1. Virtual Unbundling A new wholesale product in NGA networks
Kurt Reichinger
Austrian Regulatory Authority for
Telecommunications and Broadcasting
The opinions expressed in this presentation are the personal view of the author and do not prejudge decisions of the Austrian regulatory authorities.

2. Agenda The Austrian Unbundling Market Virtual Unbundling
Final Considerations
The Regulator’s dilemma: Finding a balance between hard-core SMP and new soft law regulation
The old Unbundling market as an example: Closing the gap between safeguarding competition and promoting innovation and taking due account of the European Commission's NGA recommendation
From the ladder of investment concept to accepted products on the market: Classical Unbundling, Virtual Unbundling and Bitstream Access
Final Considerations
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3. The Austrian Unbundling Market
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4. Market Analysis Procedure
Overview
Market Analysis Procedure
December 2008 – Market Definition Ordinance (“TKMV08”) issued
Market for “Access to physical network infrastructure” defined
copper access-lines (LLU, SLU)
not included: CATV, FTTH, Mobile (GSM, 3G, LTE, …)
not included - but regulated: duct, dark-fibre
January – Start of Market Analysis Procedure (“M 3/09”)
> 500 parties involved (due to Administrative Court Decision as of 2008)
TKK commissioned RTR with an expert opinion
Fall 2009 – RTR expert opinion issued
Market Analysis and Obligations for LLU/SLU (copper lines)
Further recommendation for “NGA-related” regulation
Spring/Summer 2010 – public consultation / coordination
September 2010 – final decision by TKK
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5. Market Analysis - Indicators analysed
Overview
Market Analysis - Indicators analysed
Indicator
Interpretation
Market share
Incumbent: near 100%
Barriers to entry
High „sunk cost“
Control over not easily replicable infrastructure
A1 Telekom: largest access network, can offer access services nationwide
Countervailing buyer power
Not existing as incumbent is sole supplier
No self-supply for OLOs due to high barriers to entry
vertical integration
Leveraging from LLU market to neighbour markets (Retail PSTN access, BB market)
natural monopoly
Duplication of access network not economically feasible
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6. Market Analysis – Obligations imposed
Overview
Market Analysis – Obligations imposed
Obligation
Content
Access (with cost oriented pricing)
LLU, SLU, v-ULL (virtual unbundling)
Annex-Services
Access to Duct & Dark Fibre, Collocation
and - Deployment permitted
NGA Regulation
Compensation for frustrated investments, coordination meetings, …
Reference Offers
General rules, v-ULL, Access to Duct & Dark Fibre
Transparency
OLO can request relevant information for planning of own FTTC/B-deployments … …
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7. Conclusions of the Austrian market analysis
Copper access network of A1 Telekom Austria still a „bottleneck“
But: there are also (derived) disadvantages for alternative operators in current and future NGA roll-out scenarios
Lack of information
Lack of economies of scale …
 Sole imposition of „copper-related“ remedies deemed insufficient for NGA deployment scenarios
 Additional „NGA-related“ remedies seen as necessary
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8. Deployment scenarios Yesterday: Copper only Today: Copper and fibre
ADSL2+ / neu: VDSL2
Deployment scenarios
Yesterday: Copper only
ADSL2+: ~ 16 – 20 MBit/s
~ 25 – 30 MBit/s
Today: Copper and fibre
FTTC: ~ 30 – 40 MBit/s
FTTB: ~ 50 – 80 MBit/s
Tomorrow: Fibre only
FTTH: > 100 MBit/s
Glasfaser
VDSL2
Glasfaser
VDSL2
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9. EC‘s recommendation on NGA regulation (2010)
 Addressing the challenge of managing competing (and sometimes conflicting) drivers in the implementation of broadband
Securing investment in infrastructure and roll out,
Past and future investment in active and passive infrastructure
Both from incumbent and alternative operators
Promoting competition both at the infrastructure and service layers,
Promotion of competition on both infrastructure and service edge possibly conflicting
Relaxing regulation where there are sufficient levels of competition
Relaxing regulation on markets fully based on regulation may be dangerous
Signals of relaxing regulation important for investment decisions
Designing a framework for the transition from copper to fibre.
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10. Traditional (copper-related) remedies
Full unbundling of copper line - LLU
Sub-loop unbundling of parts of copper line - SLU
Co-location (incl. compensation payment when MDF is closed down)
Cost orientation
Non-discrimination
Separated accounts
ADSL2+ / neu: VDSL2
Unbundling
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11. Additional „NGA-related“ remedies
Promote alternative operator‘s investments in
Allow for investments of A1 Telekom Austria in FTTC/B
Promote alternative operator‘s investments in FTTC/B
Keeping alternative operators competitive  Virtual unbundling
FTTC
FTTB
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12. Promote alternative operator‘s investments in VDSL@CO
VDSL2 from the „Central Office“ allowed nationwide as a first step
Compensation payments for frustrated investment (Modem and DSLAM) in case of subsequent FTTC/B roll-out
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13. Allow for investments of A1 Telekom Austria in FTTC/B
No obligatory PSD-shaping under specific conditions
Transparency regarding planned NGA-deployment
Coordination meetings
Compensation payment for frustrated investments (Modem, DSLAM)
Cost-free migration to virtual unbundling
Prioritising more advanced technologies
< FTTC < FTTB < FTTH
Possible risk premium for new infrastructure
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14. Promote alternative operator‘s investments in FTTC/B
No obligatory „spectrum shaping“ under same conditions as for A1 Telekom
More comprehensive data delivery for FTTC/B-Planning  transparency
A1 Telekom has to negotiate in the case of OLOs requesting the installation of new cabinets
Access to ducts – for backhauling
Cost savings – civil works
Attractive access conditions – better than general rule acc to Telecoms Act
Nationwide offer – not only in NGA areas
Fees – similar to general rule
Access to dark fibre – for backhauling
Same as for duct-access
BUT: only available in case of ducts not available or not economically viable
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15. Keeping alternative operators competitive
Introducing a new substitute wholesale product for physical unbundling
In addition to traditional remedies on unbundling market
Introducing an active (layer 2 bitstream) product on the passive wholesale market for access to physical infrastructure
 Reference Offer for „Virtual unbundling“ - VULL
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16. Virtual Unbundling
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17. Virtual unbundling – 8 cornerstones
Possibility for a grade of innovation comparable with passive access
Highest possible transparency for higher layers
Possibility for multicast services
Technological neutrality
Flexibility for choosing CPE (white list)
Service hand-over at MDF (or similar PoP in the NGA)
Third-party service hand-over
Configuration access for all relevant connection parameters or non-overbooked bandwidth between customer and PoI
To be offered in NGA areas only
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18. Technical Concept of VULL Reference Offer
Overview
Technical Concept of VULL Reference Offer
CPE
Bandwidth
DSLAM
POI
CPE
Bandwidth
Bandbreite
Bandbreite
CPE
Bandwidth
Bandbreite
Bandbreite
Bandwidth (HP/LP)
Network
OLO
Netz ANB
CPE
Bandwidth
Bandbreite
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19. Reference Offer by A1 Telekom Austria
Under consultation
Reference Offer by A1 Telekom Austria
Modular layer 2 bitstream product based on Ethernet technology
Access part:
VDSL2 on copper loop with 3 bandwidths to choose from (8/20/30 MBit/s)
Ordered per customer
Backhaul part:
Ethernet with 16 bandwidths to choose from (2 … 800 MBit/s) allowing OLOs to choose degree of overbooking – even allowing non-overbooked services
Ordered per DSLAM
Quality of Service: Service priorisation of Ethernet Frames using p-Bit
p=5: Voice / p=4: Video / p=1: Business Internet / p=0: Residential Internet
50% of Link: high priority quality guaranteed / Remainder: low priority quality
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20. Reference Offer by A1 Telekom Austria
Under consultation
Reference Offer by A1 Telekom Austria
Customer Premises Equipment (VDSL2 Modem/Router)
No modem included – to be chosen by OLO
Minimum modem requirements defined
Modem whitelist with modems tested, being qualified as properly working and guaranteeing defined service performance parameters
Service hand-over for several DSLAMS at MDF location in NGA roll-out areas  1 GbE and 10 GbE
Service hand-over to third party provider possible
Transparency for multicast services
Pricing issues
Margin squeeze free
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21. VLAN Concept (1/2)
VULL services are aggregated for every MDF area connected
MDF area (MPoP) comprising several VDSL2 DSLAMs
VULL services are mapped into double-tagged VLAN (S-Tag and C-Tag) allowing to adress customers via Layer 2 Ethernet
S-Tag defines specific DSLAM
VLAN-ID 10 … 2009 (i.e DSLAMs per handover point)
C-Tag defines specific customer
VLAN-ID 100 … 300 (i.e. 200 customers per DSLAM)
p-Bit marking defines QoS
VULL services are handed over to VULL partner on defined PoIs
Hand-over is at today‘s MDF locations (i.e. locations with existing collocation and backhaul facilities)
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22. VLAN Concept (2/2)
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23. Prioritisation with p-Bit Marking (1/2)
VULL partner defines associated quality of data frames within bandwidth ordered for a single DSLAM using priority bit marking
p-Bit = 5 … high priority
p-Bit < 5 … low priority
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24. Prioritisation with p-Bit Marking (2/2)
50% of bandwidth ordered for DSLAM area available for high priority (HP) traffic according to defined service and service-class parameters
Up to 100% of bandwidth ordered for DSLAM area available for low priority (LP) quality as long as bandwidth is not used for HP traffic
Traffic exceeding 50% limit available for HP is discarded (p = 4 discarded before p = 5)
In LP class p = 0 discarded before p = 1
Re-marking of p = 2, 3, 6, 7 to p = 0
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25. Defined Service Parameters for VULL
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26. Maximum Transfer Unit (MTU) Size
Limited by equipment currently used by A1TA
Maximum frame size
1522 Byte (customer edge)
1526 Byte (VULL hand-over)
Frame size limit to be adapted as soon as new equipment is available
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27. Pricing issues
Pricing according to FL-LRAIC methodology taking into account the full range of products offered, i.e. NGA and non-NGA products
Risk premium applicable for NGA products
No margin squeeze in relation to A1TA retail offerings
Non-NGA
Non-NGA
Non-NGA
Non-NGA
8.192 / 768
8.192 / 768
8.192 / 768
8.192 / 768
NGA
NGA
NGA
/ 4.096
/ 4.096
/ 4.096
/ 4.096
NGA
NGA
/ 4.096
/ 4.096
/ 4.096
/ 4.096
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28. CPE – DSLAM: bandwidth and monthly fees
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29. DSLAM – PoI: Bandwidth profiles and monthly fees
Price comparison:
Full LLU: € 5,87 per month
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30. Next steps Public consultation until mid march 2011
Evaluation of consultation responses
Possible adaption request from TKK …
Introduction of VULL on the market
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31. Final Considerations
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32. Final considerations
The telecoms landscape is changing – so are regulatory interventions
Some of yesterday‘s remedies may not be appropriate any longer
Such remedies may have to be phased out with new remedies being carefully introduced in order to support today’s regulatory intentions
Virtual Unbundling is such a new remedy that could even replace several of today’s remedies in a medium to long term perspective, e.g.
Classical Unbundling
Classical Bitstreaming
Terminating Segments …
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33. Virtual Unbundling A new remedy in NGA networks
Kurt Reichinger
Austrian Regulatory Authority for
Telecommunications and Broadcasting
The opinions expressed in this presentation are the personal view of the author and do not prejudge decisions of the Austrian regulatory authorities.
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