University of Athens

COST
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IS0605 Econ@Tel
Econ@Tel

“FFTx: Learnings from West European and Emerging 
Markets”
Dr. Dimitris Katsianis
Theodoros Rokkas, Vagia Kyriakidou, Aris Chipouras, Thomas Kamalakis, 
Dimitris Varoutas and Thomas Sphicopoulos

Department of Informatics and Telecommunications, 
University of Athens, Greece

Presented at Cost ISO605 Econ@Tel
Seville 2‐4 April 2008

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Abstract

In this presentation, a techno-economic evaluation of the

business prospects of a wide scale deployment of FTTx as a last-
mile solution is carried out. The evaluation is based on a Techno-
Economic (TE) tool which, taking into account network topology,
area characteristics, service demand and price evolution
forecasting estimates key economic figure-of-merits.

Part A. The analyzed scenarios (Fiber-to-the-Home/Office or

Fiber-to-the-Cabinet) for the European market is driven from
several parameters and have less favorable business prospects
where the duct availability is limited.

Part B. In addition technical, business and economic aspects of

the case Greece will be presented concerning the development of
the municipal networks in order to arise some issues about the
FTTH future development in emerging markets.

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
The motivation for 
technoeconomic evaluation

Market
Demand
Willingness to pay
User behaviour

Technology Strategy
Technology variety Where?
Open provisioning When?
Service integration How?

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
ECOSYS/TONIC Tool ‐ Methodology
Operators Components
Database
Suppliers
Cost Evolution
Standardization
body OA&M Class
Year n
Other
Volume Class Revenues...
Year 2
Revenues Decision
Decision
Investments
Year 1
Index
Index
Revenues
Investments
Cash Flows calculation
calculation
User inputs Revenues
Investments (NPV,
Cash Flows (NPV,IRR,
IRR,
Profits Payback period)
Payback period)
Services
Services Investments

el
Cash Flows
Profits

od
lM
Architectures Cash Flows
Profits

ia
Geometrical Model

nc
Profits

na
Fi
Operators
Market Tariffs
Size
Surveys
Policy

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
ECOSYS/TONIC Tool ‐ Methodology
Operators Components
Database
Suppliers
Cost Evolution
Standardization
body OA&M Class
Year n
Other
Volume Class Revenues...
Year 2
Revenues Decision
Decision
Investments
Year 1
Index
Index
Revenues
Investments
Cash Flows calculation
calculation
User inputs Revenues
Investments (NPV,
Cash Flows (NPV,IRR,
IRR,
Profits Payback period)
Payback period)
Services
Services Investments

el
Cash Flows
Profits

od
lM
Architectures Cash Flows
Profits

ia
Geometrical Model

nc
Profits

na
Fi
Operators Real Options
Market Tariffs
Size Competition
Surveys Model
Policy

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
Steps in Network Evaluation

– Definition of service basket

– Network scenarios
– First Simulations – Main Financial
results
– Sensitivity and Risk Analysis
– Evaluation Recommendation and
Guidelines

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

The Tool

• Based on Office 2003 platform

– Excel & Access
• Automatic sensitivity analysis
• Compatibility with Risk
Analysis Tool(s)

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
The tool & its database

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Main Financial Results

• Net Present Value, NPV

• Internal Rate of Return, IRR
• Payback Period
• Financial indicators
– Investments
– Running Costs
– Revenues
– Cash Flows
– Depreciation
– Profits
– Taxes
– Retained Cash Flows
– Cash Balance
– Rest Value

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Risk Analysis
Component Price

NPV
10 000 Trials Frequency Chart 52 Outliers
,027 269

Probability

Frequency
,020 201,7
0,68 0,74 0,80 0,86 0,92
,013 134,5
Service Penetration ,007 67,25

,000 0
-3000 -1000 1000 3000 5000
kE

• Statistical Variation of the

1,09 1,54 2,00 2,46 2,91
input parameters
Revenue per customer • Using Monte Carlo Simulation
• Results: probability
distribution, risk profile of the
business case
0,55 0,78 1,00 1,23 1,45 • Extended basis for investment
decisions

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Risk Analysis ‐ NPV

Forecast: NPV
1.000 Trials Frequency Chart 988 Displayed
,038 38

,029 28,5

,019 19

,010 9,5

,000 0
-317.277.492 -86.334.971 144.607.551 375.550.072 606.492.594
Certainty is 82,10% from 0 to +Infinity

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
Requirements for T‐E study BP 
– Services Scenarios
• Dimensioning
– Commercial Network Architectures .
• For these services
• Database
• Serving areas
– T-E Model Constructions
• Study period (5 years?)
– Potential market
– Market Shares (e.g operator)
– Pricing
– Runs- Results
– Sensitivity and Risk Analysis
– Evaluation of the results – Recommendation and
Guidelines - Commercial viability

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
Example Models for European Cases

a) FTTx and duct availability

b) Application to TDM-PON and
WDM-PON Access Networks

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

The world of Optics
9Optical technologies currently allow the transmission of Tb/s 
bit rates using Wavelength Division Multiplexing (WDM) on 
the metropolitan are and core network.
9However, there is yet no technology of choice in the access 
network capable of delivering Gb/s access at an affordable 
price (This is the last mile problem).
9Installing fiber up to the customer premises has questionable 
business prospects: Fiber installation may cost as much as 
€80,000/Km (!)
9ADSL and RF technologies eventually run out of bandwidth

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Can we put fiber everywhere (FTTH/O) ?

FTTH NPV vs Duct Availibility

0

200m 1200m 5200m

-50
Passive Optical Network (PON)
DenseUrban
-100
Urban
1:4 1:8 1:8 1:4 1:1
Suburban

NPV M€
-150

`
1:4 1:16 -200
Branching Local Branching Central
Customer Floor Building Cabinet Box #2 Exchange Box #1 Exchange
(LEx) (CEx) -250
65536 16384 1024 256 32 4 1 1
-300

-350
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Duct Availability

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Can we put fiber nearly everywhere (FTTC) ?

FTTC NPV vs Duct Availability

40

200m 1200m 5200m

Passive Optical Network (PON) 20

1:4 1:8 1:8 1:4 1:1

NPV M€
`
1:4 1:16

Branching Local Branching Central

Customer Floor Building Cabinet Box #2 Exchange
-20
Box #1 Exchange
(LEx) (CEx)
DenseUrban
65536 16384 1024 256 32 4 1 1 Urban
Suburban
-40

-60
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Duct Availability

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Why do we even bother?

9Installing optical fibers involves digging up trenches and 
hence costly civil works!
9The prospects of the investment largely depend on the 
duct availability (da).
9In large Western European countries the duct availability 
is 70% so the prospects of FTTC are quite good in dense 
urban areas
9FTTH/O and FTTC prospects severely degrade as the 
duct availability decreases!

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Up Close: Fiber up to the Cabinet

Revenues
Running Costs
Investments (Fiber)
Investments (Other)
15 Cost Breakdown
Cash Flows
Cumulative Cash Flows 40, M €
10 35, M € Cabling
30, M € Digging & Ducting
5
Inhouse Infrastructure
(M€)

25, M €
CPE Equipment
0 20, M € Cabinet Equipment
2006 2007 2008 2009 2010 2011 2012 2013
15, M € LEx Equipment
-5 CEx Equipment
10, M €
-10 5, M €

0, M €
-15 FTTC

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Conclusions (a)

• FTTC and FTTH/O are undermined

when the duct availability is
reduced!
• Other solutions could be
investigated (next session)
• Public authorities could increase
the duct availability

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

TDM vs PON cases ‐ Architectures

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Services Classes and Traffic Assumptions

Dmax Umax
Area Ct Example Interface
(Mb/s) (Mb/s)

Silver Residential 100 10 0.05 FastE / GbE

Gold Residential 300 30 0.05 GbE

Basic Business 500 50 0.05 GbE

Silver Business 1000 100 0.2 GbE

Gold Business 1500 150 0.2 10GbE

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
NPV of the TDM/PON and WDM/PON solution 
depending on the initial year of installation

-8

-10

-12

-14
NPV M€

TDM PON
-16 WDM PON

-18

-20

2007 2008 2009 2010 2011 2012 2013 2014

Year of first installation

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
Sensitivity analysis of the NPV of the TDM/PON and 
WDM/PON with respect to the initial price of the 
optolectronic components

-10

-12

-14
TDM PON
-16 WDM PON
NPV M€

-18

-20

-22

-24

-26
50% 60% 70% 80% 90% 100%110%120%130%140%150%
PON Components Price

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
Sensitivity analysis on the NPV of the TDM/PON and 
WDM/PON with respect to O&A costs

20
0
-20
-40
TDM PON
-60 WDM PON
NPV M€

-80
-100
-120
-140
-160
-180
50% 60% 70% 80% 90%100%110%120%130%140%150%
OA costs

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel
Impact of Tariff Reductions in the NPV of the 
WDM/PON and TDM/PON solutions.

-10 WDM/PON
TDM/PON
-15

-20

-25
NPV

-30

-35

-40

-45
50% 60% 70% 80% 90% 100%
Rate Reduction

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Conclusions (b)

• TDM/PON and WDM/PON are

attractive especially for mature
markets
• WDM/PON Technology is crucial
affected by the price of the
optoelectronic components
• WDM could be the driver for
Europe (for high demand regions)

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
Municipalities Networks

In Greece
 University of Athens
COST
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Ορεστιάδα
Προσοτσάνη
Δράμα Ξάνθη Διδυμότειχο
Σέρρες
Κιλκίς Κομοτηνή
Καβάλα
Φλώρινα Έδεσσα Αλεξανδρούπολη

Αλεξάνδρεια Θάσος
Νάουσα
Καστοριά Πτολεμαίδα
Βέροια

Κοζάνη Πολύγυρος
Κατερίνη
Γρεβενά

Κέρκυρα Ιωάννινα
Καλαμπάκα Γιάννουλη
Λάρισα
Ηγουμενίτσα Τρίκαλα
Ν.Ιωνία
Καρδίτσα
Φάρσαλα Βόλος
Άρτα
Πρέβεζα
Μυτιλήνη

Λαμία

Λευκάδα Αγρίνιο
Αταλάντη

Οινιάδες Ναύπακτος
Μεσολόγγι Άμφισσα Ορχομενός
Χαλκίδα
Αργοστόλι Αίγιο Λειβαδιά Θήβα Χίος
Πάτρα

Ξυλόκαστρο

Ζάκυνθος Κιάτο
Κόρινθος
Αμαλιάδα

Βαθύ
Πύργος Άργος
Τρίπολη Ναύπλιο

Source: www.infosoc.gr
Ερμούπολη

Μεσσήνη
Σπάρτη Πάρος Νάξος

Information Society Καλαμάτα

Ρόδος

Metropolitan Area Χανιά

Municipalities
Networks (MAN’s) Ρέθυμνο
Ηράκλειο
Αγ.Νικόλαος Σητεία

Ιεράπετρα

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
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MAN’s Details

• Constriction of MANs in 75 Cities (12 main regions)

• Total Budget > €62 M
• 750 Km
• 2800 points of Public Interest

Current Citation (Nov 2007)

• 72 RFP have been assigned

• 60 municipalities have a contract
• More than 30 municipalities have ongoing construction
projects

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Main Additional Actions

• Wireless Networks to the rest of the

public interest points (smallest
Municipalities)
• Broadband (mainly xDSL) access to the
90% (geographical coverage) of Greece
(€ 210 M) including 3500 KM of optical
Network

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Layers in an Optical Network

Services and Content

Providers

Operation Active
Infrastructure

Owner -Passive (Dark

Fiber)

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
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Service & Content Providers

Active Net B
Maintenance and Administration of Access

Active Net A
Routers, Switches, Access Points

Physical Infrastructure
Buildings etc.

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Key Points for Operations

• Concrete Business Plan for all

players involved

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

BPlans proposed
Proposed Models
Network
Layers
S1 S2 S3 S4
Content 
& Services
Administration
( Access & 
Maintenance )
Active
Network
Passive
Network

Public
Private Private Neutral Operator
Municipality
Partnership
(PPP)

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Qualitative Evaluation
Public
Ownership- PPP in Private PPP in
Outsource Active initiative in Infra
Administration Layer (S2) Active Layer (S3) Structure (S4)
(S1)
Easy Decision
+++ + ++ ++
Making
Complexity - -- - -
Transparency + +++ +++ ++
Total
Value of +++ ++ +++ ++
Networks
Risk & Required
-- -- - --
Investments
Time
+++ + ++ ++
Scaling
Expected
+++ + ++ ++
Performance
Competition +++ + +++ ++
Functionality +++ + ++ ++
Break-through
+ +++ +++ ++
Participation

TOTAL 20+, 3- 13+, 4- 20+, 2- 16+, 3-

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Technoeconomic Results

Cash Flows

-500.000

-1.000.000

-1.500.000
Euro

-2.000.000

-2.500.000

-3.000.000

-3.500.000

-4.000.000 2008 2009 2010 2011 2012 2013

Cash Flow s MAN (individual) -1.089.783 -2.487.641 -3.591.035 -3.679.727 -3.422.065 -2.938.941
Cash Flow s MAN (Unified) -898.863 -2.055.493 -2.758.608 -2.519.109 -1.947.588 -1.126.404

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

0,80

0,70 Subsidization Scenario B ΣΤΕΛ

0,60 ΔΕΛΛ
0,50
ΚΜ
ΑΜΘ

Euro
0,40
ΠΕΛ
0,30

0,20

0,10

0,00
Operators
1 2 3 4
ΣΤΕΛ 0,61 0,30 0,20 0,15
ΔΕΛΛ 0,22 0,11 0,07 0,05
ΚΜ 0,50 0,25 0,17 0,13
ΑΜΘ 0,42 0,21 0,14 0,10
ΠΕΛ 0,63 0,32 0,21 0,16

1,40

1,20
W/O Subsidization Scenario B ΣΤΕΛ
ΔΕΛΛ
1,00
ΚΜ
0,80
ΑΜΘ
Euro

0,60 ΠΕΛ
0,40

0,20
Operators
0,00
1 2 3 4

ΣΤΕΛ 0,86 0,43 0,29 0,22

ΔΕΛΛ 0,32 0,16 0,11 0,08
ΚΜ 0,74 0,37 0,25 0,19
ΑΜΘ 0,63 0,32 0,21 0,16
ΠΕΛ 1,03 0,52 0,34 0,26

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Integration of Tariff Policy

• MAN administrations in regions (8-

10 MANs) could:
– Reduce rental cost for the Operators
per KM per duct or fiber
– Reduce administrations complexity
– Increase the negotiation ability of
Passive network owners

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
 University of Athens
COST
COST IS0605
IS0605 Econ@Tel
Econ@Tel

Conclusions (Public MANs)

• Private initiative in Active Layer (S3) is

the most attractive scenario following
by the Public Ownership-Outsource
Administration (S1)
• Integration of MAN administration could
reduce the yearly costs in collaboration
with private schemes

Seville 2-4 April 2008 D. Katsianis, et al. Dept of Informatics and Telecommunications
Time for Questions & Answers

D.Katsianis@di.uoa.gr