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Introduction

Telecommunications service providers of all types as well as businesses and educational institutions are seeking ways to deliver greater network bandwidth to meet the growing volume of data communications, particularly for Internet access. At the same time, they want to avoid the expense of adding fiber cables, multiple T1 lines or wireless extensions to existing network infrastructures. With High-bit-rate Digital Subscriber Line (HDSL) technology, these organizations can leverage existing copper pairs in their buildings to deliver high-speed data services to users.

Business Need

Several trends have emerged in the 1990s that complicate conventional models for analyzing the cost of network bandwidth. Among these trends are:

• The growing number of powerful desktop computers
• A new class of collaborative, multimedia business applications
• The explosive popularity of the Internet and Intranets. Applications such as network videoconferencing and push technology are early examples of what the networked office environment will look like in the very near future.

Meeting the communications demands created by these trends will require seamless, high-speed access to both private networks and wide area networks (WANs). Yet for many network managers the question remains: how can networks be upgraded cost-effectively to meet user needs for more bandwidth? Until recently, delivering high-speed communications would have required fiber-optic cabling. However, many buildings, complexes, and campuses built over the past two decades did not include fiber cabling because of its high initial cost. Now faced with the need to upgrade their networks in light of bandwidth demands, managers must weigh the trade-offs of numerous technological approaches. While fiber-optic cabling, Category 5 cabling, multiple T1 lines or wireless networking provide high bandwidth, all are costly to implement (even in new construction) and even more costly to retrofit into existing construction.

Unable to afford the expense of new wiring, many organizations have settled for using conventional modem connections. While modems are very inexpensive, they cannot deliver the required bandwidth to support even the most rudimentary collaborative business applications when more than a few users are interacting at the same time.

Leveraging the Copper Infrastructure

Network managers are seeking a new, economical solution for high-speed network access, one that capitalizes on the existing copper infrastructure in a building or campus. All buildings and campuses have numerous copper pairs installed, originally intended to support plain old telephone service (POTS). By combining these copper pairs with the right transmission technology, network managers can quickly and easily give users more bandwidth for accessing local-area networks (LANs) in a building or campus as well as the WAN.

Telecommunications service providers are also looking for ways to offer new data services to their customers over the existing copper plant. Incumbent carriers want to enhance current customer relationships by offering new services. And with the opening of markets by industry deregulation, Competitive Local Exchange Carriers (CLECs) and Internet Service Providers (ISPs) can also access a prospective customer's copper through the local loop and offer high-speed voice and data services on a resale basis.

Pre-wiring a building or campus with fiber or coaxial cable requires the builder to make an initial capital investment without any guarantee that it will generate revenue. In contrast, pre-wiring the building or campus with copper is a given because copper wiring is used for POTS. By taking advantage of the copper wiring, service providers need to invest in equipment for new data services only at the time when a customer actually signs-up for the service. Unlike fiber-based services, no up-front capital equipment expenditures are needed for a copper-based network before the service provider can market a new data service.

HDSL Delivers the Solution

HDSL technology offers a solution that meets the diverse interests of users, network managers, and service providers for high-speed data communications. As a transmission technique, HDSL enables service providers to deliver high-speed access to LANs and WANs over the basic copper wiring in a building or campus. This mature technology overcomes bandwidth limitations in the local loop by making use of the available transmission spectrum in copper wiring. This enables data to be sent digitally over ordinary phone lines at speeds many times faster than those provided by other technologies such as modems or Integrated Services Digital Network (ISDN).

HDSL, which supports sustained transfer rates up to 768 kbps, has been used by telcos for many years to extend the capabilities of T1 trunks to the local loop. With HDSL now commercially available for private networks, copper local loops can bring high-speed data services to individual users.

Analyzing the Costs of Delivering HDSL Services

The cost analysis example presented in this section assumes that a service provider wants to offer high-speed Internet access to each office in a 48-unit complex. Each office is pre-wired with copper pairs that terminate in a centralized location such as a basement or wiring closet. Although this example shows costs for a business complex, the same economics would apply to a LAN extension application for a private enterprise or an Internet access application for multiple, stand-alone business sites.

NOTE: This business case was developed to highlight the opportunities available for HDSL products in a private operating environment. The intent of this document is to provide the framework and cost elements required to address this opportunity, but not to accurately reflect the actual cost of delivering this class of service. Actual costs and revenue will vary due to differences in equipment prices, discount levels, lease conditions, access rights, local Internet access tariffs, and other factors.

This example cost analysis is based on use of the Cellworx^™ HDSL products from ADC Kentrox, which include the SAT-300^™ HDSL access router for user sites and the Remote Access Concentrators (RAC) for integrating access from multiple users in the service provider's central office (CO) or point-of-presence (POP).

For this example, providing Internet service to each of the 48 offices requires the following equipment:

• 48 Cellworx SAT- 300 HDSL Access Routers
• 2 Cellworx RAC units (23" rack size)
• 48 LAN Modules for the RAC
• 2 Ethernet hubs, 24 ports each
• 1 Router with 2 Ethernet ports and 2 T1 ports

Equipment and Service Costs

The table below shows the calculated cost of the required equipment and associated monthly lease payments. This analysis assumes the service provider will structure the capital purchases through a lease arrangement to minimize initial expenditures. It also assumes the service provider will receive a 30 percent discount on equipment purchases. On the open market, realistic discounts for this equipment can range from 0 to 45 percent.

Quantity		Equipment		Unit List Price		Total Cost
48		SAT-300 HDSL Access Router		$1,195		$57,360
2		RAC Remote Access Concentrator (23")		$995		$1,990
48		LAN Module for RAC		$1,195		$57,360
2		Twenty-four port Ethernet hub		$400		$800
1		Router with 2 Ethernet ports and two T1 ports		$5,000		$5,000
				Total Equipment Cost (List Price)		$122,510
				Total Equipment Cost (30% discount)		$85,757
				Monthly Lease Payments for Total Equipment Costs		$2,144

The network configuration shown in the figure above assumes the service provider will implement a 10:1 over-subscription ratio for users of the Internet access service. With this assumption, supporting 48 users at 768 kbps service for each requires an aggregate network bandwidth of approximately 36 Mbps if all users simultaneously connect to an Internet application. However, based on industry statistics of a typical Internet user's traffic profile, an aggregate 3 Mbps Internet connection to the RAC should provide adequate service for each subscriber.

Given the 3 Mbps Internet connection to the RAC, providing Internet access to each of the 48 offices would require the following services:

• 48 Service rights for the copper pairs
• 1 Co-location right for the wiring closet
• 2 Internet-service T1 lines

The following table shows the monthly access costs for the service provider.

Quantity		Service		Unit Cost		Total Cost
48		Copper Pair Access Rights		$25		$1,200
1		Co-location Access Costs		$100		$100
2		T1 Internet Access Connections		$1,500		$3,000
				Monthly Service Payments for Total Access Costs		$4,300

Analysis of Potential Revenue and Profits

In this analysis, the overall monthly revenue from the business complex is approximately $14,400. This total is based on an average charge of $300 per month per subscriber, which ADC Kentrox estimates will be a competitive price for an Internet access service operating at 768 kbps.

With monthly revenue of $14,400 and monthly expenditures of $6,444 for equipment lease and access fees, the service provider earns an approximate 55% gross service margin from this business complex (see table below). Additional opportunities for reduced monthly expenses (capital and access) and increased monthly revenue can be realized from lower (or zero) costs for copper-pair access, equipment discounts of up to 45 percent off list price, and a monthly revenue for 768 kbps service that could potentially exceed $300 per office.

Gross Monthly Revenue (48 offices x $300 per month)		$14,400
Less: Monthly Equipment Lease Cost		$2,144
Less: Monthly Access Costs		$4,300
Net Monthly Profit		$7, 956
Profit Margin		55%

ADC Kentrox HDSL Solutions

The Cellworx family of HDSL products from ADC Kentrox supports the needs of business communications over the service provider network. Cellworx products provide HDSL network access with the SAT-300 access router at the customer premises and the RAC concentrator at the service provider’s access point.

By adopting a copper pair strategy that includes the Cellworx products, service providers can:

• Bring cost-effective, high-speed services to users at line rates up to 768 kbps.
• Achieve lower per-connection costs that are competitive for small and large numbers of users.
• Provide high-quality connections that offer fiber-optic quality transmissions over existing copper pairs.
• Access and manage networks either locally or remotely in a manner consistent with existing management practices.

Cellworx Benefits for Service Providers

• Cost-effectiveness: HDSL is gaining momentum as the most cost-effective technology to bring high-speed services to multi-tenant facilities and campus environments. The ADC Kentrox SAT-300 access router is one of the most cost-effective HDSL products on the market.
• Low Entry Costs: Cellworx products have very low entry costs for both the initial SAT-300 and RAC investment and per-connection costs, which are the same whether a small or large number of SAT-300 units are serviced by a RAC unit.
• High-quality connections: The proven Cellworx HDSL technology delivers fiber-optic-quality transmissions over existing copper pairs, regardless of how other copper pairs in the cabling binder are used.
• Simple installation: The SAT-300 router employs a "quick-start" method for configuring installation parameters in a matter of minutes.
• Local and remote access: The SAT-300 router can be accessed via terminal emulation mode, Telnet, or the Simple Network Management Protocol (SNMP) in a manner consistent with existing network management practices.

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