixed broadband access networks.
Operators and governments globally may still envisage ubiquitous fibre-to-the-premises deployments, first mooted in the 1980s, as their eventual Nirvana. But right now, capital and time constraints are obliging most of them to wring as much value as possible out of their existing copper networks – particularly in the last mile, where the civil costs of upgrading to fibre spike up sharply.
That’s what has been driving telcos around the world – including AT&T, BT, Deutsche Telecom, Swisscom, Belgacom and Telecom Austria – to make large commercial commitments to a technology known as vectoring in the last couple of years. An upgrade for existing DSL systems, vectoring offers hefty performance improvements on copper in the right conditions; it was co-invented by Cioffi back near the beginning of the millennium but, with vendors now having shipped millions of lines’ worth of vectoring-ready hardware, it’s right on the brink of hitting the big time.
WHAT IS IT? Vectoring is essentially a transmission method that virtually cancels crosstalk noise on copper wire; the corresponding International Telecommunications Union standard was ratified in 2010.
As Alcatel-Lucent fixed access marketing director Dr. Stefaan Vanhastel explains, crosstalk gets worse at the higher range of frequencies used to drive higher speeds on copper, and has been a key factor holding back VDSL deployments from actually achieving their design speed – and thus competing with HFC and even first-generation FTTH networks.
“VDSL2 is fantastic compared to ADSL; you get 100Mbps downstream if you test it in the lab, at 400m,”says Vanhastel.
“[But] unfortunately, once you actually deploy VDSL2 and take it out of lab conditions, you don’t get that 100Mbps, because of the crosstalk between the telephone lines in the same binders – you maybe [get] 30-60Mbps, a significant drop. It depends, basically, on how lucky you are; your line might be in the centre of the binder, you’re surrounded by other lines, and you get interference from all of them. Your neighbour might be on the outside of the binder, and he’s only getting interference from a few lines. [And] the traffic patterns on individual lines change all the time.”
Vectoring, though, all but removes that crosstalk – pushing VDSL speeds, at least on short loops, up close to their theoretical levels. “Noise cancelling headphones are the typical analogy; you measure the crosstalk, and then you generate an antiphase signal. When you add the noise and the anti-noise you end up with… near zero noise on every line,” says Vanhastel. “But it’s way more complicated than the headphones [analogy would suggest] because you have to measure the crosstalk from each line into all of the other lines, you have to do that for four thousand frequencies, and you have to do that for upstream and downstream… multiple times per second in real time. And then, for every signal that you transmit on each of the lines, you actually have to generate [an additional] anti-noise signal – because that signal that you sent on Line 1 is going to create [its own] noise signal on Line 2, 3 and Line 400.”
“So it’s very complex and, while I hesitate to say that [the result] is zero [noise], it’s as good as zero –you cannot afford to let one bit of noise slip through, because it will wreak havoc on the other lines.”
WHERE CAN IT BE USED? It’s important to note that, from an end-user perspective, the absolute quantum of improvement from vectoring will depend on the degree to which crosstalk was impeding performance in the first place. In particular, at longer loop lengths (and to a much lesser extent, lower diameter cables), where attenuation rather than noise starts to become the limiting factor, the vectoring gain will be smaller – even though noise on the lines will still be eliminated.
Vanhastel says that while customers who’ve tested vectoring at 1,200m have still seen 10-20Mbps improvements, it’s at the loop lengths of 300-500m that they’ve been hitting the important 100Mbps bar, with the most impressive gains out to the 800m mark.
Other key vectoring vendors report similar experiences. “What we’re seeing for vectoring is that it’s being used anywhere between 500 and 100 metres,” says Huawei Australia CTO Peter Rossi. “BT, [for example], has deployed in such a way that it’s within that 500 metres.”
“Between 400 and 550m is a nice sweet spot,” adds ADTRAN carrier networks product marketing manager Kurt Raaflaub.
“Customers are going after the 100Mbps on the downstream… to compete with DOCSIS 3, or just keeping in line with – if you’re in North America – the FCC mandate for the year 2020, or the digital agenda in Europe where 100Mbps has been quoted.” That means vectoring can work well in fibre to the cabinet, fibre to the node, or fibre to the basement deployments, dramatically increasing line speeds across the short copper loops within apartment blocks or from cabinets to homes. “It’s very conducive for large apartment buildings, because you can put it down to the basement, utilising existing infrastructure, and minimise as much as possible the cost,” says Huawei’s Rossi. “But it’s [also] being used in fibre-to-the-cabinet type deployments, because that’s where…. crosstalk really causes a lot of problems.”
“Something that’s a misnomer is that many customers can’t be reached with [vectoring effectively], because a loop length of 500m is quite short,” adds Raaflaub. “But there have been quite a few studies where, depending on the nature of the country, between 65-80% of homes can be tackled with that 100Mbps – they’re inside that 500 metres. And in our studies of countries like Australia, they’re actually leaning towards the upper bound.”
WHO’S DEPLOYING IT? Vectoring is at least a few months away from household use at any scale, but is expected to ramp up sharply in the near future. Broadbandtrends forecast last year that 27% of all VDSL2 ports would be vectored by 2017. In terms of spend, the inflection point may already have been passed.
Cioffi – a pioneer in broadband over copper since the 1970s and now CEO of ASSIA, which holds some of the basic patents on vectored VDSL and is helping investors AT&T and Deutsche Telecom with their deployments – notes that AT&T has made a US$6 billion commitment to vectored copper, with Deutsche Telecom committing EUR6 billion as well.
“Those are real commitments – that part of it’s there, the money, and now it’s a matter of following the process to actually make it reality!” he says. “[But] you will not see large volume until we get into 2014 and beyond; a lot of the volumes being quoted right now are actually ‘vector-ready’ DSLAMs. They’ve sold this many ports…but the equipment that’s going into the field at the fibre-fed nodes is ‘vector-ready’ in that they can stick in a new card and it coordinates between the other cards and does vectoring in the future, but there is no actual vectored VDSL in service quite yet.”
Alcatel-Lucent says it’s shipped 1.3 million vectoring lines as of Q2 this year. It has sixteen vectoring customers, with the most advanced having deployed over half a million vectoring lines; only Belgacom and Telecom Austria have thus far gone public. “In our case, you can still choose to buy regular VDSL line cards or vectoring line cards… so if [operators] didn’t plan to do vectoring, they wouldn’t buy the line cards!” says Vanhaastel. “Operators are a bit reluctant to go public at this moment in time; one of the reasons is that many of them want to build out their footprint and achieve a certain coverage before they start advertising higher bitrates, in order not to disappoint…a number of other operators are still waiting for the final regulatory approval to activate vectoring services.”
“One way to estimate how close operators are to activating vectoring services is to look at the number of vectoring processors that are being shipped… we’ve shipped enough system-level vectoring processors to cover about 430,000 lines. So if you compare that to the 1.3 million vectoring lines shipped, it means that at the moment, about 1/3rd of those are pretty close to being activated, and in some cities, operators have already activated lines in vectoring mode – but without advertising the service.”
Huawei, for its part, has shipped over a million vectoring lines, with public customers including BT and Swisscom. “The biggest challenge in vectoring is the CPE… the availability of CPE for vectoring today is minimal. The capability will be there, it will just be the CPE itself. It’s easier to upgrade the exchange… than it is to upgrade every individual single user end-point. But that will occur,” says Rossi. “Now that we’ve come out with vectoring and G.fast I’d expect it to accelerate, and I’d expect to see [some] operators solely purchasing VDSL and vectoring – because it’s backwards compatible to ADSL fallback, it makes no sense not to go forward.”
HOW MUCH DOES IT COST? One of the key draws of FTTX VDSL and vectoring deployments is the lower capital cost compared to fibre, particularly since they use existing last-mile copper rather than installing a new last-mile fibre plant at tremendous cost.
“In terms of capex plus installation costs, we typically use ADSL as a reference point, so ADSL from the central office has a cost of 1. Of course this differs from country to country, but as a rule of thumb, we use a factor of 15 for FTTH, so it’s 15 times more expensive per subscriber. FTTN with vectoring is about 4-5, so it’s three times cheaper than FTTH,” says Alcatel-Lucent’s Vanhaastel.
“Some large telcos have thrown around 3x and 3.5x as the [capex] delta between 100% FTTH and a mix of FTTH/FTTX,” agrees ADTRAN’s Raaflaub. Cioffi is even more aggressive. “The costs really are a few hundred dollars, or euros, per customer to get them to this [50-100Mbps] speed with FTTN … it’s about 10-20% of what FTTH costs,” he says.
The opex discussion is slightly more complicated. Huawei’s Rossi, for example, suggests that opex on an FTTX build with vectoring would come in around the same or slightly higher than an FTTH build – but says that Huawei is still doing tests in this area. A frequent criticism of broadband plans using legacy copper plant is that maintenance costs on older copper can be high; there’s also the ongoing power cost to contend with. But Cioffi offers another perspective.
“I have seen two other large customers in the world who had been doing FTTH, and are also ASSIA customers for the DSL part of their network. We have been privy to the maintenance costs in both cases, and these are large deployments – at least a million of fibre and DSL each, and in most cases much more than that,” he says. “If the system is being managed by ASSIA, we make a reduction in operator costs, it’s one of our selling points; we reduce calls, trouble tickets, reduce dispatches, churn and so forth. If you look at those measures for the fibre network and you look at them for the DSL network, after we’re managing it it’s actually lower on the DSL side,” he says. “It depends on the situation – but it’s roughly 30% lower on the operating costs.”
“Part of that is that operators tend to offer more service on fibre, so there are more things that go on… but there’s no truth that the passive fibre is somehow less maintenance. It is passive, but it has additional problems because it is passive – particularly, if there’s a problem but they don’t know where, it’s a very expensive endeavour to find out where the problem is. You get all these consumers that are hung off the same fibre, and you don’t know which one has the problem at their home that is causing the issue. That’s part of it. And if you run fibre to the desktop, fibre is sensitive to movement, unlike copper – so if people move the box around, the optics can degrade. It depends on the fibre that you use how much it degrades…in Europe, for one of the major deployments they used the wrong fibre, and they have a very high call rate, double digit per month on the fibre network. And it’s because of people moving the boxes.”
“Active [electronics] in the loop plant, which is what VDSL introduces at the node, do have a powering issue, and that creates its own set of issues,” concedes Cioffi. “But typically, if it’s a well-managed system, the copper networks are coming in at a lower number of calls, a lower number of dispatches, and a lower churn rate.”
ADTRAN, which ships FTTH as well as FTTN gear, tells a similar story. “You’re removing a lot of the repeaters, a lot of the bridge taps – and those are the parts of the copper plant that have the biggest issues – when you get down to a shorter loop,” says Raaflaub. “We’ve been deploying FTTN systems with carriers for almost a decade – with nearly 100,000 of them in place,” adds CTO Dr. Kevin Schneider.
“Once you get down to the shorter loops… our experience is that there are fewer troubles there than there are with the very long cables from the central office.”
TECHNOLOGY MIX: None of the vendors are positioning vectored VDSL as a total replacement for FTTH in all cases. Rather, they all see higher-speed copper tech working along with fibre in an integrated network, with different access technologies deployed as necessary to meet specific needs. “Both economic and technical conditions are different from locality to locality,” says ADTRAN’s Schneider.
“A different tool may be needed to bring the broadband delivery, and hit the price and availability dates, that each region needs. The collection of different technologies is definitely in the future for us as an industry.”
“A lot of operators deploying FTTH, are looking at DSL again because of the time to market advance, but also because it allows it to connect more people within the same budget,” notes Alcatel-Lucent’s Vanhastel. “We have more fibre customers than VDSL customers, but the combination of the technologies is, in my opinion, a good way to deliver more broadband to more people quickly and cheaply.”
For Huawei’s Rossi, one of the key advantages of vectoring is that it enables copper last-mile access to keep pace with FTTH deployments, or close to it – avoiding a ‘digital divide’ in a mixed rollout. “Fibre will give you 100Mbps [in early deployments]… and I have the ability with vectoring and VDSL2 to give you 100Mbps, so I have a unified environment between copper and fibre,” he says. “We have a true environment where we can look at a pure, heterogeneous network where we can provide the same functions for all users – [one user] on the copper world can have the experience as another user on fibre.”
“And that’s the important part – we can sweat it without having to put out the huge amount of cost over a short period of time to rejuvenate or change that copper out.
For Cioffi, this kind of technology mix is in line with “the history of nearly everything that happens in telecom.”
“This thing about running a fibre to everyone’s home has been there since the mid-1980s, and it hasn’t happened anywhere – even though several nations have committed to this, the first of which was the US with what was called the National Information Infrastructure Act of 1988, and they all went through the same process of learning that it costs too much. So they backed off. Verizon stopped their fibre program two years ago, no more new homes passed because it cost too much. The situation in France has changed, they’re going to VDSL there because FTTH costs too much. The Germans didn’t even bother to try FTTH because they saw for everybody else that it cost too much,” he says.
“Where fibre makes a lot of sense is in the network, even out to the node, where you’re sharing the cost of fibre – digging up streets and other things. It does make sense on very high-speed links where you’re going to 100Gbps, IP networks at 200Gbps, IP networks in the core – that’s got to be fibre, and even if it costs a lot of money, it’s shared over so many users that it’s got to be productive. But when it’s shared over just one user, it becomes very, very difficult to manage that,” continues Cioffi.
“With copper, you don’t have that concentration problem; if you have 50 or 100Mbps, you’re not sharing it with anybody until you get way back into the core of the network, where you hit the fibre segments and you start to see aggregation occurring. But those are going to be much higher speed fibres, they’re not going to be running at 1-2Gbps like PON is.”
“It’s fools’ gold to believe that anyone is going to sell you a [single] piece of equipment, whether fibre based or copper based, that suddenly solves all the problems.”
Communications minister Malcolm Turnbull has told NBN Co to proceed with its current wireless, satellite, transit and POI network plans but cease issuing new instructions on brownfield fibre rollouts under a statement of expectations released in Sydney this afternoon.
The statement urges NBN Co to avoid service disruptions for consumers, minimise the impact of changes on the construction industry and implement the Coalition’s policy for a less costly and faster rollout as “seamlessly” as possible.
It wants NBN Co to continue to work on existing satellite, wireless, transit and greenfield fibre rollouts but to desist from new build or remediation instructions in brownfields pending further discussions and analysis. The fixed wireless rollout should take into account the potential for VDSL rollouts in its service area.
It also calls on NBN Co to prepare its next three year corporate plan and to provide weekly NBN rollout information.
Turnbull also said that the Department of Communications had begun a 90 day review of broadband quality and availability in different regions of Australia which will inform the future priorities of NBN Co.