DSTI/ICCP/CISP(2007)2/FINAL
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There are different available options for high-speed to networks development which private
companies need to evaluate in making investment decisions and adopt the approach more in line with
existing infrastructures and market conditions.
There are different views regarding the cost effectiveness of investing in VDLS (FTTN). Some
operators in OECD countries are upgrading their networks to VDSL (FTTN), as it provides significantly
higher capacity – both upstream and downstream – than current ADSL technologies, at the same time
allowing for a quicker deployment at a lower cost compared to FTTH networks. Other operators prefer to
deploy directly FTTH networks, considering their higher performance and scalability, and therefore their
capability to meet future bandwidth demand. In terms of cost, there is still debate as to the most efficient
investment strategy for fibre. Arguments have been made that VDSL (FTTN) which in the short term is
lower in terms of capital expenditure is not cost-efficient since VDSL has higher operational expenditure
than FTTH (PON) technology since FTTH active electronic equipment is managed in the Main
Distribution Frame and not dispersed across a number of curb-side boxes.
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In addition, only some of
FTTN investment expenditure can be reused for FTTH so that the eventual upgrading of a VDSL network
to a FTTH network in order to attain higher capacity might finally cost more than directly building a FTTH
network.
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. At the same time FTTN is often chosen as the preferred technology since it allows a more
rapid network deployment, giving the operator a first-mover advantage, with a lower capital expenditure.
This is particularly relevant considering that it may be difficult for operators to justify heavy investment in
fibre with their shareholders, as at the same time they are being confronted with higher debt ratios and not
necessarily higher revenue streams, at least in the short term.
For regulators FTTN increases complexity in discussions on sharing and unbundling of networks.
With fibre rolled out to the node, there is less need for local exchanges in the network. The street cabinet
functions as an exchange. For alternative operators who used the unbundled local loop, the business case
is often not positive
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since to access customers using the incumbent’s loop they will need to invest up to
the node. Furthermore they will possibly need to invest in a street cabinet which has power and air
conditioning (creating problems at the municipal level) and it is not clear whether they can unbundle since
electrical interference may prevent this. Some incumbents have indicated that they will sell their Main
Distribution Frame (MDF) locations in order to finance VDSL roll-outs which could strand the investment
of new entrants unless adequate regulation is put in place to ensure that new entrants are given adequate
time to invest in alternatives before main distribution frames are dismantled. The viability of sub-loop
unbundling has been questioned by some experts in particular because the costs involved for new entrants
to roll-out their network to a street cabinet will require that they obtain a relatively high market share in the
specific geographic market.
In summary, where adequate facilities-based alternatives are unlikely to develop, the network
architecture chosen by incumbent telecommunications operator for their next generation access network
will have important implications for access and competition in the communications market. Most of the
fibre access solutions are based on a network topology where it is much harder, technically and/or
economically, to unbundle loops. Wholesale broadband access, much as bitstream access in xDSL
markets, can provide some service competition, but is insufficient in the long run in providing effective
competition. The development of fibre networks requires those regulators that have mandated local loop
unbundling (LLU) should assess the economic and technical feasibility of continuing LLU policies in their
country, taking into account investment plans of the incumbent, the presence of alternative network
infrastructures, and the characteristics of particular markets, amongst other things, in order to begin to
determine the best regulatory framework to ensure effective competition. In addition, ensuring sub-loop
unbundling, where this is feasible, access to rights of way and ducts for new entrants, regulations for
backhaul from street cabinets, and regulations for sharing inside wiring of buildings are measures that can
reduce barriers to competition, both to promote facilities-based competition and to enable certain
unbundling polices as fibre is deployed further into the access network. In those countries that have not