The Present and Future of Fixed Broadband

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The Present and Future of Fixed Broadband Prof. Kevin Werbach werbach@wharton.upenn.edu / Twitter: @kwerb Tel Aviv, June 2014

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Just released: http://t.co/bUCnJDqtkf

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Setting The Context 3

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“The Internet” (The “Peacock Map” of Internet autonomous systems, circa 1999)

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Personal Computers Phone Networks Information Goods

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?1.5 billion PCs ?1.3 billion landlines 1.65 billion CDs The World, Circa 2012

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The World, Circa Now > 1.6 billion smartphones+tablets 7 billion mobile lines Streaming > 50% of Net traffic

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Post-PC Devices Converged Broadband Networks The Cloud The Next Internet

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The PC is Dead

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So is the PSTN! U.S. Residential switched access lines 194 million in 2000 101 million 2012 % of U.S. Households with POTS 93% in 2003, 25% in 2013, and…

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Not Just a U.S. Phenomenon >50% of OECD countries experienced a drop in PSTN access lines from 2009-11. In 8 OECD countries, already <20 PSTN access lines per 100 inhabitants. – OECD Communications Outlook 2013

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Coming Next: Internet of Things

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Cloud Platforms are the New Utilities 13

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Infrastructure of the 21st Century 14

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Implications for Fixed Broadband 15

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3 (Share of fixed connections still on dial-up in the OECD as of 2011) % Broadband is Here

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Why Go Beyond Broadband? Convergence Voice/video/data to IP Fixed/mobile/nomadic Applications Streaming media Real-time communications Telework/telepresence Cloud computing and storage Financial services Internet of Things Smart homes 17

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OK, But Why FIXED Broadband? Mobile still only 7% of traffic in 2017 (Cisco) Fixed is complementary to mobile Most “wireless” traffic quickly goes to fixed WiFi offload estimated at 70% of smartphone data Most recent data suggests per-device mobile data usage may be peaking At least, until the wearable/IoT explosion! 18 Has to plug in somewhere!

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From Here to Fibre Only truly future-proof technology The Good GDP benefits of ultrafast networks Knock-on effects of “economics of abundance” The Bad Up-front capex costs very high Heavily take-rate dependent Municipal obstacles like ROW Transit costs an issue in some areas Business case uncertainties 19

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…And The Confusing All modern fixed broadband access systems incorporate some fiber Key is how far fiber is extended toward the end-user Claimed speeds aren’t necessarily representative 20 Netflix USA Speed Index, January-May 2014

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Big Variation in Fibre Adoption 21 OECD ranks by FTTP as % of Broadband Subscriptions OECD Average: 15.75% (June 2013)

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Big Variation in Fibre Adoption 22 OECD ranks by FTTP as % of Broadband Subscriptions OECD Average: 15.75% (June 2013)

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Cable Changes the Data Somewhat 23 OECD ranks by FTTP+Cable as % of Broadband Subscriptions

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Approaches to Next-Generation Fixed Broadband 24

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Architectural Choices Fiber to the home vs. the node Cost vs. capacity tradeoff The Australia example May be multiple technologies deployed within countries Esp. with municipal networks Hierarchy by density (FTTH/VDSL2/VDSL/Wireless) Path dependencies important High DSL/cable adoption may actually slow fiber 25

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Business/Regulatory Models Role of incumbents vs. new entrants Non-traditional entrants (Reggefiber, Google) important in some countries Scope of public funding or provision Different models being used at the national, regional, and local level Success stories (Stokab), failures (Provo, UT), and incompletes (Australia) Requirements for open access or wholesale Prevalent in most of the world except the U.S. Wholesale model often chosen voluntarily 26

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Vectoring and G.Fast Potential game changers? “Fiber-like” speeds at “DSL-like” costs Challenges May make unbundling technical infeasible Heavily dependent on loop lengths Real-world performance and deployment pace lags Still tops out well below fibre speeds 27

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Israel Fibre Network An important global test case Israel Electric Corporation (IEC) deploying a 1 Gbps wholesale network nationwide First announced in 2011 Partnership with a group led by Sweden’s Viaeuropa Service scheduled to begin this month, offered by retail providers (10 so far) Plans to cover two thirds of the country by 2020, and the remainder by 2033 Bezeq/Hot investing in FTTH in response 28

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Key Policy ISsues 29

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What’s the Goal? End-user maximum download speed isn’t necessarily representative Interconnection, transit, caching, equipment matter Full capacity not always available at consumer prices Caps, tiers, usage-based prices also significant Importance and meaning of ubiquity? Technological neutrality may be impossible Investment decisions today lock in particular configurations for many years. 30

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What About Competition? Virtually no business case to overbuild fiber, except urban MDUs Natural monopoly? Will the cost dynamics change any time soon? Unbundling may be restricted E.g. with vectoring Potentially removes a major regulatory tool in much of the world Choose between next-gen broadband and competition? 31

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Operators vs. Edge Providers 32

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Already an Issue in the U.S. 33

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Watch This Space Going Forward ETNO Proposal for “sender pays” rule Complicated arrangements CDNs, multiple end user fees, etc. Data caps, freezones, usage charges also significant. At high level, interests are aligned Preconceived idea of cost “causation” not realistic. Voluntary deals raise neutrality concerns Compulsion skews competition/investment w/no guarantee of more infrastructure 34

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Surveillance and Governance Governments go where the information is Information goes where the users are An ongoing governance challenge 35

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Concluding Thoughts 36

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Ubiquity Capacity & Robustness Interconnection Innovation Data Integrity & Privacy The Network Utility Agenda

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These Questions Aren’t as New

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“A new pronouncement by the regulatory agencies of a doctrine of free interchange of signals across the boundaries of individual systems would be of tremendous technological benefit.” -- Paul Baran, “Communication Policy Issues for the Coming Computer Utility”, May 1968

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???? ???! werbach@wharton.upenn.edu Twitter: @kwerb