Residential Access Network Evolution

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Residential Access Network Evolution
Fred Kemmerer Access Architecture
StrategyLucent Technologies fkemmerer_at_lucent.com
June 1998
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Current Environment

• Data is a primary driver for network upgrades
• There are a number of technology choices for
  broadband data access
• Access competition is focused around data
• Keys to the industrys success
• Building on existing networks (at least in the
  short term)
• Supporting technologies
• New business models to support data services,
  particularly addressing the customer interface
  challenges

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Access ChessboardCompetition converging around
data mobile telephony
Services
Fixed Telephony
Mobile Telephony
Data
Video
RBOCs/LECs - SBC - Bell Atlantic - GTE IXCs -
ATT - MCI - Sprint Cable MSOs - TCI - Time
Warner - Comcast Wireless - Air Touch - NexTel -
PCS Winners Satellite ISPs- AOL -
Mindspring Market Size (1997) Growth Rate
CellularPCS
2nd LinesADSL
VDSL/Video?
Leased Loop?Cable Partnerships? Fixed Wireless?

• LeasedLoop?
• Resale?
• IP Telephony?

Cellular,PCS
Players
IP Telephony?
CableModem

• Direct TV
• Dish
• Echo Star

• Direct PC
• Teledesic
• PanAm Sat

• Irridium

62B3
32B16
8 B26
27B8
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Household Data Demand
Avg. Service Expenditure(/mo.)
Subscribers millions
CPE Cost ()
FixedVoiceLines
27 (local) 26 (LD)
20-60
Cable TV
0-300 (DBS)
42
Cellular/PCS
0-200
56
PCs
1,000-3000
-
Internet
100-250
20-40
Total US households 102M
Source Veronis and Suhler, IDC, CTIA FCC
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Wide Range of Projections for Success
ADSLmillions
Cable Modemmillions
High
High
Medium
Medium
Low
Low

• One winner or zones-of-advantage based winners?
• Wireless, satellite?

Source Cowles/Simba, Forrester Research, IDC,
Yankee Group, Dataquest
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DSL Business Model Early Market ViewA
positive business model for DSL exists for
business and is emerging in high-end
residential/SOHO.
Willingness-to-pay
1,000
T1
Small/MediumBusiness Based on nearest
alternative currently in use
Frac T1
Existing Business Market Opportunity
ISDN
Top 25 of Residential Market Based on range of
current market research Potentially higher if
businesses subsidize (As in early cellular
business model)
100
perMonth(log scale)
ADSL
HDSL
10
IDSL
Incremental Cost(vs. Analog Modem)
Emerging High-End Residential Opportunity
1
0.1 Mbps
1 Mbps
10 Mbps
Downstream Speed (log scale)
Source Mercer management Consulting
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Whats Required?

• Loop Technologies
• Leverage existing copper and coax loops
• Wideband base stations for wireless
• Dollars
• Supporting Technologies
• CPE
• Applications enablers
• Core Network Capacity
• Focus on Customer Interface
• Industry Cooperation
• Encouraging Regulation

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Integrated Voice/Data Networks Existing
Infrastructure
Switch Line Unit w/ Integrated DSLAM
Circuit
Packet
ADSL via Metallic Distribution
DLC w/ Integrated DSLAM
Circuit
Packet
Cable Modems via Coaxial Distribution
Cable Modem Terminating System
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Integrated Voice/Data Networks New Build
Circuit
Packet
Fiber-to-the-Home
Circuit
Packet
Fixed Wireless
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New Access Networks Are ExpensiveLeveraging
existing infrastructures is a critical advantage
Cumulative Investment in Residential Access Plant
Billion

• High First-Costs favor
• Incremental Upgrades - ADSL, Cable Modems
• Focused Builds - CAPs
• Variable Cost Approaches - Satellite

Source FCC, CTIA, Kagan
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Expected Cable MSO HFC Upgrade Path
2-way HFC Upgrade of Homes Passed
Source Average view of Forrester, Jupiter,
Datapro, Company Announcements
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Bandwidth Likely to Bring Newand Increased Usage
of Internet Users Who Would Start/Increase Use
if the Net Were Much Faster and Had Better
Audio-visual Quality
Use More
Start Using
Make Video Calls
Watch Videos
Purchase Goods or Services
Play Games
Broadcast Videos
Surf/Browse
Make Voice Calls
Source Mercer management Consulting Internet
Lead user Study
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Key Related Technologies toSupport Applications
Technology
Some Applications/Benefits

• Always On/Permanent NetworkConnection
• IP Telephony
• Streaming Audio/Video Hardwareand Software
• Push
• New classes of Plug and Play Data-Enabled
  Devices/Modems in Consumer Devices
• Home LANs

Quick-use applications real-time
communications Flat-rate long distance E-mail
Voice Mailintegration High quality gaming, Video
clip newsfeeds, Sports replays, Video-on-demand,
Video-mail Personalized information, targeted
advertising to help fund network costs Internet
access via TV, smart appliances, ease of
use Reduced cost for multiple broadband modems
Intra-home networking Home Management
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Business Model/Customer InterfaceCable Modem
Example

• Focal point for industry cooperation issues
• Backbone and server architecture/capacityfor
  end-to-end high speed experience
• National branding and marketing platform
• Uniform nationwide standards- Technology-
  Standard Operating Procedures
• Customer Interface Development- Customer
  support- Operating systems
• National scale for content, advertising plays
• Centralize data networking expertise
• Raise funds from the capital markets
  tosupplement limited cash flows

Business Model
Content Servers
MSO Head- End
National Backbone
Regional Data Center
Cable Modem
PC
NAP
Network Management Admin.
Caching Servers
Cable MSOs
Cable ModemNational ISP
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Broadband Access Lift-Off EnablersCable Modems
on the inside track?
Business Model/Customer Interface
Customer Coverage
Trials-Proven Technology
Cost
Standards

• HFC upgrades on track

Cable Modem
ADSL

• Spectrum available, but infrastructure build can
  be time consuming

Wireless

• Need satellite launch
• Can ramp to 100 quickly

Satellite
Full Service Network/FTTH
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What Will the Access Landscape Look Like?
Near Term
Long Term

• Focused demand
• High cost for new network builds
• Current applications dominate
• PC
• Internet
• Sow the seeds for new broadband applications
• VF modems continue to dominate
• Incremental upgrade technologies
• Cable Modems ADSL
• Pull Fiber to the Neighborhood
• Wireless as a Wild-Card

• Broad Demand
• Cost curves decline
• Data, Video and Voice
• Always-on, Many devices
• Fiber Close-to and Into the Home

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Rate of Access Plant Fiberization
of Plant
Long Distance Carrier Network Local
Inter-office Trunking Local Distribution
Feeder
Source FCC Filings, Lucent Estimates
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Thank You!!