Key Factors in Developing and Evaluating an IPTV Business Case

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Key Factors in Developing and Evaluating an
IPTV Business Case
November 2005 Jack Barrett Director Business and
Financial Analysis Juniper Networks
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Objective

• Understand the economics of IPTV services to
  support Capital Investment decision making
• Answer
• What Impacts Demand?
• What impacts Capital Investment?
• What Impacts Operational Expenses?

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Anatomy of Opex, Capex, ROI/TCO in the Network
Edge (Capex)
Core (Capex)
Facilities (Opex)
Total Costs Of Network?
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Economics of IPTV

• Calculating Traffic and Circuits
• Applications
• Take rates
• Total peak bandwidth
• Network Architecture and Engineering Rules
• Capital Investment
• Architecture and number of POPs
• Line Card Protection
• Efficient Scaling
• Operational Expenses
• Running Costs
• Network Management
• Customer Care
• Remediation Costs
• Pricing Analysis (not covered here)
• Market Based vs. cost plus
• Service Costs and Partnerships

To compare alternative implementation we use the
traffic models capital deployment and cost models
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Application Requirements

• Internet Traffic
• 100K per ADSL2 Connection growing at 2 per Year
• Over-subscription 501
• Concurrent peak usage 50
• Penetration S-curve approaching 75 saturation
  value
• VoD Traffic
• Bandwidth 3.5 M per growing at 5 per year
• Oversubscription 11
• Concurrent peak usage 12
• Penetration S-curve approaching 35 saturation
  value
• Broadcast TV
• Bandwidth 3.5 Mbps growing at 5 per year
• 400 channels
• 75 channels being viewed
• Penetration S-curve approaching 40 saturation
  value
• IP Phone
• Average Bandwidth 40Kbps per second
• Oversubscription 51
• Concurrent Peak Usage 35

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Market Size and Penetration of Applications
Network connections will drive OpEx costs (ie
provisioning, monitoring, etc) and will determine
revenue (Price connections) Each connection
will subscribe to various services with a high
majority choosing VOD. This factor is especially
important over time as new unicast based
applications drive additional traffic volumes.
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Total Traffic Load
This chart shows 12 VOD concurrency driving over
90 of your traffic as non-aggregated downstream
unicast. This should drive a question in your
IPTV economics evaluation as to the value of
aggregation for a small percentage of multicast
traffic.
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Reference NetworkSet the Network Architecture

• GE connectivity from DSLAM to Aggregation and/or
  BSR
• 10 GigE between Aggregation and BSR
• 10 GigE between BSR and Core or Video Servers

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Converting Bandwidth to CircuitsAssumptions
Impacting Deployment

• Circuit Utilization 75
• Percent of traffic to core 98
• Oversubscription 11
• No protection on facilities from DSLAM to
  aggregation layer
• 11 Facility protection (active and non-active)
  from DSLAM to Agg and from Agg to Core

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Circuits Required to Support Demand and
Architectural Design

• Traffic is converted to Circuits based on design
  criteria and number of locations
• Note that some aggregation can be achieve in
  first two years due to lightly loaded DSLAMs
• Modeling tool can be used to optimize the
  deployment of Aggregation points and BSR
  locations by setting the number of each to 1
• The number of chassis when setting locations to 1
  generates optimum number of chassis to carry
  traffic
• Will be a trade-off however between back haul
  costs and capital by spreading optimum number of
  chassis across network

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Closer look Average Utilization of DSLAM
Facilities

• Circuit utilization at 25 year 1 makes
  aggregation possible in the first year
• Requires constant monitoring year 1 to year 5 for
  growth (OpEx)
• Note modeling tools takes this into account to
  forecast optimal number of circuits based on
  utilization and traffic rules

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Networking Capital Investment

• At this point, we know how many circuits are
  needed based on traffic and number of locations,
  so capital can be estimated based on
• Network Architecture
• Number of boxes required in solution
• Number of locations for each type of equipment
  such as DSLAMs, aggregation, and routing points
  and growth
• Costs and associated capacities of equipment and
  line cards used to terminate the ports
• N1 Line Card Redundancy
• Scalability
• Server Placement
• Dependent on Cost structures
• Trade-off between capital, bandwidth and
  management costs

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Architecture Choices Distributed vs. Centralized

• Model 1. Centralized with Direct connect to DSLAM
• Will minimize operational expense and scale the
  best
• Potentially minimizes capital expenses
• Enables option to use existing aggregation
  capacity or a mix between Model 1 and 2 to
  optimize
• Model 2. Centralized with simple Aggregation
  Layer
• Provides a simpler device to management to
  minimize opex
• Potentially lowers Capital in cases where there
  are low utilized DSLAM or there is an existing
  aggregation layer
• Model 3. De-Centralized Network Intelligence
• Puts network intelligence in less expensive
  equipment throughout network
• Potentially increases costs by adding more
  complex equipment

Model 3 BSR with split functionality

• L2 Aggregation
• Subscriber Mgmt
• Queuing
• Rate limiting

• BRAS
• Routing intelligence
• Protocol mgmt

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Impact of N1 Line Card Protection
1 1 Redundancy Could cut the effective bandwidth
half or risk reduced service availability
R
R
R
R
R
R
R
R

• MPT

• BRAS

N1 Has little impact on capacity of equipment
R
R

• BSR

10G ingress

10G egress

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Impacts on Scalability

• Example With little or no over-subscription an
  increase of 10 Gig per POP will
• Single Box requires one additional 10 Port GE
  Card and 1 additional 10Gig Card on egress
• An Aggregation switch doubles the number of cards
  needed
• If N1 line card protection is not available,
  then the number of card doubles again
• Potentially this could be a 41 ratio

Added Line cards, N1 protection comes with
chassis requiring no additional line protection
cards
Aggregation Layer Solution
Line cards added in 4 places-plus 4 additional
Line protection cards to support 11 redundancy
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Economics of Operational Expense

• Operational Expense enhances competitiveness and
  next to revenue attainment is the most important
  factor related to profitability
• Operational expenses are driven by
• Labor Costs
• Professional Services
• Site preparation,
• Installation, testing and turn-up
• Network management
• Monitoring
• Upgrades and planned outages
• Fault management and troubleshooting
• Configuration Management
• Customer Support
• Service Provisioning
• Trouble calls
• Add, change and deletes
• Billing
• Running costs such as power, space, maintenance
  and transmission
• The complexity of these process and number of
  times they need to be invoked will depend on
  equipment reliability, architecture and number of
  platforms

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Network Management DriversIllustrative Example

• 37 more chassis in stalled over 5 years
• 300 more line cards and associated line modules
  installed over 5 years
• Will have a linear increase in operational
  expense in terms of
• Space and Power
• Installation
• Test and Turn-up
• Increase number of alarms
• Planned outages
• Monitoring Hours

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Customer Service

• Enable Pre-Provisioning and Self Provisioning
• Minimize calls to customer care work centers
• Ensure easy integration of new services
• Application integration and ease of adding
  business services
• Bandwidth sharing across applications improves
  customer satisfaction and reduces churn
• Minimize Devices in the Home
• Avoid multiple devices per service
• Simplified billing and better network reliability
  will reduce calls into customer care

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Customer Care can have the largest Impact on
Operational Expenses

• Assumes 12 cost to carrier to provision a
  service connection (not including ADSL
  connections) and shows the impact of cutting
  connection requests in half
• In the highest growth years this represents a
  12.5M savings

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OpEx and RevenueSecurity and Optimization

• Dual Firewalls for strong security with
  continuous uptime
• IDP functions for deep packet security
• Wire speed head ends to protect VoD streamers
• Application accelerators for SSL Offload and HTTP
  load balancing of VoD navigation portal
• Enhanced security
• OpEx reduction via lower remediation costs
• Enhanced revenue through reduced churn

Multicast Encoder/ Streamer
VoD RTSP Control
VoD Navigation
VoD Streamers
SSL HTTP Assist
Middleware
Head-End Router
Middleware
Firewall
Multicast Access control
DHCP
Head-End (Broadcast and Routing)
Content Management Platforms
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Cost of a Security Incident

• Calculations for estimating the costs associated
  with a security incident range from simple to
  complex

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Economics of Architecture Summary

• Necessity of aggregation is dependant on the
  existing architecture and DSLAM utilization
• Architectural decision for Centralized verse
  De-centralized approach are dependent on many
  factors which must be considered together and
  over the life of the project
• Important not to overlook
• Zero touch provisioning and online customer care
• Adding new services quickly to move customers to
  higher margin services
• Security and protection of the IP infrastructure

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Thanks!Questions?