investing in next generation internet
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Investing in the Investing in the NextNext--Generation Generation
InternetInternetKyle EnrightKyle Enright
November 2003November 2003
Overview of the Session Overview of the Session Objective for Today:Objective for Today:
Review todayReview today’’s cuttings cutting--edge broadbandedge broadband–– WhatWhat’’s possible & how it workss possible & how it works–– WhatWhat’’s being deployed & wheres being deployed & where–– Investment ImplicationsInvestment Implications
Format:Format:PPT presentation with Q&A as we go alongPPT presentation with Q&A as we go along6060--70 mins presentation70 mins presentation2020--30 mins discussion30 mins discussion
AgendaAgendaOverview of the Broadband MarketOverview of the Broadband MarketBB Technology FundamentalsBB Technology FundamentalsTodayToday’’s Cutting Edge Broadband:s Cutting Edge Broadband:–– CopperCopper–– Fiber Fiber –– Powerline Powerline –– Fixed WirelessFixed Wireless
Other Key Aspects of deploying BroadbandOther Key Aspects of deploying BroadbandInvestment OpportunitiesInvestment Opportunities
Overview of the Overview of the Broadband Broadband
Market Market
The Digital Home Vision
Why is Broadband so important? Why is Broadband so important?
High-rate broadband critical both to the home and in-home
Intel Confidential
The Convergence of The Convergence of Four “Waves”Four “Waves”
Digital Home Opportunity
Broadband becomes mainstream
Home Networking
Digital device proliferation
Content explosion
Substantial Broadband GrowthSubstantial Broadband GrowthWW Broadband Connections by Tech. 2002-2007(M)
-
50.0
100.0
150.0
200.0
250.0
2002 2003 2004 2005 2006 2007
FWAMetro ethernetCable modemDSL
WW Broadband Connections by Region 2002-2007 (M)
-
50.0
100.0
150.0
200.0
250.0
2002 2003 2004 2005 2006 2007
Rest of WorldAsia/PacificWestern EuropeUnited States
• 210M+ broadband subs WW by YE’07 (25%+ CAGR)• Broadband IC revs of $1B+/yr ; Broadband Eqpt revs of $3.5B+/ yr• Broadband services rev >$25B in ’03; >$100B by ’07 (40%+ CAGR)
Source: IDC, Dell Oro - 2003
Digital Home Content TrendsDigital Home Content TrendsDownload time is significant barrierDownload time is significant barrier
Est. movie download time (2Hr movie, 500kb/s bb BW)
28
80
20
40
14104
11
0
10
20
30
40
50
60
70
80
90
Broadcast (NTSC) DVD (480p) HDTV (1080i)
Resolution
# Hrs
MPEG2WMV or MPEG4, Pt 2H.264 (MPEG4, Pt. 10)
3
High-rate BB critical to make Digital Home a reality
HD movie download reqmt: ADSL or cable modem: > 5hrs
VDSL: <20 mins FTTH: <5 mins
Broadband Market VisionBroadband Market VisionMore broadband in more places More broadband in more places …… soonersooner
–– More usersMore users–– More geos More geos –– More ways to access BB (work, home, hotspots, mobileMore ways to access BB (work, home, hotspots, mobile……) )
HigherHigher--rate broadband rate broadband –– 100Mbps+ symmetrical is Japan publicly stated goal!100Mbps+ symmetrical is Japan publicly stated goal!
More useful broadbandMore useful broadband–– Richer applicationsRicher applications–– Easier to useEasier to use–– More reliable; more secureMore reliable; more secure
TodayToday’’s ADSL & cable modem services are inadequates ADSL & cable modem services are inadequate
BB Technology BB Technology FundamentalsFundamentals
BB Access Network EvolutionBB Access Network Evolution
The network must change significantly in order to support new services
Central OfficeCabinetCurbSubscriber
DSLAMADSL
ATM/IP
Current Network
Future
DSLAMADSL++
ATM/IP
Short-loop ADSL
APACJapan
Likely Geos
EMEANAMO
Japan & APAC NAMO, EMEA
ATM/IP
ADSL++or VDSL
FiberFTTC w/xDSL NG-DLC
OLTFiber
FTTP
DSLAMADSLATM/IP
Fixed Wireless
APACJapanEMEANAMOFiber
or
BB BasicsBB BasicsKey design parameters for BB networks: Key design parameters for BB networks:
–– # of users & density# of users & density
––Planned services (Mbps; QoS)Planned services (Mbps; QoS)
––Existing infrastructureExisting infrastructure
––Can I ever make money? Can I ever make money?
BB Technology BasicsBB Technology BasicsShannonShannon’’s Law: C = B*logs Law: C = B*log22 (1+S/N) (1+S/N)
––Capacity (Capacity (““CC””) is function of:) is function of:–– bandwidth (B), Rx signal strength (SNR)bandwidth (B), Rx signal strength (SNR)
Providing more Mbps Providing more Mbps requires:requires:––More RF spectrum/ more bandwidth (moreMore RF spectrum/ more bandwidth (more MHz)MHz)––More efficient modulation (moreMore efficient modulation (more bits/Hz)bits/Hz)–– Improved SNR (extend range; increase bits/Hz)Improved SNR (extend range; increase bits/Hz)
Modulation TechniquesModulation Techniques
Frequency
Pow
er
FrequencyPo
wer
Single CarrierSingle Carrier(QAM)(QAM)
MultiMulti--carriercarrier(Spread Spectrum: OFDM, DMT)(Spread Spectrum: OFDM, DMT)
MultiMulti--carrier: several narrowcarrier: several narrow--band bursts with long durationband bursts with long duration–– Overlapping carriers spread over wide frequencyOverlapping carriers spread over wide frequency
SingleSingle--carrier: single wideband burst with short durationcarrier: single wideband burst with short duration
‘N’ parallel sub-carriers; each @ 1/n data rate
Adaptive ModulationAdaptive ModulationPrinciple: Vary bits per Hz according to signal strength
HighHigh--rate BB rate BB over Cuover Cu
(ADSL2+; VDSL)(ADSL2+; VDSL)
DSL BasicsDSL Basics
DSL uses high frequencies (>25kHz) of telephone line for data TxDSL uses high frequencies (>25kHz) of telephone line for data Tx–– POTS and DSL peacefully coPOTS and DSL peacefully co--existexist–– Support for multiple services (voice, data, video) using ATMSupport for multiple services (voice, data, video) using ATM
ADSL = ADSL = AsymmetricAsymmetric Digital Subscriber LineDigital Subscriber Line–– More bandwidth down than upMore bandwidth down than up
IP Connection
Internet
ATM Connection
ISP2
ISP1
T1/T3
Telco Central Office
DSLAM DSL Modem
DSL Connection
Twisted Pair Copper < 24kft
DigitalLoop Carrier
Short CopperLoop
VDSL vs. ADSL SpectrumVDSL vs. ADSL SpectrumADSL uses Discrete ADSL uses Discrete MultitoneMultitone (DMT) modulation(DMT) modulation
–– Spread spectrum (256 carriers @ 4.3125 kHz) + QAMSpread spectrum (256 carriers @ 4.3125 kHz) + QAM
–– ADSL (ITU G.992.1): 8 Mbps down/ 0.8 Mbps upADSL (ITU G.992.1): 8 Mbps down/ 0.8 Mbps up
–– New ADSL versions (ADSL 2, 2++): 26Mbps+New ADSL versions (ADSL 2, 2++): 26Mbps+ADSL evolving towards VDSL ADSL evolving towards VDSL
–– Driven by bandwidth demand & technologyDriven by bandwidth demand & technologyADSL++ in draft standard statusADSL++ in draft standard status
–– Spectrum uses up to 3.75M as in VDSLSpectrum uses up to 3.75M as in VDSLADSL2+
2.2M138K
DOWNU
ADSL
1.1M
D U
138K
12M
VDSL
8.5M5.2M3.75M138K
UP UPDOWNDOWN DOWN
30M
Optional Band
U
DSL Data Rates vs. Loop LengthDSL Data Rates vs. Loop LengthLoop lengths by regionLoop lengths by region
kmVDSL
ADSL
% C
usto
mer
s R
each
ed
USA
India
Germany
UK
Italy &France
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0
JapanSource: IEEE
Length & quality of loop determines DSL Length & quality of loop determines DSL availability & service level (Mbps)availability & service level (Mbps)
ADSL2 extends DSL reach
EFM (VDSL) in APAC(Korea, Japan)
ADSL reach limit
ADSL 2++
ADSL 2++ and VDSL extend the rate and reach of DSLADSL 2++ and VDSL extend the rate and reach of DSL
Improving DSL PerformanceImproving DSL Performance
100
Internet Broadband
Distance K ft
Mb/s
6 12 18 24 30
3
Enhanced DSL
G.shdsl
EthernetT1 Rate
VDSLVideo
108
ADSL
Techniques: multi-user coordination; mitigate non-linearity; alt. modulation methods; improved FEC (Trellis Coding); auto line diagnostics
1
52
HighHigh--rate Cu Market Segmentsrate Cu Market Segments
Fiber Ring
MFEUn-lit
Buildings
100/100 Mbps • VDSL-DMT
FTTP Extension
ONU
• VDSL-DMTResidences
70/40 Mbps
APPLICATIONS:
- 19 Mbps – HDTV- 15 Mbps – 3 Digital TVs- 10 Mbps – VPN- 5 Mbps – High-Speed Internet Access- 400 kbps – Multiple Voice Channels
Businesses• DS3 Extension
22/3 Mbps
Residences• ADSL-DMTResidences
• VDSL-DMT
CO/RT• VDSL-DMT
MxU
50/30 Mbps
Hanaro Telecom’s 50 Mbps VDSL
HighHigh--rate BB over Cu Todayrate BB over Cu TodayKT’s Megapass for
50 Mbps VDSL
FTTxFTTx(Fiber(Fiber--toto--thethe--X X …… Home, basement, curb)Home, basement, curb)
FTTH: The Ultimate Network?FTTH: The Ultimate Network?Best for dense areas w/ high bandwidth demandBest for dense areas w/ high bandwidth demand
•• ““FutureFuture--proofproof”” infra. w/ highest capacity, lowest attenuationinfra. w/ highest capacity, lowest attenuation–– Only way to reliably offer 100 Mbps+ to simultaneous usersOnly way to reliably offer 100 Mbps+ to simultaneous users
Fiber Access AlternativesFiber Access Alternatives
1. Point-to-Point
2. Point-to-Multipt (Active)
3. Pt-to-Multipt (Passive)- PON
All three topologies being deployed today. No clear technology winner.
Overview of Optical TxOverview of Optical Tx3 key elements of FTTH Transmission system:3 key elements of FTTH Transmission system:
Fiber cabling (transmission medium)Fiber cabling (transmission medium)–– Light signals travel through the inner Light signals travel through the inner ““corecore”” of the fiber due to of the fiber due to total internal total internal
reflectionreflection
Light source (transmitter) Light source (transmitter) –– either an LED (light emitting diode) or a semiconductor laser dieither an LED (light emitting diode) or a semiconductor laser diodeode
Photodiode and ICs for OpticalPhotodiode and ICs for Optical--Electrical conversionElectrical conversion–– Performs intermediary conversion that allows digital data to be Performs intermediary conversion that allows digital data to be transmitted transmitted
as photonsas photons
ElectricalSignal Input
Optical Fiber(Transmission Medium)
Converts Signalfrom optical to
electrical
ElectricalSignal Output
Light Source(Transmitter)
Light Detector(Receiver)
Converts Signalfrom electrical
to optical
• Laser• Driver• PMD• PMA
• Photodiode• PMD• PMA
BPON ONU DesignBPON ONU Design
Trip
lexe
r
CDR
Driver
NetworkProcessor
VideoAmp
PONMapper/Framer/TDMA/TDM
FastEthernet
DSP
PowerControl
Ethe
rnet
POTs
Battery
CA
TV
PHY's
Processing
POTS
Power VideoCATV
Conversion
SLIC + CODECSLIC + CODEC
Client side: VoiceVideo
EthernetIntel Component or IP
Not Core ICG Technology
20032003 20072007
ASPASP % Total BOM% Total BOM ASPASP
$45$45
$30$30
$125$125
% Total BOM% Total BOM
$125$125
$55$55
$280$280
OpticsOptics 45%45% 36%36%
ElectronicsElectronics 20%20% 24%24%
Total BOMTotal BOM 100%100% 100%100%
switchswitch
ENET
EN
ET
PHY
PHY
PON ONUPON ONU
FTTx Component EvolutionFTTx Component Evolution
Today: Micro Optics
• Complex BOM with micro-optic assemblies
• Limited cost reduction
• Wafer scale fabrication• Improved yield & reliability• Lower cost & components
Next-gen: PLC + SiOB
(Minimum Configuration)
Laser
Monitor
Video PIN
TIA
DATA PIN
TIA
Bragg
Filter1310
1310
1555
1490
1490
0.5"
0.5"
Dream Triplexer
Planar Waveguides
Fiber
Connector
Laser
Monitor
Video PIN
TIA
DATA PIN
TIA Post AMP
CDR Video AMP
Laser
Driver
Bragg
Filter1310
1310
1555
1490
1490
0.5"
0.5"
Dream Triplexer
Planar Waveguides
Fiber
Connector
(Maximum Configuration)
Drawing directly from Alcatel
PLC SiOB
Triplexer (Optical Front-end)
BPLBPL(Broadband Powerline)(Broadband Powerline)
Broadband over PowerlineBroadband over PowerlineUtilize power lines to deliver Utilize power lines to deliver ““last milelast mile”” accessaccess
–– Alternative to DSL, cable modem, fixed wirelessAlternative to DSL, cable modem, fixed wireless–– Powerline inPowerline in--home networking not addressed herehome networking not addressed here
Services Enabled: Data, VoIP (Video possible)Services Enabled: Data, VoIP (Video possible)
AdvantagesAdvantages–– Low infrastructure costs: no Low infrastructure costs: no ““new wiresnew wires””–– LowLow--cost equipment and easy install (plug & play CPE)cost equipment and easy install (plug & play CPE)–– Ubiquitous coverage of homes and businessesUbiquitous coverage of homes and businesses–– Utilities have: rightsUtilities have: rights--ofof--way, experience in operating networks, way, experience in operating networks,
relatively healthy balance sheets relatively healthy balance sheets
Most applicable for emerging market geosMost applicable for emerging market geos
Typical Electric Power Network Typical Electric Power Network (Aerial)(Aerial)
Utility substation(5-20k homes served)
Medium Voltage Feeder Line(2-15 feeders per substation; ½-5 mile each)
Neighborhood Transformer(US: 1-10 HHs; EMEA: 200-400 HHs)
Tree-and-branch topology: substation -> MV feeder branches -> Txformers
BPL NetworkBPL Network
Fiber backhauls to a carrier Point of Presence (POP)
Customer plugs Powerline modem into any outlet: broadband instantly enabled
Powerline-fiber interface at substationRouter/PMTS location
PLC eqpt installed along powerlines
•• Install powerline router at utility substationInstall powerline router at utility substation•• PLC aggregation/ repeater devices every PLC aggregation/ repeater devices every ½½ mile along MV linesmile along MV lines•• Simple CPE: lowSimple CPE: low--cost PLC modem, selfcost PLC modem, self--install possibleinstall possible
BPL Technology OverviewBPL Technology OverviewPowerlinePowerline is a Very Challenging Tx medium is a Very Challenging Tx medium –– Noisy environment that is largely uncharacterized Noisy environment that is largely uncharacterized –– Discontinuous environment with unstable multipathDiscontinuous environment with unstable multipath–– Significant signal attenuation Significant signal attenuation –– Lacks Lacks ““flatflat”” frequency response profilefrequency response profile–– Significant safety issues (30k volts on MV lines)Significant safety issues (30k volts on MV lines)
•• Other Issues: FCC restrictions on EMI (Part 15)Other Issues: FCC restrictions on EMI (Part 15)US
SpectrumPlanning
45-50MHz30 MHz2 MHz0 MHz
RF AM band.5 –1.6 MHz Extended PLC
(contemplated)HomePlug 1.0
(4-21 MHz)
Lower FCC limits on emitted power (100uV/ meter @3 meters)
FCC limits: 30uV/meter measured at 30 meters
Emerging Solutions for BPLEmerging Solutions for BPLInductive coupling provides safe, easy install for Inductive coupling provides safe, easy install for equipment on power linesequipment on power lines
Several techniques for handling MVSeveral techniques for handling MV-- LV junction at the LV junction at the transformertransformer
–– DDrive signal through transformer rive signal through transformer –– Physical bypass of transformer (separate cabling)Physical bypass of transformer (separate cabling)–– Use wireless for last 100Use wireless for last 100’’ to avoid LV plant entirelyto avoid LV plant entirely
PowerlinePowerline Market in InfancyMarket in InfancyUS Trials:US Trials:
Florida P&L, PEPCO, Cinergy, AEP, Hawaiian Florida P&L, PEPCO, Cinergy, AEP, Hawaiian ElecElecEMEA:EMEA:
EndesaEndesa –– SpainSpainSeveral in Portugal, France, GermanySeveral in Portugal, France, Germany
Developing geos:Developing geos:Chile Chile –– EnersisEnersisRussia Russia –– ElectrocomElectrocom
But several countries have regulations that limit BPL But several countries have regulations that limit BPL or have past bad experiences with BPL or have past bad experiences with BPL UK, Japan, othersUK, Japan, others
Fixed Wireless BBFixed Wireless BB
BWA Market SegmentsBWA Market Segments
BACKHAUL
1
Telco Core Network or Private
(Fiber) Network
INTERNETBACKBONE
4
GREEN FIELD DEPLOYMENTS
DEVELOPING COUNTRIES(e.g., Eastern Europe)
RESIDENTIAL & SoHo DSL
3
FRACTIONAL T1 for SMALL BUSINESS
T1+ LEVEL SERVICE ENTERPRISE
BACKHAUL for HOTSPOTS
2
5ALWAYS BEST CONNECTED
802.11
802.16
802.11
802.11
Wired vs. Wireless ChannelsWired vs. Wireless ChannelsSIGNAL THROUGH A WIRE• Relatively Static Channel• Spatially Confined• Efficient Use of Transmitted Energy• Relatively Predictable Interference to other Signals
SIGNAL THROUGH SPACE (WIRELESS)• Dynamic Channel• Signal Spreads Out Over Space• Significant Multi-path Energy• Significant (unpredictable) Interference to Other Users
Wall
Moving ObjectWireless Improvements rely upon Wireless Improvements rely upon airair interfaceinterfaceAntenna systemsAntenna systemsRadio chainsRadio chainsPhysical layerPhysical layerMedia Access Control layer (MAC)Media Access Control layer (MAC)
Antenna
RF PHY MAC
Evolution of Broadband WirelessEvolution of Broadband WirelessPoint to MultiPoint to Multi--Point Wireless Access Equipment Timeline Point Wireless Access Equipment Timeline
•License exempt (2.4 GHz)•Licensed MMDS •Licensed LMDS •Use 802.11 or proprietary PHY
•Data rate: 6-54 Mbps•Air interface:
•OFDM & S-CDMA
• Spectrum: < 11 GHz• Data rate: Up to 75 Mbps • OFDM based (20MHz)• Volume silicon suppliers• Interoperable, scalable• New Technologies: beamforming, MIMO; mesh network topologies
’00
Off-the-Shelf 802.11 &
Proprietary
Proprietary(70+ OEMs)
Standards-based802.16a
’01 ’02 ’03 ’04 ’05
•Data rate: 2-11 Mbps
Methods to Improve WirelessMethods to Improve Wireless
Technology Strategy #3: Reduce Channel Idle Time• Advanced MAC via re-configurable building blocks
Tech Strategy #1: Move the Channel Capacity Curve “Up” (use more of avail freq)• Smart Antenna Systems (MIMO) via cheap integrated radios & cheap DSP gates
TIME
Tech Strategy #2: Actual Performance -> Max Capacity• Advanced OFDM, Advanced FEC via cheap DSP gates
8 bps/Hz7 bps/Hz
5 bps/Hz
Cha
nnel
Cap
acity
5 to 10 year strategies
Improving BB Improving BB ServicesServices
Going Beyond Going Beyond ““the Pipethe Pipe””Deploying the BB infrastructure (the pipe) is Deploying the BB infrastructure (the pipe) is only the first steponly the first step
Need content, services, delivery models that:Need content, services, delivery models that:–– Attract usersAttract users–– Entice users to pay Entice users to pay –– Allow network operators and xSPs to earn ROIAllow network operators and xSPs to earn ROI
Critical areas for consideration:Critical areas for consideration:–– Service Creation & Delivery (provisioning)Service Creation & Delivery (provisioning)–– InIn--home networkinghome networking–– Devices in the homeDevices in the home–– Premium content for the networkPremium content for the network
Rich Content
Media Formats
Physical Network
Network Protocol
Device Discovery& Control
Media Transports
Service Delivery
Managed Broadband ServicesManaged Broadband Services
…… Remotely managed and provisioned Remotely managed and provisioned by the service providerby the service provider
xSP’s Perspective:• Increase ARPU• Decrease Churn• Increase Penetration
User’s Perspective:• Easy-to-use• Increases value of BB connection• Increases value of digital devices
Home Network AdoptionHome Network AdoptionHome Network Adoption (Millions HH)
0
10
20
30
40
50
60
70
03 04 05 06 07
ROWAsiaEuropeNorth America
Home Network Connections by Type
0102030405060708090
100
03 04 05 06 07
Media NetworkConnectionsResidential Gateways
Infrastructure (net ofNICs)NICs
Source: InSource: In--stat/MDR stat/MDR ‘‘0303
Home Network ChallengesHome Network Challenges
Investment Investment OpportunitiesOpportunities
Investment StrategyInvestment StrategyInvest in breakthrough technologies:Invest in breakthrough technologies:–– 10x+ improvement in transmission rates10x+ improvement in transmission rates–– 5x+ reduction in costs5x+ reduction in costs–– Radical improvement in deployment ratesRadical improvement in deployment rates
Invest in key areas of Broadband ecosystemInvest in key areas of Broadband ecosystem–– BB service creation & provisioningBB service creation & provisioning–– S/w, services to increase the value of BBS/w, services to increase the value of BB
Accelerate deployment of Broadband Accelerate deployment of Broadband Networks Networks
Broadband Investment PlanBroadband Investment Plan
• FTTx Deployment (FTTx networks; technology to reduce FTTx costs)
• BB service provisioning s/w • Compelling apps for high-rate BB• Complimentary products to IXP for
FTTx, VDSL (triplexer, etc.)• Support new BB technologies
(ecosystem or E&E)
• Access / front-end Si gaps (tuner, DSL, demodulator, cable, etc.)
- Mike Buckley ICap lead
• Home Networking Technologies
• Early
• Late
• Early/ Medium
Target Investment AreaTarget Investment Area
Stage of Stage of Investment Investment
Cycle Cycle MaturityMaturity Deal TypeDeal Type
• Mkt Development• Eyes and Ears
• Ecosystem investment
• Acquisition /investment / license
• Investment/ License
1-2
• 1-2• 0-1• 0-1
N/A
1-2
$2-6M
$2-6M
Targ
et
Targ
et
Deals
Deals Ta
rget
$
Targ
et $
Inve
stm
ent
Inve
stm
ent
• Early/ Medium
• Early/ Medium
N/A
$ 2-4M
CONFIDENTIA
L
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