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Network
Topologies for Future Telecommunications Services
1997-2002
a market research report
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Bio-diversity in the natural
world is crucial to a healthy ecosystem, and in the telecommunications
world the analogy helps in trying to imagine what a strong carrier will
look like in the future. Each of the various network
architectures––POTS, CATV, wireless, and satellite––seem so well
adapted at provisioning a particular service that the term “natural
fit” is the best way to describe it. But survival of the fittest
will force carriers to offer communications solutions utilizing a
mix-and-match of networks to align cost/benefit with each customer’s
requirements. Carriers with hybrid products and diverse technology
portfolios will be best suited to evolve into next-generation service
providers.
The future success of
telecommunication services will be determined by a carrier’s ability
to better understand the differing needs of various types of consumer
and business customers, providing alternative services tailored to the
needs of each market. Those networks that offer user-integrated
applications and whose providers aggressively market their network
services will thrive in the years ahead. Furthermore, it is not
necessarily the technology associated with the network architecture that
will guarantee its business success, but rather the application
solutions and marketing strategies of the industry participants.
The achievement or failure of a carrier will be determined by the
effective promotion of networks as integrated business system solutions.
According to Insight, each
network architecture has a role to play in driving the total US telecom
market revenue at an annual rate of 6.8 percent from $251 billion in
1997 to $350 billion in 2002. The probable result of current
market forces will be increased segmentation of the market, with
different architectures serving different segments of the consumer and
business markets.
Network Topologies for
Future Telecommunications Services 1997-2002 describes and analyzes
the different types of network architectures used in communications
networks, including existing networks and newer technology still being
deployed. Insight examines the capabilities of each network, their
investment costs, subscribers, future directions, and convergence
migration, providing a thorough analysis of network architecture
evolution.
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Report Excerpt
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Future Networks
Bio-diversity in the natural world is crucial to a
healthy ecosystem, and in the telecommunications world
the analogy helps in trying to imagine what a strong
carrier will look like in the future. There is no single
answer to what service providers will be deploying; each
of the various network architectures discussed in this
study seems so well adapted to provisioning a particular
service that the term "natural fit" seems like
the best way to describe it. Insight expects competition
to force carriers to better understand the differing
needs of different types of consumers and businesses and
to provide alternative services tailored to the needs of
each market.
This study looks at traditional networks, various
wireless networks, and newer satellite-based networks,
including:
- POTS (plain old telephone service);
- CATV (cable television);
- Mobile wireless: cellular, PCS, MMDS,
LMDS;
- Satellite: DBS (direct broadcast satellite),
LEO/MEOs
(low and medium
earth orbit systems).
We examine the capabilities of each of these networks,
their future architecture directions, their investment
costs, and other attributes. Insights into the future
directions of network architectures are then given.
In our assessment of which networks will dominate the
future of telecom, we have extrapolated from current
trends. We believe the market forces accelerating the
pace of change and investment in telecommunications will
be constrained by the industry's ability to absorb
radical ideas. When billions of dollars are needed to lay
fiber across the ocean floor or to US homes, plenty of
new solutions being touted: one company suggests building
planes to circle cities and act as flying cellular phone
towers; another says data service can be provided
inexpensively and reliably using unmanned data blimps
which would cruise at 70,000 feet; another is planning to
build 192,000 miles of fiber-optic cable in 38 large
loops around the planet by 2003, but they have not found
funding yet.
We tend to be a bit more down to earth in our assessment
of what the telecommunications industry is willing to
absorb. For example, though the telco's provisioning of
video services is far down the agenda today, we believe
the issue will be put back up top once the long distance
wars settle into siege mode. The probable result of
current market forces will be increased segmentation of
the market, with different architectures serving
different segments of the consumer and business markets.
POTS Networks
The national public switched telephone network (PSTN)
currently providing universal telephony services we are
calling the POTS network. Synchronous optical network (SONET) and advanced intelligent network
(AIN) are
playing a major part in the future direction of POTS
network architectures, while integrated services digital
networks (ISDN) and xDSL (generic digital subscriber
line) are being positioned as interim technologies to
bolster the existing network performance within
acceptable cost parameters. ISDN is increasingly being
deployed in POTS networks and has found recent market
niches in the high-speed Internet access and SOHO (small
office-home office) markets. xDSL provides a temporary
fix by using the existing copper drop plant to support
broadband applications; it gives the telcos the ability
to compete with the CATV operators' coaxial drop
bandwidth advantage.
The revenues for all local US traffic in 1997 were $113.6
billion growing at 7.5 percent on average per year, while
the long distance market had revenues of $80.5 billion
growing annually at 5.5 percent. In both markets, new
entrants, increasing deregulation, and technical advances
are rapidly increasing the number of potential optimum
architectures and the cost structures upon which the
carriers' network investment criteria are based.
CATV Networks
The basic broadcast distribution of TV video signals
through independent geographically focused networks is
provided by CATV. Unlike the nationwide PSTN, CATV
networks are not interconnected. They operate
independently of each other and do not currently connect
to external networks. Although not as ubiquitous as
telephony service, CATV services are rapidly approaching
the same penetration levels as the telephone industry a
few years ago.
Mobile Wireless Networks
By 1997 over 53 million users in the US subscribed to
mobile wireless services, either cellular or PCS. The
combined number of business and residential subscribers
to these networks is expected to grow to over 88 million
by 2002, while the annual service revenues will grow to
$41.2 billion.
Cellular networks are the older, analog networks that are
widely deployed, available in nearly every major city and
suburb, and enjoy the benefit of largely sunk costs.
Cellular networks are therefore capable of generating
large and positive cashflows, if not profits, and are
able to lower prices substantially while still
maintaining profitability as competition develops.
Cellular systems are upgrading to digital technology
which will allow them to serve larger numbers of
subscribers with the same frequency spectrum.
Digital technology also improves cellular's security,
in-building coverage, and extends the battery life of the
handsets.
PCS networks were built with a fully digital
infrastructure from the ground up, and they offer
improved security, messaging, and better frequency
utilization. PCS architecture can also evolve to create
wireless local loops by building on the existing copper
or fiber-to-the-curb (FTTC) infrastructures. PCS
providers are at a distinct financial disadvantage when
compared to their cellular counterparts, however, because
they will have to simultaneously pay the immense
licensing fees they bid for their operating licenses, pay
to deploy their network infrastructure, and spend
marketing money to build their customer base. They will
be desperate to generate cash flow by adding subscribers,
possibly using a deeply discounted service price
strategy, but they will need to generate usable funds to
meet their operating obligations.
While the PCS networks are establishing themselves, the
competing cellular networks will be matching them sales
promotion for sales promotion and being profitable.
Insight expects that the two networks and their
respective wireless carriers will actively compete in
many local markets, with PCS gradually gaining market
share even as they struggle to remain viable corporate
entities, given their high level of contractual
obligations.
New networks based on fixed wireless network technologies
were authorized by the FCC in 1997. MMDS and LMDS, two of
these new types of networks, operate at the higher
microwave frequency spectrum, and they are being deployed
to provide broadband applications. MMDS is also called
wireless cable because of its ability to support
broadcast video transmissions on a wireless network. LMDS
is being referred to as cellular TV because its cell-type
of network infrastructure supports interactive video
services. Both of these new services transmit along the
line of sight to small receiver antennas at the
subscriber's location.
Satellite Networks
Direct broadcast satellite systems use high frequencies
to transmit signals that can be received by small dish
antennas. These antennas are typically 15 to 18 inches in
diameter, much smaller than the antennas needed to
receive satellite signals in the past. Four primary DBS
operators currently provide cable-type video services in
competition with the incumbent cable television
operators. Satellites are now operating in a one-way
broadcast-only mode, but the technology exists to provide
two-way interactive video services.
Low and medium earth orbiting networks are a new
technology that provides universal roaming voice and data
capabilities. Remote rural areas of the world that
cellular networks cannot reach are another market for
these networks. LEO/MEOs deploy a constellation of
satellites that provide broad geographical coverage and
at the same time require less power because the
satellites in these low orbits are closer to the
earth-receiving antennas. Six major systems will be
deployed over their next five years, and at least one
should be operational by the end of 1998.
The Best Network Architecture?
Most of the newer service offerings are wireless
networks, indicative of a trend toward using wireless
technologies to provide the benefits and cost economies
associated with untethered communications. Users in the
future will require portable, mobile communications from
any location without being tied to a fixed wireline
network in order to connect to a network. New technologies provide support not only for untethered
communications but also for broadband and wireless cable
video applications.
LMDS is the only network currently promising to support
all four types of applications, though all of the
networks could be upgraded to support all four
applications if substantial investments were forthcoming.
However, if diversity of resources is used to measure a
telecommunications company's health in the future,
looking for the particular service's "natural
fit" may be the best way to proceed. Insight Insight
expects these alternative networks to compete and
carriers to succeed by matching the strengths of each to
the needs of targeted sectors of the overall market.
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Market Segmentation
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- Network Architecture
- POTS
- CATV
- Cellular
- PCS
- MMDS
- LMDS
- DBS
- LEO/MEOs
- Type of Service
- Local Services
- Cable Services
- Long Distance Services
- Wireless Services
- By Traffic
- Voice Services
- Data Servcies
- Video Services
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Table of Contents
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Chapter I
EXECUTIVE SUMMARY
1.1 Future Networks
1.1.1 POTS Networks
1.1.2 CATV Networks
1.1.3 Mobile Wireless Networks
1.1.4 Satellite Networks
1.2 The Best Network Architecture?
Chapter II
COMMUNICATIONS NETWORK ARCHITECTURES
2.1 Introduction
2.2 Network Comparisons
2.2.1 POTS
2.2.2 CATV
2.2.3 Cellular
2.2.4 PCS
2.2.5 MMDS
2.2.6 LMDS
2.2.7 DBS
2.2.8 LEO/MEOs
2.3 Network Architecture Opportunities<BR>
Chapter III
POTS NETWORK ANALYSIS
3.1 POTS Network Architecture
3.1.1 Central Offices
3.1.2 Local Distribution Network
3.1.3 Interoffice Networks
3.1.3.1 IntraLATA and InterLATA POTS Networks
3.1.4 POTS Signaling Network
3.2 Interim POTS Technology
3.2.1 ISDN
3.2.2 xDSL
3.2.2.1 HDSL
3.2.2.2 SDSL
3.2.2.3 ADSL
3.2.2.4 VDSL
3.3 Other Technologies
3.3.1 SONET
3.3.1.1 SONET Network Survivability
3.3.2 AIN
3.4 New Video Network Architectures
3.4.1 Bell Atlantic's Switched Digital Video Network
Architecture
3.4.2 SBC Communications' Switched Digital Video Network
Architecture
3.4.3 NYNEX's ATM-based Network Architecture
3.4.4 New Technology for Long Distance Networks
3.4.4.1 MCI's Network Upgrade
Chapter IV
CATV NETWORK ANALYSIS
4.1 CATV Background
4.2 CATV Network Architectures
4.2.1 Coaxial CATV Networks
4.2.2 CATV Fiber-Coaxial Networks
4.2.3 Hybrid Fiber Coaxial CATV Networks
4.2.4 Fiber to the Curb Switched Digital Video
Architectures
4.2.5 Fiber to the Tap Networks
4.2.6 Fiber to the Home Networks
4.3 CATV Applications
4.4 CATV Technology
4.4.1 Digital Compression
4.4.2 Interactive Television
4.4.3 Cable Modems
4.5 Future CATV Network Architectures
Chapter V
WIRELESS NETWORKS
5.1 Mobile Wireless Networks
5.1.1 Cellular Networks
5.1.2 PCS Networks<BR>
5.1.2.1 FCC Auctions of PCS Licenses
5.1.2.2 Broadband and Narrowband PCS
5.1.2.3 PCS Service
5.1.2.4 PCS Use by Mobile Workers and Consumers
5.1.2.5 Wireless Local Loops
5.1.3 Wireless Data Networks
5.1.3.1 CDPD for Data Transmission
5.1.4 Mobile Wireless Network Architectures
5.1.4.1 Cellular Network Architectures
5.1.4.2 PCS Network Architectures
5.2 Fixed Wireless Networks
5.2.1 Multipoint Distribution Services
5.2.2 MMDS
5.2.2.1 MMDS Network Architecture
5.2.2.2 FCC Licensing of MMDS
5.2.2.3 Recent MMDS Developments
5.2.3 LMDS
5.2.3.1 Development of LMDS
5.2.3.2 LMDS Network Architecture
5.3 Wireless Standards
5.4 Wireless Technology Trends
5.4.1 CDMA
5.4.2 TDMA
5.4.3 GSM
5.4.4 MMDS
5.4.5 LMDS
Chapter VI
OTHER NETWORKS ANALYSIS
6.1 Introduction
6.2 Satellite Networks
6.2.1 Direct Broadcast Satellites
6.2.2 LEO/MEO Satellite Networks
6.2.2.1 Iridium
6.2.2.2 GlobalStar
6.3 IP Backbone Networks
6.4 Data Service Networks
6.4.1 Frame Relay
6.4.2 SMDS
6.4.3 Asynchronous Data Transfer
6.5 Miscellaneous Networks
6.5.1 Application-Based Networks
6.5.2 Native LAN Data Network
6.5.3 Wireless Internet
Chapter VII
INDUSTRY ANALYSIS
7.1 Local Exchange Carriers
7.1.1 Ameritech
7.1.2 BellSouth
7.1.3 Bell Atlantic
7.1.4 SBC Communications
7.1.5 SNET
7.1.6 New RBOC Offerings
7.1.7 RBOC Agreements with Other Companies
7.2 Interexchange Carriers
7.2.1 Entering Local Markets
7.2.1.1 AT&T
7.2.1.2 MCI
7.2.1.3 Sprint
7.2.1.4 WorldCom
7.2.1.5 Frontier
7.3 Cable Operators
7.3.1 Tele-Communications, Inc.
7.3.2 Jones Communications
7.3.3 Continental Cablevision, Inc.
7.4 Competitive LECs
Chapter VIII
REGULATORY SITUATION
8.1 Telecommunications Act of 1996
8.1.1 Telecom Act Opens Local Markets to New Carriers
8.1.2 Local Interconnection Part of Telecom Regulation
8.2 Goals of the Telecom Act
8.2.1 Conditions for RBOCs Entering Long Distance Markets
8.3 Challenges to Telecom Reform Act
8.3.1 AT&T Fights to Maintain Their Long Distance
Market Share
8.4 Restrictions on RBOC Manufacturing and Video
8.5 FCC Regulatory Background
8.6 FCC Rulings
8.6.1 NPRM 96-182
8.6.2 R&O 97-208
8.6.3 R&O 96-325
8.7 CATV Regulations
8.7.1 Basis for CATV Fees
Chapter IX
NETWORKS COST ANALYSIS
9.1 Cost Analysis Background
9.2 Summary Network Investment Cost Analysis
9.3 Cost Analysis Methodology
9.3.1 POTS Networks
9.3.2 CATV Networks
9.3.3 Hybrid Fiber-Coaxial Networks
9.3.4 Fiber to the Curb Networks
9.3.5 Cellular Networks
9.3.6 Satellite Networks
9.3.7 MMDS/LMDS Networks
9.4 Summary Network Investment Cost Forecasts
9.4.1 POTS Cost Forecast
9.4.2 CATV Network Cost Forecast
9.4.3 HFC Network Cost Forecast
9.4.4 FTTC Network Cost Forecast
9.4.5 MMDS/LMDS Network Cost Forecast
9.4.6 Cellular Network Cost Forecast
9.4.7 Satellite Network Cost Forecast
9.5 Make/Buy Decision Analysis
9.5.1 Economics Favor Interconnect Solution
Chapter X
FUTURE NETWORK ARCHITECTURES
10.1 Convergence
10.2 Video Server Architectures
10.3 IXCs' Future Network Architectures
10.4 PCS Hybrid Fiber Coaxial Networks
10.5 Analysis of New Network Technologies
Table of Figures
Chapter I
I-1 Revenues from Telecom Markets in the US, 1997-2002
($Billions)
I-2 History of Network Implementations (1910-2000)
I-3 Forecast of Mobile Wireless Subscribers and Service
Revenue, 1997 and 2002
Chapter III
III-1 National POTS Network
III-2 Local Distribution Network Architecture
III-3 Carrier Service Area Network
III-4 Local Office POTS Pathways
III-5 Signaling System #7 Network
III-6 ISDN Network
III-7 ADSL Network Architecture
III-8 SONET Architecture
III-9 AIN Network Architecture
III-10 Bell Atlantic's Switched Digital Video Network
Architecture
III-11 SBC Communications' Switched Digital Video Network
Architecture
III-12 NYNEX's ATM-Based Network Architecture
III-13 MCI's Network
Chapter IV
IV-1 Growth of the Number of US Households Subscribing to
Cable, 1980-1995 (Millions)
IV-2 CATV Coaxial Network Architecture
IV-3 CATV Fiber to the Feeder Network Architecture
IV-4 HFC Network Architecture with Video Services Only
IV-5 HFC Network Architecture with Video and Voice
Services
IV-6 HFC Network Architecture with Video and Voice
Services
IV-7 HFC Network Architecture
IV-8 Cable Modem Architecture
IV-9 CATV Future Network Architecture: Regional Hub
Chapter V
V-1 CDPD Wireless Network Architecture
V-2 Cellular Network Architecture
V-3 PCS 1900 Architecture
V-4 MMDS Network Architecture
V-5 Ten Highest Bidders for MDS Licenses ($Millions)
V-6 Ten Highest Bidders for LMDS Licenses ($Millions)
V-7 LMDS Network Architecture
Chapter VI
VI-1 DBS Operators, 1998
VI-2 Iridium Orbits
VI-3 GlobalStar Orbits
VI-4 Early Architecture of Internet IP Backbone
VI-5 Typical ISP's IP Backbone Node
VI-6 Internet Statistics, 1995-2000
VI-7 Frame Relay Network using Permanent Virtual Circuits
VI-8 ATM Network
VI-9 Application-Based Networks
VI-10 Native LAN Data Network
Chapter VII
VII-1 SNET's Video Service Network Architecture
VII-2 Frontier's Long Haul Fiber Network
VII-3 Continental Cablevision's Modified HFC Network
Architecture
VII-4 Continental Cablevision's Boston College HFC
Network: Dedicated Fiber Ring Architecture
VII-5 CLEC Private Fiber Optic Network
Chapter VIII
VIII-1 Long Distance Market Share, 1997
Chapter IX
IX-1 Comparison of Number of Subscribers with Investment
Cost per Subscriber in Existing Networks, 1996
IX-2 Comparison of Number of Subscribers of Typical
Network with Investment Cost per Subscriber for
Prospective Networks, 1997-1998
IX-3 Total Annual US Network Revenues, 1997-2002
($Millions)
IX-4 Annual Network Revenues by Type of Service,
1997-2002 ($Millions)
IX-5 Annual Network Revenues by Traffic, 1997-2002
($Millions)
IX-6 Market Share of Network Services and Traffic, 1997
IX-7 Comparison of Cost per Subscriber for Types of
Networks, 1996 and 2001
IX-8 Services Offered by the Top 25 New Local Carriers,
1998
Chapter X
X-1 Future LEC Network Architecture
X-2 HFC Multimedia Broadband Network Architecture
X-3 Cablevision ATM Network
X-4 Interactive Broadband Network
X-5 End-to-End Broadband Network Architecture
X-6 Full Service Network Architecture
X-7 Lucent's Interactive Video Server Architecture
X-8 ICTV's Video Server Network Architecture
X-9 PCS HFC Network Architecture
Table of Tables
Chapter I
I-1 Forecast of Mobile Wireless Subscribers and Service
Revenue, 1997 and 2002
I-2 Attributes of Network Architectures
Chapter II
II-1 Comparison of Networks
Chapter III
III-1 SONET Hierarchies
III-2 Conversion of SONET OC Rates to DS Levels
III-3 Comparison of Path Switching and Line Switching
III-4 Comparison of HFC and Switched Digital Video
Chapter V
V-1 PCS Licensing Frequency Bands
V-2 Bandwidth Comparison of Wireless Systems (MHz)
V-3 Comparison of LMDS, MMDS, and DBS Services
V-4 MMDS Internet Access Tests
V-5 Wireless Standards
V-6 Digital Technology Supporters
Chapter VI
VI-1 Advantages and Disadvantages of DBS Television
Systems
VI-2 LEO/MEO Satellite Systems to Be Implemented
VI-3 ATM Specifications
VI-4 Remote Access Network Service Providers
VI-5 Message-Based Networks
Chapter VIII
VIII-1 FCC Cost Pricing Study for R&O 97-208
VIII-2 State Proxy Ceilings for the Local Loop, 1996
Chapter IX
IX-1 Implementation of Networks
IX-2 Comparison of Investments in Existing Networks, 1996
IX-3 Expected New Network Topologies and Their
Investments, 1997-1998
IX-4 Forecast of Annual US Network Revenues, 1997-2002
($Billions)
IX-5 POTS Cost Analysis, 1995 and 1996
IX-6 Cost per User of CATV Networks, 1996
IX-7 Cost per User of HFC Network Components, 1996
IX-8 Cost per User of HFC Networks, 1996
IX-9 Cost per User of FTTC Network Components, 1996
IX-10 Cost per User of FTTC Network, 1996
IX-11 Cost per User of MMDS/LMDS Networks, 1996
IX-12 Investment Forecast and Risk Analysis, 1996 and
2001
IX-13 CATV Network Investment Cost per User in 2001
IX-14 HFC Network Investment Cost per User in 2001
IX-15 FTTC Network Investment Cost per User in 2001
IX-16 MMDS/LMDS Network Investment Cost per User in 2001
Chapter X
X-1 Advantages and Disadvantages of Different Primary
Network Technologies
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