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ITU workshop, 07/09/03 — 1 All rights reserved © 2003, Alcatel
An Industry View of NGN Wireline
Geneva July 9, 2003Jean-Pierre LartigueVP Business Strategy, Fixed
Networks
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ITU workshop, 07/09/03 — 2 All rights reserved © 2003, Alcatel
Optical Core
Multi-protocol IP/MPLS/ATM
Core
Towards a Smarter Consolidated Network
ConsolidatedConsolidatedServices PoPServices PoP
Any Any AccessAccess
Any Any ServiceService
AnyAnyBackboneBackbone
Metro Ethernet Aggr.
Multi-serviceATM Aggr.
Multi-serviceOptical Aggr.
BroadbandAccess
IP/MPLSCore
Networkmanagement
SwitchingEvolution
Traditional VPNsLeased Lines
Internet AccessIP-VPN
IP-VPNEthernet VPN
Hosted Services
Services for Mission Critical Business Aplications
RoutingEvolution
Application servicesApplication services
Edge network
MPLS
G-MPLSG-MPLS
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ITU workshop, 07/09/03 — 3 All rights reserved © 2003, Alcatel
NGN Wireline/Voice, an evasive market?
Softswitching investment Market by IDC
0
1,000
2,000
3,000
4,000
5,000
6,000
2000 2001 2002 2003 2004 2005
Million $
June 2000 August 2001 July 2002
DelayDelay
Declin
eD
eclin
e
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ITU workshop, 07/09/03 — 4 All rights reserved © 2003, Alcatel
NGN Wireline covers three market segments
> Competitive Voice:Competitive Voice: Long Distance Bypass & local competitive basic IP Telephony
> Broadband NGN:Broadband NGN: New business and high end residential Broadband services, including Voice + services
> PSTN evolution:PSTN evolution: Incumbents’ traditional Voice Local & Long Distance/transit services
Different dynamics - different solutions requirements
Common NGN building blocks
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ITU workshop, 07/09/03 — 5 All rights reserved © 2003, Alcatel
Broadband seen as a key catalyst across segments
0
1000
2000
3000
4000
2001 2002 2003 2004 2005 2006
PSTN evolution
BB NGN
Competitive voice
WW NGN
CAPEX(Mio €)
Source: Conservative analysts perspectives for Softswitch, C-AGW and TGW market
WW NGN Voice Equipment market (1)
Voice over BB competition
New BB services•Managed
communications.•Multimedia
PSTN & BB convergence
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ITU workshop, 07/09/03 — 6 All rights reserved © 2003, Alcatel
(1) Regulation, competition offering and perceived end-users needs
Market perspective for Competitive VoiceAn early growing niche market
> Long Distance Bypass:Long Distance Bypass: a proven NGN voice service
• Alternative Long Distance for Competitive operators
• Bypass to out-of-region for incumbents
> Internet (PC) TelephonyInternet (PC) Telephony deployed in some countries
• Niche service to High End residential or businesses
> Emerging Residential Voice over BroadbandResidential Voice over Broadband competition
• Yahoo BB Japan (1.6 Mio Subs), Voice over Cable (2.9 Mio Subs)
• Cheap basic telephony bundled with High Speed Internet
• Yahoo example: $3.3/subs/month & $0.06/3minutes (local, LD,US)
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ITU workshop, 07/09/03 — 7 All rights reserved © 2003, Alcatel
Market perspective for Broadband NGN Premises of a new Broadband Economy market
Source: Jefferies & Company, RHK, Yankee Group
Subsc
ribers
(0
00
)
Total CAGR = 47%Total CAGR = 47%
DSL49%CAGR
Cable41%CAGR
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2001 2002 2003 2004 2005
DSLCableSatelliteFWAFTTU/Other
DSL annualized service provider revenue end 2002 > 14 Bn € Starts to compensate for voice revenues erosion Growth rate continues at > 2M lines per month
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ITU workshop, 07/09/03 — 8 All rights reserved © 2003, Alcatel
Market perspective for Broadband Grow Broadband services value in three waves
TIME
Business Access
High Speed Internet access
$
Residential Multimedia
Today
Address new audiences (PC, TV, console) with new services (gaming, personal communication,
content sharing)
Move aggressively into
HSI
Build on existing infrastructure & start with underserved SOHO segment
Observed timeframe to generate positive contribution• For an incremental Consumer: 12 to 14 months• For an incremental Business subscriber: 4 to 6 months
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ITU workshop, 07/09/03 — 9 All rights reserved © 2003, Alcatel
Market perspective for Broadband NGN Raising Managed Communications for Small businesses
End-user segments
ServicesProfile
Full hosting seekers(45%)
• Hosted IP PBx• Web call centers• Web hosting• Hosted messaging• IP Videoconferencing• E-commerce
Conservatives(25%)
• Traditional voice• High Speed Internet
Average access needs - no real leading service
Networkers(30%)
• IP & Voice VPNs• Web call centers• IP Videoconferencing
Remote worker or Multi site & remote
Stronger interest in turn-key solutions
Source: Alcatel end-users analysis
Secu
rity & m
ob
ile office
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ITU workshop, 07/09/03 — 10 All rights reserved © 2003, Alcatel
Market perspective for Broadband NGN Telephony, embedded in BB residential services
Music download VOD
Video/audio streaming
On-line gaming
Entertainment content
E-mail, chat, and instant message
Unified messaging
PC- and cable-based telephony
Video conferencing
Commun-ication
Walled Gardens, security
Virtual models and toursEnabling /
Productivity tools
“Click and talk“ audio/video support On-line care
Embedded BB NGN telephony services
Wired &
unwired
connectio
n
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ITU workshop, 07/09/03 — 11 All rights reserved © 2003, Alcatel
Market perspective for Broadband NGN Telephony, embedded in BB residential services
Music download VOD
Video/audio streaming
On-line gaming
Entertainment content
E-mail, chat, and instant message
Unified messaging
PC- and cable-based telephony
Video conferencing
Commun-ication
Walled Gardens, security
Virtual models and toursEnabling /
Productivity tools
“Click and talk“ audio/video support On-line care
Embedded BB NGN telephony services
Wired &
unwired
connectio
n
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ITU workshop, 07/09/03 — 12 All rights reserved © 2003, Alcatel
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ITU workshop, 07/09/03 — 13 All rights reserved © 2003, Alcatel
Market perspective for Broadband NGN Home networking: a key dimension for futureAlice’s Video portalAlice’s Video portal
Alice’s PhoneAlice’s Phone
Alice’s HomeAlice’s Home
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ITU workshop, 07/09/03 — 14 All rights reserved © 2003, Alcatel
Market perspective for Broadband NGNBB NGN net contribution to an Operator’s wireline business
Source: Alcatel analysis, (1) includes full cost impacts (billing, network management, network impact); HIS: High Speed Internet, BBE: Entertainment
Share of operators’
Wireline value (% NPV DCF )
1,3%
1,0%
0,7%
0,5%
0,1%
21,6% 25,3%
Hoted IP PBX Messaging Video conf. IP Phone Messaging HSI, VPN & BBE Total BB
BB NGN BB NGN BusinessBusiness
BB NGN BB NGN ResidentialResidential
Hosted
IP PBX
Messa-ging
Video-conf.
IP Phone Messa-ging
HSI, BBE, VPN
Total
BB
3.6%3.6%
Payback: ~12 months Payback: ~30 months
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ITU workshop, 07/09/03 — 15 All rights reserved © 2003, Alcatel
Market perspective for PSTN evolutionNot yet a shift from PSTN to full NGN
> Traditional switching telephony is Traditional switching telephony is still still preferred choicepreferred choice
• Economically competitive
• Optimised (voice services regulation & feature) & robust
• Existing investment protection
> Operators anticipating evolution towards NGN Operators anticipating evolution towards NGN
• Network consolidation opportunities
• Replacement of end-of-life TDM technology
> Evolution scenario and timing specific to local situationsEvolution scenario and timing specific to local situations
• Constraints of legacy architectures
• Feature parity requirements
• Broadband penetration
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ITU workshop, 07/09/03 — 16 All rights reserved © 2003, Alcatel
Market perspective for PSTN evolution~25% estimated OPEX savings for large deployments
TDM drawbacks
• Layered & meshed network
• Many network nodes
• Large footprint per node
• Dedicated networks for individual services
NGN voice improvements
• Self managing• More flat networks
• Less # service-related nodes
• Reduced # switching ports • Lower site costs per node
• Shared voice & data resources • Centralised management• Reduced transmission capacity• Cheaper new SW development
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ITU workshop, 07/09/03 — 17 All rights reserved © 2003, Alcatel
Market perspective for PSTN evolution Upfront CAPEX remains the key barrier: C4 networks
Note: CDE included. Important impact on 200K project. Network description in note page
Relative C4 equipement Cost (%)
0
20
40
60
80
100
120
140
TDM 1 hop
TDM 50% 1 hop50% 2 hops
TDM 2 hops
NGN with trunking
gateway
Complex C4 networks replaced with NGN
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ITU workshop, 07/09/03 — 18 All rights reserved © 2003, Alcatel
Market perspective for PSTN evolution Upfront CAPEX remains the key barrier : C5 networks
Large obsolescence or
extension in BB markets
• NGN Voice comparable with TDM costs
• C5/NGN replacement under consideration
• Risk hedging (maintenance, failure, BB Voice)
• Fast PSTN/BB access synergies
Other situations
• Primary TDM investment
• NGN-readiness of the infrastructure
• BB, the main next investment wave
Limited obsolescence
or extension
• TDM still advantageous
• No major C5/NGN replacement
• Gradual access (& mobile) synergies
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ITU workshop, 07/09/03 — 19 All rights reserved © 2003, Alcatel
In summary
> NGN build out will occur from three different markets
• Competitive voice, Broadband NGN & PSTN Evolution
> Broadband, a key catalyst to opening the opportunities for new NGN services
• Basic voice over BB
• Managed Communications for SMEs
• Embedded telephony in new residential BB services
> PSTN will progressively be improved with NGN components
• Converging PSTN & BB infrastructure over time
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ARCHITECTS OF AN INTERNET WORLDARCHITECTS OF AN INTERNET WORLD
Questions and comments