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Don’t Forget Opex in Copper vs. Fiber Debate

Danny Dicks
Heavy Lifting Analyst Notes
Danny Dicks
8/27/2013
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A combination of difficult fiber rollout economics, rapid development of innovative technology, small DSLAMs and more capable home gateway CPE, and pressures from regulators and cable competitors is encouraging large telcos across the world to consider retaining copper access for the final drop into the subscriber's home, even if they have announced plans for fiber-to-the-home (FTTH). It's accepted that preserving copper in the ground and minimizing new network build (taking fiber to a cabinet, node or distribution point and using advanced DSL technologies) is cheaper and quicker than deploying FTTH. But telcos have difficult decisions to make that involve consideration of density of consumer broadband spend, quality of copper in the ground, loop lengths, and the technology roadmaps of their preferred access kit vendors.

It is natural to consider the capital expenditure required for different technologies -- the cost of civil work and engineer time being particularly significant -- and much focus is on the final few meters across the subscriber's yard and through the wall of the house. Telcos will also be concerned with the speed with which services can be launched on new networks: Competition in most broadband markets is intense and consumers know faster services are being introduced by many players.

A careful capex, time-to-market and revenue analysis may well result in a mixture of technologies being considered for different parts of an operator's network: perhaps fiber pulled to the home in affluent urban areas; vectored VDSL2 from cabinets/nodes as a lower-speed, lower-cost alternative in areas of lower demand density; and pair bonding, repeaters/regenerators and vectoring deployed to boost broadband speeds over longer lengths of copper where subscribers are far from the CO.

But it's important not to forget the opex consequences of such a strategy. Multiple technologies deployed through a network inevitably mean duplication of management systems -- simple networks are easier and cheaper to manage, requiring smaller NetOps departments, less reliant on the support of multiple vendors, or the knowledge of many specialist in-house engineers. There's also the requirement to maintain multiple networks over the long term, and also potentially very large electricity charges at every location where there is active equipment that cannot be line-powered.

This doesn't mean that advanced copper access technologies are not going to be a major part of most telcos' future broadband networks, but rather that the decisions on the choice of technologies must not be made on comparisons of rollout costs alone.

The Heavy Reading Insider report "Copper for Superfast Residential Broadband" looks at the key enhancements to DSL copper access -- focusing on bonding of copper pairs, vectoring, Phantom Mode and the emerging G.fast technology. It considers where, why and when each of these technologies might be deployed, and reviews the relevant portfolios of a number of the leading vendors of access equipment and solutions, summarizing and comparing their offers.

— Danny Dicks, Analyst, Heavy Reading Insider


"Copper for Superfast Residential Broadband," a 25-page report, is available as part of an annual subscription (12 monthly issues) to Heavy Reading Insider, priced at $1,595. This report is available for $900. To subscribe, please visit: www.heavyreading.com/insider.

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pdecker
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pdecker,
User Rank: Light Beer
8/27/2013 | 12:51:21 PM
consumer perspective
"Competition in most broadband markets is intense and consumers know faster services are being introduced by many players."


As a consumer, I don't feel that this is really the case. It's a duopoly at best if I want television programming delivered in addition to internet, at least in the 3 big cities I've lived in in the past 5 years, reinforced when you compare tv-only to double or triple play pricing.  I would hardly call the competition "intense" nor the number of players "many".
Duh!
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Duh!,
User Rank: Blogger
8/27/2013 | 11:29:53 AM
Re: When does the FTTH opex savings kick in?
FTTH provides lots of places to save OPEX.  Biggest savings do come from decommissioning the copper.  Fiber requires significantly less routine maintenance and has longer MTBF than copper, especially in aging distribution plant.  New fiber plant is going to have better record keeping and less deterioration of cross boxes, etc., so more reliability and shorter MTTR.   And don't forget the recovery value of scrap copper, which presumably would end up on the balance sheet as revenue.

Also in an apples-to-apples comparison of FTTH vs FTTN/FTTC, don't forget OPEX for powering VRADs, including energy cost plus the associated costs of maintaining batteries, chargers, and utility connections.  And  incremental OPEX associated with VRAD maintenance and logistics.

I'm not privy to Verizon's financial analysis, but have heard (third or fourth hand) that there were supposed to be significant OPEX savings even before scrapping out the copper plant.
Carol Wilson
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Carol Wilson,
User Rank: Blogger
8/27/2013 | 10:05:21 AM
Re: When does the FTTH opex savings kick in?
That was what I was getting at - Verizon makes the argument that they don't benefit from their fiber investment while being forced to maintain copper. Of course, decommissioning copper precludes competition on that platform, including for small business customers. 
mendyk
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mendyk,
User Rank: Light Sabre
8/27/2013 | 9:56:25 AM
Re: When does the FTTH opex savings kick in?
Judging from Verizon's actions, once fiber is in place they'd prefer to decommission copper. That doesn't mean fiber opex is lower, but one opex is better than two.
Carol Wilson
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Carol Wilson,
User Rank: Blogger
8/27/2013 | 9:45:57 AM
Re: When does the FTTH opex savings kick in?
Thanks, that makes sense.

Do they reap even bigger rewards when they start decommissioning the copper - or is that the small stuff?
brookseven
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brookseven,
User Rank: Light Sabre
8/27/2013 | 9:43:47 AM
Re: When does the FTTH opex savings kick in?
Carol,

Having spent a lot of time with Verizon on FiOS let me give you the info that I have.  The savings for them started almost immediately.  The reason for that was that they were able to reclassify union positions in the new network.  This enabled a smaller, more flexible work force.  The unions HATE FiOS.

seven

 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
8/27/2013 | 9:10:48 AM
When does the FTTH opex savings kick in?
Do companies such as Verizon, which made a huge FTTH commitment, have to completely retire its copper network to get the full opex savings of fiber, or does that savings come incrementally?

 
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