Abstract (Tentative)

Residential broadband is increasingly seen as a catapult for a more general economic growth. Deployment of new and advanced broadband access networks is a prerequisite for the continuous development and success of broadband. This thesis investigates available deployment strategies for broadband access networks required to support the near-future transmission requirements of converged voice, video, and data services. The approach of telecoms using Digital Subscriber Line technology is compared to entry strategies based on Fibre-to-the-Home to evaluate the financial feasibility of residential broadband deployment in different geographical areas.

A fundamental assumption in residential broadband deployment is that the required investments are based on financially feasible premises. Investment appraisal of deployment scenarios is therefore of interest to operators and regulators alike, but is not trivial and relies on knowledge of the technological, economic, and regulatory parameters that affect the foreseen cost and revenue of networks and services. In contrast to existing static methods of evaluating financial feasibility this thesis argues that properties of the networks and services need to be related to competitive interactions between infrastructures when evaluating financial feasibility.

To accomplish this, the thesis is divided into three main parts, where the first part analyses properties of packet based multimedia services and performs quantitative forecasting of near-future transmission requirements. The second part analyses residential broadband deployment based on Digital Subscriber Line technology in comparison to Fibre-to-the-Home, describes the parameters that shape deployment, and identifies plausible deployment strategies capable of meeting the identified transmission requirements. The last part develops a quantitative simulation model based on existing techno-economic (engineering) cost models that additionally calculates revenues and estimates financial feasibility. To study competitive interactions the thesis supplements the framework with elements of game theory, using the von Stackelberg model.

The framework is applied to the case of Denmark using a dataset from the Danish LRAIC model, motivated by the foreseen wide-scale FTTH deployment by the energy utility sector in Denmark. The results show that the future of residential broadband networks is based on converged voice, video, and data services that pose stringent quality of service requirements on transmission. While these services, and especially IPTV, can be expected to raise transmission requirements from 20 Mb/s to 50-100 Mb/s in the course of the next five years, this thesis concludes that there are no strong demand sided requirements that call for FTTH rather than DSL, given that the DSL infrastructure is upgraded to meet these requirements.

The study shows that DSL deployment is highly reliant upon the existing copper infrastructure. Copper loop lengths determine maximum transmission throughput and can limit service selection and thereby revenues. Upgrade strategies are based on co-locating DSL equipment in existing copper aggregation nodes. In the case of Denmark, there are two levels of aggregation points. The first is on average located 0.7 -1.6 km from customer premises, enabling on average 7-16 Mb/s in transmission throughput, while the second is on average 70 – 210 m from customer premises, enabling transmission throughput of 52-90 Mb/s. While this short distance to secondary nodes enables high throughput, the number of nodes (and thereby the cost) increases by a factor of 10 for each step.

By applying game theory the thesis shows that telecoms are forced to embark on residential broadband deployment as a defensive move. This is especially true in densely populated cities where VDSL/VDSL2 deployment from secondary distribution points can offer competitive transmission throughput to that of FTTH. For other geographical areas than cities, deployment of DSL from primary distribution points captures the majority of potential revenue stream, while minimising deployment cost. In addition to selecting the right location of equipment, timing of deployment is a key-variable for telecoms, as price of equipment can change significantly depending on global deployment trends.

The study of FTTH deployment highlights the effect of long expected lifetime of ducts and trenches. While access trenches account for 61% of the € 2,019 capital expenditure of FTTH per subscriber in cities at 50% broadband market share, that ratio is reduced to 35% of the annual € 228 cost. The study concludes that FTTH deployment in Denmark can be financially feasible in cities if take-up rate is above 25% (translates to 40% of the foreseen residential broadband market) but not in other regions of the country. However, by considering economics of scope from other operations, e.g. shared digging cost, the Danish energy utility sector can deploy financially feasible FTTH in all geographic areas in Denmark.