Traffic and network architecture

Bottom-up Cost Modelling for Bitstream Services in ATM Based Broadband Access Networks (*) Klaus HACKBARTH & Laura RODRIGUEZ DE LOPE Telematics Engineering Group, Cantabria University, Spain Dragan ILIC & Gabriele KULENKAMPFF WIK GmbH, Bad Honnef, Germany

Abstract: This contribution proposes a bottom-up model for determining the cost of bitstream access services. For this purpose a traffic model is developed and a network structure for the corresponding broadband access network (ATM) is determined. The cost model is designed against the regulatory background and respective requirements in cost allocation. In this paper the model is exposed and applied to a network example. Additionally some problems arising for quality of service differentiation in providing bitstream access services are shown and a first approach is indicated. Key words: bitstream access service, broadband access network, cost modelling, regulation.

A

lthough most European telecommunication markets have been liberalised in 1998, incumbent operators still have significant market power in most wholesale markets. According to the European regulatory framework the existence of significant market power requires regulations. With regard to the broadband market, which is under consideration in this contribution, European Regulators decided incumbents to have significant market power in imposed remedies. Among others some national regulatory authorities obliged the incumbent to provide bitstream

(*) Acknowledgement: The research and studies of this contribution are partially financed with funds of the national R+D project TIC 2003-05061 from the Spanish Ministry of Science and Technology, and the Network of Excellence EURO-NGI of the 6th framework program supported by the European Commission, IST-50/7613. Furthermore, the development of a reference specification of an analytical cost model for the broadband network and first software implementations resulted from a project for the German Regulatory Authority, BNetzA (Bundesnetzagentur Bonn, 2005).

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access services at cost based rates 1. This generally implies the application of the forward looking long run incremental cost standard. In order to determine the forward looking long run incremental cost of wholesale services bottom-up cost models are applied by national regulatory authorities (HACKBARTH, RODRIGUEZ DE LOPE, GONZALEZ & KULENKAMPF, 2002). Bottom-up modelling means that a network configuration is studied considering the corresponding services, and demand respectively (HACKBARTH, RODRIGUEZ DE LOPE & KULENCAMPFF, 2005). Forward looking long run incremental cost means selecting the best network technology and an optimal network design without considering historical costs or an already existing network 2. As modern telecom networks integrate various services all of them must be considered for studying the cost increment of a certain service. This contribution treats cost modelling for bitstream access services in broadband access networks because many national regulatory authorities are required to impose regulatory measures on this market and thus a detailed understanding of cost of efficient service provision is of utmost importance. The paper proposes a model for the bottom-up broadband access network configuration, a service classification for considering the service integration inside the network and a cost model for the forward looking long run incremental cost approach. This contribution resumes and actualizes a recent study from the same authors provided for the German regulator BNA-Bonn (Bundesnetzagentur, 2005).

Regulatory background The implementation of bitstream access services is considered to be important for enhancing competition in the broadband market. In this context

1 Of course, not all national regulatory authorities impose cost based regulation on the incumbent operator. In a set of countries less restrictive measures are applied such as eviction tests, retail minus, etc. 2 Despite this clear requirement, most regulators accept a scorched node approach that means that the first location, where the user network interface connects with the network of the incumbent operator is considered.

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ERG 3 defines the main elements of bitstream access as follows (ERG, 2004) 4: - "high speed access link to the customers' premises (end user part) provided by the incumbent; - transmission capacity for broadband data in both direction enabling new entrants to offer their own, value-added services to end users; - new entrants have the possibility to differentiate their services by altering (directly or indirectly) technical characteristics and/or the use of their own network; - bitstream access is a wholesale product consisting of the DSL part (access link) and "backhaul" services of (data) backbone network (ATM, IP backbone)" (MMR, 2003). According to this definition it is important to note, that the bitstream access is not equitable with a combined wholesale product consisting of an unbundled or shared access and a conveyance service in the access network, respectively the backbone. This is because the ERG definition requires that alternative operators must be able to differentiate their services; and a simple resale of the access line does not allow the alternative operator to differentiate access speed 5. The ERG does not define the point of traffic handover, but outlines possible points of access which include access at the DSLAM, the ATM level (parent or distant point of presence) or at the IP level (parent or distant point of presence). Although the ERG's common position is not binding on member states, many countries have already implemented bitstream access services or are about to introduce it. A survey reveals quite a few differences between the implemented services, not at least with regard to the possibility of competitors to differentiate their services. Since the ability for product differentiation is a particular characteristic of bitstream access services, special attention should be paid to the provision of different quality of service classes. It shall be noted, that currently bitstream access services are mainly defined as bandwidth tubes (tunnels) and do not consider the source traffic resulting from the different applications using this tunnel.

3 ERG: European Regulator Group composed of representatives of national regulators, see http://erg.eu.int/ 4 Please refer to the following http://erg.eu.int/documents/cons/index_en.htmn an ERG Consultation document (Draft Common Position) on bitstream access. 5 In its market decision on IP bitstream access the German regulatory authority stressed this issue (Bundesnetzagentur, 2007).

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Traffic and network architecture The implementation of the forward looking long run incremental cost standard in a bottom-up model requires a detailed knowledge of an efficient network configuration and the traffic load on it. In the following we first outline details on the network architecture, and second on traffic patterns.

Network architecture The network architecture for bitstream access services can (at most) be segmented into the following network segments: - subscriber access network, - broadband access network, and - IP core network. Figure 1 - xDSL reference architecture

The broadband access network is required because an IP core network does not connect all the DSLAM locations directly. Hence, the broadband access network covers the section between the DSLAMs and the IP core access provided by a corresponding broadband remote access server. In most European countries this network section is implemented in the form of OSI layer 2 networks, currently with ATM technology. The implementation of broadband access networks under Ethernet technology already started in some countries, but, at the moment, its penetration is still low, (CRAWFORD & VRHEYE, 2003). The model outlined and applied in this paper is still based on ATM technology. Although ATM constitutes an outdated technology (which is about to be replaced by Ethernet) the model considers ATM equipment for the logical network since in European countries bitstream access services are still – to a large extent – based on

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ATM. Regardless of the ATM based broadband access network assumed here, the model calculates the cost for an IP based interface. Depending on the size of the country, the number of customers and their geographical distribution and respective demand, a large ATM based broadband network, at national level, can be composed of an up to four level structure, as shown in figure 2. The first level, or level 0, is composed of pure DSLAM locations, mainly at nodes with a low concentration of access lines. The next level has the objective to concentrate traffic that is streaming from the level 0 nodes. Of course, the assumption is made that there is collocation of level 0 and level 1 equipment in the level 1 nodes. Level 2 and 3 consist of ATM switches providing not only traffic concentration, but also traffic routing in terms of virtual paths switching. The highest level is close to a corresponding IP core location (or even collocated at the same place). At this IP core location the broadband remote access server is installed providing the point of presence functions for getting access to the IP network part. The determination of an optimal number of levels and locations for each one is an important parameter to be studied in regulatory cost studies for bitstream access services. Figure 2 - Hierarchy of an ATM-based broadband network serving as an access network for IP services. BRAS stands for broadband remote access server

Under the four level hierarchy the network describes a three level star topology, shown in figure 2. This network structure can be subdivided into an ATM-access network (level 0 up to level 2) and an ATM-backbone network (level 2 up to level 3). It should be emphasized that the backbone of an ATM network not necessarily has to be part of a bitstream access service. This is

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only the case if (1) a nationwide ATM network is already in place, (2) the IP core network is just about to be established and has less core network locations then the ATM core network. In this case not only the ATM broadband access network but also the ATM core network serves as an access (backhaul) network for IP services. Given a strict hierarchical routing, all IP traffic generated at the DSLAMs is routed up to the corresponding ATM switch at level 3, using different virtual paths for each service class.

Traffic pattern The bottom-up modelling approach requires the knowledge of the traffic flow in the network elements based on the peak load traffic demand. For this purpose detailed description of the traffic resulting from the different services demanded by the subscribers is required for dimensioning the corresponding network elements correctly. The set of broadband access services provides a service class description in the form of a bandwidth tube for different types of users. The capacity of this tube depends on the bandwidth required from the users of the corresponding service class normally determined in the high load period (the high load period is similar to the busy hour in the telephone service). From this the following parameters for each service class can be derived: - equivalent bandwidth in kbps (covering relevant aspects of quality of service, e.g. bit rate, packet loss, latency, jitter); - total number of users for each service; - number of parallel sessions in terms of number of users being active simultaneously in the high load period; - minimum bandwidth guaranteed per user. The key parameter is the so called equivalent bandwidth required from each service in order to allow for an appropriate network dimensioning. The corresponding value must be determined by separate studies for each service because it depends on the maximum, minimum and mean bandwidth required from a service class and corresponding quality of service requirement (e.g. a service requiring a mean bandwidth of 1 Mbps under very small delay and jitter requirement values requires a higher equivalent bandwidth e.g. 1,25 Mbps than a service with the mean bandwidth requirement but allowing larger delay and jitter values e.g. 1,1 Mbps).

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Most broadband access services currently offered are mainly grouped into four different service classes which are shown in table 1. For quality of service provision each service class must be routed in separated virtual paths up to the point of presence of the interconnection to the corresponding core ATM or IP network, mostly at level 2 or 3. The product categories outlined in the following table may provide a reasonable framework capturing the services available in the market and thus serve as a basic assumption in modelling traffic patterns. Table 1 - Broadband access services and its characteristic parameters DSL products

Equivalent bandwidth

Bandwidth guaranteed

Number of subscribers

DSL mass market

Low

No

High

DSL business

Middle

Yes

Middle

IP-VPN enterprises High

Yes

Limited

ATM access

Yes

Strongly limited

High

Network design model The aim of the network design model is to provide an efficient network configuration providing all information on the traffic load and equipment required for its implementation. With this information the total network cost and the unit cost for each service class is calculated accordingly with the forward looking long run incremental cost model. As long as the model follows a scorched node approach 6, the geographical locations of the main distribution frame 7 sites constitute the main input data. From these locations the BAN nodes for the different levels

6 Generally, two approaches are distinguished: scorched node and scorched earth. Scorched earth constitutes a green field approach i.e. all locations of network equipment are subject to optimization while scorched node makes concessions to the incumbent operator acknowledging its existing network locations. Regulatory cost models in general follow scorched node approaches. According to this the authorities take the main distribution frame locations for granted since within a conveyance network every network node hosts a main distribution frame. In our model we make the assumption that DSLAM are collocated at main distribution frame sites. 7 The main distribution frame is the location where the subscriber access network terminates on the network side.

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are selected. This selection is based on the traffic load resulting from the number of subscribers connected and the network design characteristics, such as the number of nodes at each level, network element capacities and the distance between nodes. Figure 3 - Inputs and outputs of the model

Figure 3 resumes the different type of input data which influence the network design and the main figures resulting form the network design. The network design model is divided into five different stages which must be provided sequentially and are shown in figure 4. Figure 4 - Logical structure design stages

The first stage, traffic calculation, evaluates the number of subscribers and traffic load at each node. This stage allows mainly identifying those main distribution frame locations which are not economically accessible for the broadband access network and thus should be discarded accordingly. The second stage, node classification, represents an optimization process based on a p-median model and implemented by a deepest first

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algorithm in relation with the hierarchy of PSTN/ISDN and by considering a minimal distance between nodes in higher hierarchical levels (2-3) to get an equilibrated geographical distribution of these nodes. The assignment of the lower level nodes to the higher ones is being provided by an algorithm based on the shortest geographical distance with a capacity constraint limiting the maximum number of assigned nodes. To be in line with the forward looking approach, information on expected traffic growth and its spatial distribution is required. The third stage, traffic routing, starts from the traffic load at the DSLAMs grouped in virtual paths for the different service classes. This demand, due to the star architecture exposed above, is routed hierarchically to the upper levels. The last two stages provide a complete list about the requirements for the physical transport currently provided by digital signal groups of the synchronous digital hierarchy in the form of corresponding transport modules (STM-N with N = 1,4,16) required on the links between nodes and the ATM network equipments required at each broadband access network location.

Cost model The cost model applied here has the objective to calculate the cost for the provision of bitstream access services in an efficient network. The determination of the efficient network, however, presumes an endogenous optimisation of the network topology. To carry out this optimisation procedure the model refers to geographic information system (GIS) data 8. Apart from this, other cost models do not base their calculation on geographical information, but use instead input parameters. The use of input parameters generally implies an intensive value discussion and provides transparency on parameter settings during the regulatory process. However, commonly these models do not make allowance for endogenous network optimisation and efficiency aspects. Only models which use geographical information system data can carry out these optimisation issues.

8 An other model is the one developed by the French regulatory authority ARCEP. ARCEP’s model is open to public and can be downloaded under www.arcep.fr.

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The cost model under consideration – as already outlined – is applying a total element forward looking long run average incremental cost approach. With regard to the bitstream access service the increment under consideration is defined by the total number of network elements required for service provision. Furthermore, this concept requires that costs of network elements jointly used by multiple services are shared by these services accordingly. In narrowband networks the subscriber access network and the conveyance network constitute regulatory increments. The broadband network service bitstream access considered here includes subscriber access and conveyance network. According to the total element forward looking long run average incremental cost approach in the conveyance network the cost for network elements jointly used by narrowband and broadband services (bitstream) are shared by these services. In the subscriber access network, however, we diverge from this approach and completely assign the cost for the copper line to the narrow band service. This method is reasonable since these costs are borne by the end user anyhow regardless of the cost sharing between the broadband and the narrowband access line service. This copper line is traditionally borne by the PSTN subscription. With the provision of naked DSL services, it becomes necessary to attribute the costs of the copper line to the broadband access service, here bitstream access.

Cost categories and cost drivers Cost models for telecom network cost studies require the identification of corresponding cost categories and cost drivers. The main cost categories applied for cost models in telecom network are direct cost, indirect cost (CAPEX) and cost for operating the network and its services (OPEX). The direct cost are the annualized investment in network units and derived under consideration of the unit's economic life time, its average rate of price change per year and the average interest rate per year which is based on the total change of the price respectively and the interest rate during the unit's economic life time. These variables are part of the capital cost factor which is a formula that considers the expected price change and interest rate development and calculates the annualized investment, i.e. the cost, which is required to keep the network in future. The indirect costs are induced by expenditures that are needed in order to carry out the installation of the corresponding network equipment. The

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indirect investment includes positions such as: motor and vehicles, office facilities, network support, network management and land and building. A bottom-up modelling approach for indirect cost would require an activity based costing model. Because of the great difficulties in specifying such a model, which is supposed to calculate "cost of efficient service provision", bottom-up models generally apply a mark up on the direct investment in order to determine indirect cost. The mark-up can be interpreted as a percentage supplement that has to be added to the investment. After the calculation of the indirect investment has been carried out the indirect cost are annualized by taking account of economic life time, rate of price change and interest rate. For more details on costing methods and their application on telecom networks and services see (COURCOUBETIS & WEBER, 2003; EURO-NGI, 2003). Bottom-up cost modelling is based on a demand driven network dimensioning. Accordingly, cost driver analysis is most important and has to cover all major network elements. Depending on its individual function, the required number of each network element is driven either by the number of connected access lines or the bandwidth. Because an increase of these factors positively correlates with the number of network units and investment in the network, they are also declared as cost drivers. A cost model for bitstream access services has to carry out an analysis of the cost driver for each network element, where the cost driver is the technical parameter acting as a restrictive factor, i.e. that could be regarded as the technical bottleneck of a unit. Table 2 - Cost drivers of network elements for bitstream product Bandwidth

Number of access lines

DSL modem Splitter DSLAM ATM concentrator ATM traffic selector BRAS

Table 2 lists the cost drivers for the network elements considered in the network architecture.In general, each network element is assigned to a single cost driver, but in some cases, as for example given for the DSLAM,

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an assignation to more than one cost driver is required. Here, the number of (customer-sided) incoming line cards depends on the number of access lines, while the number of (network-sided) outgoing transmission systems depends on the user's bandwidth demand. Regarding the infrastructure topology and density constitute important cost drivers. The model applied here, however, is based on GIS data for the main distribution frame locations and thus automatically accounts for topology and the respective geographic distribution of demand.

Service integration and the problem of cost allocation The broadband access network provides service integration meaning all services are using the same network equipment. This method allows realizing economies of scope, which finally lead to reduced cost per service. The simultaneous use of the network unit by muliple services leads to the question how to allocate its cost. For this it makes sense to apply the principle of causation which states that the costs are allocated to each service by its proportionate use of the unit. This implies that the costs of a network unit are borne only by those services whose traffic is routed through them. To apply the above explicted principle of cost causation the different services and their individual traffic routing must be known. The following services are using the broadband access network: DSL mass market products (IP-DSL), DSL business products (IP-other than ADSL), ATM xDSL leased lines and ATM leased lines. The following example, outlined in figure 5, shall be used for illustration of the above mentioned cost causation principle: In this example the ATM leased lines do not bear any cost of the ATM access network because they only use the ATM backbone for traffic transmission. The cost of the ATM access network is allocated to the three remaining access services. In the following the cost per service can be calculated by the fomula: [5.1] CService i = AService_i + bandwidthService i*Bunit where CService_i is the cost borne by service I and A is the cost driven by access lines (i.e. cost for DSLAM incoming cards, cabinet, hardware, software etc.) divided by the total number of access lines. B is the cost

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driven by bandwidth divided by total bandwidth volume routed through the respective element leading to a cost per kbps-expression multiplied by the average bandwidth of service I bandwidthService I. Figure 5 - Typical broadband services and their individual routing in the broadband access network BRAS IP-DSL

Transit Switch

ATM ATMBackbone Backbone

ATM Switch

ATM-Leased Lines

ATM ATMAccess AccessNetwork Network

ATM-xDSL Leased Lines

IP-other than ADSL

IP-DSL 384 kbps 512 kbps 1024 kbps

In comparison to the ATM access network the ATM backbone considers leased lines as additional service for cost allocation, so that the cost for ATM parent and distant switch should be allocated to this service, too. Apart from this the broadband remote access server is exclusively used by IP-DSL traffic, so that this service is completely bearing the cost of this network element. The total cost per service may be driven either by access lines or bandwidth or by a combination of both. Depending on the considered service thus the adequate base for cost determination may differ 9.

9 Moreover the network cost may depend on whether the costs of the unbundled local loop are borne by the broadband network or by the narrow-band network which is not uniformly arranged across the European Union and depends on the respective regulatory authority’s point of view. For example the German regulatory authority Bundesnetzagentur, completely assigns the cost of the unbundled local loop to the PSTN network while the incremental cost for broadband

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The broadband access network transmits the traffic of two main service categories: business services and mass services so that a network operator tends to realize economies of scale. In contrast to competitive Internet service providers having no proper broadband access network and asking for wholesale bitstream access services, the broadband access network operator mostly gains benefits from this, see figure 6. This is because of the following interdependencies: In the case of an ATM based broadband access network, business traffic is routed as ATM CBR services, while mass services are routed as UBR services. ATM nodes give CBR services priority against UBR services, so that compared to mass services the transmission of business traffic tends to be faster. The current xDSL market indicates that UBR services relative to CBR services are mostly dominant. Figure 6 - Typical connection of a DSL customer to its (competitor) Internet service provider server frame location over a broadband access network operated by a different operator

equipment are accounted to the broadband services. This point of view is adopted in this paper and hence the incremental cost for broadband transport in the subscriber access network is assumed to be zero.

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Accordingly, this provides an integration benefit for the CBR service class because of the service benefits from the higher system capacity required for the total traffic and the higher capacity usage resulting from the best effort character of UBR traffic. To study the above mentioned aspects more systematically two schemes should be compared: (a) traffic segregation between CBR and UBR and (b) corresponding separate dimensioning and traffic integration under priority queuing, where CBR traffic compared to UBR is prioritised. The study mentions that CBR traffic requires a larger overhead so that this reduces the effective capacity of an STM-1 link by 44/53, while UBR causes only a 48/53 reduction. A corresponding queuing model for ATMbased BAN results to a G/D/1 scheme, where the arrival process is in the case of an IP-Poisson arrival process modelled by an interrupted deterministic process, where the time interval between two ATM cell bursts caused by an IP-packet is exponentially distributed (ROBERTS, 1992).

3,000 2,500 2,000 1,500 1,000 0,500 0,000

CBR

9, 5

8

6, 5

5

3, 5

UBR

2

0, 5

delay in ms

Figure 7 - Packet delay on a STM-1 output interface with same arrival rate and packet length for CBR and UBR services considering separated tunnels

arrival rate kp/s

A M/G/1 for CBR and UBR in the separate scheme and two level M/G/1 non pre-empty queuing model in the case of integration is used for a first approximation (AKIMARU & KAWASHIMA, 1999). The case assumes the same IP-packet lengths for both traffic classes (L=1,5 koctets) and geometric packet length distribution. Figure 7 shows the system delay for CBR and UBR, where the CBR rate under normal load condition on a STM-1 link is at about 6500-7500 packets. This corresponds to an IP-layer load between 0,50 and 0,62. For the UBR rate results a value between 7,5 and 8,5 p/s corresponding to an IP-load between 0,6 - 0,68. Another inconvenience results from the small number of CBR users compared to UBR which implies mostly that in the ATM access network part a STM-1 link exclusively dedicated for CBR services can not be optimally filled. The

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integration of UBR and CBR traffic in the "priority scenario" avoids the disadvantage for CBR mostly resulting from the separate dimensioning. Figure 8 shows the delay for both service classes in the case of a common traffic load at the STM-1 physical layer of 0,8. The figure indicates the advantage of integration for CBR without any significant deterioration of the UBR delay. The CBR traffic portion lies under 50% of the total traffic load. Figure 8 - CBR and UBR delay in case of service integration and priority queuing for CBR traffic and a constant STM-1 use of 0,8

delay in us

2500.000 2000.000 1500.000

CBR

1000.000

UBR

500.000

0. 75

0. 6

0. 45

0. 3

0. 00 0

1 0. 15

0.000

CBR use factor

This small study refrains from analysing additional integration benefits resulting from the fact that the high load periods for business traffic and mass market traffic differ. Here the dominant position of mass market services in the high load period is not considered. The different aspects of an integration benefit for both traffic types are resumed in table 3. Table 3 - Comparison of the integration benefit for CBR and UBR traffic classes Type of integration benefit

CBR

UBR

Improved use of transport capacities yes

no

Different high load period

yes

no

Delay reduction

yes

no

Temporal free capacities

no

yes

Under these circumstances a dominant broadband access network operator who transports mass service traffic for an Internet service provider gets a competitive advantage in cases where the integration benefit of the different traffic types into common STM-N links and node equipment is not considered or "not correctly distributed". An assessment of the integration cost benefit can be calculated by the difference between costs of separate

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dimensioning and integrated dimensioning. With regard to cost allocation this benefit could be distributed according to the traffic shares of CBR and UBR. Of course, the dominant allocation rule for this integration benefit does not exist. The outlined 2 service approach can be extended to multiple traffic categories. A typical multi-traffic scheme may comprise of OAM and signalling traffic as highest class, a second level traffic class for virtual private networks, a third level traffic class for users with VoIP service and a standard traffic class for users requiring only traditional best effort traffic

Application of the model and first results The following study illustrates the impact of relevant parameters for the bitstream access services' total cost by applying a ceteris paribus analysis 10. Starting from a base scenario a change in the number of DSL users, number of DSLAM sites, port card density and average bandwidth is gradually carried out allowing an analysis of each parameter's influence. The input parameters for the different scenarios are shown in table 4. Table 4 - The scenarios and their parameter levels No. Access lines Base scenario

No. DSLAM sites (*)

Port density (**) per line card

Average bandwidth

47000

60

38

100

Scenario 1

107000

60

38

100

Scenario 2

107000

60

48

100

Scenario 3

107000

60

48

200

Scenario 4

107000

100

48

200

(*) The scenario assumes an alternative broadband access network operator that starts to implement a proper broadband access network limited to the main cities (**)The port density specifies the maximum number of subscribers that can be connected to a line card and each DSLAM can accommodate up to 15 line cards.

The model calculations are based on a constructed network which emulates a Spanish broadband access network under a limited number of DSLAM sites (60 or 100 respectively) allowing DSL realization in high and

10 The following analysis addresses the impacts on the costs of the broadband access network only, and does not consider the costs of the subscriber access line which is also part of the bitstream access product.

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middle sized cities. The example is based on public geographical data and public information on the number of PSTN/ISDN access lines in Spanish cities. The figures 9 and 11 illustrate the total investment per acess line and resulting cost parts (Cost part A and B) per scenario. Figure 9 - Total investment per access line (in €)

3

4 Sc en ar io

2 rio

Sc en ar io

1 Sc en a

Sc en ar io

Ba se

Sc en ar io

8 000 6 000 4 000 2 000 0

Figure 9 shows almost similar values for all scenarios except for scenario 4. The higher investment per access line results from the strong increase in the number of DSLAM sites leading to additional investment. Figure 10 - Monthly cost per access line resulting from the fixed cost part A from formula [5.1] (in €)

3

4 Sc en ar io

Sc en ar io

1

2 Sc en ar io

Sc en ar io

Ba se

Sc

en ar io

6 5 4 3 2 1 0

The monthly fixed costs per access line shown in figure 10 indicate two relevant level variations. The cost per access line increases significantly in the case of rising DSL access lines (Base Scenario -> Scenario 1) and in the case of a higher number of DSLAM sites (Scenario 3 -> Scenario 4). Regarding the first case, a higher number of access lines has to be accommodated by additional DSLAM units, so that relative to the base scenario the fixed cost per access line may rise if each DSLAM unit accommodates a lower number of lines. Scenario 4 shows a similar cost causation. In relation to the other scenarios here the number of DSLAM sites is set higher, so that the number of DSLAM units tends to rise. In

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comparison to scenario 3 the number of access lines per DSLAM unit decreases while the total cost per DSLAM remains constant, so that the average cost per access line increases.

0,14 4 io

Sc en ar

io

3

0,22 Sc en ar

io

2

0,23 io

1

Sc en ar

Sc en ar

Ba se

Sc en ar

io

0,44

0,5 0,4 0,3 0,2 0,1 0

0,12

Figure 11 - Monthly cost per bandwidth unit (Kbps) (*) – Cost part B (in €)

The total traffic transmission [in kbps] mostly results from the number of access lines multiplied by the average bandwidth per access line in the high load period. As the number of access lines and average bandwidth differ from scenario to scenario, the total traffic transmission rises from the base scenario to scenario 4. The growing traffic volume allows the realization of additional economies of scale and decreasing monthly cost per bandwidth unit. Figure 11 shows this effect. The value for scenario 4 is slightly higher than for scenario 3 due to the extension of the xDSL coverage. The above listed results indicate that an increase of access lines per DSLAM side mostly leads to significant CAPEX cost reduction per subscriber, moreover in the case where a broadband access network operator limits its xDSL offer to sites with high access line concentration. In contrast, an expansion to sites with smaller population or rural zones increases the cost per access line so that, if the number of potential access lines is lying below a certain threshold, the usage of alternative broadband access solutions, e.g. SkyADSL, WIMAX, PLC etc, should be studied. Increasing bandwidth per access line implies a cost reduction, too. This effect becomes even stronger when Ethernet technology substitutes the current ATM implementations 11.

11 Many European incumbent operators already started to or announced to implement Ethernet technology in the broadband access networks. This technology invention is mainly driven by lower price and increased capacity, which is expected to become of utmost importance with the introduction of multimedia services, especially IP TV.

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Conclusions and future work This contribution addresses the regulatory challenges associated with the implementation of bitstream access services. The models and the corresponding implementation in form of a network design and cost analysis tool forms a framework for future applications for regulatory cost studies. For this purpose the models and tools can be extended and adapted to the national particularities. The current implementation of the model 12 developed by WIK Consult and the Telematics Engineering Group of the University of Cantabria called TAROCA-BAN 13, allows to study a number of regulatory cost related issues. Among others these comprise of - optimal design of the network structure and topology, - infrastructure sharing with the PSTN/ISDN, - outsourcing of parts of network, - tariff determination by element based cost analysis, and - break even point cost analysis. Future work will consider with more details the modelling of the integration benefit under different broadband access networks quality of service management strategies and various service classes (GARCIA & HACKBARTH, 2006). Also the evolution path from a pure ATM broadband access network over a ATM, Ethernet hybrid broadband access network up to pure Ethernet broadband access network and its consequence to the network design and cost model have to be considered (ALCATEL, 2005).

12 This tool is specified and implemented under a complete modular concept using an object orientated approach. This allows a strong reuse of software parts in different tools and decreases significantly the time of the software design. Algorithms are completely separated from the graphical interface which allows an easy data exchange with the user. 13 TAROCA means Traffic Routing and Cost calculation. WIK-consult in collaboration with GITUC have already developed under this label a set of forward looking long run average incremental cost tools for regulation of interconnection prices in PSTN/ISDN and GSM mobile network (HACKBARTH, RODRIGUEZ, GONZALEZ & KULENKAMPFF, 2002; HACKBARTH, RODRIGUEZ & KULENCAMPFF, 2005).

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