FTTH Network layers

An FTTH network can comprise of a number of different layers: the passive infrastructure involving ducts, fibres, enclosures and other outside plants; the active network using electrical equipment; the retail services providing internet connectivity and managed services, such as IPTV; and not least, the end-users. An additional layer can also be included: the content layer, located above the retail services layer and the end users. This can be exploited commercially by so-called “over-the-top” content providers.

This technological structure has implications for the way an FTTH network is organized and operated.?Let’s look at these in more detail:

#Passive infrastructure?involving physical elements is required to build the fibre network. This includes the optical fibre, trenches, ducts and poles on which it is deployed, fibre enclosures, optical distribution frames, patch panels, splicing shelves and so on. The organization?responsible for this layer would also normally be responsible for network route planning, right-of-way negotiations as well as civil works necessary for the installation of the fibre.?This is the layer where the network topology is implemented, whether point-to-multipoint (also known as “tree” or “star”) or point-to-point (also known as “home run”).

#Active network?refers to the electronic network equipment needed to bring the passive infrastructure alive, as well as the operational support systems required to commercialize the fibre connectivity. The party in charge of this layer will design, build and operate the active equipment part of the network.?

#Retail services?become involved once the passive and active layers are in place. This layer is where basic internet connectivity and other managed services, such as IPTV, are packaged and presented to consumers and businesses. Besides providing technical support, the company responsible for this layer is also in charge of customer acquisition, go-to-market strategies and customer service.? The retail service provider may also decide to offer premium services from the content layer, such as #IPTV.

Types of FTTH organization

Each network layer has a corresponding function. The network owner is in charge of the first layer, although they may outsource its construction to a third party. The network operator owns the active equipment, while the retail services are provided by the internet service provider (#ISP).

These three functions may exist as departments within the same company, or under the control of different organizations. Indeed, the same organization?could have different business models in a number of geographical areas, depending on the local market and the availability of potential business partners.

The traditional telecom model is based on “vertical integration”, in which one entity controls all three layers of the network. This is often the case for incumbent operators, for example, #Orange, #Telefonica and #Verizon.

At the other end of the spectrum is the fully separated ownership of the different layers, as is the case in some parts of the Netherlands where Reggefiber controls the passive infrastructure. KPN runs and operates the active network and provides wholesale access; and various retail service providers including KPN, Telia and #Vodafone, package the #broadband and provide access to the services they offer as well as selling directly to end-users.

Here are some typical FTTH operator models:

Vertically integrated, which means one #operator controls all three layers of the network. Consequently, if a second operator is interested in offering broadband and telephony services in the same area, he would have to build his own infrastructure, and operate and market it directly to the end-user. This is a clear form of infrastructure competition.

Passive sharing?leverages a single passive #infrastructure, which is built and maintained by one infrastructure owner. Active and services layers are owned by different organizations. A second service provider may share the same passive infrastructure with the first service provider but would be required to invest in active network equipment and operations as well as the services and subscriber-facing activities.

Active sharing?is where a single organization owns the passive and active infrastructure and operates the active network. This vertical infrastructure owner #wholesales broadband access to various retail service providers who then compete with each other for customers.

Full separation, as mentioned above, ownership layers are partitioned. Each layer is owned by a different party with the infrastructure owner generating income by providing passive infrastructure access to one or more network operators, who in turn wholesale broadband access to retail service providers.

As an FTTH network owner, your interest could stop at any of the three levels in the value chain. Indeed, the same organization could have different interests in different geographical areas, depending on the local market and the availability of potential business partners.

Each type of operational model has its own opportunities and challenges, which are summarized in the following table:

Deciding which operational model to choose is fundamental, as it will determine?the business model of your activities and your financial model. This decision,?however, is also dependent on the regulations within the territory you are?planning to operate, the competitive environment, and your core business?activities and competencies.

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