Seminar on tariff policies, tariff models and ... · Topological changes impact on infrastructure and are slower to implement than technology substitution • Less network nodes and

September 2008 ITU/BDT NGN: Migration and Investment Strategy - O.G.S. slide 1

Oscar González SotoITU Consultant Expert

Strategic Planning and Assessment

Seminar on tariff policies, tariff models and Seminar on tariff policies, tariff models and methodologies for the determination of costs of methodologies for the determination of costs of

services provided with NGNservices provided with NGN

Monday 8 September, 2008Monday 8 September, 2008ITU Headquarters ITU Headquarters -- Geneva, SwitzerlandGeneva, Switzerland

NGN: Migration and Investment StrategyNGN: Migration and Investment Strategy


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyContent Content

• Key factors for the evolution towards NGN• Convergence factors

• Issues in network evolution

• Network architecture evolution at transit, local and access levels• Topology and architecture migration

• OSS/BSS evolution and IMS

• Investment factors and business strategies


At Network domain• One network for all service types: NGN, IMS

At Service domain • Fixed, Nomadic, Mobile, Interactive and Broadcasting, etc.

At radio Access domain • DECT, Wi-Fi, WiMax, 3G, 4G, etc.

At Operational and Business domain• OSS, Billing, etc, for all customer classes

At Terminal domain • 2G, 3G, PDA, iPod, etc.

NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyConvergence dimensionsConvergence dimensions

Convergence is taking place at several domains


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyConvergence profiles as a Convergence profiles as a functionfunction of of investmentinvestment

and and deploymentdeployment timetime

Migration profile driven by: Initial status, Market development, Economy of scale and Operator Strategy

Network

Services

Terminals

Operations

Access

Convergence Domain Full convergence

Low level convergence

Medium level convergence

SeparatedImplementation

Level of convergence

Present Modeof Operation

PartialConvergence Profile

AmbitiousConvergence Profile


Economies of scale are an inherent characteristic to the telecom technologies that impacts on solutions, evolution, tariffs and survivability in competition

– The five dimensions of the economy of scale:

• By Size of the systems Larger systems cheaper per unit

• By Technology capabilities New technologies with higher capacity

• By Traffic efficiency with occupancy Higher utilization for a given GoS when more servers

• By customers Density Quadratic increase with coverage radio

• By Volume of purchasing Discount per volume in log scale

NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyKey Drivers: Economies of Key Drivers: Economies of scalescale


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyIssues in evolutionIssues in evolution (I)(I)

• Why to evolve?

• Services and revenue increase with multimedia services:

• Cost reductions by sharing network infrastructure and systems

• Simplification of O&M, thus lowering OPEX

• When to evolve?

• According to new technology maturity per network layer (physical, switching, services and applications)

• Different time scales for access, edge and core segments

• As a function of current network aging and demand grow

• Plan business and investments on time to allow feasible return and positive NPV at reference periods


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyIssues in evolutionIssues in evolution (II)(II)

• How to evolve?

• Business continuity required to maintain ongoing dominant services and customers that require carrier-grade service

• Flexibility to incorporate existing new services and react quickly to the ones that appear on real time (main advantage of IP mode)

• Plan architecture and capacity for end to end QOS and interoperability between domains

• Services security and network survivability ensured over all period

• What-if for multiple alternatives and each decision?

• Architecture, starting, number of steps, timing, investment rate, charging, etc.









NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: TopologyArchitecture Evolution: Topology

Topological changes impact on infrastructure and are slower to implement than technology substitution

• Less network nodes and links due to the higher capacity of systems (one order of magnitude).

• Same capillarity at access level due to identical customer location

• Topological connectivity higher for high capacity nodes and paths due to security

• High protection level and diversity paths/sources in all high capacity systems, both at functional and physical levels


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture migration: TopologyArchitecture migration: Topology

What changes from current scenario towards target network ?

OtherNetworks

DLC

Control

Transport/Media Distributed Switching

DSL

Wirelessgateway

Softswitch

OSS Services

PacketNetwork

IP/MPLS/CAC

Accessgateway

Accessgateway

Accessgateway

Trunkgateway

SCP

TDM

POTS ISDN

RSU

LEX/TEX

LEX

PCM

DataATM/IP

MUX/DSLAM

NMC

SS7

HDSL/XDSL

NAS

MobIN


StructureSimplification

NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: TopologyArchitecture Evolution: Topology

TRANSIT NETWORKTRANSIT NETWORK

NATIONAL LAYERNATIONAL LAYER

REGIONAL LAYERREGIONAL LAYER

AccessLAYER

LEXLAYER

Single-layeredTRANSIT NETWORK

SingleSingle--layeredlayeredTRANSIT NETWORKTRANSIT NETWORK

NATIONAL/REGIONALLAYER

NATIONAL/REGIONALLAYER

AccessLAYER

LEX/GWLAYER


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: AccessArchitecture Evolution: Access

Access dominated by physical infrastructure cost and deployment time

• Quick deployment of DSL and Multimedia Services

• FO closer to customer when implementing new outside plant or renovating existing one

• New Wireless technologies for low density customer scenarios

• Shorter LL length than classical network to be prepared for high bandwidth Multimedia services


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: LocalArchitecture Evolution: Local

Dominated by functions migration investment and interoperability

• Move from joint switching and control to separated control and media GW

• Introduce Multimedia Services at all areas

• Optimize number, location of nodes and interfaces among existing and new network

• Requires longer time and higher investments due to variety of geo-scenarios and geographical distribution


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: CoreArchitecture Evolution: Core

Dominated by high capacity and protection level

• Overlay deployment for full coverage in all regions

• Quick deployment needed for homogeneous end to end connections

• Strong requirements for high quality, protection and survivability

• Importance of the optimization for location and interconnection


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: Combined SegmentsArchitecture Evolution: Combined Segments

Where to start and how to co-ordinate migration?

- Network “consolidation”Cost Optimisation of the network

- Reducing nodes and increase their capacity- Deployment of ADSL and multiservice access

- Network expansionNGN solution :

- Cap and Grow; this means keeping the existing PSTN network as it is, and grow demand with NGN equipment

- Network replacementReplacement of out-phased (end of life) TDM equipment

- gradual replacement : this means coexistence of the two technologies - full accelerated replacement with a short transition period

Need to optimize overall network evolution: technically and economically


• Starting with the 5 current separated networks based on TDM ( PSTN, IN, SS7, Mobile, Data ATM/IP)

• Migrating to single IP based NGN at core segment

• Migrating at IP based NGN at Edge and Access Segments

• Incorporating partial pre-IMS open service architecture

• Incorporating full end-to-end IP mode with IPv6

• Implementing full IMS functionality

NGN: Migration and InvestmentNGN: Migration and Investment StrategyStrategy

Overall Convergence steps at network and service domains


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyArchitecture Evolution: Combined SegmentsArchitecture Evolution: Combined Segments

CAPEX

• TDM and NGN CAPEX are close

• NGN CAPEX in the first years driven by geographic coverage

• Access systems represent a large part of CAPEX

– similar values in TDM and NGN

OPEX

• OPEX in NGN trends to be lower

• Migration scenarios will have a mixof TDM OPEX (installed base) and NGN OPEX (substitution and growth)

• Significant impact of manpower cost due to convergence in operations

Overall impact of evolution on network CAPEX and OPEX

Key factors for the evaluation: Geo-scenarios, Network grow rates, Aging of equipment, New services


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyEvolution to Evolution to convergedconverged OSS BSS: New OSS BSS: New requirementsrequirements

- In addition to conventional typical functions, new requirements and higher relevance for existing tasks are needed in the NGN IP mode technology as follows:

- Managing support to multimedia services with voice, data, video and multiple play- Security policy management,- Content management,- Managing interdomain operational activities - Managing functionalities for the coexistence of legacy and new technologies- Implementing new business procedures associated to bundled offers- Manage multimedia/multiparty charging application- Service Level Agreements (SLA) management,- Service creation and upgrading management,- Focus on common processes to all support functions and technologies


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyEvolution to Evolution to convergedconverged OSS BSS: PhasesOSS BSS: Phases

Separated OSS, BSS and Platforms

Integrated OSS/BSS inCommon Platform

BSS

PSTN DATA

MOBILE

OSS

App

licat

ion

1

OSS

App

licat

ion

2

OSS

App

licat

ion

n

BSS/OSS

PSTN DATA

MOBILE

OSS Applications

OSS Middleware

Integrated IT Platform

Migration from legacy support systems in vertical piles towards integrated OSS/BSS in an IT platform per network type


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyEvolution to Evolution to convergedconverged OSS BSS: PhasesOSS BSS: Phases

Integrated OSS/BSS inCommon Platform Full Integrated NGSS platform interworking with IMS

BSS/OSS

PSTN/DATA MOBILE

OSS Applications

OSS Middleware

Integrated IT Platform

NGSSbased on

(SOA)

BS

S/O

SS

A

pplic

atio

ns

Transport Stratum

Service Stratum

Third Party Applications

Transport Functions

Transport Control Functions

Service Control FunctionsIMS

Applic. Support Functions

IMS Architecture

Migration from IT platforms per network type towards New Generation OSS/BSS for an NGN multiservice network with IMS functionality


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyEvolution to Evolution to convergedconverged OSS BSS: OSS BSS: BenefitsBenefits

Converged OSS/BSS applications will provide a series of benefits similar to the ones obtained by the IMS within the network but related to the overall company

operational activities external to the network:

- Short time reaction to new services introduction

- Labor force reduction for the operation

- Common look & feel for the support services with easier training

- New facilities for charging adaptation to costing and for agile reaction to

business competitive forces

- Profitability increase due to advance in the revenues and decrease of Opex

- Quick reaction to contract updates, customer care and SLA requirements


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyMatchingMatching evolution to NGN, IMS and NGSSevolution to NGN, IMS and NGSS

Convergence to NGN infrastructure

Separated OSS and BSS platforms for PSTN,

Mobile,& Data

OSS/BSS Integration forPSTN and Data

Full Integrated platformFixed + Mobile & federated with IMS

Convergence to Integrated OSS/BSS

PSTN

NGN IP core

End to End NGN

PSTN Architecture

Pre - IMSCoexistence for PSTN and NGN

Full IMS “SIP” Services- Open Service Architecture- Integration of OSS and BSS

functionalities

- NGSS based on “SOA”- Incorporation of new operations

for IMS new services









– High cost impact of network infrastructure layer: > 60% in Greenfield areas of which > 70% in access segment.

– Dimensioning and cost evolving in 3 phases through time:

– A) Accessibility due to Geo coverage either physical or radio

– B) Equipment in Ports/users as customers grow

– C) Capacity in Traffic due to increase of multiservice applications

– Significant savings by resources and equipment sharing within an operator due to convergence at network layers : i.e.: 30%

– Additional savings inter-operators due to cost sharing of non-core equipment (buildings, towers, etc.) > 20%

NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyKey Key FactorsFactors: : CostCost structure and structure and savingssavings


NGN: Migration and Investment Strategy NGN: Migration and Investment Strategy Investment Distribution in Greenfield AccessInvestment Distribution in Greenfield Access

Network Cost Compositionfor traditional PSTN and Data(Urban 1 node Ducts+ Aerial)

25 %

13 %51 %

4 %7 %

PrimarySecondaryCivil WorksEngineeringManagement

Infrastructure (OSP) Cost Composition(Urban 1 node Ducts+Aerial)

5 %

12 %

74%

4 %5 %

DATA Overlay

OSP

Transport

PSTN accessPSTN core

Dominant Outside Plant component compared to Electronic Equipment for traditional WL technologies


NGN: Migration and Investment Strategy NGN: Migration and Investment Strategy Example forExample for Composition of prices: WL Composition of prices: WL vsvs WLL casesWLL cases

Solutions for Greenfield scenarios (excluding Backhauling)

Switching

Access Equipment

Transmission

Infrastructure

Rural WL Rural WLL6%

74%

0%

20%2%

16%

20%62%

- WL more intensive in Infrastructure and density dependent- WLL more intensive in Electronic equipment and traffic demand dependent


Example for Cumulated Capex by layers: DLC caseVillages: DLC based solution (Greenfield)

0

1000000

2000000

3000000

4000000

5000000

6000000

1 2 3 4 5 6 7 8 9 10

mon

etar

y un

its

Infrastructure

Transmission

Access Equipment

Switching

Years


- High investment at launching phase with dominant contribution by Infrastructure and access equipment by geo-coverage and customer volume


Cost sensitivity to customer density per type of solutionCost sensitivity to customer density per type of solution


0500

1 0001 5002 0002 5003 0003 5004 0004 5005 000

7 13 20 27 33 40 47 53

Density: (customers/ km^2)

CA

PEX,

pric

epe

rlin

e,

Mon

etar

yun

its WL extension inexisting network

.WL solution Greenfield

WLL solution Greenfield

- Clear cross-point between WL and WLL solutions as a density function

- Important impact of existing network reusability


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyRoleRole of Business of Business StrategyStrategy PlanningPlanning

• Net Present Value (NPV) for the overall migration project is the best global evaluator

• Conservative migration deploy new technologies for demand grow of existing services and substitution of obsolete equipment

• Ambitious migration forces deployment of new technologies and new services as allowed by state of the art technology

NPV for two migration strategies

-10000

-5000

0

5000

10000

15000

20000

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

KEu

ro

Ambitious migration Conservative migration


SOHO and Small EnterpriseAll Segments (reference)Residential

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Year-1e+08

0e+08

1e+08

2e+08

3e+08

4e+08

5e+08

6e+08

7e+08

8e+08

Eur

o Effects of the mix of customers on Reference Scenario: Low competition level

Network NPV


• SME and SOHO with quicker recovery but less NPV and company value at medium term

• “All customer segments” case with much better behavior


Internet

Internet & VoDSL

Internet & Video

All Services (reference)Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Year-2e+08

-1e+08

0e+08

1e+08

2e+08

3e+08

4e+08

5e+08

6e+08

7e+08E

uro


Effects of the mix of services on Reference Scenario: Low competition levelNetwork NPV

• Major impact of service classes on NPV and company survivability• Single service classes without future

• High benefit of “all services” case


Internet

Internet & VoDSL

Internet & Video

All Services (reference)

Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Year-2e+08

-1e+08

0e+08

1e+08

2e+08

3e+08

4e+08

5e+08

Eur

o


Effects of the mix of services on typical scenario: Medium competition levelNetwork NPV

• Increase of competition level decrease market share and tariffs, amplifies the previous effects on feasibility: big differences between service mixes

• Very robust behavior for the “all services” case


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategyEvaluation for 2G to 3G migrationEvaluation for 2G to 3G migration

Year

GSM base stations

UMTS base stations

UMTS carriers

GSM TRXs

Y0 Y2 Y4 Y6 Y80e+07

2e+07

4e+07

6+07

8e+07

1e+08

1.2e+08

US

$

Resource Capital Expenditure

Investment in Network elements during network transition at an scenario with accelerated migration and customers growth (non saturated market)



Y0 Y2 Y4 Y6 Y8Year

0

400.000

800.000

1.200.000

1.600.000

2.000.000

2.400.000

2.800.000

3.200.000

Mbi

t/s

Bandwidth per service class of business customers

Data bandwidth

Voice bandwidth

Dominant bandwidth demand by data services as new network scenario with service maturity



Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9Year

0e+07

4e+07

8e+07

12e+07

16e+07

20e+07

24e+07

28e+07

US

$

Revenue per service type for consumer customers

Data services

UMTS voice

GSM voice

Significant increase of data services revenues when network and new services are promoted


NGN: Migration and Investment StrategyNGN: Migration and Investment StrategySummary of Evolution StrategySummary of Evolution Strategy

• Plan a phased approach for the network migration based on business evaluation per network segment.

• Start at Core network segment and OSS/BSS

• Ensure coordination between network segments, OSS/BSS functionality, IMS and IPv6

• Select overall strategy as a function of network aging, demand grow and competition level

Documents

Seminar on tariff policies, tariff models and ... · Topological changes impact on infrastructure and are slower to implement than technology substitution • Less network nodes and