November 2003

The All-IP Broadband Network:
What The U.S. Can Learn From The Rest Of The World

BY DAVID HOWARD

Leading up to the NASDAQ crash of April 14, 2000, it seemed as though everyone was focused on IP technology as the way to bring broadband Internet access to individual consumers and businesses. But there were conflicting opinions when it came to figuring out how to make money on IP. After the crash, it became clear that IP alone was not sufficient to create a sustainable business. Lacking coherent business plans, many of the CLECs that had led the charge for IP-based DSL broadband services in the U.S. folded.

RBOCs stepped into the void left by the CLECs. However, as guardians of the U.S. telecommunications structure and legacy, the RBOCs have been reluctant to cannibalize their existing services for the sake of new services or to introduce relatively unproven technologies into their networks. Even today, DSL in the U.S. is used mainly for basic Internet access. Yet service providers in Asia are taking advantage of IP-based DSL to offer Internet access as well as a host of profitable, low-cost broadband applications on a wide-scale, including mass deployments of VoIP and TV over IP (TVoIP).

The Evolution Of A Success
The emergence of Yahoo! BB, a Japanese CLEC, typifies the evolution of a successful broadband provider. In early 2001, broadband service in Japan was in its infancy, with fewer than 200,000 DSL subscribers. Yahoo! BB addressed the underserved broadband market with an always-on, low-cost, high-bandwidth, multi-application ADSL service available over ordinary telephone lines. The company introduced its first service, an 8-Mbps ADSL data service priced at $19 a month, in September 2001, and added BB Phone, for a basic fee of $3 a month, in early 2002. In July 2002, Yahoo! BB upgraded its data service to 12 Mbps, which costs subscribers $20.75 a month, and in March 2003 introduced its TVoIP service, Yahoo! TV, for an initial subscription fee of $82 and a basic monthly charge of $20.

In only 18 months, Yahoo! BB became the largest DSL provider in Japan, with 2.3 million subscribers and a 30 percent share of the market. More than two-thirds of Yahoo! BB�s data users now subscribe to BB Phone. The company also became the first competitive carrier in the world to surpass the incumbent provider in market share, signing up 40 to 50 percent of all new DSL subscribers in Japan.
The company�s business strategy, which calls for it to be the first to market with the latest applications at the lowest price, is crucial to its immense success. Yahoo! BB uses the latest technology to stay six to 12 months ahead of the competition, and looks for savings in every aspect of its business while taking a creative approach to distribution and marketing. U.S. service providers looking to protect existing subscribers and their revenues from cable operators and cellular service operators can learn much from Yahoo! BB.

Pass ATM, Go Directly To IP
Rolling out nationwide DSL service requires a high initial capital investment. To minimize that investment as well as on-going operating expenses, Yahoo! BB built a nationwide backbone based on dark fiber and an all-IP infrastructure that provides a simpler access and backbone network than does a traditional ATM-based infrastructure. Central to the network is an IP-based DSLAM from UTStarcom, the AN-2000 IB. A high-density, non-blocking, easy-to-deploy solution, the AN-2000 IB delivers high-speed Internet data, voice, and video services over a wireline network. Because the UTStarcom platform provides IP from the ADSL line card, Yahoo! BB can provide a pure IP backbone network comprised solely of IP switches and routers.

An all-IP infrastructure is less complex, less expensive, and easier to deploy than an ATM infrastructure. It is also far more efficient to transport IP packets over an IP infrastructure. As a result of these and other factors, Yahoo! BB�s IP backbone was only one-tenth the cost of an ATM backbone, but it offers ten times the speed -- and accelerates time to profitability.

All-IP also enables Yahoo! BB to create a hierarchical network that broadly distributes bandwidth, thus increasing performance in the DSLAM and backbone. ATM-based DSLAM networks tend to groom all network traffic across a backbone to a centralized broadband remote access server (B-RAS). The B-RAS acts as an IP keyhole entry and exit to and from subscribers -- and as a bottleneck to quick delivery of broadband services.

The UTStarcom platform also helps Yahoo! BB realize remarkable savings in operating costs. Because the AN-2000 IB is rack efficient, Yahoo! BB saves money in co-location charges. Energy costs are $3 less per month per subscriber, and ease of installation reduces costs by $3 per port.

Yahoo! BB has also realized savings by simplifying network operations. Typical ATM-based DSLAM deployments require per-access subscriber authentication, so the operator has to maintain a subscriber database. Yahoo! BB eliminated the need for such a database by capturing all the information needed to �authenticate� the customer -- telephone number, billing address, and the identification of the DSL modem, which Yahoo! BB provides -- at customer sign up. Thereafter, the company does not need to authenticate subscribers every time they access the network.

Service providers in the U.S. and other countries can gain similar savings from an all-IP network -- and they can translate those savings into more attractive prices for their applications.

Engineering The Network For Bandwidth Requirements
As service providers look to expand their broadband services, they must consider how much bandwidth the applications they want to offer will require. Bandwidth drives decisions about the access network, application technology, and backbone requirements. Available bit rate has increased over time, while the bandwidth required by applications has decreased. The bandwidth required for DVD-quality video, for example, has declined from 4 Mbps (MPEG-2) to 1.5 Mbps (MPEG-4). Service providers need to understand where available bit rate and application bandwidth demand intersect to determine what equipment they need to deploy and thus optimize their infrastructure investment.

Although application bandwidth requirements are decreasing, there are limits to service providers� ability to deliver service to all potential subscribers over the existing copper infrastructure. Higher bit rates demand shorter copper loops. ADSL can reach customers up to 18,000 feet from the central office (CO), while higher-bandwidth ADSL2+ services can only reach customers that are no more than 5,000 feet from the CO. Downstream bit rates up to 50 Mbps will require loop lengths of 4,000 feet or less.

In highly urbanized Japan, the majority of the population is served by short loop lengths that can be reached from the CO. In the U.S., where suburban sprawl is the norm, many subscribers are served by long loops and cannot receive higher-bandwidth services that are available only over short loops. U.S. providers that want to capture the largest possible number of subscribers will thus need to consider installing DSLAMs in the outside plant (OSP), and equipment vendors are developing DSLAMs specifically for these locations. This development will make multiservice DSL more attractive to U.S. service providers by enabling them to attain greater market penetration.

Applications And Distribution Keep Company At Forefront
Yahoo! BB relies on its all-IP network and IP DSLAMs to stay ahead of the competition when it comes to offering the advanced applications that are central to its business plan. Yahoo! BB is also deploying softswitches in their network to enable rapid service and application delivery.

An innovative distribution model is also instrumental in the rapid and widespread uptake of Yahoo! BB�s DSL service. To reach as many subscribers as quickly as possible, the company realized that a modem and Internet service had to be as easy to purchase as a carton of milk. To this end, the company has set up distribution channels with 7-11, the most popular convenience-store chain in Japan; with coffee shops such as Mister Donut and Starbucks; and with bookstores.

Even more innovative -- and extremely effective -- is Yahoo! BB�s giveaway program. Many Yahoo! BB subscribers in urban Japan have quite literally picked up their DSL modems on a street corner, from a promotional stand. Armed with pen and clipboard, Softbank representatives use the offer of a free modem to lure passersby to sign up for service right there on the sidewalk. The representatives are equipped with cell phones, allowing them to call in and quickly validate the potential subscriber�s residential phone number. The newly registered subscribers walk away with a modem that they can take home to self-install.

Learning From A Leader
While there are great differences between the Japanese and U.S. markets, there is much U.S. service providers can learn from the success of Yahoo! BB. An all-IP network offers significant savings in both capital and operating expenses when compared to an ATM network. Carefully tailoring bandwidth to the requirements of applications and simplifying network operations can further reduce costs. Keeping the business focus on applications -- and being nimble enough to be the first to offer important new applications -- is crucial to gaining and keeping market share. A distribution model that reaches out to potential subscribers at places where they ordinarily do business also helps accelerate market growth. Service providers anywhere in the world can implement these principals to attract and retain customers, reduce churn, and improve the bottom line.

David Howard is product manager at UTStarcom, Inc. UTStarcom is a leading global provider of wireless and wireline access and IP switching solutions. The company designs, manufactures, sells, and installs an integrated suite of future-ready access network and next-generation switching solutions.

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