1. Center for Tele-Information Evolution of the Infrastructure Market SERENATE final workshop Bad Nauheim 15/16 June 2003 Knud Erik Skouby CTI/ DTU

2. Center for Tele-Information Overview Introduction Organizational aspects Regulatory aspects Trends in bandwidth demand Market trends Economic analysis incl examples Conclusions

3. Center for Tele-Information Introduction (1) Based on material collected from equipment suppliers and operators and modeling work by Dante & CTI to illustrate the evolution of costs of (international) connectivity over the next five years

4. Center for Tele-Information Introduction (2) Parameters affecting the evolution in transport infrastructure for research and education networks Organization Regulation Market Technology

5. Center for Tele-Information Organizational aspects (1) Current model for NREN transmission networks, 3 layers: - International - National - Local/ university Alternative models/ features for network infrastructure - Regional networks - Border hopping and border crossing

6. Center for Tele-Information Organizational aspects (2) Ownership options for the physical infrastructure –Full ownership of fibres –Dark fibres –Managed dark fibres –Direct access to fibres –Buying of capacity

7. Center for Tele-Information Regulatory aspects New regulatory package -Public or private network -General authorization - notification -Local loop unbundling (copper and fiber) RoW Regulation can only facilitate competition & development

8. Center for Tele-Information Trends in bandwidth demands (1) Very different usages patterns, which might suggest different connection levels or a building block principle

9. Center for Tele-Information Trends in bandwidth demands (2) Based on average growth rates the predicted traffic volume is 33 times bigger in 2006, equaling 20,000 Terabytes

10. Center for Tele-Information Market trends (1) Equipment market Infrastructure services –Deregulation –New technologies –Unprecedented availability of very low cost capital Market scenarios –Four market structures: Liberal I & II; emerging; monopolistic –Three scenarios: optimistic (I), neutral (II) and pessimistic (III)

11. Center for Tele-Information Market trends (2) Scenarios

12. Center for Tele-Information Economic analysis (1) Three major building blocks –Transmission link –Transmission equipment –Routing and switching equipment Transmission link –Full ownership –Dark fibre –Direct access –Leasing capacity

13. Center for Tele-Information Economic analysis (2) Assumptions - List prices for equipment - No sharing included - Digging for fibre, € 50,000/km - Leasing dark fibre, € 500/km - Leasing dark fibre with amplification, € 750/km - Leasing dark fibre with amplification and regeneration € 1,000/km - Equipment operation and maintenance, 20% of investment costs - Fibre operation and maintenance, € 1,000/km - Capital costs, 10% per year - Amplifiers every 75 km - Regenerators every 800 km

14. Center for Tele-Information Economic analysis (3) Transmission link

15. Center for Tele-Information Economic analysis (4) Transmission equipment

16. Center for Tele-Information Economic analysis (5) Router and switch equipment

17. Center for Tele-Information Economic analysis, example I Link distance and capacity –3000 km link –4 x 40 Gbps or 16 x 10 Gbps Equipment: -2 DWDM terminals -8/32 interface cards -36 amplifiers -3 regenerators -24/96 regenerator interface cards

18. Center for Tele-Information Economic analysis, example I

19. Center for Tele-Information Economic analysis, example II Link distance and capacity –500 km link –4 x 40 Gbps or 16 x 10 Gbps Equipment: –2 DWDM terminals –8/32 interface cards –6 amplifiers

20. Center for Tele-Information Economic analysis, example II

21. Center for Tele-Information Economic analysis, example III Link distance and capacity –150 km link NIL –4 x 10 GE Equipment: –8 interface cards –8 Gbic interface modules –2 amplifiers (one at each end)

22. Center for Tele-Information Economic analysis, example III

23. Center for Tele-Information Economic analysis, example IV Link distance and capacity –15 km link NIL –4 x 10 GE Equipment: –8 interface cards –8 Gbic interface modules

24. Center for Tele-Information Economic analysis, example IV

25. Center for Tele-Information Economic analysis, example V Combined router and switch solution - POP solution - 10 wavelengths of either 10 or 40 Gbps

26. Center for Tele-Information Economic analysis, example V Equipment for a pure router solution –1 10/40 Gbps router –10 10/40 Gbps router interface cards Equipment for a combined router and switch solution –1 10/40 Gbps switch –1 10/40 Gbps router –15 10/40 Gbps switch interface cards –5 10/40 Gbps router interface cards

27. Center for Tele-Information Economic analysis, example V

28. Center for Tele-Information Conclusion Investment/ building of fibre expensive and distance dependent If the market is transparent and there are competition among several players, it is not economic relevant for NRENs to build transmission link unless The distance between the connected points are relatively short and the cost of deploying a transmission link can be shared with others There is no available fibre