Techno-Economic Study of Optical Networks Koen Casier, Sofie Verbrugge Internet Based Comm. Networks and Services (IBCN) Dept. of Information technology, Ghent University - IBBT Gaston Crommenlaan 8 (Bus 201), B-9050 Gent, Belgium {koen.casier, sofie.verbrugge}@intec.ugent.be Carmen Mas Machuca Institute for Comm. Networks Technische Univ. München (TUM) 80290 Munich, Germany cmas@tum.de Abstract— Techno-economic research focusing on optical access networks traditionally looks at the upfront network installation costs. This paper additionally indicates where techno-economic research is heading and which questions it aims to answer. Keywords- techno-economic; next generation optical access; total cost of ownership; optical access; business modelling, I. INTRODUCTION Telecommunication networks are dominated by very rapid technology evolution, rendering existing equipment quickly outdated, increasingly closing gaps between formerly incompatible fields (e.g. broadcast and broadband). Additionally there seems to be no limit yet to the bandwidth the customer could consume (due to the ever newer and more bandwidth thirsty services) and would be willing to pay for when given the opportunity. Given the broad variety of projects to invest in as well as the competitive setting, it is for the operator not straightforward to estimate which project will have highest chance of getting the highest return. Especially for those projects which involve large network infrastructure rollouts, and unknown returns, a thorough and methodologically sound investment and risk assessment is required. The deployment of an FTTH network, which is currently under question in different regions across the world, is a typical example. This paper gives a condensed overview of the field of techno-economic research and the current existing knowledge base considering optical access networks. Additionally this paper also indicates in which directions this techno-economic research is extended to cope with future challenges for Next Generation Optical Access (NGOA) networks. II. ECONOMICS OF OPTICAL ACCESS Techno-economic research takes a closer look at the economic value of (e.g. telecom) technology, infrastructure and services. Evaluating a telecom deployment project is much more than just summing up all costs and revenues, as network technology is very complex and infrastructure costs are huge and cover large geographical areas. The installation and operation of new equipment and deployment of new services is spread over many years and the different services have very different and uncertain uptake. Moreover, the related costs are varying over time and so is the competitive setting. Optical access networks have been the focus of a lot of techno-economic research since they are associated to a limited number of users (i.e. low cost sharing factor and low bandwidth compared with aggregation and core networks). The main concern of most of this research has been on the investment in the new network infrastructure, as an FTTH network involves the deployment of a whole new network and the replacement of all the equipment at the customer side and in the central office. This is the highest cost and as such has been considered in most detail (e.g. contrast point-to-point and point-to-multipoint network in fiber). Existing studies indicate how the cost of installation of the all optical access network infrastructure has a cost of at least 400-500$ per connection in dense urban areas and quickly reaching a cost higher than 1000$ per connection for more rural areas [1],[2],[3]. Additionally, customers are split between different operators within the same regional area, and as such only part of the connections are customers increasing therefore the cost quickly over 1000$ per customer. The 70% of this cost is associated to the outside plant [1]. The difference in cost between technologies – active optical networks vs. passive optical networks – is typically somewhere around 10% [1],[4]. Operational processes and revenues are typically not modeled in detail in the existing studies. III. ECONOMIC CHALLENGES FOR NEXT GENERATION OPTICAL ACCESS While the focus of the existing studies was on the upfront investment cost of the optical access network, many operators still struggle with the options beyond this point and look for answers to questions such as how to get the lowest long term operational expenditures, how to lower the energy consumption, or what technology will give market advantages and best upgrade possibilities. Regular investment analysis is not incapable of giving answers to these questions nor can it give sufficient information on the outcome of any new service deployment, estimation of risk profile, optimal long term upgrade strategies, etc. A first step in this direction is seen in different projects, including OASE [5], in which the techno-economic research is looking at the full cost of ownership for an optical access network, completing the infrastructure costs with operational expenditures and taking all stages of the complete lifecycle of the project into account and finally also covering the full access area from the customer up to the central office. As such the research gives a better view on all components of the costs and will be able to give a more balanced toolbox for optimizing the choices in all stages, areas and technologies.