Stephan Jay, Dragan Ilic, Thomas Plückebaum
Network Access Options in an NGA Environment
No. 332 / December 2009
Summary
The migration to Next Generation Access (NGA) networks leads to structural changes of access networks which impact on cost, regulated fees and the business case of the operator. The goal of this study is to analyze (wholesale) access options for different NGA-architectures and compare the economics of building one’s own infrastructure with procuring bitstream access. To this end we classify NGA deployment by architectures (Fibre-to-the-X) and technology (Point-to-Point, Passive Optical Networks), identify access barriers and analyze the relevance of active and passive access products for NGA. Based on this qualitative analysis a Long Run Incremental Cost (LRIC) bottom-up cost model is applied to conduct a quantitative comparison of an infrastructure and a bitstream access business model of an alternative German operator.
The study shows that access barriers differ between architectures/technologies both regarding unbundling at the Metropolitan Point of Presence (MPoP) or the Distribution Point and access to inhouse cabling. For this reason the Ladder of Investment will likely have more rungs, whose relevance depends on the NGA roll-out and national/regional conditions.
An analysis of the business cases for FTTC and FTTH/P2P shows that under the given assumptions (such as no increase of revenues per user) high market shares are required to operate NGA profitably. Under the conservative model assumptions FTTH/P2P only reaches about 14% of German users. As expected FTTH/P2P requires higher market shares than FTTC because of the higher requirement for new investments which is due to the assumption that the copper drop cable segment for FTTC is rented from Deutsche Telekom and not redeployed. The model assumes a deployment without use of existing ducts or dark fibre. Therefore investments and critical market shares of a real deployment will be lower. However, the dominant investments of FTTH/P2P lie in the drop cable segment in which only little (joint) use of existing infrastructures from Deutsche Telekom is expected.
At low market shares an operator building his own NGA produces at higher cost than a bitstream access seeker. At higher market shares this is reversed. In between there is market share level at which both business cases are profitable but it is still cheaper to procure bitstream access. This shows that at consistent wholesale pricing (in this case based on cost) the NGA Ladder of Investment provides incentives to invest into own infrastructure.
(Full version only available in German language)
Discussion Paper is available for download.