As I couldn’t read this whole story on Point Topic today, even though it was sent within their excellent newsletter, I am reprinting it here for others that haven’t seen this article on the costs of middle mile services (referred to here as backhaul). If you do subscribe to Point Topic you can access the story here: http://point-topic.com//content/ukplus/shortreports/UKPbackhaul.html
Accessible, affordable, high-speed backhaul has been identified as key to bringing next-generation broadband services to the UK’s rural and remote communities. These locations tend to suffer from lack of access to backhaul provision because they are usually some distance from their nearest BT exchange and are situated in areas not served by other commercial providers.
The importance of backhaul was highlighted by the Coalition Government in its broadband action plan published on 6 December 2010. “Our aim is to ensure every community has a point to which fibre is delivered, capable of allowing the end connection to the consumer to be upgraded – either by communities themselves, or since this will make the business case more viable, industry itself might choose to extend the network to the premises.” The plan, entitled “Britain’s Superfast Broadband Future”, proposes a “digital hub” in every community by the end of this Parliament (in 2015) and Broadband Delivery UK (BDUK) is to explore the viability of the approach at a local level. This builds on the idea of the “digital village pump” first coined by community interest company NextGenUs UK in 2010.
The Digital Scotland Report, published on 26 October 2010 by The Royal Society of Edinburgh, explores backhaul provision in greater depth. “Lack of backhaul capacity limits the provision of local access, the delivery of next-generation speeds to homes and businesses, and the rollout of mobile data services.” A number of remote communities have built their own high-speed local access networks but have limited speeds as a result of sharing a slow backhaul connection. In Scotland these include Tiree, Eigg and Knoydart. The report adds that a high-speed backhaul infrastructure would stimulate investment to build new local access networks as well as benefiting those that already exist.
Proponents of better and particularly fibre backhaul cite not only its beneficial effects on next-generation local access network provision but other benefits including greater efficiency in public services and enabling mobile operators to roll out 3G and LTE 4G mobile broadband offerings.
Industry has highlighted a number of ways in which the cost of both backhaul and access network construction could be reduced, namely sharing existing infrastructure, deployment of new overhead infrastructure, microtrenching and sharing streetworks. Other approaches on backhaul are also coming to the fore, the most interesting of which are demand aggregation on alternative infrastructure and the use of public sector networks.
In this short report we identify the options for providing backhaul to communities seeking next-generation broadband speeds, particularly those in remote areas. We look at the cost of providing backhaul and some of the products available today together with what is expected to be available in future. The emphasis is on fibre-optical solutions.
2 Defining backhaul
Backhaul is the connection over which traffic is carried from a local aggregation node such as a street cabinet or telephone exchange back to an internet gateway. It is sometimes referred to as the “middle mile” as opposed to the “last mile” or the local access network. Backhaul can be provided using different types of technology: fibre optic cable, fixed wireless radio and microwave technologies and satellite.
Essentially there are three flavours of backhaul – local, regional and national:
- Local backhaul takes traffic from the primary connection point (PCP), back to a local aggregation point or node. Typically the PCP will be one of the green street cabinets operated by BT Openreach, used as a access point for a communications provider involved in sub-loop unbundling, and the aggregation point will be a BT exchange.
- Regional backhaul collects traffic from the local aggregation node and delivers it to an aggregation point where a national backhaul provider has a point of presence (PoP). Here it connects to the national backhaul network. However, this [regional?] aggregation point need not be a BT exchange. Other providers including Cable & Wireless, Virgin Media and TalkTalk have similar connection points, as do some local authority networks.
- National backhaul takes traffic from the regional aggregation point to a telehouse for internet breakout and onward delivery to the voice network. As above, the national link can be provided by various other providers besides BT.
The backhaul network needs to have enough capacity to serve aggregated traffic demand from the entire community it serves. End-users do not all use the network simultaneously but the network should still be able to handle peak hour demand.
The most likely approach for getting backhaul to a community deployment is for Openreach to provide a fibre as part of its Ethernet portfolio. Alternatively the fibre may be dug by a fibre-laying company, of which Openreach is one. Existing dark fibre may be another option although this is less likely to be available beyond urban areas and national routes.
Alternatively wireless technology could be used to provide the local backhaul element using 5.8GHz radio. This would involve conducting line of site surveys and sourcing suitable premises for masts or erecting poles, together with gathering the required wayleaves and landlord commitments. Both fibre and wireless approaches has been employed by Rutland Telecom, for instance, which uses Openreach fibre for its Lyddington sub-loop unbundling deployment, and point-to-point radio for backhaul from a number of smaller villages in Rutland.
3 Costs of backhaul provision
The problem for many rural and remote communities is that the local backhaul element simply does not exist in any readily accessible commercial form. The effect of geography and distance means therefore that backhaul provision comes at a high price. The cost of backhaul varies depending on the individual circumstances of deployments. Anecdotal accounts of specific backhaul costs include those cited in the Digital Scotland Report of £140,000 per year for 34Mbps backhaul supplied by BT to the Connected Communities network on the Western Isles in Scotland. The report goes on to estimate installation and operational costs of £250 million over 15 years for the 2,500 km of fibre it says is needed to bring backhaul to Scottish communities of more than 800 homes.
3.1 Backhaul pricing examples
To explore how significant the cost of backhaul is for rolling out NGA, Point Topic has calculated the implications of Openreach’s prices for backhaul projects to serve communities of different sizes over a range of distances. For local backhaul we assume communities at 1,000, 2,500, 5,000 and 7,500 metres from the serving BT exchange. We also consider how the costs per household or business look if they are allocated across 250, 50 or only 10 premises.
Each community is served by one PCP with fibre-to-the-cabinet (FTTC) deployment using sub-loop unbundling, putting VDSL2 into the cabinet. Thus an optical fibre is required to connect the communications provider’s (CP) cabinet, adjacent to the PCP, to the serving BT exchange. The prices for Openreach’s Ethernet Access Direct (EAD) products are used. EAD is due to replace Openreach’s current Backhaul Extension Service (BES) and Wholesale Extension Service (WES) products in June 2011. Prices include both one-off and annual rental elements, corresponding to the standard telecoms categories of capital and operating expenditure, capex and opex.
The differences in economic impact across this range are considerable. If fibre is already available and costs can be recovered from as many as 250 premises then the one-off capital costs would be quickly paid for and continuing opex would be quite modest per home or business, at only £20.30 per year even at 7.5km range. But recovery from as few as 10 premises gives opex per premises of £273.50 even at a short distance from the exchange, far beyond what is likely to be economic on a commercial basis.
The picture is less encouraging if new fibre has to be provided. Opex stays the same but capex is much higher, ranging from £23.80 for a home in a large and nearby community to £3,195 for one in a small community far from the exchange. And costs go up by another order of magnitude if a new duct has to be dug for the whole distance as well. Here the range of capex is from £163.80 to £29,445.
It is also important to remember that here we are looking simply at the cost of backhaul. The figures quoted are only small part of the total cost of providing a broadband service. They do not include, for example, the cost of the CP’s street cabinet or the cost of the unbundled tie cable from PCP to home among many other things. Legal and planning costs, exchange costs, marketing costs and a profit margin all need to be covered by the full price quoted to the end-user.
These simple calculations raise a number of questions without providing answers. What is a reasonable amount to spend on providing broadband to remote places? If my house is a few £100,000 cheaper because it is remote, would it be worth investing even £30,000 to abolish some of the disadvantages of remoteness? And what should the working assumptions be about the take-up of superfast broadband services in rural communities? Commercial CPs cannot afford to assume 100% take-up of a service or anything close to it, but it makes sense to assume 100% in cost-benefit analysis of a publicly funded project. In the long run the aim will be indeed to achieve 100%. Many homes will be users without appearing to access the internet as far as they are concerned, whether for streaming TV, telecare or smart metering.