FTTH COUNCIL EUROPE MEDIA AND ANALYSTS NEWSLETTER ISSUE TWO

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1 FTTH COUNCIL EUROPE MEDIA AND ANALYSTS NEWSLETTER ISSUE TWO Contents - President s Introduction - Forthcoming Events - Current European Architectural Perspectives for Fibre - a short article reviewing the latest trends in architectural approaches - Crunch Time for European Broadband Regulation a short article discussing an imminent regulatory milestone - European News Digest PRESIDENT S INTRODUCTION By Hartwig Tauber, FTTH Council Europe President Welcome to the latest instalment of the FTTH Council Europe s Media Newsletter. Whilst uptake of FTTH is flourishing in North America and Asia, Europe continues to lag severely behind. In July, I presented at the Council s APAC Conference in Japan and unsurprisingly, the statistics I gave stood in stark contrast to other regions. In Japan alone, there are already four times more FTTH subscribers than in the whole of Europe; that s one country s uptake exceeding the combined total of over 25. The key is regulation. Europe s steps toward embracing an information economy remain eager but slow, and the uncertainty of the regulatory framework continues to act as the largest barrier. The Japanese delegates I met were bemused by Europe s novel municipality-based business models; solutions designed almost entirely in response to the ambiguity of our regulatory climate. We are now entering a critical period for FTTH in Europe. Already we have seen decisiveness from the European Commission on the subject of Deutsche Telekom s controversial FTTN/VDSL project. The next few months will prove enormously important for operators, service providers and the industry as a whole as we learn more about the EU s position on the regulatory environment. Come September, The Council will be continuing its involvement in this crucial debate and will shortly be making its representations to the consultation process. These forthcoming regulatory decisions will have a direct impact on the future of high-speed broadband in Europe, affecting businesses, consumers and providers alike. The outcome will decipher the path forward for all future fibre projects in the region.

2 FORTHCOMING EVENTS AND MILESTONES Mark your diaries for the following events, involving the FTTH Council Europe Odebit Conference September 11 13, 2006 CNIT, Paris la Défense, France FTTH Council Europe is an Official Conference Partner. Optical Networks Europe Conference September 24 25, 2006 Palais des Festivals et des Congres de Cannes, France FTTH Council Europe Board Member Rami Houbby will be giving a presentation entitled: FTTH: where, when, why, and how much? 3rd Annual GTB Conference on Making Convergence Pay September 25-26, 2006 Jumeirah Carlton Tower, London, UK FTTH Council Board Member Tadhg Leonard will be joining the roundtable debate on FTTH. European Conference and Exhibition on Optical Communication (ECOC) September 25 27, 2006 Palais des Festivals et des Congres de Cannes, France FTTH Council Europe President Hartwig Tauber will be presenting a session entitled: Why a competitive Europe needs FTTH World E-Gov Forum October 18-20, 2006 Issy les Moulineaux, Paris, France FTTH Council Europe Board Member Francisco Fuentes will be speaking at this event. The 3rd Annual Carriers World CEE November 13 15, 2006 Intercontinental Hotel, Budapest, Hungary This event is officially endorsed by the FTTH Council Europe FTTH Council, US Conference October 2 5, 2006 The Venetian Resort Hotel and Casino, Las Vegas, USA FTTH Council Europe President Hartwig Tauber will present a track session entitled: FTTH in Europe: Success Stories

3 FTTH Council Europe Conference February 7 8, 2007 Palau de Congressos de Catalunya, Barcelona, Spain The landmark event of 2007, the FTTH Council Europe s next annual conference will feature debates, presentations and case studies from world-renowned speakers

4 CURRENT EUROPEAN ARCHITECTURAL PERSPECTIVES FOR FIBRE Article produced by the Architecture Committee of the FTTH Council Europe While most FTTH deployments in the US and Japan are based upon standard Passive Optical Networks technology, the spectrum of architectures deployed in Europe is wider and includes besides PONs mostly point-to-point and ring-based topologies employing Ethernet technology. Beyond the transmission aspects in the access network, service delivery architectures are becoming increasingly important as they can allow broadband services to be delivered independently of any particular access network technology or topology. Very high bitrates in the access network are required both for the effective support of high bitrate streaming applications like broadcast video or VoD, as well as for reducing the latency of very high-speed bursty data applications like video download or upload. Some streaming applications require bitrates to be reserved for the entire duration of the application. As such, it may be necessary to permanently allocate the bitrate of one or more video channels for individual subscribers in order to avoid video blocking. This requires very high capacities of the aggregation and backbone networks, and typically becomes the dominating factor in network capacity dimensioning. Another consideration factor is the increasingly symmetric nature of traffic patterns due to the creation of content by individuals or bi-directional traffic patterns (e.g., for video telephony). Architectures being deployed can be roughly classified by three categories: Ring architectures, Star architectures, and Tree architectures using PON technologies. The choice of any particular architecture depends on the type of deployment (FTTP/FTTH), availability and topology of fibre, costs, and availability of equipment. All the architectures can be mixed and matched within a single network, and even complemented by other access technologies. Initial FTTH projects in Europe have been based on architectures where switches located in Multi-Dwelling Unit (MDU) basements have been interconnected by Gigabit Ethernet in a ring structure. This structure provides excellent resilience against fibre cuts and can be built very cost-effectively, but has the disadvantage of sharing a comparatively small bandwidth (in relation to long-term bandwidth requirements) in the access ring. More recently, Ethernet star architectures have been primarily used. These provide dedicated fibres from each endpoint (individual residences, apartments, MTUs etc.) to the Point of Presence, where they are terminated on a switch. The benefit to the operator is the flexibility of a dedicated fiber per subscriber available at POP premises which allows future upgrades to be done on a customer-bycustomer basis. This flexibility however does not come for free. The aggregate fiber and transceiver costs are higher than in a PON architecture and in practice the maximum number of fibers (hence subscribers) that can be aggregated per POP is

5 limited. For large deployments this does not allow network topologies with a smaller number of POPs compared to today's PSTN deployments. Passive Optical Network (PON) based architectures are characterised by passive optical splitters distributing the fibre to each customer using splitting ratios up to 1:64. The benefits to the operator are the savings of ports in the POP and of fibre in the access network if the splitter is deployed in the field. Allocation flexibility of customers to splitters can be achieved by combining the splitter with an optical distribution frame (ODF) either in the POP or in a field cabinet. This is particularly important when the uptake of customers is not easily predictable. However, such flexibility comes at the cost of building and maintaining the ODF in the field. All the architectures use the Ethernet protocol. Indeed, Ethernet is the common denominator for Layer 2 transport in virtually all European FTTP/FTTH deployments. Besides pure Layer 2 VPN approaches for LAN interconnection, however, all the services rely on IP as the Layer 3 protocol. Experience from the enterprise networking market also indicates that Layer 2 domains have to be restricted in size in order to remain stable and manageable. Consequently, all the architectures outlined above use IP routing functionality at an aggregation layer in the network. In some parts of Europe the concept of Open Access Networks (OANs) has become very popular. OANs are based on the idea that service providers can derive strictly equitable access to end customers via a fibre-based infrastructure. This differs from wholesale scenarios which rely on incumbents infrastructures, because the owner of the infrastructure is typically barred from competing with a service offering against his service provider partners. Open access can be achieved on multiple layers: The physical infrastructure provider provides dark fibre connectivity to multiple individual network operators which can be vertically integrated The network operator uses a layer 2 (i.e. Ethernet) infrastructure and provides connectivity between service providers and subscribers using VLANs The network operator uses a layer 3 (i.e. IP or MPLS) infrastructure and provides connectivity using conventional peering mechanisms or MPLS LSPs to segregate the traffic of multiple SPs Fibre-based access networks are being deployed today, across Europe, based on different architectures and technologies. Mature standards for these technologies and availability of the necessary equipment allow for a low-risk deployment of networks.

6 CRUNCH TIME FOR EUROPEAN BROADBAND REGULATION Article produced by the Regulatory Committee of the FTTH Council Europe September promises to represent an extremely important moment for fibre-based broadband penetration in Europe. The European Commission will conclude its public consultation on broadband regulation and define the basis for future investments and competition among incumbent carriers, alternative network operators, public authorities, municipalities, utilities and content providers. Commissioner Reding has already controversially suggested radical changes to the current regulatory framework, believing this to be the best way of stimulating next generation broadband rollout at levels high enough to compete with those of other global economies (US, Japan, China, India etc.) before they accelerate out of sight. Will she as reports suggest push for the structural separation of incumbent carriers, or opt for a subtler carrot and stick approach? The truth is, nobody knows. Rumours abound, but the only certainty is that nobody is at all certain how the situation will pan out in the end. It is worth recalling how we arrived at this juncture, and what so many years of an ambiguous and uncertain regulatory framework have done to Europe s broadband aspirations. It is less than 18 months since the European Commission outlined its bold strategy for a transcontinental information society i2010. i2010 is a wonderfully positive and ambitious body of work, articulating a vision of a Europe just four years from now where fully ubiquitous high-speed broadband connectivity imbues the lives of all European citizens with profound economic, social and environmental benefits. Sadly, to make the aims of i2010 a reality, fibre needs to be rolled out to Europe s many millions of homes (FTTH) or, if not, at least closer to those homes than currently in evidence (FTTN). But the regulatory situation is stopping telecoms investors practicing their usual game, and is producing a playing field that many believe is uneven and a set of rules that few can follow. If a month long Olympic Games takes six years to organise, then surely a Europe-wide multi-billion Euro invest/build programme will take longer. During these last 18 months of paradoxical regulatory meanderings, we ve seen a corresponding hive of FTTH activity from European municipalities. Several major projects involving investments from publicly financed local authorities in coordination with the private sector have exploited regulatory loopholes and are delivering passive primary infrastructure for the good of local competition as well as local businesses and citizens. Indeed, the eruption of innovative municipality-led fibre broadband projects is the one positive by-product of an uncertain regulatory framework. Elsewhere in the world such approaches are peculiarly rare, presumably because there is less call for intervention from municipalities in the wake of so much positive regulatory encouragement to fibre network investment. Later in September the FTTH Council Europe will produce its response to the EU regulatory process in the form of a set of recommendations aimed at rapid and harmonised FTTH development across Europe. This will be made available to the media, and other stakeholders.

7 EUROPEAN NEWS DIGEST The following is a recent round up of important fibre-related news from the FTTH Council Europe, and across the European fibre industry. DT Must Share Network European Commission Upholds BNetzA ruling Silicon Phonetics Enters the Broadband Age Cornell University students pioneer silicon chip technology ticle=17&page=1 Quantum Dots Enable Broadband Laser Output German company makes broadband laser a reality EU Prohibits State Aid for Appingedam Commission bars public funding for additional broadband network in Appingedam (Netherlands) ML&aged=0&language=EN&guiLanguage=en France Telecom Launches Fibre Pilot Project France Telecom hooks up its first 100 customers directly to its own fibre optic network Market Report: Broadband Increases Consumer Electronics Demand New data shows fibre optic connections are boosting interest in futuristic applications