Strategies for transforming fixed networks
Through its work with multiple operators in the transformation of their fixed networks, Bell Labs Consulting has discovered that operators should modernize their broadband access and voice telephony networks at the same time. We discuss how operators with both kinds of networks can take advantage of network transformation synergies to obtain significant savings.
Fixed network challenges
Fixed Service Providers offering voice and broadband access (BBA) services face several challenges to maintaining their competitiveness and profitability. BBA customers demand increasingly higher speeds, up to 1 Gbps, driven by the growth of internet-enabled devices and video-centric services. Fixed Service Providers who do not keep up with the growing demand risk losing their customers to competitors. Plain old telephone services (POTS), on the other hand, do not face the same competitive issues. Rather, the challenges are operational, especially as per line operational costs escalate:
- Switching equipment is reaching end of life
- The service provider’s POTS operational workforce is reaching retirement age
- The base equipment is being shared among fewer and fewer subscribers.
At some point, the traditional public switched telephone network (PSTN) will either reach technical end of life or the cost per sub will reach a tipping point requiring more cost-effective platforms being made available. In the case of voice-only subscribers, the business case for doing the migration must be based on the savings obtained. There are no new revenue streams that will result.
Transformation options for the PSTN operator
Fixed Service Providers facing the escalating cost per subscriber of their PSTN platforms have a series of options, the two most popular being IP based Voice over Broadband or Voice over Narrowband solutions:
Migrate subscribers to IMS using Voice over Broadband (VoBB) Sometimes referred to as “commercial migration”, this option encourages subscribers to migrate to a service bundle where the voice telephony service is provided over a broadband connection as Voice over IP (VoIP). It uses a Residential Gateway (RGW) or Interface Access Device (IAD) to provide VoIP along with other services such as video or internet. As it is the most effective way to migrate them, it is worthwhile for the Fixed Service Provider to offer incentives to current POTS customers to switch to a double play (voice and BBA) or triple play (voice and BBA and video) service.
Migrate to an IMS Voice over Narrowband (VoNB) or ePOTS solution In areas where broadband access is offered but there are subscribers who only want voice service, an analog service provided by a copper line terminating at a multi-service access node (MSAN) is a possible solution. The MSAN may also terminate broadband access services (fiber or copper-based) for other subscribers in the area and may be located in the central office (CO) or in a street cabinet. In this option, the service is migrated but the interface to the subscriber premises remains unchanged. This is also referred to as “technical migration”.
Operators also do have other options at their disposal to complement the two approaches above such as sweating the PSTN assets, extending their life as much as possible or using the mobile network to emulate POTS service.
A graphical representation of the options is shown below.
While commercial migration requires the consent of the customer to perform the migration and implies the addition of a broadband access service to a voice only customer, technical migration can be implemented with limited or no customer impact.
Access transformation options
In order to provide higher access speeds over twisted-pair copper lines, Fixed Service Providers have various options, all of which depend on extending optical fiber deeper into the network. Fiber can be extended all the way to the customer premises using a solution such as GPON, or it can terminate at a street cabinet or distribution point, such as a CO, with the existing copper plant being used from that point to the customer premises.
Advances in xDSL technologies, such as vectoring, Vplus and G.fast, enable service providers to offer higher speeds over copper plant, thereby extending its life. The best solution to meet the needs of a particular serving area is determined through a complex techno-economic analysis accounting for a wide range of criteria including the density of the homes, bandwidth demands, customer demographics, condition of the existing copper plant, prevailing labor rates, etc.
In cases where a street-cabinet-based solution is used, deploying a hardened MSAN with IP Line Access Gateway (LAG) functionality allows broadband and narrowband subscribers to both be served.
Total cost of ownership and business case
OPEX savings predominantly drives the business case for PSTN migration. Transforming a copper-based POTS service platform to IP access is transparent to the customer and can provide opportunities for introducing new service revenue through WEB-RTC and bundled services.
Bell Labs Consulting recently completed a study with an incumbent Fixed Service Provider in Eastern Europe that had an embedded base of legacy PSTN equipment from multiple vendors that was approaching end of life. At the same time, the Fixed Service Provider was looking to upgrade its fixed broadband access infrastructure to maintain a competitive position against cable, second operators and wireless service providers. Bell Labs Consulting performed a comprehensive analysis, looking at their fixed access network, their PSTN and the overall market demand in the serving areas. As part of this analysis, a stand-alone business case for PSTN transformation was created and compared to a business case for doing PSTN transformation concurrently while the access network was also being upgraded.
The comparison of the results showed that the key financial metrics of the business case improved when the fixed access and PSTN transformations were conducted concurrently. The break-even-payback (BEP) period was reduced by one year and the net present value (NPV) for the project was also improved by 150 percent, primarily due to the shared cost of the street cabinets, which terminated the copper loops for both the PSTN analog and xDSL lines. As well, the cost of labor was shared between projects by using the PSTN workforce on the larger transformation project (with some retraining). The grooming and re-homing of legacy switches to fewer hosts in the areas where no broadband access rollout was planned in the short-to-medium term to improve the PSTN transformation business case further. The combined improvements resulted in a reduction of the overall PSTN transformation payback by more than 3 years. The NPV and Internal Rate of Return (IRR) of the access and PSTN transformation combined improved by 23% and 20% respectively, and created a compelling business case for the service provider.
When planning a transformation of the access and PSTN networks, there are other key factors that should also be considered in addition to those already presented:
The overall access and PSTN transformation plans must be aligned to derive the full financial and technical benefits. The access network is typically transformed based on distribution areas (DAs), while the PSTN is done based on COs. Voice and broadband access network transformations are often managed by different organizations within the service provider’s business. A successful transformation requires the coordination of plans and schedules for PSTN and access across all organizations within the company.
The order in which the serving areas and COs are transformed can have a significant impact on the overall business case. In the example below, it can be seen that approximately the top 15 percent of the COs in the serving area account for 80 percent of the potential OPEX savings. Since a transformation can take several years to implement, it is desirable to have a prioritized plan where the costliest COs are done first. A delay in the transformation of a few offices can make a significant impact on the overall business case.
Additional savings can be obtained by further network integration and asset consolidation. Examples include convergence of network layers, such as IP and optical in the core, virtualization of key network functions, or the merging of traditional silos such as in the fixed and mobile infrastructures.
There may be cases when a full transformation of the network is not the optimal course of action in the short to mid-term. A surgical approach tends to work best, by focusing the access transformation in high value areas. This allows the service provider to maximize the benefits received from the transformation effort. In areas where it is uneconomic to deploy an MSAN infrastructure for access and where PSTN migration itself cannot be justified, additional PSTN savings can be gained by re-homing the PSTN lines to a smaller number of TDM switches and/or performing switch grooming. Such network optimization activities can provide significant savings through reductions in power consumption, floor space and other operations cost.
Access Network transformations and legacy PSTN network retirements can also provide additional savings and revenue opportunities. Optimizing the overall network architecture and streamlining the operations can realize cost efficiencies, but it can also create the capability to generate additional revenues through new services, reduced churn and improved competitive positioning.
Transforming legacy PSTN networks and upgrading broadband access might seem at first glance to be costly and have separate challenges. However, fixed network services providers can leverage synergies by transforming their fixed access and PSTN at the same time, also implementing other cost saving activities to achieve compelling business cases. As demonstrated by Bell Labs Consulting with numerous customers, additional cost savings can be achieved by realizing synergies between multiple network segments while they are being transformed, including fixed access, IP and transport packet networks.
Click here for more information on how the Nokia PSTN Smart Transform solution can help Fixed Service Providers migrate to an efficient ultra-broadband IP network architecture that reduces cost and unlocks new revenue opportunities. To learn more about how Bell Labs Consulting can help tackle critical challenges with transformation please click here.
The authors would like to acknowledge the contributions of Jean-Philippe Joseph and Azfar Aslam to this article.
 An analysis done by Bell Labs Consulting for a specific customer provides more information on these criteria along with the total cost of operations (TCO). It can be found at https://insight.nokia.com/vdsl2-and-gpon-study-finds-sweet-spots.