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Residential Broadband Telephony: How and When Sandy Teger and David Waks System Dynamics Inc. Voice On the Net Asia 2000 November 15, 2000 Copyright © 2000 System Dynamics Inc.
Copyright © 2000 System Dynamics Inc. Slide 2 Focus Of This Presentation Residential (including SOHO) –as opposed to business Broadband access networks –as opposed to backbone network –Multiple contenders - cable, twisted pair,... –In-home issues in next session Mainly North America perspective –Cable telephony –DSL telephony Mainly view of facilities-based access providers –as opposed to other ISPs
Copyright © 2000 System Dynamics Inc. Slide 3 Broadband Is... High Speed –Megabits: Millions of bits per second –… at least in one direction Always on –Continuous connection to the outside world Bidirectional –High speed from the home as well as to the home –Can see the home from the outside
Copyright © 2000 System Dynamics Inc. Slide 4 Why Is Broadband Important for Telephony? Facilitates telephony competition –Existing telcos, cable operators and electric utilities –New entrants - wireless, satellite,... Broadband access brings digital telephony all the way to the home Provides framework for new services –Multi-party video calls –Extension of office PBX –Follow-me services –Customer line provisioning Allows integration of previously separate services –Seamlessly integrate voice, video and data
Copyright © 2000 System Dynamics Inc. Slide 5 Broadband Access Choices Many different approaches –Twisted pair (xDSL) –Hybrid fiber-coax cable (cable modem) –Fixed wireless –Satellite (two-way) –Fiber to the home or curb (ATM or Gigabit Ethernet - GigE) –Power line –Digital terrestrial Differing stages of development and deployment –xDSL and cable leading in North America, fixed wireless distant third –GigE rolling out in Sweden and being tested elsewhere –First 2-way satellites being deployed now –Powerline testing now Most approaches suitable for telephony –Satellite and digital terrestrial are questionable
Copyright © 2000 System Dynamics Inc. Slide 6 Factors in Broadband Access Choices Population density Existing infrastructure (e.g., twisted pair, cable, fiber) Government policies Competitive and regulatory dynamics Technology evolution Farm Homes MDU GigE Fiber Cable modem Twisted pair DSL Satellite City: High-rise multi-family units Suburbs: Individual single- family units Rural: isolated single family unit
Copyright © 2000 System Dynamics Inc. Slide 7 Source: Hughes from Pioneer Consulting, LMDS xDSL SATELLITE CABLE MODEM SUBSCRIBERS, M Subscriber Forecast Global Broadband Access
Copyright © 2000 System Dynamics Inc. Slide 8 Broadband Over Cable In The United States Cable passes about 97% of TV households –100M households Cable penetration stable at about 68% –DTH has stopped cable growth Plant upgrades continuing –62 million North American homes ready for high-speed data High speed data over cable deployed to almost 4 million homes in North America –6% of homes marketed Like any rapid growth sector, some challenges remain
Copyright © 2000 System Dynamics Inc. Slide 9 Cable Industry Goals Defend video services business against DTH today and others tomorrow Enter new businesses - replace lost revenue, keep growing Be first to provide all pieces of the bundle Video Data Analog/digital PPV/NVOD/VOD Interactive services PC and TV Local Long distance Telephony Video telephony Videoconferencing
Copyright © 2000 System Dynamics Inc. Slide 10 Cable Telephone Services: The Landscape Multiple Markets –Residential - single family –Multiple dwelling units (MDUs) –Business Multiple Technologies –HFC telephony - Circuit-switched over HFC plant –IP telephony - Packet-switched over infrastructure deployed for cable modem services Industry goals –Add to the bundle to promote customer loyalty –Incremental revenue stream
Copyright © 2000 System Dynamics Inc. Slide 11 Todays Circuit-Switched Network Originating Carrier SS7 Network Access Network (twisted pair) Terminating Carrier Access Network (twisted pair) CO Inter-Exchange Carrier CO
Copyright © 2000 System Dynamics Inc. Slide 12 HFC Telephony Provides Alternate Access Originating Carrier SS7 Network Access Network (Hybrid fiber-coax cable with HFC telephony) Terminating Carrier Access Network (twisted pair) CO Inter-Exchange Carrier CO Circuit-circuit
Copyright © 2000 System Dynamics Inc. Slide 13 HFC Telephony - Technology Platform Four major products deployed worldwide –Arris Cornerstone (Antec/Nortel) –ADC HomeWorx –Tellabs CableSpan 2300 –Motorola CableComm Proprietary and mutually incompatible Cable Hub Site and/or Headend HFC distribution plant Customer Home Multi-line voice port ( or NIU) Host digital terminal Arris Interactive Cornerstone equipment Class 5 Switch PSTN GR-303 or V5.2 (T-1/E-1)
Copyright © 2000 System Dynamics Inc. Slide 14 IP Telephony Can Provide Alternate Access... Originating Carrier SS7 Network Terminating Carrier Access Network (twisted pair) CO Inter-Exchange Carrier CO Access Network (Hybrid fiber-coax cable with IP telephony) IP Gateway Packet-circuit
Copyright © 2000 System Dynamics Inc. Slide 15 …And Can Enable End-to-End IP Originating Carrier Terminating Carrier Access Network (IP based) Inter-Exchange Carrier CO Access Network (Hybrid fiber-coax cable with IP telephony) IP Gateway Access Network (twisted pair) Packet-Packet
Copyright © 2000 System Dynamics Inc. Slide 16 IP Telephony Overlays The Cable Plant Local Cable Headend HFC distribution plant Customer home Cable modem or OpenCable set-top box with PacketCable functionality GatewayCMS (Gatekeeper) Local PSTN Private IP Network with QoS Remote PSTN Remote Cable Headend Gateway Customer home HFC distribution plant CMTS CMS (Gatekeeper)
Copyright © 2000 System Dynamics Inc. Slide 17 PacketCable Initiative Cable industry cooperative effort –Modeled on success of MCNS/DOCSIS initiative –Under CableLabs umbrella –MSOs work together to agree on and implement common specifications for a family of products –Vendors part of process (and do most of work) Two phases –Phase 1 (Single domain, VoIP access) –Phase 2 (Multi-domain, End-to-end IP) Timetable/Status –Started September 1997 –Pre-certification field tests –Phase 1 certification and deployment 2001 –Phase 2 specification development now under way, deployment Requires DOCSIS 1.1 modems with Q0S –Certification in process
Copyright © 2000 System Dynamics Inc. Slide 18 Sources: AT&T Investor Relations; Cable Datacom News, August 1998 AT&T/TCI Cable Telephony Plan (6/98) Phase One - Circuit-Circuit: Early to mid 1999 –Deploy circuit-switched HFC telephony –Scale OSS systems –Gain marketing experience Phase Two - Packet-Circuit: Late 1999 –Local loop bypass with bundled AT&T long distance –Connects from headend into PSTN via 5ESS –Compatible with all CPE, including fax and modems Phase Three - Packet-Packet: By yearend 2000 –End-to-end packet telecommunications –Connect all long-distance IP telephony traffic to AT&T national packet network
Copyright © 2000 System Dynamics Inc. Slide 19 Cable Telephony in North America Packet- Packet Circuit- Packet Circuit- Circuit Cox AT&T Videotron Comcast 400,000 >100,000
Copyright © 2000 System Dynamics Inc. Slide 20 Digital Subscriber Line - A Long Evolution xDSL - Digital data over local loop –while preserving existing analog telephony Initial trials - Television delivery by telcos ADSL deployed for high-speed Internet access –Meet competitive threat from cable operators –Both ILECs and CLECs deploying –Over 1 million residential ADSL subs in US Starting to be used for digital telephony –Original thrust by competitive carriers –Bundled with high-speed Internet access –Incumbent carriers now moving in this direction –Targeted on small business market; unclear when it will reach residential market
Copyright © 2000 System Dynamics Inc. Slide 21 VoDSL Provides Alternate Access Originating Carrier SS7 Network Access Network (Twisted pair with VoDSL) Terminating Carrier Access Network (twisted pair) CO Inter-Exchange Carrier CO
Copyright © 2000 System Dynamics Inc. Slide 22 Elements of VoDSL IAD Digitizes & packetizes voice Offers data access functions (routing/bridging) Connects directly to DSL Voice Gateway Converts packetized voice to PCM stream Supports TDM connections to Class 5 switch Provides focus for management of voice service IAD xDSL DSLAM Class 5 Switch Voice Gateway ISPs Data Access Packet Source: Martin Taylor, CopperCom
Copyright © 2000 System Dynamics Inc. Slide 23 VoDSL Solution Characteristics –Today supports up to 16 lines of toll-quality voice plus data on as little as 384 kbps DSL connection –Leverages existing DSL deployments (both ADSL and SDSL) Based on ATM, not on IP –Voice packetization based on native ATM using AAL2 Why ATM? –ATM is there: most DSL is ATM-based –Bandwidth efficiency is much better –QoS is available and proven –No security concerns (using PVCs) –Almost no local service providers looking for a VoIP solution Source: Martin Taylor, CopperCom
Copyright © 2000 System Dynamics Inc. Slide 24 Gigabit Ethernet Over Fiber - B2 in Sweden Pure Ethernet for broadband access –Gigabit Ethernet over fiber to each MDU –Ethernet switch in basement –New structured wiring to each apartment –Engineered for 100 Mbps per apartment –Now delivering 7-8 Mbps symmetric IP-centric approach –High-speed data –IP telephony –IP television (broadcast and on-demand) –Interactive TV Competitively priced –Internet access 200 SEK/month (about $20 US or $150 HK) Status –Rolling out building by building in Stockholm –High-speed access now, IP telephony and TV in 2001
Copyright © 2000 System Dynamics Inc. Slide 25 Two Different Visions of VoB Evolution
Copyright © 2000 System Dynamics Inc. Slide 26 The Innovators Dilemma in Action? Cable and others building framework for end-to-end IP in belief that it will enable wide range of new applications which can only come from having voice as an integral building block in IP applications Telcos seem to be preserving existing infrastructure - circuit switches and ATM, not using broadband to implement IP voice End-to-end IP could be a disruptive technology –Doesnt threaten existing markets today but could tomorrow High risk to incumbents if new entrants are right See The Innovators Dilemma, Clayton Christensen
Copyright © 2000 System Dynamics Inc. Slide 27 How and When How –Multiple access mechanisms for broadband telephony –Traditional telcos will use VoATM and circuit switching –New entrants will use VoIP –IP will win When –Circuit-circuit now –Will start transition to packet-circuit in 2001 –End-to-end IP deployed in volume 2002 to 2003 But –The future is unknowable
18 Beaver Ridge Road, Morris Plains, NJ (973) Fax (973) system-dynamics.com system-dynamics.com For More Information: System Dynamics Inc.
Copyright © 2000 System Dynamics Inc. Slide 29 Backup Slides
Copyright © 2000 System Dynamics Inc. Slide 30 Some Broadband Acronyms and Definitions Cable Operators –Broadband access system: Cable modem + CMTS (cable modem termination system) –DOCSIS (Data Over Cable Service Interface Specifications) - North American industry initiative for standardized cable modems, led by CableLabs –MCNS - Consortium of MSOs which funded DOCSIS –OpenCable - NA industry initiative for digital set-tops –PacketCable - NA industry initiative for IP voice and video Telephone Companies –Broadband access system: ADSL modem + DSLAM (DSL access multiplexor) –Digital Subscriber Line (DSL) –Asymmetric DSL (ADSL) –UAWG - Universal ADSL Working Group
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