1. FTTx in Telekom Slovenije Beyond NGA
Matjaž Pogačnik, MBA
Telekom Slovenije d.d.
Brussels, October 9th, 2008

2. Agenda Slovenia and Telekom Slovenije
Access and BB networks Telekom Slovenije
FTTx implementation
Conclusion
I have structured my presentation in following way:
I will begin with short introduction of key facts abot Slovenia and Telekom Slovenije
After that, I will present you current status of our networks
Then, I will I will move to FTTH project – which we call F2
After that, i will conclude

3. Short facts about Slovenia
Area: km²
Population: ,694
Settlements:
Cities over (2 over )
Households:
BB access: 56 %
CATV: %
So, as you know Slovenia is relatively small country with approximately 2 mio inhabitants
When talking about residential market potential is households,
What I would like to point out here is Slovenia has highly dispersed settlements, 6000, Only 16 with more than citizens
One of the facts you count in when you think about deploying something new
I would also like to point out that GDP, which to a certain level defines the amount of money people are ready to spent for different purposes, Slovenia is slightly below EU average, but approximately between Portugal and Greece
This as a conseqence determines amont which household is spending per month for electonic communications and in Slovenia is 86 EUR.

4. Telekom Slovenije: after successful diversification, a future focus will be on stronger integration
100%
83.38%
63.75%
50%
75%
Slovenia
Mobile
operator
Construction and maintenance of telecom networks
Systems integrator
Telephone directory publisher
Bosnia-
Herzegovina
ISP
Gibraltar
Telecom incumbent
Mobile portal
Saline
24%
M-Pay d.o.o.
Mobile payment
Search
engine
Serbia
Croatia
Internet search engine
76%
70%
Macedonia
Fixed licence
Albania
Kosovo
ISP and 2nd GSM license
Telekom Slovenije is a group fixed operators, mobile operators, Internet service providers, in the future, our focus will be on stronger integration between companies within the group
25 M population in countries with TS affiliates
High diversity, age, GDP, cultural
Developed from non BB to cutting edge BB

5. Agenda Slovenia and Telekom Slovenije
Access and BB networks Telekom Slovenije
FTTx implementation
Conclusion
On the next slides, I will introduce you current status of our Access and BB networks

6. Broadband in Telekom Slovenije
March 2001: First commercial subscribers (ITU-T G Annex B (ADSL/ISDN), ADSL packet 512/128 kbit/s)
February 2003: ADSL packet 8192/768 kbit/s
September 2003: IP TV over ADSL (1 STB, ATM, mcast on BRAS)
September 2004: LLU
May 2005: Triple IP/Ethernet DSLAM
January 2007: VDSL2
April 2007: First commercial FTTH subscribers
Triple play service: data, VoIP, IPTV (120 channels, HDTV, EPG, VoD, nPVR, MPEG2  MPEG4); analogue TV over FTTH (80 channels)
Prices: Triple EUR; standalone: 20/20 EUR, EUR, EUR, EUR
To begin with key milestones
Offering 1 Gig service
I would like to emphasize
Transition from MPG2 we want to offer TV to more customers greater reach and release the burden of network
Prices are the same regardless of technology used

7. Strong infrastructure competition in Slovenija
Q2/2008 situation
BB market share of TS is 48% (from 100% in 2004)
market share per technology:
23% Cable (0% TS)
8% FTTH (25% TS)
69% DSL (67% TS)
FTTH subscriber growth taking up
Cable operators going for FTTH implementation
TS has 25% FTTH market share
FTTH in Slovenia: Telekom Slovenije is follower!
24,8
28,1
28,6
32,3
33,6
1,7
8,6
24,0
28,2
30,5 5 10 15 20 25 30 35 40
dec. 04
dec. 05
dec. 06
jun. 07
dec.07 % EU SI
Comparison of LLU and BSA
over xDSL EU and SI (Source:EU)
Talking about competitive environment, there is strong innfrastructural competition in Slovenia
I would also like to point out here that regarding FTTH, we have strong competitor: one company, alternative operator started with P2P FTTH two years ahead of us, they claimed to have homes passed in YE2007, they are covering all major cities in Slovenija, basically cherrypicking

8. Market share of alternative operators is increasing
Number of xDSL subscribers growing
Market share of alternative operators increasing (Q2/2008 = >30%)
Situation on DSL
23% Cable, 8% FTTH, 69% DSL (market share by technology)
FTTH increasing very fast
LRIC (Long run retail cost) model
Access to copper infrastructure (relevant market 11)
Access to all reasonable network elements (relevant market 12)
Non discrimination
Transparency (obligation to publish reference offers)
Price control (LRIC model – 11)
Price control (retail minus – 12; - 43% to 66%)

9. Alternatives migrating from BSA to LLU
Fast progress in Ladder of investment
Market share of new DSL connections is in favour of alternative operators
Left hand graph showing alternative operators share split by type of access
Blue and red is LLU (full and shared)
Yellow is bitstream access
Right hand graph representing percentage of new DSL connections, blue

10. Access networks today: last mile is relatively short, pairgain systems are bottleneck
BB Services:
HSI:
VoIP:
IPTV:
This is real data, measeured from our management system
It looks nice
On the other hand, we have we have a huge number of subscribers connected over pairgain systems
As you can see on the picture below – yellow dots
Some parts of our network are literally full and we cannot offer them BB services
If we would want to get red of pairgain systems, Estimated investment
When talking about competitive environment, Telekom Slovenije has 47% BB market share
our competitors have access to more than 80% of our customers through unbundled local loops;
If you take a look at the speed of happening some might say it is going a bit too fast - we can say our regulatory office is very effective –

11. Agenda Slovenia and Telekom Slovenije
Access and BB networks Telekom Slovenije
FTTx implementation
Conclusion
With this, I will move to the FTTH project

12. IPTV is the driver! FTTH milestones and objectives of Telekom Slovenia
April Mass P2P fiber deployment
Filling available ducts space
more focus on FTTN:
Civil works & available ducts
’black holes’’ & pairgain reduction
FTTH customers today:
homes passed
customers
0,1 % > 20/20 Mbit/s
1 IPTV: 41 %
2 IPTV: 19 %
CATV: 44 %
VoIP: 96 %
IPTV is the driver!
In 2006 Telekom Slovenia reach a decision of bulding optical acces networks also for residential area.
Same plan for 2008 but have changed it
Long term switch to new infrastructure
Unlimited possibilities for introduction of new services
A business – technical must
Strategic occupancy of telecommunication market
Free ducts, high density of population, competition
Solution: 2 fibres, 1st for IP + 2nd for analogue TV services
Separate residential and business cable / SLA!

13. P2P will prevail in long turn
Future proof (unlimited speed per subscriber - possibility of 10Gbit/s)
End-to-End Ethernet – no additional complexity
CPE is a mass market product
Greenfield players are deploying P2P
PON +
Usually quoted reasons:
Less fibres
Less space (CO, underground pipes)
Not quoted reasons:
Preventing LLU
Impact of suppliers
PON -
IPTV limited
Interoperability
Higher cost (SW + CPE)
More BW – upgrades?
No backward compatibility
WHY CATV
Traditional customer prefers classical TV instead of IPTV today.
CATV customer will be offered other services - IP services.

14. Technical solution: P2P two fibers: IP + CATV

15. FTTx vs Others = why bother with FTTH?
2007: without civil works: 970 EUR
2008: Urban areas: EUR
2008: Rural areas: EUR
Up to EUR/HH in rural areas!
FTTB:
24 port: EUR
48 port: EUR
96 port: 689 EUR
FTTN:
200 port: 815 EUR
ADSL2+:
240 port: 122 EUR
VDSL2:
216 port: 247 EUR
Wimax:
200 port: 650 EUR
Distribution of Households per MDU is not in fawour of FTTB
We are using all the tecnologies shown in this slide, but I wont to emphasize that now FTTH is our goal. In rural areas, where fiber to the home is too expensive because of the long distances of local loops and where the existing coper infratrsucture is good we will place street cabinets with ADSL2+ or VDSL2 to assure broadband communications to the peope living there.
BE = 8 year, per year, customers

16. xDSL vs FTTx  network perspective
Testna prezentacija.
FTTN is introducing additional challenges:
What with unbudled local loops – there has to be a lot of communication between service providers, investment stopped in 60% of
You have seen the numbers on previous slides - there is pure economic logic behind this.

17. QoE: reliability and stability
Different requests from different user groups (gaming vs IPTV)
Fault reports statistics have a strong seasonal extremes
FTTH solves the xDSL reliability and stability issue
Marketing reserach has showed main two important things to our customers
Customers with triple play over ADSL are satisfied with the servies and are reluctant to migrate to FTTH – and there are more reasons for that
Reconstruction of home network needed! Same services as over Cu network and they are satisfied with the services
QoE measurments we perform periodically
the traffic pattern has changed - upload bigger than download! PROSUMER!

18. Focus on applications, services and content
HD programs only for FTTH customers
Ambient - videoarts in VoD (SD and HD)
Security package, WiFi AP
Siol Plac! Network storage
Having full infrastructural competition, we have learned that we have to compete in other ways as well

19. Agenda Slovenia and Telekom Slovenije
Access and BB networks Telekom Slovenije
FTTx implementation
Conclusion

20. FTTH is a must!
TS is follower in FTTH  Main FTTH driver is competition
FTTN driven by services
Build it and they come!  NOT WORKING!
3-4 parallel infrastructures - who will survive?
NGA is here!
Who will compensate for OTTs? BBC, Disney
TS expectations:
Market analyses and definition on sub-national level  different obligations in different areas and markets
Up-to-date market situation should be considered
Coherent approach to regulation (markets 4 and 5 together)
Symmetrical obligations for all FTTH players
Slovenija has unique situation!
From regulation
We believe that FTTH is a huge opportunity, It has the potential of triggering changes and it will impact our lifes more than we can imagine today
Full infrastructural competition – therefore this is not enough for differentiation
regional access concept in NRA market analyse – different obligations in different regions
NRA measures should be result of current situation (v 2007 ukrepi je bil ukrep na podlagi )
Ločeno časovni intervali med trg 11 in 12 ukrepi
Fast changing situation in BB market
Who is taking the risk for investment?
Prices should not be geographically averaged.
Januar 2007 so naložili obveznosti na trgu ,
Oktober 2007 smo dobili odločbo za trg 12 – 5
Avstrija: Obveznost na trgu 5 samo tam, kjer ne deluje dobro na trgu 4
Izhajaš iz stanja na maloprodajnem trgu in daješ obveznosti na grosističnem trgu
Dali so analizo , obveznosti 2007
Regulatory recommendations regarding NGA for Slovenia is delayed

21. Thank You for Attention!
Thank You for Attention!

22. Price per FTTH subscriber in 2007 is 970 EUR
BE in the 8th year
NPV in 10th year is 44 mio EUR
IRR = 16%

23. FTTH elements Central Office:
Optical access L2/L3 switch is conected to LAS
Optical switches and CATV equipment must be placed in racks with fiber guides (like optical distribution frames - ODF)
The ODF for access network is separated from the ODF for backbone
LC / APC connectors, interconnect
Access network:
Optical kable with 864 fibres from central office, splices in shafts
2 fibres/residental subscriber, 4 fibres/business subscriber
From CO to subscriber without connectors – only splices
Costumer:
Optical fibres terminate in an outlet box with SC connectors.
Possibility of self install
CPE: WAN + 4port 10/100BaseT + 2port FXO/FXS SIP + RF+ WiFi + USB

24. Central office Obstoječi (MK) ODF LAS CATV Head end IP RAS
Existing backbone cable
LAS
F2 access cable
846 fiber

25. CPE – one box fits all approach
WAN interface = 100baseFX (SM BiDi)
4x 10/100BaseTX LAN ports
2x RJ11 (SIP interface) – POTS (FXS)
2x USB host (possibility of WiFi interface g - USB stick)
1x RF COAX OUT in aditional unit with place for extra lenght of patchcords, MMC unit and power suply.
We believe in
As you can see design also matters
Competition has three different boxes to cover IP Triple play

26. IP ODF CATV CO location – opportunity to renowate
Heat dissipation dictates placement of equipment