Investing In Next Generation Internet
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Investing In Next Generation Internet

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Overview presentation I gave back in Nov '03 summarizing some key broadband technologies and related investment strategies. Reflects much of my activity from 2001-2005 that generated 6 venture ...

Overview presentation I gave back in Nov '03 summarizing some key broadband technologies and related investment strategies. Reflects much of my activity from 2001-2005 that generated 6 venture investment exits and 50%+ IRR.

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Investing In Next Generation Internet Investing In Next Generation Internet Presentation Transcript

  • Investing in the Next-Generation Internet Kyle Enright November 2003
  • Overview of the Session Objective for Today: Review today’s cutting-edge broadband – What’s possible & how it works – What’s being deployed & where – Investment Implications Format: PPT presentation with Q&A as we go along 60-70 mins presentation 20-30 mins discussion
  • Agenda Overview of the Broadband Market BB Technology Fundamentals Today’s Cutting Edge Broadband: – Copper – Fiber – Powerline – Fixed Wireless Other Key Aspects of deploying Broadband Investment Opportunities
  • Overview of the Broadband Market
  • The Digital Home Vision
  • Why is Broadband so important? Intel Confidential The Convergence of Four “Waves” Broadband becomes mainstream Home Content Digital Home Networking explosion Opportunity Digital device proliferation High-rate broadband critical both to the home and in-home
  • Substantial Broadband Growth WW Broadband Connections by Tech. 2002-2007(M) WW Broadband Connections by Region 2002-2007 (M) 250.0 250.0 200.0 200.0 FWA Rest of World 150.0 150.0 Metro ethernet Asia/Pacific Cable modem Western Europe 100.0 100.0 DSL United States 50.0 50.0 - - 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 • 210M+ broadband subs WW by YE’07 (25%+ CAGR) • Broadband IC revs of $1B+/yr ; Broadband Eqpt revs of $3.5B+/ yr • Broadband services rev >$25B in ’03; >$100B by ’07 (40%+ CAGR) Source: IDC, Dell Oro - 2003
  • Digital Home Content Trends Download time is significant barrier Est. movie download time (2Hr movie, 500kb/s bb BW) # Hrs 90 80 80 MPEG2 WMV or MPEG4, Pt 2 70 H.264 (MPEG4, Pt. 10) 60 HD movie download reqmt: 50 40 ADSL or cable 40 modem: > 5hrs 28 30 20 VDSL: <20 mins 20 FTTH: <5 mins 14 11 10 10 4 3 0 Broadcast (NTSC) DVD (480p) HDTV (1080i) Resolution High-rate BB critical to make Digital Home a reality
  • Broadband Market Vision More broadband in more places … sooner – More users – More geos – More ways to access BB (work, home, hotspots, mobile…) Higher-rate broadband – 100Mbps+ symmetrical is Japan publicly stated goal! More useful broadband – Richer applications – Easier to use – More reliable; more secure Today’s ADSL & cable modem services are inadequate
  • BB Technology Fundamentals
  • BB Access Network Evolution Central Curb Subscriber Cabinet Office Current ADSL DSLAM Network ATM/IP Future Likely Geos APAC ADSL++ Short-loop DSLAM Japan ADSL ATM/IP Fiber ADSL++ FTTC w/ EMEA NG-DLC xDSL or VDSL NAMO OLT Fiber Japan & APAC ATM/IP FTTP NAMO, EMEA ATM/IP APAC ADSL Fixed DSLAM Japan Wireless or EMEA NAMO Fiber The network must change significantly in order to support new services
  • BB Basics Key design parameters for BB networks: – # of users & density – Planned services (Mbps; QoS) – Existing infrastructure – Can I ever make money?
  • BB Technology Basics Shannon’s Law: C = B*log2 (1+S/N) – Capacity (“C”) is function of: – bandwidth (B), Rx signal strength (SNR) Providing more Mbps requires: – More RF spectrum/ more bandwidth (more MHz) – More efficient modulation (more bits/Hz) – Improved SNR (extend range; increase bits/Hz)
  • Modulation Techniques Multi-carrier Single Carrier (Spread Spectrum: OFDM, DMT) (QAM) ‘N’ parallel sub-carriers; each @ 1/n data rate Power Power Frequency Frequency Multi-carrier: several narrow-band bursts with long duration – Overlapping carriers spread over wide frequency Single-carrier: single wideband burst with short duration
  • Adaptive Modulation Principle: Vary bits per Hz according to signal strength
  • High-rate BB over Cu (ADSL2+; VDSL)
  • DSL Basics Digital Loop Carrier Telco Short Central Office Copper ISP1 Loop Twisted Pair Copper < 24kft T1/T3 Internet DSL Modem DSLAM ISP2 DSL Connection ATM Connection IP Connection DSL uses high frequencies (>25kHz) of telephone line for data Tx – POTS and DSL peacefully co-exist – Support for multiple services (voice, data, video) using ATM ADSL = Asymmetric Digital Subscriber Line – More bandwidth down than up
  • VDSL vs. ADSL Spectrum ADSL uses Discrete Multitone (DMT) modulation – Spread spectrum (256 carriers @ 4.3125 kHz) + QAM U D ADSL – ADSL (ITU G.992.1): 8 Mbps down/ 0.8 Mbps up – New ADSL versions (ADSL 2, 2++): 26Mbps+ 138K 1.1M ADSL evolving towards VDSL – Driven by bandwidth demand & technology ADSL++ in draft standard status U DOWN ADSL2+ – Spectrum uses up to 3.75M as in VDSL Optional 138K 2.2M Band VDSL U DOWN UP DOWN UP DOWN 12M 138K 3.75M 5.2M 8.5M 30M
  • DSL Data Rates vs. Loop Length Length & quality of loop determines DSL availability & service level (Mbps) Loop lengths by region 100% 90% Italy & 80% % Customers Reached France 70% UK 60% 50% Germany 40% India 30% 20% USA 10% Japan 0% Source: IEEE EFM (VDSL) 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 km ADSL reach limit in APAC VDSL (Korea, Japan) ADSL2 extends DSL reach ADSL ADSL 2++ ADSL 2++ and VDSL extend the rate and reach of DSL
  • Improving DSL Performance Techniques: multi-user coordination; mitigate non-linearity; alt. modulation methods; improved FEC (Trellis Coding); auto line diagnostics 100 Enhanced DSL 52 Mb/s VDSL Video 10 8 Ethernet T1 Rate 3 Internet Broadband ADSL G.shdsl 1 6 12 18 24 30 Distance K ft
  • High-rate Cu Market Segments Residences • ADSL-DMT Businesses Residences • DS3 Extension • VDSL-DMT Residences • VDSL-DMT 22/3 Mbps • VDSL-DMT 50/30 Mbps CO/RT Fiber ONU 70/40 Mbps Ring FTTP MxU Extension • VDSL-DMT 100/100 Mbps APPLICATIONS: - 19 Mbps – HDTV - 15 Mbps – 3 Digital TVs Un-lit - 10 Mbps – VPN Buildings MFE - 5 Mbps – High-Speed Internet Access - 400 kbps – Multiple Voice Channels
  • High-rate BB over Cu Today KT’s Megapass for Hanaro Telecom’s 50 Mbps VDSL 50 Mbps VDSL
  • FTTx (Fiber-to-the-X … Home, basement, curb)
  • FTTH: The Ultimate Network? Best for dense areas w/ high bandwidth demand • “Future-proof” infra. w/ highest capacity, lowest attenuation – Only way to reliably offer 100 Mbps+ to simultaneous users
  • Fiber Access Alternatives 1. Point-to-Point 2. Point-to-Multipt (Active) 3. Pt-to-Multipt (Passive)- PON All three topologies being deployed today. No clear technology winner.
  • Overview of Optical Tx 3 key elements of FTTH Transmission system: Fiber cabling (transmission medium) – Light signals travel through the inner “core” of the fiber due to total internal reflection Light source (transmitter) – either an LED (light emitting diode) or a semiconductor laser diode Photodiode and ICs for Optical-Electrical conversion – Performs intermediary conversion that allows digital data to be transmitted as photons Optical Fiber Light Source Light Detector (Transmission Medium) (Transmitter) (Receiver) • Laser • Photodiode • Driver • PMD • PMD • PMA Electrical • PMA Electrical Signal Output Signal Input Converts Signal Converts Signal from electrical from optical to to optical electrical
  • BPON ONU Design Processing CDR PON Fast Mapper/ Network Ethernet Ethernet Framer/ Processor ENET PHY switch TDMA/ TDM DSP Driver Triplexer Client side: Voice PHY's POTS Video POTs Ethernet SLIC + CODEC Intel Component SLIC + CODEC or IP Video Not Core ICG CATV Power Video Technology CATV Amp Conversion Power Control PON ONU Battery 2003 2007 ASP % Total BOM ASP % Total BOM Optics $125 45% $45 36% Electronics $55 20% $30 24% Total BOM $280 100% $125 100%
  • FTTx Component Evolution Triplexer (Optical Front-end) Today: Micro Optics Next-gen: PLC + SiOB • Wafer scale fabrication • Complex BOM with micro- • Improved yield & reliability optic assemblies • Lower cost & components • Limited cost reduction Dream Triplexer Dream Triplexer (Minimum Configuration) (Maximum Configuration) PLC SiOB TIA TIA Post AMP DATA PIN Video AMP DATA PIN CDR Planar Waveguides 1490 1490 1490 TIA Fiber Bragg 1490 TIA 0.5quot; Fiber Bragg Filter Video PIN 0.5quot; 1310 1555 Connector Filter Video PIN 1310 1555 Connector Planar Waveguides 1310 1310 Laser Laser Driver Laser Monitor Monitor 0.5quot; 0.5quot; Drawing directly from Alcatel
  • BPL (Broadband Powerline)
  • Broadband over Powerline Utilize power lines to deliver “last mile” access – Alternative to DSL, cable modem, fixed wireless – Powerline in-home networking not addressed here Services Enabled: Data, VoIP (Video possible) Advantages – Low infrastructure costs: no “new wires” – Low-cost equipment and easy install (plug & play CPE) – Ubiquitous coverage of homes and businesses – Utilities have: rights-of-way, experience in operating networks, relatively healthy balance sheets Most applicable for emerging market geos
  • Typical Electric Power Network (Aerial) Tree-and-branch topology: substation -> MV feeder branches -> Txformers Utility substation (5-20k homes served) Medium Voltage Feeder Line (2-15 feeders per substation; ½-5 mile each) Neighborhood Transformer (US: 1-10 HHs; EMEA: 200-400 HHs)
  • BPL Network • Install powerline router at utility substation • PLC aggregation/ repeater devices every ½ mile along MV lines • Simple CPE: low-cost PLC modem, self-install possible Powerline-fiber interface at substation Fiber backhauls to a carrier Router/PMTS location Point of Presence (POP) PLC eqpt installed along powerlines Customer plugs Powerline modem into any outlet: broadband instantly enabled
  • BPL Technology Overview Powerline is a Very Challenging Tx medium – Noisy environment that is largely uncharacterized – Discontinuous environment with unstable multipath – Significant signal attenuation – Lacks “flat” frequency response profile – Significant safety issues (30k volts on MV lines) • Other Issues: FCC restrictions on EMI (Part 15) US RF AM band HomePlug 1.0 Spectrum Extended PLC .5 –1.6 MHz (4-21 MHz) Planning (contemplated) 0 MHz 2 MHz 30 MHz 45-50MHz FCC limits: 30uV/meter Lower FCC limits on emitted power measured at 30 meters (100uV/ meter @3 meters)
  • Emerging Solutions for BPL Inductive coupling provides safe, easy install for equipment on power lines Several techniques for handling MV- LV junction at the transformer – Drive signal through transformer – Physical bypass of transformer (separate cabling) – Use wireless for last 100’ to avoid LV plant entirely
  • Powerline Market in Infancy US Trials: Florida P&L, PEPCO, Cinergy, AEP, Hawaiian Elec EMEA: Endesa – Spain Several in Portugal, France, Germany Developing geos: Chile – Enersis Russia – Electrocom But several countries have regulations that limit BPL or have past bad experiences with BPL UK, Japan, others
  • Fixed Wireless BB
  • BWA Market Segments 3 2 RESIDENTIAL & SoHo DSL FRACTIONAL T1 for 4 SMALL BUSINESS BACKHAUL for HOTSPOTS DEVELOPING COUNTRIES (e.g., Eastern Europe) T1+ LEVEL SERVICE ENTERPRISE BACKHAUL GREEN FIELD DEPLOYMENTS 1 5 ALWAYS BEST CONNECTED 802.16 802.11 INTERNET Telco Core BACKBONE Network or Private 802.11 (Fiber) Network 802.11
  • Wired vs. Wireless Channels SIGNAL THROUGH A WIRE • Relatively Static Channel • Spatially Confined • Efficient Use of Transmitted Energy • Relatively Predictable Interference to other Signals SIGNAL THROUGH SPACE (WIRELESS) Wall • Dynamic Channel • Signal Spreads Out Over Space • Significant Multi-path Energy • Significant (unpredictable) Interference to Other Users Wireless Improvements rely upon air interface Moving Object Antenna systems Radio chains Antenna Physical layer Media Access Control layer (MAC) PHY MAC RF
  • Evolution of Broadband Wireless Point to Multi-Point Wireless Access Equipment Timeline ’00 ’01 ’02 ’03 ’04 ’05 Proprietary Off-the-Shelf Standards-based 802.11 & (70+ OEMs) 802.16a Proprietary • Spectrum: < 11 GHz • License exempt (2.4 GHz) • Licensed MMDS • Data rate: Up to 75 Mbps • Licensed LMDS • OFDM based (20MHz) • Use 802.11 or proprietary PHY • Volume silicon suppliers • Interoperable, scalable • New Technologies: •Data rate: 2-11 Mbps • Data rate: 6-54 Mbps beamforming, MIMO; mesh network topologies • Air interface: • OFDM & S-CDMA
  • Methods to Improve Wireless 5 to 10 year strategies Tech Strategy #1: Move the Channel Capacity Curve “Up” (use more of avail freq) • Smart Antenna Systems (MIMO) via cheap integrated radios & cheap DSP gates 8 bps/Hz 7 bps/Hz Channel Capacity 5 bps/Hz Tech Strategy #2: Actual Performance -> Max Capacity • Advanced OFDM, Advanced FEC via cheap DSP gates Technology Strategy #3: Reduce Channel Idle Time TIME • Advanced MAC via re-configurable building blocks
  • Improving BB Services
  • Going Beyond “the Pipe” Rich Content Deploying the BB infrastructure (the pipe) is only the first step Media Formats Service Delivery Need content, services, delivery models that: Media Transports – Attract users Device Discovery & Control – Entice users to pay Network Protocol – Allow network operators and xSPs to earn ROI Physical Network Critical areas for consideration: – Service Creation & Delivery (provisioning) – In-home networking – Devices in the home – Premium content for the network
  • Managed Broadband Services User’s Perspective: xSP’s Perspective: • Increase ARPU • Easy-to-use • Decrease Churn • Increases value of BB connection • Increase Penetration • Increases value of digital devices … Remotely managed and provisioned by the service provider
  • Home Network Adoption Home Network Adoption (Millions HH) Home Network Connections by Type 100 70 90 Media Network 60 80 Connections 50 70 ROW Residential Gateways 60 40 Asia 50 Europe Infrastructure (net of 30 40 NICs) North America 30 20 NICs 20 10 10 0 0 03 04 05 06 07 03 04 05 06 07 Source: In-stat/MDR ‘03
  • Home Network Challenges
  • Investment Opportunities
  • Investment Strategy Invest in breakthrough technologies: – 10x+ improvement in transmission rates – 5x+ reduction in costs – Radical improvement in deployment rates Invest in key areas of Broadband ecosystem – BB service creation & provisioning – S/w, services to increase the value of BB Accelerate deployment of Broadband Networks
  • Broadband Investment Plan st t $ Stage of t en ve e Investment al t I n arg m De rge s Cycle T Ta Deal Type Target Investment Area Maturity • FTTx Deployment (FTTx networks; • Early • Mkt Development 1-2 $2-6M technology to reduce FTTx costs) • Eyes and Ears • 1-2 • Early/ • BB service provisioning s/w • Ecosystem Medium • 0-1 • Compelling apps for high-rate BB L $2-6M investment • Early/ IA • 0-1 • Complimentary products to IXP for Medium T FTTx, VDSL (triplexer, etc.) EN • Support new BB technologies (ecosystem or E&E) ID N/A F • Access / front-end Si gaps (tuner, • Late • Acquisition / N/A N DSL, demodulator, cable, etc.) investment / license O - Mike Buckley ICap lead C • Home Networking Technologies • Early/ 1-2 $ 2-4M Medium • Investment/ License