Cost and other obstacles when migrating from copper to fibre networks (No. 457)

Summary

While 10 years ago the question was prominent what the appropriate future fixed network architecture will be todays‘ core question is how to satisfy the permanently increasing user demand for residentials and business in a performant manner regarding quality and bandwidth. Starting with the traditional copper pair based network from the local exchange over the cabinet to the customer premises techniques had been discussed either based on a rest of the copper pairs like VDSL, VDSL2 Vectoring, G.fast, XG.fast, or based on fibre in a point-to-multipoint (PtMP) topology like FTTB or FTTH with G-PON, XG-PON, XGS-PON, NG-PON2, TWDM-PON OR simply based on FTTH with a point-to-point (PtP) topology transparently connecting each end customer directly to the Local Exchange.

In the meantime it is widely agreed that for the future fibre PtP is the most future proof infrastructure for telecommunications, offering a high level of customer individual flexibility together with highest possible quality. It is even capable transmitting future terrabit capacity not only between High Perfomance Computing Centres (HPC) (or clouds) but providing terabit access to users located somewhere in the country. In order to provide a European wide platform for high innovation potentials the users may be even located somewhere in a Garage. [see Ecorys 2020] 

This discussion paper shortly summarises the characteristics of the most relevant transmission techniques and defines several meaningful migration paths towards the goal of a fibre PtP architecture. These migrations paths become investment evaluated with WIK’s NGA model tool. Since there is overall not the time to run these architectures over their components‘ complete lifetimes before replacing them by the next steps‘ components we have assumed two migration cycles of either 3.5 or 7 years, resulting in rest book values of the not fully depreciated and not reusable components. This way of considering concatenated migration steps is new for telecommunication access networks and had not been taken in the past as far as we are aware. 10 years ago the dominating philosophy was to determine the appropriate technology for a longer future satisfying my users demand, and the demand estimations differed widely. WIK’s demand models support a rather demanding development looking at 5 and 10 years from now.

Our calculations clearly demonstrate that there is not much time left stepping over several migration steps towards the 2030 goal. Each migration steps has inefficiencies regarding investments and stranded investments. They are of significant height and can lead to the double investment compared to the direct migration path toward fibre PtP. A direct migration also would allow for avoiding regulating complex VULA products leading to delay and high transaction and monitoring cost.

The results for a direct migration path from FTTN (copper at LEX) to FTTH PtP in Germany are investments of 61.- bn. €, per home passed (HP) of 1,379.- €.

For a medium path, observable in reality, from FTTN over FTTC and FTTB to FTTH PtP the investments sum up to 114.8 bn. € and the stranded investment sums up to 6.4 bn. €. This results in an amount of 2,741.- € per home passed. If the 3 migration steps would be made after 42 month (3.5 years) each, the total time will be longer than 10.5 years minimum.

A longer path consisting of 5 steps with observable plausibility would be starting again with FTTN, using next FTTC, then FTTS and proceeding towards FTTB PtMP, ending in FTTH PtP as before. Its invest sums up to 128.3 bn. €, the accumulated stranded invest to 20.3 bn € and the invest per home passed to 3,361.- €. Not considered, but however relevant in some cases, are additional interim steps in the GPON architecture family for PtMP fibre topologies, causing additional investments into OLTs and ONUs, additional delay and may be stranded investment once again. Such considerations are far beyond the user time expectations.

The results include any possible reuse of passive access network components for the next migration step so that the already existing ducts, cables and distribution frames are not stranded.  

In a state aid context the model results imply significant consequences. Subsidisation of intermediary technology platforms results in significantly higher subsidy demand than a direct subsidy in the final architecture. The subsidies look smaller for each single step, but in total are significantly higher. The inherently occurring stranded investments for each step are also subsidized. This can be avoided only by only subsidising the final and future proof architecture without any deviations.   

Discussion Paper is available for download.