1998 06 ats kemmerer

Residential Access Network Evolution: 

Fred Kemmerer Access Architecture & Strategy Lucent Technologies fkemmerer@lucent.com June 1998 Residential Access Network Evolution

Current Environment: 

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 industry’s 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

Access ChessboardCompetition converging around data & mobile telephony: 

Access Chessboard Competition converging around data & mobile telephony RBOCs/LECs - SBC - Bell Atlantic - GTE IXCs - AT&T - MCI - Sprint Cable MSOs - TCI - Time Warner - Comcast Wireless - Air Touch - NexTel - PCS Winners Satellite ISPs - AOL - Mindspring Market Size (1997) Growth Rate Players Fixed Telephony Mobile Telephony Data Video Services 2nd Lines; ADSL VDSL/ Video? Cellular, PCS IP Telephony? Leased Loop? Resale? IP Telephony? Cable Modem Irridium Direct PC Teledesic PanAm Sat Direct TV Dish Echo Star $62B 3% $32B 16% $8 B 26% $27B 8% Cellular; PCS Leased Loop? Cable Partnerships? Fixed Wireless?

Household Data Demand: 

Household Data Demand Fixed Voice Lines Cable TV PCs Internet Source: Veronis and Suhler, IDC, CTIA FCC Subscribers millions Cellular/ PCS CPE Cost ($) $20-60 $0-300 (DBS) $1,000-3000 $0-200 Avg. Service Expenditure ($/mo.) $100-250 $27 (local) $26 (LD) $42 - $56 $20-$40 Total US households = 102M

Wide Range of Projections for Success: 

Wide Range of Projections for Success ADSL millions High Medium Low One winner or zones-of-advantage based winners? Wireless, satellite? Cable Modem millions High Medium Low Source: Cowles/Simba, Forrester Research, IDC, Yankee Group, Dataquest

DSL Business Model – Early Market ViewA positive business model for DSL exists for business and is emerging in high-end residential/SOHO.: 

DSL Business Model – Early Market View A positive business model for DSL exists for business and is emerging in high-end residential/SOHO. 1 10 100 1,000 0.1 Mbps Downstream Speed (log scale) $ per Month (log scale) T1 Frac T1 ISDN IDSL HDSL ADSL Incremental Cost (vs. Analog Modem) Small/Medium Business • Based on nearest alternative currently in use Emerging High-End Residential Opportunity Existing Business Market Opportunity 1 Mbps 10 Mbps Top 25% of Residential Market • Based on range of current market research • Potentially higher if businesses subsidize (As in early cellular business model) Willingness-to-pay Source: Mercer management Consulting

What’s 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 What’s Required?

Slide8: 

ADSL via Metallic Distribution Cable Modems via Coaxial Distribution Circuit Packet Circuit Packet Cable Modem Terminating System DLC w/ Integrated DSLAM Switch Line Unit w/ Integrated DSLAM Integrated Voice/Data Networks Existing Infrastructure

Slide9: 

Fixed Wireless Circuit Packet Circuit Packet Integrated Voice/Data Networks New Build Fiber-to-the-Home

New Access Networks Are ExpensiveLeveraging existing infrastructures is a critical advantage: 

New Access Networks Are Expensive Leveraging existing infrastructures is a critical advantage Cumulative Investment in Residential Access Plant $Billion Source: FCC, CTIA, Kagan High First-Costs favor: Incremental Upgrades - ADSL, Cable Modems Focused Builds - CAPs Variable Cost Approaches - Satellite

Expected Cable MSO HFC Upgrade Path: 

Expected Cable MSO HFC Upgrade Path 2-way HFC Upgrade % of Homes Passed Source: Average view of Forrester, Jupiter, Datapro, Company Announcements

Bandwidth Likely to Bring Newand Increased Usage: 

Bandwidth Likely to Bring New and 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

Key Related Technologies toSupport Applications: 

Key Related Technologies to Support Applications Always On/Permanent Network Connection IP Telephony Streaming Audio/Video Hardware and 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 Mail integration 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 Technology Some Applications/Benefits

Business Model/Customer InterfaceCable Modem Example: 

Business Model/Customer Interface Cable Modem Example Focal point for industry cooperation issues Backbone and server architecture/capacity for 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 to supplement limited cash flows Business Model Regional Data Center Content Servers MSO Head- End Cable Modem PC Caching Servers Network Management & Admin. Cable MSOs Cable Modem National ISP National Backbone NAP

Broadband Access Lift-Off EnablersCable Modems on the inside track?: 

Broadband Access Lift-Off Enablers Cable Modems on the inside track? Cable Modem Standards Customer Coverage Trials-Proven Technology Business Model/ Customer Interface Cost ADSL Wireless Satellite Full Service Network/FTTH HFC upgrades on track Spectrum available, but infrastructure build can be time consuming Need satellite launch Can ramp to 100% quickly

What Will the Access Landscape Look Like?: 

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 What Will the Access Landscape Look Like? Near Term Long Term

Rate of Access Plant Fiberization: 

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

Thank You!!: 

Thank You!!