1. Network Technology Laboratory Economics and Methods to Provide Optimal Access Network in Broadband Access Network

2. -2- 1 Introduction 2 KTs Broadband Access Network 3 Optimal Equipment Provision Criteria 4 5 Modeling and Economics Conclusion

3. -3- What is Broadband ? Narrowband The highest speed modem used with a traditional telephone line, known a s a 56K modem, offers a maximum data transmission rate of about 45,00 0 bits per second (bps). For example, using a 56K modem connection to download a 10-minute vi deo or a large software file can be a lengthy and frustrating exercise. Broadband Broadband or high-speed Internet access is provided by a series of techn ologies that give users the ability to send and receive data at volumes an d speeds far greater than current Internet access over traditional telephon e lines. In addition to offering speed, broadband access provides a contin uous, always on connection (no need to dial-up) and a two-way capabi lity, that is, the ability to both receive (download) and transmit (upload) da ta at high speeds.

4. -4- Access Networks Access networks is part of a communications network which connects subscribers to their immediate service provider. Access networks provide broadband services over the last mile to home s and small offices We can classified access networks into two categories depending on the infrastructure Wireline infrastructure CATV networks xDSL technologies - Existing copper technologies (ADSL,VDSL,XDSL etc.) Fiber To the Home (FTTH) or to the Building (FTTB), to the Pole(FTTP) Wireless infrastructure Satellite WiFi and WiMAX, Wibro 3G WCDMA and HSDPA ZigBee Bluetooth

5. -5- Broadband Technologies Category FTTH ( Fiber to the Home ) FTTC ( Fiber to the Curb ) xDSL (Twist-pair) xDSL (Twist-pair) HFC ( Hybrid Fiber Coaxial ) HFC ( Hybrid Fiber Coaxial ) LAN ( UTP Cable) LAN ( UTP Cable) Home Run (Point-to-Point) Home Run (Point-to-Point) AON ( Active Optical Network ) AON ( Active Optical Network ) PON ( Passive Optical Network ) PON ( Passive Optical Network ) ADSL 8M VDSL1 50M DOCSIS 2.0 40M DOCSIS 2.0b 200M CMTS : Cable Model Termination System ETTH : Ethernet to the Home OLT : Optical Line Termination ONU : Optical Network Unit ONT : Optical Network Termination TDM : Time Division Multiplexing CWDM : Coarse Wavelength Division Multiplexing DOCSIS : Data Over Cable Service Interface Specifications DOCSIS 3.0 200M ETTH 200M Fast Ethernet 100M KT : Ntopia Directly connect between OLT and ONU(ONT) 100M Powered switch node UTP connection Fiber signal amplification Speed low High Cost TDM WDM A/B-PON E-PON G-PON DWDM-PON CWDM-PON VDSL2 100M

6. -6- 1 Introduction 2 KT s Broadband Access Network 3 Optimal Equipment Provision Criteria 4 5 Modeling and Economics Conclusion

7. -7- KT Broadband Network IP-VDSL Ntopia FTTH (WDM-PON) FTTH (E-PON) FTTP/FTTC Metro-core S/W (RS38000) GES FES OLT MODEM ONT OLT 24 UTP Fiber RN(SPLITTER) Fiber 1 32 ONT RN(AWG) 32 1 OLT VDSLaggregator S/W FNU(S/W) 24 UTP 1 32 Metro-core S/W (RS38000) UTP Fiber Ntopia S/W Copper RN(AWG) 1000BFX APT 100BFX 1000BFX 100Mbps/ λ 100Mbps 32 λ /1core 1.25Gbps/1Core VDSLaggregator S/W BBx BackBone NetworkAccess Network Home Network

8. -8- The Number of Subscribers and Equipments at KT DSLAM (8M) IP-ADSL IP-VDSL (10M) IP-VDSL (20M) IP-VDSL (50M) NTOPIAFTTPFTTH APT No. equip. 383,353-869,681876,230729,5191,583,749--4,442,532 user 236,497-564,662590,678524,630903,618--2,820,085 user% 8.4%-20%20.9%18.6%32%--100% Single housing No. equip. 3,450,179877,494-154,629729,519-68,86125,0765,305,758 user 2,128,476710,181-104,237524,630-26,89910,3243,504,747 User% 60.7%20.3%-3%15%-0.8%0.3%100% SUM No. equip. 3,833,532877,494869,6811,030,8591,459,0381,583,74968,68125,0769,748,290 user 2,364,974710,181564,662694,9151,049,259903,61826,89910,3246,324,832 user% 37.4%11.2%8.9%11%16.6%14.3%0.4%0.2%100% )2007 year 85% of all subscribers at KT use Copper, especially 95% at single housing 68.5% of all subscribers at KT use 20M below equipments In case of single housing, 20M below equipments occupied about 84% In case of APT complexes, 50M above equipments provided about 50%

9. -9- The Status of Equipment Provision at KT Current Provision Basis High Density Housing Area (Apartment) UTP possible : Ntopia UTP not possible : 100M VDSL Low Density Housing Area (Single Housing) Densely populated area : BBx-50M-VDSL / FTTH Sparsely populated area : BBx-50M-VDSL / FTTH-P Suppy Equip. Quality upgrade requirement APT New housing Special classFTTH UTPNtopia-E TP50M-VDSL100M-VDSL Old housing Re-modelingNtopia-E No Re-modeling50M-VDSL100M-VDSL Single housin g Inside CO(1Km)50M-VDSL Outside CO (1Km) Densely AreaBBx-50M-VDSL FTTH Sparsely AreaADSL(Single)BBx-50M-VDSL(Single)

10. -10- 1 Introduction 2 KT s Broadband Access Network 3 4 Quality and Optimal Provision Criteria 5 Modeling and Economics Conclusion

11. -11- Transmission Rate depending on distance VDSL has distance problem 50M VDSL : 500M longer, transmission rate attenuation 100M VDSL : 300M longer, transmission rate attenuation FTTH provides constant transmission rate regardless of distance * VDSL 50/100M downstream basis Transmission rate according to distance

12. -12- Bandwidth according to Subscriber capacity rate FTTH provides the constant bandwidth WDM-PON provides the constant bandwidth regardless of subscriber capacity rate(for using wavelength) E-PON, Ntopia fluctuate according to subscriber capacity rate VDSL E-PON, Ntopia fluctuate according to subscriber capacity rate * VDSL 50/100M downstream basis

13. -13- Fault-rate and Cause [number of fault/1000 users] Ntopia solution lowest fault rate No equipment in the customers premises VDSL(50M/100M) solution highest fault rate Many connection node from backbone to access including modem or ONT Copper line has copper deterioration FTTH has fault rate lower than VDSL, but higher than Ntopia Because ONT fault in customer premises

14. -14- Network Requirement to provide TPS When TPS activated, Over 40+œ Mbps is required When TPS started, 20+œ Mbps is required for servicing HDTV 1 channel, SDTV 1channel When TPS activated, 40+ œ Mbps is required to provide 3 channels HDTV simultaneously Applications and Services Bandwidth when TPS started Bandwidth when TPS activated IPTV (HDTV 1channel X 9Mbps, MPEG 4) (SD TV 1channel X 4Mbps) 13 Mbps (HDTV 1 channel 9Mbps, SDTV 1 channel 4Mbps) 27 Mbps (HDTV 1 channel 9Mbps) Online Game 2 Mbps VoIP 0.3 Mbps Data (HTML & Multimedia Data) 5 Mbps10 Mbps Video Conferencing 3 Mbps Total23.3 Mbps42.3 Mbps

15. -15- Operation Quality Operation Quality Comparison Good 100M VDSLNtopiaFTTH FTTP/CHybrid FTTH Speed TPS possible QoS Fault competitiveness Cabling difficulty (suburban) Cabling difficulty (apartment) Bad

16. -16- Optimal Access Network Topology (housing type) ONT FES VDSL2 UTP Copper RS-38K [Densely populated housing] [Area inside CO] (Remodeling Apt.) (Remodeling impossible) (Special Apt.) Ntopia(FES) L3 [Current Ntopia] Real-FTTH PON + Ntopia Modem PON + VDSL2 VDSL2 Copper (Remodeling impossible) L3 + VDSL2 [Hybrid FTTH] OLT UTP Model Copper ONT FES UTP (Remodeling impossible) (Suburban housing) Real-FTTH PON + Ntopia RN (Inside 900M ) [Non densely populated housing] Modem Central office (backbone) Modem Copper VDSL2 OLT KORNET IP-Premimum In case of reusable BBx [BBx of outside CO] Ntopia-SW RN [Hybrid FTTH] Equipment APT New housing Special classFTTH UTPFTTH PON + FES TPFTTH PON + VDSL2 Old housing Re-modelingFTTH PON + FES No Re- modeling FTTH PON + VDSL2 Single housing Inside CO(1Km)VDSL2 Outside CO (1Km ) BBx suppliedVDSL2 BBx not supplied FTTH

17. -17- How to invest and Provide access network equipment Selection of investment priority Area Which area is firstly provided Choosing Priority item Choosing weight Selection of network solution Selection of access solution as housing type Re-selection as economics and competitors Selection of wiring Size Choosing the number of line as subscribers size and density Analysis of investment Economical analysis as investment and maintenance costs 1 2 3 4

18. -18- Priority Selection for providing access technology Priority Diagnosis Table Each items is calculated with weight The item of comparing bandwidth with competitor and KT is the highest In case the total sum is many, priority is highest The area of densely populated, apartment complex, equipment is inferior to competitor KT market share (15%) Number of people (25%) Provision technology with competitor and KT (45%) Housing type (5%) Price rate (5%) VOC(fault)/number of subscriber (5%) basisValuebasisValuebasisValuebasisValu e basisValu e basisValue 35% below101000 above10 Next page APT10competitor/KT< 1 100.26104 above (top 5%) 10 35%~50%8501~10008 51%~70%5301~5006Rural Area 5competitor/KT= >1 10.04273~ 0.26104 5 71%~90%4101~3004 91% above 1100 below 10.04273 below (low 5%) 1

19. -19- Priority Selection for providing access technology CompetitorKT basisvaluebasisvalue 100M1010M below10 10M8 20M5 6 10M150M4 100M1 Item of provision technology with competitor and KT

20. -20- Priority Selection for providing access technology (summary) KT 50% KT Market share Number of people Low density competitor/K T price APT Rural 1 Ranking The area of densely populated and equipment is inferior to competitor 2 Ranking The area of sparsely populated and equipment is inferior to competitor The area of densely populated and KTs market share is high 3 Ranking The area of sparsely populated and equipment is superior to competitor The area of KTs market share is high and equipment is superior to competitor ranking 8p~10p : 1 ranking 5p~8p : 2 ranking 5p below: 3 ranking 2 KT 50% Below KT 50% above High density Low density Inferior SuperiorInferior Superior Inferior Superior Inferior Superior VOC rate 1 22222 333311111133333 2 1 22222 3333111 2 333333333333 2222 1 2222222222

21. -21- 1 Introduction 2 KT s Broadband Access Network 3 Optimal Equipment Provision Criteria 4 5 Modeling and Economics Conclusion

22. -22- Analysis of Capital Efficiency (wiring cost) Densely populated housing Hybrid solution is 11% more than Ntopia Hybrid solutions have provided good quality and bandwidth than Ntopia Sparsely populated housing FTTH solution is 8% more than BBx-VDSL In the future, considering trenching costs, it is desirable to capitalize to competitive FTTH in one step, without undergoing other solutions Wiring cost per sub. FTTH (special level) Hybrid FTTHBBx-VDSL Densely populated housing 32% 8% 11% VDSL (No using BBx) Ntopia Wiring cost per sub. 45% sparsely populated housing

23. -23- Modeling to analyze economics We define generic sets and objective functions Optimal functions to maximize income cost of revenues – capital expense Revenue costs * {Y t=1 + } Y =the number of subscribers, = rate of increasing subscribers Service usage cost of i technology per subscriber, where t= year, z= target year,

24. -24- Modeling to analyze economics Capital costs A set of parameters, where i=Access technology, j= Housing type Equipment cost Wiring cost Service opening cost Modem cost ParameterMeaningParameterMeaning iAccess technologyr(i,j)Average ground rental cost per BBx jHousing typeBx(i,j)BBx count(p/q ) pSubscriber line countPo(i,j)Electricity cost (monthly) per BBx qMaximum line count per BBxAs(i,j)AS(After Service) cost for subscriber E(i,j)Equipment cost per subscriberEr(i,j)Fault rate L(i,j)Wiring cost per subscriberHLabor cost per subscriber O(i,j)Service opening cost per subscriberRtCapital expense occurring at t year M(i,j)Modem cost per subscriberMtMaintenance cost occurring at t year Line count at t year

25. -25- Modeling to analyze economics Maintenance Costs Rental costs Electricity costs AS(After Service) costs, where H = Labor cost per subscriber p= Subscriber line count at t year Average ground rental cost per BBx * BBx count Electricity cost (monthly) per BBx * BBx count Fault rate * AS(After Service) cost for subscriber

26. -26- Modeling to analyze economics Optimal formula to minimize the capital costs and maximize the revenues * {Y t=1 + } - + } { [ ] Maximize -

27. -27- Wiring Cost per one Subscriber (densely poluplated area) NtopiaHybrid NtopiaFTTH Capital cost Wiring costW 162,190W 181,912W 396,702 Equipment costW 29,190W 106,791W 23,388 Cabling costW 102,000W 142,705W 214,250 Service Opening Cost ModemNA W 98,784 Opening costW 31,000W 49,121W 60,280 BBx maintenance cost Ground rental cost NA Electricity cost NA AS cost Fault rate 2.0% 2.3% AS cost per subscriber W 17,895 Labor cost per subscriber W 25,780 Total Cost in densely Area W 368,055W 524,204W 837,079 ($1 = W 1,000)

28. -28- Wiring Cost per one Subscriber (sparsely poluplated area) Inside CO VDSLHybrid VDSLBBx VDSL Capital cost Wiring costW 196,238W 310,788W 366,022 Equipment costW 121,200W 143,045W 121,200 Cabling costNAW 92,705W 169,784 Service Opening Cost ModemW 44,048 Opening costW 31,000 BBx maintenance cost Ground rental cost NA W 3,500,000 Electricity cost NA W 62,220 AS cost Fault rate 3%2.5%3.3% AS cost per subscriber W 17,895 Labor cost per subscriber W 25,780 Total Cost in sparsely Area W 412,961W 665,918W 4,337,949 ($1 = W 1,000)

29. -29- Modeling Results NPV(Net Present Value) > 0 : revenue occurs < 0 : revenue does not occur Assumption 10 thousand lines are supplied at the first year. All equipments is newly deployed Comparing for 5 years Discount ratio = 9.81 %

30. -30- Modeling Results(Densely populated housing) Capital expense and revenue result during Y+5 Year in densely populated housing Ntopia solution is the most economical (at approximately Y+3) FTTH solution is less economical than Notpia, Hybrid solutions Densely populated housing Y Y+1 Y+2Y+3Y+4Y+5 Ntopia Hybrid Ntopia FTTH NPV Year

31. -31- Modeling Results(sparsely populated housing) Y Y+1 Y+2Y+3Y+4Y+5 Inside CO VDSL Hybrid VDSL BBX-VDSL NPV Year sparsely populated housing Capital expense and revenue result during Y+5 Year in sparsely populated housing VDSL solution inside the central office (CO) without BBx is the most economical (at approximately Y+3) VDSL solution using BBx is less economical than inside CO VDSL, Hybrid solutions

32. -32- Conclusions Reviews economics and efficiencies comparing three different access technologies such as VDSL2, passive FTTH, fiber LAN of Ntopia FTTH appear to be the best candidate for the next-generation access network - Subscribers want to be provided high bandwidth - Broadband market shifts from ADSL to FTTH In the eyes of KT (network provider), it is impossible to convert all access networks at one time to an optical for the cost problem. We propose middle stage, Hybrid access network such as FTTH PON+Ntopia and FTTH PON+VDSL providing economical solution

33. -33- Thank You ! jkchun00@naver.com