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WIK Newsletter No 118, March 2020

The new WIK Newsletter (only in German language) is available for download. Next to articles about current projects at WIK it starts off with a contribution about „Corona – accelerator for digitisation“.

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SDN/NFV and cost implications for mobile and fixed networks

New technologies enable simpler network management and new products

The introduction of SDN/NFV represents the next stage of development of mobile and fixed networks. In a discussion paper, WIK analyses what these new technologies mean for the network operation and how they may lead to cost reductions. The main feature of SDN/NFV is a centralised, software-based network management. Instead of an architecture that routes traffic from node to node, it will be possible to control the traffic flow as a whole. Intelligent network equipment at the nodes will be replaced by virtual machines, so-called "white boxes". Such centralised control will allow a better utilisation of resources and reduces fixed costs. It can be expected that the achieved cost advantages of network operation will be passed on to wholesale products. Therefore, this discussion paper derives implications of SDN/NFV for the cost structures of mobile and fixed networks as well as for the wholesale charges based on them.

Due to software-based management, new features such as network slicing will enable the introduction of completely new wholesale products, such as the real-time setup of leased lines. The discussion paper illustrates the potential of SDN/NFV based on first case studies.

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Replicability of NGA connections within the scope of Art. 61(3) EECC

With the help of the NGA model developed by WIK, indications can be obtained as to whether and to what extent replicability of the network is possible at different access points in the context of the application of Article 61(3) of the EECC. In particular, the population density or subscriber density plays an important role in the replicability of network infrastructures. In the NGA model it is represented by considering twenty clusters. The analyses show that it is not profitable for competitors to expand a further, additional fibre optic network to the access point up to the building's internal infrastructure in case there already is an existing FTTH network. A parallel expansion of two fibre optic networks to the end customer is unprofitable in all clusters (i.e. independently of the level of urbanisation). In contrast, parallel fibre roll-out up to the SC by a competitor in combination with obtaining a wholesale product at the SC can be profitable for competitors in certain cases (e.g. in clusters with high subscriber density) as long as the market share of the existing infrastructure provider is not too high. Access at the MPoP is generally more profitable for competitors than access at the SC, especially because the investment costs for a competitor are on average around 50% lower and more subscribers can be reached, however a case-by-case analysis is required. Depending on the market conditions (market shares of alternative infrastructure providers, different wholesale prices), it should always be examined whether a certain access area allows profitable access.

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Strategies of the most important internet platforms

Google, Apple, Facebook and Amazon are currently often the focus of public debate. They operate globally and are continuously and massively expanding their business, even beyond their original business areas. WIK has examined the strategic diversification of these groups, taking a close look at both, acquisitions and patents. In particular, developments in the field of speech assistance and virtual and augmented reality were identified as strategically important areas in the future. These were also examined in detail. 

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How to maintain rural retail networks?

WIK-Consult supports USPS OIG analysis with an international benchmark

The U.S. Postal Service (USPS) and its international counterparts face similar challenges when it comes to serving their rural customers. The U.S. Postal Service Office of the Inspector General (USPS OIG) studied what other posts are doing to promote rural engagement and profitability in their rural retail networks. Their goal was to apply their insights and best practices of the international benchmark to the USPS. The benchmark comprises national postal operators and their retail networks of six countries (Australia, Canada, France, Germany, Sweden, and the United Kingdom). This white paper presents the observations on the regulatory constraints that these posts operate under, attempts to cut rural retail costs, and the ways rural networks are used to generate new sources of revenue.

WIK-Consult supported the analysis of the USPS OIG with a report on strategies of international posts in rural areas.

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Status quo of copper shutdowns in the EU

What lessons can be learned for Germany?

The expansion of new FTTB/H networks creates incentives for incumbents to shut down their copper networks and thus to exploit synergies and efficiencies. The incumbents in Estonia, Norway, Spain and Sweden have already started a major switch-off of their copper networks. However, the switch-off may have implications for competition and consumer interests, so that regulatory measures may be necessary. Building on a European-wide survey, the discussion paper gives an overview on the status-quo on Member State level.

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Copper to Fibre Migration

Migration over interim technologies increases cost and delay

In the long term the FTTH Infrastructure is the only demand satisfying network structure. This goal can be reached via intermediate technology steps like FTTC Vectoring, FTTS with G.fast, FTTB on a Point-to-Multipoint or Point-to-Point topology. However, deploying the broadband network in several technology steps requires more investment over time and in addition causes sunk investments, which increases the total investment and need for subsidy significantly. With Germany as an example we use the WIK-NGA model calculating the investments required for different migration paths taking into account any reusable assets of the elder technologies left behind, but also determining the stranded investment occuring, depending of the innovation cycle chosen. With regard to the European gigabit infrastructure goal of 2030 several technological innovation steps do not appear to be appropriate.

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