Broadband Business Industry Perspective
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Presentation to international broadband operators on the trend of broadband business
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Broadband Business Industry Perspective
- 1. TREND: Broadband Business An Industry Perspective Xiaolin Lu August 26. 2002
- 2. What is this all about? Bubble burst, led by the US communication industry – what to do in new environment? European has similar and also different regulatory and business environment. What could learn from the US?
- 3. CHALLENGES Street Opportunities Perspectives Operation Reality Regulation Competition Assets Technology Financial Industry Innovations Markets Environment
- 4. TOPICS Industry Perspectives Technology Platform Operation Challenges
- 5. Perspectives and Dynamics
- 6. LANDSCAPE TELECOM IN US Long-Haul Metro Access “Unregulated” “Unregulated” Regulated or Semi-Regulated AT&T MSO Worldcom ILEC Spring CLEC Qwest
- 7. REGULATION AND BUSINESS VOICE DATA VIDEO Communication Information Content Regulation Services Services Service Title 2 Title 1 Title 6 Requirement Open Pipe None Franchising Business Selling Minutes Flat rate Flat rate + Usage Regulation Business Platform
- 8. HARVEST ON REGULATION Regulation (intend) Harvest Managed Infrastructure Open Access Managed Services: multi- dimension business Open Conditional Open platform Access CPE innovation Digital Video Full digital platform
- 9. INDUSTRY DYNAMICS Cable Dominates ILECs Dominates Cable Leads HSD Video Market Voice Market Market Video Voice Data Cable ILECs Other Competition Reduced margin Reduced margin on from Satellite on circuit sale access sale Desire for more Desire for change New business more revenue stream of service nature looks like video
- 10. CHANGING PERSPECTIVES Video Competition Standard based Proprietary Digital Technology Capture shares Monopoly New revenue Expand the pie Data Reduced margin Managed infrastructure Regulatory Service Package Access Changing service Flat fee model New business model nature Voice VoIP possible VoIP platform Opportunity to Vertical service Costly change the nature proposition of voice service Differentiation
- 11. REALITY Opportunity Fantasy New revenue New technology Competition Sale pitch Assets Embedded base Investments How to maximize operation and economic scale? How to differentiate our business from others’? How to evolve the business and define the future? What technology direction MSO should direct vendors to?
- 12. Looking Forward: Triple Play 2002 Data $28B Cable Voice ILEC Video SDV VoIP $75B $128B VDSL Standard based equipment IP Infrastructure OSS/BSS New Services
- 13. POSITIONING Data Video Change service nature Voice Expand business Change service Go digital nature Core Competence Content aggregation & delivery Service-base infrastructure
- 14. INTERDEPENDENCY OSS/BSS Service Platforms IP – DOCSIS Regional HFC Vertical and horizontal interdependent Any change at any layer or any segment will affect others
- 15. INDUSTRY EFFORTS Broadband Full Service Platform Packet Cable Open Cable Cable Home End-to- End-to-end IP Universal set Home platform top box network N DOCSIS G Strategy Network C System Operation UPGRADE N DWDM Capacity RF Quality DSP Reliability Standards CL efforts MSO efforts
- 16. NETWORKS
- 17. HISTORICAL OVERVIEW SS7 Telco Class 5 Class 4 Switch Switch Communication Service (Title 2) LD Selling connection Circuit, connection orientated Internet Cable FN FN Headend FN FN Content Service (Title 6) Selling content Broadcast, push-and-pick push-and-
- 18. OPTIONS LEC Narrowband Switched DLC Rebuild Wireless Mobility FTTH Broadband Cable Network Upgrade Deep Fiber Broadband Broadcast Cable modem Penetration
- 19. Photonic Moore’S Law: Unlimited 10K TDM Commercial WDM Commercial 1K TDM Research Capacity (Gb/s) WDM Research 100 10 1 0.1 1985 1990 1995 2000 Year
- 20. Photonic Moore’S Law: Positive Trend DWDM Price Performance 1400 $350 1200 $300 1000 $250 $/Gbps/Km 800 $200 Gbps 600 $150 400 $100 200 $50 0 $0 1996 1997 1998 1999 2000 2001 Year Capacity Cost
- 21. DWDM IN CABLE 1.5 Xmod EDFA DWDM HHP 120 100000 100 HHP/Wavelength 10000 Cost Decline % 80 1000 60 100 40 10 20 0 1 96 97 98 99 00 01 02 Year
- 22. CABLE NETWORK EVOLUTION Demand Bandwidth per Customer Take Rate Applications User Behavior Push Fiber Deeper Split Nodes Higher RF Efficiency Time
- 23. NETWORK RATIONALITY Cell-Bus HFC HE/Hub FN Volume Migration switching Aggregation Segregation Aggregation RT Multi-stage Switched star CO/HE RT Predefined Structure RT PTP BW & connection switching Aggregation Aggregation Segregation It’s all about resource sharing through multi-stage aggregation and segregation Different cost structure, different efficiency
- 24. APPLICABILITY Switched “Overlay” Plug-in HFC Migration Residential SOHO Large Business
- 25. HFC IN THE MAKING HE FN Primary Primary Hub HE Ring HE FN Broadcast Multi-Service
- 26. HFC IN THE MAKING SH FN Primary Primary Hub SH Ring SH FN DWDM Transport Segmentation End-to-end Transparency 4X capacity
- 27. OXiom TM SH mFN mFN PH CMTS SH S mFN mFN SH mFNs replace all coax amplifiers XTR XTR XTR Less active components More bandwidth and flexibility WDM PON Deep fiber penetration with cell structure Optical add/drop to daisy chain mFNs Reduced fiber management & labor Provisioning for growth Distributed processing at mFN
- 28. Network Buildouts - Cable 105.4M TV HH, 72.95M Cable HH, 69.2% 30 25 Homes (Millions) 20 15 10 5 0 AT&T AOL-TW Comcast Charter Cox Adel Cblvsn Rogers Mcom Insight Classic 2-Way Homes Homes Not Upgraded Source: Kagan
- 29. NETWORK MIGRATION Continually improve current HFC capability DOCSIS 2.0 and beyond Optimization of network architectures for opex reduction Investigating new architecture for more flexibility and scalability New build Expansion Single platform, Core competence, Lower Capex and Opex
- 30. VIDEO
- 31. VIDEO: GOING DIGITAL! Total Households 110 111 100 106 100 90 Analog Only Houses 89 82 80 Total Digital Today 70 70 Digital Cable 60 59 50 45 40 36 Satellite Digital 30 30 25 22 20 Analog Only 10 5 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source = Kagan 2000 Databook
- 32. DIGITAL CABLE SUBSCRIPTION 25 20 Cablevision Cox Million 15 Adelphia Charter 10 Comcast AOL TW AT&T 5 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 Source: UBS Warburg
- 33. US CABLE DIGITAL PENETRATION 40 35 % of Basic Sub 30 25 20 15 10 5 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 02 Source: UBS Warburg
- 34. STRATEGIES Increase Subscription Rev$ Expand Non-TV Ad Market “Video” Pie Get Paid To Carry Content Transaction Revenue “Video” Growth Strategies Recapture DBS Subs Recapture Tape Rental Capture “Video” Share Get Ad Share From B’Cast Own The Content
- 35. PRODUCT EVOLUTION More revenue opportunity ITV Digital Penetration HDTV Reduce churn Extended VOD/PVR VOD Digital Plus Digital Basic Time
- 36. INTERACTIVE TV MARKET 40,000 35,000 30,000 Interenet TV 25,000 Direct Response $M Internet Portals 20,000 IPG 15,000 VOD 10,000 T-Comm 5,000 0 2001 2003 2005 2007 2009 2011 Source: Kagan
- 37. CONTENT DISTRIBUTION DMC Regional HFC Network HE CPE Network Post production Store and distribution Aggregation Conditional access 1st level distribution Scale Flexibility Open, managed infrastructure
- 38. HIGH SPEED DATA
- 39. HIGH SPEED ACCESS North American 100 90 80 70 HP (Millions) 60 56 50 51 48 44 40 40 36 30 30 20 22 13 10 7 0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 Marketed Cable HSD HP Marketed DSL HP Other Subs Total HSD Subs Source: Kagan
- 40. SPLIT THE PIE: 2001 US Only Other DSL 2% 32% Cable 66% Source: Kinetic Strategies
- 41. CABLE MODEM SUBSCRIBER 12 10 Adelphia 8 Cablevision Million Charter 6 Cox Comcast 4 AT&T TW 2 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 Source: UBS Warburg
- 42. MARKET DYNAMICS OF DATA BUSINESS A Land Grab For 40 Million Existing Narrowband Subscribers 1994 2002 2007 $0.6 B $28 B $55 B Advertising Content 5.4 E-Commissions 15.4 0.24 7.9 0.6 15.7 0.32 13.9 19.8 4.1 $5.0B 57% Access 50% Cable 18% $9.9B 36% Cable 18% Increasingly difficult to capture value merely with access fee Key sources of future value in the data business Advertising Ability to close the transaction Data business starts to look a lot like the video business
- 43. IP INFRASTRUCTURE OSS Server Farm Managed HFC Network CMTS CM IP Network (DOCSIS) Many IP Technologies DOCSIS Standard MPLS/VPN/BGP Optical Networking Advanced OSS/BSS Packet Cable Standard Standard based end-to-end solution Operation and scalability are the keys New business model
- 44. KEY DIFFERENCIATION ISP ISP Service Service ISP ISP Managed “Carrier” Network Network Customers Customers Content Pipe
- 45. VOICE
- 46. Voice Isn’t What It Used To Be… 1994 2002 2007 $93 B $149 B $170 B Residential Residential local LD 44.3 30.8 43.6 23.7 39.3 39.7 73.7 103 13.7 Total 15% 50% 60% Cellular Cellular has already captured 50% of the value in a decade Cellular has blurred the traditional residential-business segmentation The residential wireline business is under significant pressure
- 47. REDEFINE VOICE SERVICE Average Monthly Phone Bill: Constant $ Vertical Services CallerID, VoiceMail, Integration, etc. Price competition Access to voice Product Differentiation network (Local, Toll, LD, etc) Time VoIP Low-cost bundled offering Web based provisioning Persistent voice Benefit to Consumer Benefit to Cable Convenient Differentiation Lower cost Customer retention More service value Additional revenue
- 48. VoIP REALITY HDT SONET 5ESS PSTN NIU HFC CM CMTS Local IP Router Internet Cost saving in access Intelligent IP metro networks Classify -- Policy Accommodate legacy Coexist NIU/HDT, CM/CMTS Existing 5E
- 49. Today’s Architecture PSTN 5ESS SONET HE HDT HFC CMTS Local IP Network NIU Internet CM Separatevoice and data platforms sharing the same HFC network
- 50. Transition: IP Digital Terminal PSTN 5ESS SONET HE IPDT HFC Router Local IP CMTS Network Internet EMTA Integrated voice and data over HFC network Utilize 5ESS platform for voice interconnect & features
- 51. End-to- End-to-End IP Platform PSTN PH PSTN Gateway HFC Router CMTS Softswitch IP Network Internet EMTA Cost reduction through common IP infrastructure New revenue with emerging IP-based services Flexible user interfaces stimulate more creativities
- 52. VoIP Over Cable Network MTA CM CMS MS HFC Network CMTS (DOCSIS) Managed MGC IP Network MG PSTN MTA SS7 CM SG HFC Network CMTS (DOCSIS) OSS TGS DHCP & DNS Server TFTP or HTTP Farm RKS Provisioning CMS: Call Management server MGC: Media Gateway Controller MS: Media Server MG: Media Gateway SG: Signaling Gateway
- 53. CABLE TELEPHONY SUBSCRIBER 2.5 2 Million 1.5 Cablevision Cox 1 AT&T 0.5 0 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 01 Source: UBS Warburg
- 54. TRIPLE PLAY Create a customer destination Reduce churn Create differentiation Build a common platform for innovation and gain economic scale Increase ARPU Offensively and defensively change the services/products nature
- 56. OPERATION CHALLENGES Diversed Operation Business structures Scale Assets based Balance sheet Margin ARPU driven Cash flow Scale and efficiency Re-train wall street
- 57. OPERATION STRUCTURE - Industry example COO CTO East Technical West Engineering operation System System System System System System HFC IP Service PM NOC Execution Platform Centralized strategic decision Distributed daily execution
- 58. OPERATION LOGIC Strategy Business case Engineering Operation Guidelines Processes Support Leverage/utilize Support Vendors
- 59. SUMMARY: The Industry Trend Change business dynamics Leverage and grow core competence Harmonize operation structures and processes Utilize industry resources Improve and leverage economic scale
Editor's Notes
- But DBS has proven to be a formidable competitor Digital cable is behind, but is closing the gap The race to capture (and hold) digital subscribers is in full swing. (Could say something about getting to 100% digital to protect cable’s core video business. Is this a forecast? Do we want to say that?)
- In fact, there are even more opportunities in the “Video” space than at first meet the eye Not only can MSOs capture share in the current space… But they can also expand the pie in areas such as: Non-TV Advertising market…for example: Shifting advertiser “Direct Marketing” dollars from catalog, direct mail, telemarketing, etc. to E-TV Shifting share from print and other media, etc. Getting paid to carry content: Something like the pay-me-up-front syndication business on TV Transactions Developing the applications to “close the sale” in real-time with TV advertising and getting paid a nice commission for doing it.
- CMS: typically performs call administration and connection functions. It may use SIP to do that in pure IP environment. It is also the place that end-to-end QoS insurance would be performed, including QoS mapping between different segments of networks. It would interact with CMTS and also router in the IP cloud. In most cases, call feature will be supported here too, but some times they are in independent, so-called Application Server (not in the picture). MG: This is the place that IP network and PSTN network interact and conversion is performed, including negotiation of the use of codec, echo cancellation,etc MGC: The control function for MG. Sometimes it is part of the MG, most cases it is stand alone and control multiple MG, therefore realizing a distributed architecture. It talks to MG using H.248, H.323, or others. Packet Cable uses TGCP SG: this is the gateway that talk to SS7 network and perform signaling conversion between SS7 and IP network. In Europe, Sigtran is used. Packet Cable uses ISTP MS: usually include Announcement Server and controller. RKS is the Record Keeping Server. All these are function blocks. Generally speaking, IP connection (DHCP, DNS, etc), Call Administration and Connection, Voice Application (including announcement), Interconnection to PSTN and its control, and Back office are the main functions that support a call. In real implementation, this is done using either centralized or distributed methods, or the combination, by different vendors. They may also be functionally separated but physically collocated. To add more confusion, both CMS and MGC are called Softswitch, depends who we talk to. At very high-level, one could think they are the same: performing call administration and connection establishment (not physical switch, but signaling for terminal-to-terminal connection, including the procedure agreements), except that MGC is specifically for interacting with PSTN. Namely, without PSTN, one only need CMS, or vice versa, or just a single piece.
- Advertising & Content are the drivers of growth To capture that value, Content owners & Advertisers must have access to subscribers Access is the leverage of Distribution players Land grab for 40 million narrowband subs now underway Cable is winning the land grab vs DSL
- CMS: typically performs call administration and connection functions. It may use SIP to do that in pure IP environment. It is also the place that end-to-end QoS insurance would be performed, including QoS mapping between different segments of networks. It would interact with CMTS and also router in the IP cloud. In most cases, call feature will be supported here too, but some times they are in independent, so-called Application Server (not in the picture). MG: This is the place that IP network and PSTN network interact and conversion is performed, including negotiation of the use of codec, echo cancellation,etc MGC: The control function for MG. Sometimes it is part of the MG, most cases it is stand alone and control multiple MG, therefore realizing a distributed architecture. It talks to MG using H.248, H.323, or others. Packet Cable uses TGCP SG: this is the gateway that talk to SS7 network and perform signaling conversion between SS7 and IP network. In Europe, Sigtran is used. Packet Cable uses ISTP MS: usually include Announcement Server and controller. RKS is the Record Keeping Server. All these are function blocks. Generally speaking, IP connection (DHCP, DNS, etc), Call Administration and Connection, Voice Application (including announcement), Interconnection to PSTN and its control, and Back office are the main functions that support a call. In real implementation, this is done using either centralized or distributed methods, or the combination, by different vendors. They may also be functionally separated but physically collocated. To add more confusion, both CMS and MGC are called Softswitch, depends who we talk to. At very high-level, one could think they are the same: performing call administration and connection establishment (not physical switch, but signaling for terminal-to-terminal connection, including the procedure agreements), except that MGC is specifically for interacting with PSTN. Namely, without PSTN, one only need CMS, or vice versa, or just a single piece.
- CMS: typically performs call administration and connection functions. It may use SIP to do that in pure IP environment. It is also the place that end-to-end QoS insurance would be performed, including QoS mapping between different segments of networks. It would interact with CMTS and also router in the IP cloud. In most cases, call feature will be supported here too, but some times they are in independent, so-called Application Server (not in the picture). MG: This is the place that IP network and PSTN network interact and conversion is performed, including negotiation of the use of codec, echo cancellation,etc MGC: The control function for MG. Sometimes it is part of the MG, most cases it is stand alone and control multiple MG, therefore realizing a distributed architecture. It talks to MG using H.248, H.323, or others. Packet Cable uses TGCP SG: this is the gateway that talk to SS7 network and perform signaling conversion between SS7 and IP network. In Europe, Sigtran is used. Packet Cable uses ISTP MS: usually include Announcement Server and controller. RKS is the Record Keeping Server. All these are function blocks. Generally speaking, IP connection (DHCP, DNS, etc), Call Administration and Connection, Voice Application (including announcement), Interconnection to PSTN and its control, and Back office are the main functions that support a call. In real implementation, this is done using either centralized or distributed methods, or the combination, by different vendors. They may also be functionally separated but physically collocated. To add more confusion, both CMS and MGC are called Softswitch, depends who we talk to. At very high-level, one could think they are the same: performing call administration and connection establishment (not physical switch, but signaling for terminal-to-terminal connection, including the procedure agreements), except that MGC is specifically for interacting with PSTN. Namely, without PSTN, one only need CMS, or vice versa, or just a single piece.
- Cellular has already captured 50% of the value in a decade Cellular has blurred the traditional Residential – Business segmentation The residential wireline business is under significant pressure
- CMS: typically performs call administration and connection functions. It may use SIP to do that in pure IP environment. It is also the place that end-to-end QoS insurance would be performed, including QoS mapping between different segments of networks. It would interact with CMTS and also router in the IP cloud. In most cases, call feature will be supported here too, but some times they are in independent, so-called Application Server (not in the picture). MG: This is the place that IP network and PSTN network interact and conversion is performed, including negotiation of the use of codec, echo cancellation,etc MGC: The control function for MG. Sometimes it is part of the MG, most cases it is stand alone and control multiple MG, therefore realizing a distributed architecture. It talks to MG using H.248, H.323, or others. Packet Cable uses TGCP SG: this is the gateway that talk to SS7 network and perform signaling conversion between SS7 and IP network. In Europe, Sigtran is used. Packet Cable uses ISTP MS: usually include Announcement Server and controller. RKS is the Record Keeping Server. All these are function blocks. Generally speaking, IP connection (DHCP, DNS, etc), Call Administration and Connection, Voice Application (including announcement), Interconnection to PSTN and its control, and Back office are the main functions that support a call. In real implementation, this is done using either centralized or distributed methods, or the combination, by different vendors. They may also be functionally separated but physically collocated. To add more confusion, both CMS and MGC are called Softswitch, depends who we talk to. At very high-level, one could think they are the same: performing call administration and connection establishment (not physical switch, but signaling for terminal-to-terminal connection, including the procedure agreements), except that MGC is specifically for interacting with PSTN. Namely, without PSTN, one only need CMS, or vice versa, or just a single piece.