BIG Broadband and Gigabit-to-the-Home

See the future ofBIG Broadbandand Gigabit-to-the-Home by Wayne Caswell © CAZITech Consulting, 2006 Photo courtesy of Sandia National Laboratories

TOPICS:• Alternative Futures• The Case for BIG Broadband• Addressing Social Issues• FTTH Technical Tutorial• Fiber as Public Infrastructure• Residential Gateways by Wayne Caswell © CAZITech Consulting, 2006

Alternative Futures MKT-DRIVEN ENABLING REQUIREMENTS INFRASTRUCTURE “BIG” BROADBAND Invest in network Invest in excessBROADBAND capacity to satisfy capacity ahead of bandwidth needs of market demand to PUBLIC SECTOR popular & profitable encourage applications. innovation and BENEFIT-DRIVEN Discourage use of enable new apps Political and Citizen-Focused BW-intensive apps that would not Free or Low Cost Encourages High Adoption that increase costs evolve otherwise. Economy Drives More Capacity Investment or slow performance (attract business, close divide, incr.tax base) of others. PROFIT-DRIVEN Business case needs ROI & Quick Payback High Adoption Rate * High ARPU (monopoly) From Fixed Price to Usage-based (by Time, Volume, Transaction) PRIVATE INDUSTRY

Alternative Futures Continued PUBLIC  Legislators can’t ignore early successes  BB FTTH becomes strategic infrastructure for from Muni Wireless and Regional Fiber public safety, public health, economic initiatives and remove limiting laws development, jobs, education, and innovation  Rural & underserved communities adopt  Open access provides level playing field for WiMAX & Wi-Fi Mesh at increasing rate to competition through Fiber & Wireless address digital divide, economic  Beyond interactive entertainment, G2Home development, and other social issues enables social benefits unheard of before  Public-Private partnerships increase  US regains world tech leadership due to BB  BW varies widely by municipality, so many adoption, pricing and capabilities BIG BB opportunities still go unfulfilled  G2Home initiative provides nearly unlimited BW, but still need tiered pricing to prevent abuseBB BIG BB  Prices fall slightly as DSL & Cable operators  FTTH only in new (green field) and wealthy face new competition from wireless & BPL (high-margin) neighborhoods, ignoring others  Usage varies with all-you-can-eat pricing  Popular fixed-priced pricing of service bundles due to a few users of BW-intensive apps lock out competitors, causing overall prices to  24-100 Mbps possible but operators throttle rise with IPTV and users of BW-intensive apps usage as costs grow faster than revenue  Digital Divide widens considerably, social  Broadcast still dominates over IPTV unrest increases, US position in world economy  Digital Divide remains since rural & low- falters, and Congress is eventually forced to income populations remain underserved react to the lack of competition  BIG BB opportunities go unfulfilled PRIVATE

BIG Broadband A New Philosophy Bandwidth is becoming a strategic imperative asgovernments weigh public policy versus profit motives. Is BIG Broadband driven by market demand for bandwidth-intensive applications? … or … Is BIG Broadband an Enabler of innovation and apps that would not appear otherwise?

BIG Broadband & Clutter’s Law A New PhilosophyBandwidth is getting cheaper faster than storage.Storage is getting cheaper faster than computing. The exponentials are crossing. “A global economy designed to waste transistors, power, and silicon area -and conserve bandwidth above all- is breaking apart and reorganizing itself to waste bandwidth and conserve power, silicon area, and transistors." (George Gilder, Telecosm, 2000) www.ces.net/doc/seminars/20040525/ pr/customer_empowered_networking_thru_UCLP.ppt

The Broadband BOTTLENECKHurts Upstream Benefactors Application Service Providers Network Equipment Manufacturers PC & CE Manufacturers Content Providers …Hurts Downstream Consumers Education & Jobs Healthcare Commuting & Lifestyle …Hurts Communities & Government Failing Local Competitiveness Loss of World Tech Leadership National Security Risk Increasing Social Unrest …

Without BIG Broadband in place, many applications will not emerge, and while today’s consumer may place low value on them, that would change if the appsNetwork Requirements Bandwidth & Latency vs. Value s) ED ic L an g org utin V( mp NOTE: These relative measures of Network Requirements (bandwidth & latency) versus Application VALUE are subjective. do appear. (example: Rich Peer Collaboration – music ensemble). 4 3 2 1 0 DT Co ng UH Gr id uti lel mp ral Co ion ing Pa ve rat itch Wa bo sw ird olla el Th rC nn ee ha ) hP tc HD Ric fa s le ith ltip -2) Vw mu EG IPT e( nc MP illa d( rve lo a Su wn Do -4) TV ce EG HD en MP -2) re s d( EG lep lo a MP Te wn at y) Do 4-5 alit TV V, qu ) HD DT ert itch (H nc -tw eo co gh Vid ic ( (hi ) us ng ow lM mi nd ita Ga .wi Dig er (sm la y ce ltip re n 4) Mu nfe G- y) Co PE alit eo ,M qu Vid TV CD w) (SD ar- slo eo ne e, Vid ic ( ag us .im ng ) lM sm ari ita e( (sh Dig nc hy illa rap IP) rve tog (Vo Su ho ne d) Bandwidth lP ho se ita lep Latency Dig Te res es mp ag Vaue et co im ern ic ( p le Int us lM Sim ita g, Dig sin row bb at) We rts ch Ale ail, or (em ns Se ata &D xt Te Bandwidth Latency Vaue

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Pricing influences BEHAVIOR From Fixed Price to Tiered Pricing to prevent Abuse of Bandwidth by Consumers AND Network OperatorsBACKGROUND: Application value (phone & TV) justified initial NW investments. But always-on convergence and the ability to send these apps over competing networks gave consumers new choices and commoditized application value (e.g. long distance & local phone, music) So, network build-out is now only justified by: – Private industry’s Triple Play bundles to lock customers and increase ARPU – Municipalities as strategic public infrastructure Either way, excess capacity is quickly consumed by early adopters according to Clutter’s Law: “Clutter expands to fill the space available.” – Since applications and users become wasteful of bandwidth, storage & computing capacity, network operators will seek ways to contain abuse by a few in order to better serve all, possibly throttling innovation too. Usage-based Pricing based on Time, Volume, Transaction, etc.

Pricing influences BEHAVIOR Chargeback systems recovered costs but discouraged use.LESSONS FROM CORPORATE IT CHARGEBACK SYSTEMS: ―All-you-can-eat‖ policies encouraged individual departments & users to waste ―expensive‖ IT resources, so chargeback helped recover costs. – But users didn’t understand billing based on computer terms (e.g. MIPS), and these schemes failed to reward the apps with the most business value. Even business measurements failed (orders taken, invoices printed). – In general, chargeback ―discouraged‖ computer use instead of encouraging it. As computing ideology moved from Expense to Strategic Initiative, chargeback systems, if they survived at all, produced ―virtual bills‖ to discourage abuse or found ways to encourage strategic apps at the expense of frivolous ones.

Pricing influences BEHAVIOR Tiered Pricing can be based on Time, Volume or TransactionTIERED PRICING can also be DYNAMIC Bandwidth-intensive apps subsidize bandwidth-conservative apps High-value subscribers subsidize low-income subscribers, economic development, and public safety. Access to city portals and government pages is always free. First hour is free to encourage use, then charged on a sliding scale. – Low-volume apps are free (email, chat, browsing, sensor alerts) – But High-volume apps require a fee (music/video streaming & download) Apps with high social value are free (education, telemedicine) Apps with business benefit require a fee (teleconference, telework) Premium fees for apps consuming the most capacity (HDTV, telepresence)

Big Broadband The case for 100 Mbps Dial-up speeds (28.8–56 Kbps) limit Internet Applications: Text & Data (email & chat) Web Browsing with simple images Digital Music compressed with low quality sampling rates for small files Internet Telephone (VoIP) Broadband (1-5 Mbps) supports More Applications: Digital Music Downloads & Streaming with near-CD quality Digital Photography & Sharing of Photos Video Conferencing with video in a small window Video Streaming with low quality in a window Video Surveillance with small images or slow refresh rate Big Broadband (100 Mbps) supports Even More Apps: High Quality Digital Music HDTV: 4-5 simultaneous streams (1080i MPEG-2 needs ~20 Mbps) Download Movies in minutes instead of hours Video Conferencing that’s almost like being there

Big Broadband The case for 100 Mbps But is 100 Mbps enough? Possibly multiple HDTV streams per TV Simultaneous DVR recordings to watch later 3-5 HDTV streams * 20 Mbps each = 100 Mbps, but what about Picture-in-Picture? Large HDTV displays can support Picture Marquee (4-9 streams per TV) Fast Channel Change Consumers will want to ―flip‖ through IPTV channels just like broadcast channels, but that can mean switching between different servers. New HDTV Format: 1080p The Resolution of 1080i (great on big screens) + the Speed of 720p (30 fps) Needs 30+ Mbps (more than cable, satellite or terrestrial broadcaster has) Without Big Broadband, market success is limited by a fierce DVD standards war. Video Compression impacts quality, at least to some extent MPEG-4 and WM-9 use less bandwidth than MPEG-2 but with tradeoffs. Example: Can’t see fast moving golf ball leave the tee

BIG Broadband Gigabit-to-the-Home Enables More Rich Peer-to-Peer Collaboration Remote musicians perform together with the high bandwidth and short latency of fiber networks. Third Wave Computing Consumers are dusting off their video archive to share online. As more apps move from PCs to the Internet, there’s less need for local hard drives except as a buffer. Data moved to trusted services is secure and protected, accessable anywhere, and shared with authorized visitors. Massively Parallel Computing Grid Consumers share the capacity of otherwise-idle PCs across high-speed networks that enable massively parallel computing applications such as predicting the effect of global warming. Download to Portable Device & Go Downloading The Matrix (7.8 GB in MPEG2 DVD format, not HDTV) takes 11.5 hours at 1.5 Mbps, 10.5 minutes at 100 Mbps, 1 minute at 1 Gbps, and 6 seconds at 10 Mbps. Future portable devices with HDTV resolution will need even faster speeds. 3D TV, Organic LEDs & UHDTV 3D TV requires even more bandwidth, LEDs will bring HDTV resolution to handheld displays, and nanotech materials will make wall-size displays practical. The 1080p HDTV resolution won’t be enough, so researchers are already working on Ultra-high Definition TV. UHDTV needs bandwidth exceeding 10 Gbps.

BIG Broadband unlikely? Consider these False Predictions INVENTION – "Everything that can be invented has been invented." – Charles H. Duell, commissioner of the US Patent Office, recommending that his office should be abolished (1899) COMPUTERS – "I think there is a world market for about five computers." – Thomas J. Watson Jr., chairman of IBM (1943) – "640K [of computer memory] ought to be enough for anybody." – Bill Gates, founder and CEO of Microsoft (1981) INTERNET – "Almost all of the many predictions now being made about 1996 hinge on the Internets continuing exponential growth. But I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse." – Robert Metcalfe, founder of 3Com and inventor of Ethernet (1995)

BIG Broadband unlikely? Consider these False Predictions … CONTINUED TELEPHONE – "Well-informed people know it is impossible to transmit the voice over wires and that were it possible to do so, the thing would be of no practical value." – Boston Post (1865) RADIO – "The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?" – David Sarnoffs associates responding to his urgings for investment in radio (April 1912) TELEVISION – "Television wont last because people will soon get tired of staring at a plywood box every night." – Darryl Zanuck, Movie Producer, 20th Century Fox (1946) ELCTRIC POWER – "Fooling around with alternating current is just a waste of time. Nobody will use it, ever." – Thomas Edison (1889)

BIG Broadband for “Multiple” HDTV streams per TVDVR / Media Center Multiple RecordingsSports Marquee Multiple HD ChannelsSurveillance Multiple Cameras… simultaneously

BIG Broadband for “Multiple” HDTV streams per TV … CONTINUEDSURVEILLANCE MOVES TOWARD MASS MARKET with: Higher Resolution Images Better Image Quality reveals more information Faster Frame Rate Smoother motion More Cameras CCD image sensors already in Cameras & PDAs Cheap & Small CMOS sensors On-chip pixel processing Great when most of the image is static Will enable Facial & Gesture Recognition

BIG Broadband for Fast IPTV Channel Switching IPTV is part of a Mass Personalization trend On-demand & Interactive features yield deep consumer understanding. This enables very Personalized content and Ad insertions IPTV Complements & Threatens DTV Broadcast model Broadcast is for Large Demographic; IPTV for Special Interests. Free spectrum + multicasting = better pictures + more channels. With more Free channels, do consumers even need Cable or Satellite? IPTV can satisfy Even More Special Interests. IPTV needs the same experience Consumers channel surf quickly with a remote control. The TV ―quickly‖ tunes to specific channel Frequencies. But IPTV may need to connect to Distributed Video Servers. Picture-in-Picture amplifies the effect Picture marquee makes it even worse.

BIG Broadband for Fast IPTV Channel Switching FCC reclaims IPTV growing but still Low Penetration analog TV spectrumNOT yet Pervasive Growth needs Big Broadband 2009

BIG Broadband for new HDTV format 1080p is new HDTV format that blends the best of: 1080i (Highest resolution for large 40+‖ displays) … and … 720p (60 fps progressive scan for rapid action versus 30 fps) BUT, 1080p broadcasts need 30+ Mbps Cable, satellite & terrestrial broadcasters can’t handle that today. AND, DVDs can’t store an entire movie Studios want new DVD format w/ better DRM before releasing content. Competing DVD formats are in a Standards War. Blue-ray (Sony & most CE companies) versus HD-DVD (Intel, Microsoft, NEC & Toshiba) Sony PS3 will include Blue-ray DVD player and support 1080p.

BIG Broadband for Rich Peer-to-Peer CollaborationMulti-playerGamingDistributed, ImmersivePerformanceSigning & LipReading forthe DeafTelePresencebreaksDistanceBarriers Collaborative Music Performance over Internet 2

BIG Broadband for Rich Peer-to-Peer Collaboration … CONTINUEDLIVE STREAMING: Latency is a Crucial Limiting Factor – Only ~ 20-40 ms is unnoticeable (for universal interactive applications) – In gaming, delays mean you get shot Tradeoff: Latency versus bandwidth – Compression reduces bandwidth – But: high compression increases latency (e.g., interframe MPEG compression) Approach: – Experiment within this design space e.g. resolution, frame rate, SW/HW codecs vs. uncompressed audio & video

BIG Broadband for Rich Peer-to-Peer CollaborationLive HD Video Streaming with No Latency Delay 1280x720 pixels

BIG Broadband for Third Wave Computing INTERNET APPLICATIONS First Wave – Text & Data services such as e-mail & FTP Second Wave – Images, sound & video improve Ease of UseApps tightly APPLICATION APPLICATION Network isbound to OS subservient NETWORK to computer OS OS DATA DATA Third Wave – The Network is the ComputerApps & Data User Interface User Interface Computer isexist on the subservient Network NETWORK to Network OS OS APPLICATION APPLICATION APPLICATION APPLICATION Web Services, Open Source, Peer-to-Peer, Distributed, OS OS OS OS Agents, Java Spaces, Creative Commons DATA DATA DATA DATA

BIG Broadband for Massively Parallel Computing The World Community Grid – Many individual PCs join together to create a large system with massive computational power that far surpasses that of a handful of supercomputers. – Because the work is split into small pieces that can be processed simultaneously, research time is reduced from years to months. – More cost-effective technology enables better use of critical funds. – Data access speed is a critical limiting factor, but BIG Broadband offers remote access at local hard disk speeds. Examples: – Detect extraterrestrial intelligence through analysis of radio telescope data – Human Proteome Folding Project – UNAIDS, the Joint United Nations Program to Fight HIV & AIDS

BIG Broadband For Mobile Devices (Download & Go) Passive Broadcast Interactive On-Demand Mobile Downloading The Matrix (7.8 GB in SDTV DVD format) Delivery Method Days Hours Minutes Dial-up (56 Kbps) 13 Pony Express 11a Wireless (512 Kbps) 1.5b DSL (640 Kbps) 1 Cable (1.5 Mbps) 11.5 T1 (1.54 Mbps) 11 FedEx 10c Ethernet (10 Mbps) 2 Fast Ethernet (100 Mbps) 10.5 Gigabit Ethernet (1000 Mbps) 1a New York to California: extrapolated from record delivery time of 7 days 17 hours, Download & Go traveling approximately 2,000 miles (from St. Joseph, Missouri to Sacramento, CA)b Maximum 150 users per nodec Express delivery from New York, NY 10005 to Beverly Hills, CA 90210 CONSULTING

BIG Broadband for Ultra-High Definition Television Japan Broadcasting Company – Demo of Early Prototype – Over a 24 Gbps Fiber Network – 18 minute video = 3.5 TB storage For Room Size Displays – 450‖ (37’) Diagonal 16x the Resolution of HDTV – 7680x4320 pixels (vs. 1920x1080) – 32M total pixels (vs. 2M) – 60 frames/sec (vs. 30) 22.2 Channel Audio – 10 at ear level, 9 above, 3 below

BACKUP BIG Broadband “Pipes” For Today’s Apps AND Emerging Apps DSL, Cable … AND … Digital Music (28-700+ Kbps) JPG Images (28—2500 Kbps) Uncompressed Photo (1000-10000 KB) SDTV (500-2000 Kbps) Video Conference (500-2000 Kbps)Dialup FTTH advancedText, Data (300 bps) … AND …Phone (8-64 Kbps) Fast Channel Switching HDTV Download & Go FTTH basic FTTH basic Surveillance (multiple cameras) … AND … … AND … Peer-to-Peer (virtual concert) SDTV (MPEG2: 4000-6000 Kbps) SDTV (MPEG2: 4000-6000 Kbps) Third Wave Computing HDTV (MPEG2 1080i: 20,000 Kbps) HDTV (MPEG2 1080i: 20,000 Kbps) Massively Parallel Grid HD Video Conference (6000-20,000 Kbps) HD Video Conference (6000-20,000 Kbps) Organic LEDs & UHDTV 56 Kbps 1 Mbps 100 Mbps Fiber 1-10 Gbps Fiber

BIG Broadband Addressing Social Issues Drive Universal Broadband Adoption – We ―invented‖ the Internet and once led the world in access – But we have now fallen to 16th in percent of homes subscribing Economic Development – Must regain our lost 60-year Tech Leadership (science grid) TeleWork – Improve Employment options while Reducing Traffic TeleMedicine – Contain Healthcare Costs with aging population Distance Learning – Must recover from a Crisis in Education Bridge the Digital Divide – Leaving people (and towns) behind will drain the economy Improve National Security – It’s a matter of Survival

BIG Broadband Toward Universal AdoptionGoal: “This country needs a national goal for broadband technology…universal, affordable access by 2007.” - President George W. Bush, Albuquerque, NM, March 2004Benefits: “Broadband will not only help industry; it’ll help the quality of lifeof our citizens.” • Tele-Work • Tele-Medicine • Distance Learning • National Security • Jobs and Economic Growth - President George W. Bush, Albuquerque, US Department of Commerce, June 2004Government’s Role: “The role of government is not to create wealth;the role of our government is to create an environment in which theentrepreneur can flourish, in which minds can expand, in whichtechnologies can reach new frontiers.” - President George W. Bush, Technology Agenda, November 2002 CONSULTING

Big Broadband: Toward Universal Adoption … CONTINUEDEconomic Environment: “We ought not to tax access to broadband. If youwant something to flourish, don’t tax it.” • Extend Internet tax moratorium to Nov.2007, possibly permanent • Extend R&D tax credit, possibly permanent • Accelerate depreciation for capital equipment - President George W. Bush, Baltimore, April 2004Regulatory Environment: “Broadband providers have trouble getting acrossfederal lands. That’s why I signed an order to reduce the regulatory red tapefor laying fiber optic cables and putting up transmission towers.” • Improve access to Rights-of-Way • FCC frees new fiber infrastructure from legacy regulation • Verizon, SBC and Bell South to wire 20M new homes by 2007 (>$6B) • Pending rewrite of 1996 Telecom Act - President George W. Bush, Baltimore, April 2004 CONSULTING

BIG Broadband Toward Universal Adoption … CONTINUEDBeware of statistics & forecasts designed to impress:―95% of U.S. zip codes can access broadband today.‖ 20% of the population has No access, and others have no Competition.―Broadband will be in 62% of US households by 2010.‖ The FCC defines High-speed Internet access as anything faster than 200 Kbps in any one direction.Already, 75% of South Korean households have broadbandthat is 10-20 * faster and costs 10-25 * less.In 1992, the Bells promised fiber and speeds of >45 Mbpsin each direction, in order to get regulatory concessions. CONSULTING

BIG Broadband Toward Universal Adoption … CONTINUED ―Broadband will be in 62% of US households by 2010.‖ (BUT at what speed and what cost?) 35 30 Cable Modems 25Subscribers (M) DSL Lines 20 15 10 5 0 1999 2000 2001 2002 2003 2Q04 Source: NCTA 2004 Year End Industry Overview Source: FCC 2004 CONSULTING

BIG Broadband for Economic Development In 2005, US lost its 60-year tech leadership becauseWe now rank 12th in Broadband Adoption per 100 Inhabitants DSL Cable Other Total TOTAL per 100 per 100 per 100 per 100 Rank SubscribersKorea 14.1 8.5 2.2 24.9 1 11,921,439Netherlands 11.6 7.4 0 19.0 2 3,084,561Denmark 11.8 5.5 1.6 18.8 3 1,013,500Iceland 17.4 0.2 0.7 18.3 4 53,264Canada 8.6 9.1 0.1 17.8 5 5,631,714Switzerland 10.8 6.5 0 17.3 6 1,282,000Belgium 9.6 6.0 0 15.6 7 1,618,944Japan 10.4 2.3 2.3 15.0 8 19,097,172Finland 11.2 2.2 1.6 15.0 9 779,929Norway 12.3 2.0 0.5 14.9 10 680,000Sweden 9.5 2.6 2.5 14.5 11 1,302,861United States 4.7 7.4 0.9 13.0 12 37,900,000Source: Organization for Economic Cooperation and Development, Dec.2004 3rd in 2000

BIG Broadband for Economic Development The International Telecommunications Union (ITU) ranks the US in 16th place. US Ranks 12th in Broadband Adoption per 100 Inhabitants3025 Community Wireless DSL Cable Other That’s why municipalities without broadband install their own Wi-Fi.201510 OECD average50 Au om Ic e rk m Me lic lSl o Rep nd e ch Pol a d te s Re bli c Au Ital y No nd Fin an rg Po ny De nds a G e a in d Tu o G re ey rl a a e ce w Z trali a Ire y em tria Ki n ce ga Hu and Sw ay i ted ed en Be nd lan Sw anad lan Ne Kore r x ic a l giu pub bou nga a la rk J ap gd i ted Fra n nm rtu rw Sta rl a Sp u s rm eal s i tze C the va k Lux Un NeUnCz Source: Organization for Economic Cooperation and Development, Dec.2004 CONSULTING

BIG Broadband for Tele-Work Traffic Issue APPLICATION REQUIREMENT – Commute Time Text 300 bps – Fuel Costs Telephone 8-64 Kbps Environmental Issue Color Image 25-2,500 Kbps – Emissions Digital Photos 1,000-10,000 Kbps Employer Issue Digital Music 128-700 Kbps – Improve Productivity Video Conferencing 512-2,000 Kbps – Hire & Keep Talent MPEG-4 VoD (Internet) 250-750 Kbps – Reduce Offshoring Costs MPEG-2 (DVD, Satellite) 4,000-6,000 Kbps – Real Estate Costs, Travel HDTV (1080i MPEG-2) 20,000 Kbps Employee Issue – Family Values National Security Issue – Continuity of Operations CONSULTING

BIG Broadband for Tele-Work … CONTINUED US Broadband Basics – Speed & Price# ADSL Speeds depend on customers distance from providers central office. Cable line speeds can vary due to bandwidth sharing.These speeds are maximum without sharing. Prices are based on customer also subscribing to phone service or cable TV service. 10-20 times slower than in France & South Korea 10-25 times more expensive than in Japan Notice the slow upload speeds. Source: U.S. Census Bureau CONSULTING

BIG Broadband for Tele-Work Loudoun Magazine Art Director Elizabeth Harding Fall 2004 Issue confers with CEO Brett Phillips, Deputy Editor Layout Options Elizabeth Wilmer and • Fashion Shot • Designer Home Managing Editor Rita • Landscape Walston while debating • Editor Portrait pros and cons of a candidate magazine cover. Participants could page through to discuss candidate covers. (mock-up screen shot)TeleWork• Collaborative documents• Nonverbal communication• More like “being there”• Requires 512+ Kbps bandwidth in both directions CONSULTING

BIG Broadband for Tele-Medicine Population Distribution Male Female 78.9 85+ 80-84 Baby Boom 75-79 75.2 70-74 65-69 60-64 1 55-59 69.4 9 50-54 45-49 40-44 Population 65 6 0 35-39 30-34 25-29 20-25Years and Over 15-19 10-14 5-9 0-4 (in millions) will 53.2 double by 2030 85+ 80-84 75-79 70-74 65-69 60-64 65+ 1 55-59 50-54 39.4 9 45-49 85+ 9 40-44 35-39 30-34 34.7 0 25-29 20-25 15-19 31.1 10-14 5-9 0-4 25.6 85+ 80-84 20.0 75-79 70-74 16.6 2 65-69 60-64 55-59 0 50-54 45-49 8.9 2 40-44 35-39 0 30-34 25-29 3.1 4.2 20-25 15-19 10-14 5-9 0-4 6 5 4 3 2 1 0 0 1 2 3 4 5 6 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 % Total % Total Source: U.S. Census Bureau Population Population

BIG Broadband for Distance Learning Other nations outpace US in engineering graduates # of 1st degree in Engineering / Science 240,000 220,000 200,000 180,000 160,000 140,000 120,000 100,000 3X 80,000 60,000 40,000 Each 20,000 0 U.S. Russia India China Japan Taiwan European S Korea UnionSource: National Science Board, ―Science and Engineering Indicators – 2004‖; Table 2-33. Russia, India and S Korea data from University of Texas NCR Report 2004 CONSULTING

BIG Broadband for Distance Learning Rates for entry into college / university , the U.S. ranks 14th*80706050403020100 Kingdom Netherlands Finland Poland Sweden Zealand Denmark Australia Norway USA Hungary Iceland Italy Korea Spain United New CONSULTINGSource: Organization for Economic Cooperation and Development (OECD), Education at a Glance, OECD Indicators, 2003 Edition

BIG Broadband for Distance Learning Percentage of the population scoring at IALS literacy % level 3 or higher on the document scale, 1994-9590 16-25 yrs of age 46-55 yrs of age 80 77 76 73 67 67 66 66 62 58 56 52 52 52 53 49 50 51 46 45 47 45 45 34 35 170 Australia Zealand Belgium Kingdom Canada Germany United Poland Ireland Netherlands States Sweden Switzerland Switzerland United New (Fr) (g) Source: Centre for Educational Research and Innovation, Organization for Economic Cooperation and Development, Education at a Glance OECD Indicators 1998 CONSULTING

BIG Broadband to Bridge the Digital Divide Of Every 100 Kindergartners: Latino (24 year-olds) White 62 Graduate High School 91 29 Complete Some College 62 6 Obtain Bachelors Degree+ 30 Source: US Bureau of Census, Current Population Reports, Educational Attainment in the United States; March 2000 College Graduates by Age 24 BROADBAND at HOME Young People from High Income Families 48%<10% of HH w/ income <$25K60% of HH w/ income >$150K Young People from Low Income Families 7% Source: Tom Mortenson, Research Seminar on Public Policy Analysis of Opportunity for Post Secondary, 1997 in From: Latino Health Care Project, Report at Casey Journalism School for Children and Families CONSULTING

BIG Broadband to Bridge the Digital Divide Technology for All Houston’s Free Wi-Fi networkfor Low Income Neighborhoods MIT’s $100 Computer Aimed at 3rd World countries, 500 MHz, 1GB flash, Linux Touch screen, Wind-up power, Rugged, Flexible, Wi-Fi mesh Source: http://laptop.media.mit.edu/ Source: Jim Brazell, Millennials study, 2005

BIG Broadband For National SecurityWireless: “The spectrum that allows for wireless technology is a limited resource… and a wise use of that spectrum is to help our economy grow, and help with thequality of life of our people.” - President George W. Bush, Baltimore, April 2004 • Wi-Fi (802.11) in tens of thousands of hot spots (and entire cities) 802.11n raw speeds approaching 500 Mbps at short distance • WiMax (802.16) for >60 businesses or 100+ homes (T-1 speed) Possible extention of advanced (―3G‖) services • Millimeter Wave (30-300 GHz spectrum) may yield 5Gbps in ~5 years • But wireless has Security Risks Eavesdrop, Access, Denial-of-Service, etc.Broadband over Power Lines: “We need to get broadband to more Americans…One great opportunity is to spread broadband throughout America via our powerlines.” - President George W. Bush, Albuquerque, US Department of Commerce, June 2004 • FCC has adopted BPL rules • Utilities, hotel operators and others are moving beyond trials • But wireless has Security Risks Eavesdrop, Access, Denial-of-Service, etc. CONSULTING

Big Broadband For National Security … CONTINUED Remember Pearl Harbor We were blind-sided because we couldn’t monitor encrypted signals. Things improved when: 1. We captured a Japanese black box and were able to decrypt transmissions. 2. We started using the spoken Navajo Indian language so they couldn’t monitor our transmissions. The US is Falling Behind in Fiber Deployment With short-term vision, we focus more on Wireless & Powerline as alternatives while much of Asia deploys fiber. Fiber networks are More Difficult to Monitor (spy on) No Electromagnetic Radiation, so requires Physical Connection Fiber networks support Grid Computing Can apply grid to solving social problems (biomed, global warming) … OR Can apply grid for military use (decrypt enemy transmissions)

Technical Tutorial Why Fiber-to-the-Home? Fiber versus Copper (DSL or Cable) FTTH extends Fiber DEEPER (all the way) Enormous information carrying Capacity Relatively Easy to Install & Upgrade Reduced Operations & Maintenance Costs Allows fully Symmetric services Other Benefits of optical fiber: – Very long distances – Strong, flexible, and reliable – Allows small diameter and light weight cables – Secure – Immune to electromagnetic interference (EMI)

Technical Tutorial Fiber versus Copper (DSL or Cable) //Glass Fiber Copper Uses light  Uses electricity Transparent  Opaque Nonconductive Dielectric  Electrically Conductive Material Material – EMI immune (secure) – Susceptible to EMI Low thermal expansion  High thermal expansion Brittle, rigid material  Ductile material Chemically stable  Subject to corrosion and galvanic reactions  Fortunately, its recyclable

Technical Tutorial FTTH extends Fiber DEEPER (all the way)To Central End Last Mile Customer 2010 Office Node Network Premises Data Rates DWDM Fiber Twisted Copper Pair VDSL 24 Mbps – VDSLAM CPE to other VDSL 52 Mbps homes DWDM Optical Coaxial Cable Fiber Cable 24 Mbps – Network Modem Unit AHFC 100+ Mbps to other homes DWDM Fiber Wireless Mobile 54 Mbps – Access Wireless Device Point 280 Mbps POS Fiber Optical Optical Fiber Optical 100+ Mbps – Network Coupler Terminator 10+ Gbps to other FTTH homes

Technical Tutorial FTTH for More CAPACITY A single copper pair is can carry 6 phone calls A single fiber pair is can carry over 2.5 million simultaneous calls (64 channels at 2.5 Gbps) A fiber optic cable with the same bandwidth carrying as a copper cable is less than 1% of the size and weightSource: Corning Incorporated

Technical Tutorial FTTH for More CAPACITY … CONTINUED 200 150 Gbps 100 50 0 Twisted Pair Co-ax Multimode Single-mode * Typical system capability for 100 m linkSource: Corning Incorporated

Technical Tutorial FTTH for Longer DISTANCES 100 90 80 70 kilometers 60 50 40 30 20 10 0 Twisted Pair Co-axial Multimode Single-mode * Typical distance for 1 Gbps system capabilitySource: Corning Incorporated

Technical Tutorial FTTH for SYMMETRIC Services Outbound Internet bursting to 80Mbps Inbound Internet (upstream) averaging about 35-40Mbps Downstream is twice the download … TodaySource: Grant County Public Utility District

The Telecom Act of 1996 did not protect us According to Bruce Kushnick:  “America entrusted the phone companies with our fiber optic Digital Future, and we were taken to the cleaners.” – Failed fiber optic deployments have cost America $200 Billion … and cost the American economy $5 Trillion.  By 2006, 86 million households should have had FTTH. – 45 Mbps performance in both directions for over 500 channels of High Quality Digital Television (HDTV) – Deployed equally in rural, urban & suburban areas – At an average cost of about $50/month – The US has fallen from #1 to #16 in broadband adoption while Japan & Korea already have 100 Mbps for $40/month.  This is one of the Largest Scandals in American History.$20 eBook from www.TeleTruth.orgraises Serious Consumer Concerns – “This is a tale of deceit, fraudulent data and gaming the regulatory system using fake consumer groups, biased research firms and campaign-financed politicians to control everything from the FCC, to Congress, to the state legislatures and commissions to vote for phone-company-financed laws that are not in the public interest.”

Innovation Examplesfrom the LAST 100 years

The need for Strategic Vision In Public PolicyThe Pace of Innovation Is Accelerating The evolution of life forms accelerates exponentially. – Evolution applies positive feedback. – Winners of one stage accelerate progress in the next Technological change is also exponential. – Machine intelligence is multiplying by over 1,000 per decade. – Within a few decades, machine intelligence will surpass human intelligence – So we wont experience 100 years of progress in the 21st century – it will be more like 20,000 years of progress. The rate of exponential growth itself grows exponentially - Ray Kurzweil

Ray KurzweilInventor, Thinker, Futurist, Author www.kurzweilai.net/.../ SIN_headshot_highres.html

BIG Broadband A New Philosophy Bandwidth is becoming a strategic imperative asgovernments weigh public policy versus profit motives. Is BIG Broadband driven by market demand for bandwidth-intensive applications? … or … Is BIG Broadband an Enabler of innovation and apps that would not appear otherwise?

BIG Broadband Public Network Politicsby Wayne Caswellwcaswell@CAZITech.com CONSULTING

Public Infrastructure (a variety of objectives) (and business models) Economic Development Bridge Digital Divide Public & Emergency Services Ease Traffic Congestion Homeland Security Open Competition ROW Access Fees Minimize Street CutsWho Benefits? CONSULTING

BIG Broadband Political Obstacles Public Infrastructure or Private Monopolies? (a variety of business models, objectives & opinions) Municipal Networks – 14 States have passed laws banning them. Preserving Innovation in Telecom Act (H.R.2726) - Texas Representative Pete Sessions (R-TX) introduced a pro-business bill that would ban municipal networks. Community Broadband Act (S.1294) – Senators John McCain (R-AZ) and Frank Lautenberg (D-NJ) responded with a bill specifically designed to allow municipal networks. Broadband Investment and Consumer Choice Act (S.1504) - Senator John Ensign (R-NV) proposed a revision of the 1996 Telecom Act with pro-incumbent provisions that would supersede the McCain/Lautenberg bill and impose barriers to municipal networks. Unnamed draft from House Energy and Commerce Committee - Chairman Joe Barton (R-Texas) and John Dingell (D-Mich) offered a committee draft to prompt debate. It defines ―broadband Internet transmission services‖ (BITS) as packet-switched (regardless of network technology) and offering subscribers the ability to send and receive information such as VoIP & IPTV. Who Benefits vs. Who Pays?

US Senate Energy and Commerce Committee Congressional Hearings http://commerce.senate.gov/hearings/index.cfmDecency Thursday January 19 10:00 AMInternet Pornography Thursday January 19 2:30 PMBroadcast and Audio Flag Tuesday January 24 10:00 AMCompetition and Convergence Thursday January 26 10:00 AMVideo Franchising Tuesday January 31 10:00 AMVideo Content Tuesday January 31 2:30 PMNet Neutrality Tuesday February 7 10:00 AMMunicipal Networks Tuesday February 14 10:00 AMFCC Activities and Policy Wednesday February 15 10:00 AMUSF Contributions Tuesday February 28 10:00 AMUSF Distributions Tuesday February 28 2:30 PMWireless Issues/Spectrum Reform Thursday March 2 10:00 AMRural Telecommunications Tuesday March 7 10:00 AMVoice-over Internet Protocol (VoIP) Tuesday March 14 10:00 AMWall Street Telecom Perspective Tuesday March 14 2:30 PM

BIG Broadband Deep Fiber Example Fiber Costs & Waterloo, IA Benefit Cedar Falls, IA • Pop 68,000 • Pop 36,000 • Private cable system (tale of two cities) • 1996 Municipal telecom upgraded to digital cable network added Fiber and broadband1996 New Construction • $32M • $58M2001 New Construction • $65M • $76M2002 New Construction • $101M • $53MProperty tax rate / $1000 • $36.40 • $42.692003 tax increase • $-0.15 • $6.29 “Fiber optics is the key to Waterloo’s future growth. . . . I believe it has hurt us economically not to be able to provide fiber optics to businesses locating in our city.” – Waterloo Mayor John Roof CONSULTING

BIG Broadband Other Deep Fiber Examples Who else is doing Fiber?Cities that are building new access communications networks toserve residents and businesses include: Avery Ranch (Austin)  Palo Alto, CA Loudoun County, VA  Pittsburg, PA Bristol, VA  Nashville, TN Provo, UT  Cedar Falls, IA Tacoma, WA  Jacksonville, FL Salt Lake City, UT  Dalton, GA … and more than 400 more in 43 statesSource: Fiber-to-the-Home Council, May 2005 CONSULTING

BIG Broadband Deep Fiber as PUBLIC Infrastructure Utah Telecommunications OPen Infrastructure Agency (a Public / Private consortium of 18 Utah cities) 80% Scottsboro, AL Cedar Falls, IA 70% Harlan, IA 60% Newnan, GA Average Palo Alto 50% Take Rate UTOPIATake Rate Base Case 40% Ashland, OR Glasgow, KY Bristol, Tacoma, WA VA 30% Break even 20% (1 in 3 homes choosing 1 of 3 services from dozens of providers by year 7) 10% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Break even = meet debt service, cover operating expenses and fund technology upgrades Source: Dean & Company, SRI Survey CONSULTING

BIG Broadband Deep Fiber as PUBLIC Infrastructure Actual take-rates far exceed UTOPIA’s projections 80% 70% Provo City: free trial Provo City: converted to pay 60% Spanish Fork 50% UTOPIA Base CaseTake Rate 40% 30% Break even 20% 10% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Source: Provo City, Spanish Fork, SRI Survey CONSULTING

BIG Broadband Deep Fiber Deployment Economics Fiber Cost vs. Take Rate 5000 4500 FTTP Cost per 4000 Subscriber 3500Cost ($) 3000 Average = $2950/sub for R= 0.35 2500 Average = $2250/sub for R= 0.50 2000 1500 Variable = $609/sub 1000 Fixed = $821/hhp 500 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 $1,430/sub (100%) Take rate (R) = subscribers/homes passed Source: Corning Cable Systems, 2003 Average cost is lower with more subscribers. CONSULTING

BIG Broadband Deep Fiber Deployment Economics Fiber Cost vs. Take Rate 5000 Overlay revenue lines … 4500 $ 120/mo 4000 $120/mo supports $4320 avg cost Profitable 3500Cost ($) 3000 $ 80/mo $80/mo supports $2880 avg cost 2500 2000 1500 $ 40/mo Variable = $609/sub 1000 500 Uneconomical ($rev < fiber cost) Fixed = $821/hhp 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Take rate (R) = subscribers/homes passed Source: Corning Cable Systems, 2003 Average cost is lower with more subscribers. CONSULTING

BIG Broadband Deep Fiber Deployment Economics Fiber Cost vs. Take Rate 5000 4500 $ 120/mo To satisfy stock holders, 4000 Profitable public companies need 3500 quick Rate of Return,Cost ($) 3000 $ 80/mo Monopoly Power for 2500 high take rate, and High 2000 RPU. 1500 $ 40/mo Competition Variable = $609/sub 1000 500 Uneconomical ($rev < fiber cost) Fixed = $821/hhp 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Take rate (R) = subscribers/homes passed Source: Corning Cable Systems, 2003 Average cost is lower with more subscribers. Usually need about 35% subscriber rate. CONSULTING

Residential Gateway The Vision Possibly the most important & valuable piece of real estate in the home Narrowband for Control &Multiple Providers* Automation Wideband for Data &Different Technologies EntertainmentDifferent Protocols Different Technologies & Split Route ProtocolsNew Regulations Connect Combine Simpler Interfaces Convert * Phone (TTP), TV (coax), Electricity (power grid), Gas (black pipe), Water (copper pipe), Sewer (plastic pipe), Delivery (trucks), etc. Each pays about $800-1500 / home for their infrastructure.

Residential Gateway The AlternativesPossibly the most important & valuable piece of real estate in the home Whole-Home Any WAN, Any LAN, Gateways Any Service or Application Multi-Service Service-Specific RG + Data, Gateways Voice, Video, or Telemetry OUTSIDE OR INSIDE Data-Centric Modem + Router + LAN Gateways (integrated product) Virtual Modem + Router + LAN Gateways (discreet products) Modems, Hubs, Switches, Non-RG CPE Bridges, Wireless APs, STBs

Residential Gateway The Architecture Plug-in modules enable flexible configuration HomeGate Standard Access Network Home Network Interfaces Interfaces Ethernet 10/100/1000 BaseTPSTN Integrated Gateway Bus HomePNAxDSL HomePlug AVCable/SATV MoCAPowerline USB / 1394Wireless WirelessGSM, UMTS, WiMAX … WiFi, Z-Wave, ZigBee, UWB …FTTH Fiber

Residential Gateway and the Master Settop Box Specialized plug-in Adds Value to legacy TVs (assign a channel to each TV or each video source) Home Network Interfaces Digital & HDTV Tuning for all TVs Ethernet PiP and CallerID on all TVs 10/100/1000 BaseT Parental Control on all TVs On-Demand & Interactive TV for all TVs HomePNA Transcoding to optimize Resolution Video Telephony & Closed Captioning HomePlug AV Avoid Cabling Upgrades (RG-6, cat.5) Access PC Apps MoCA Master STB – Web Browsing, Email, Chat SD & HD Tuners – View Photos & Videos USB / 1394 – Listen to Music – Use PC (or remote) storage for DVR function Wireless Access Home Control Apps WiFi, Z-Wave, – Comfort (HVAC, lighting) ZigBee, UWB … – Convenience (automation) – Cost (energy savings) Fiber – Security (view surveillance cameras)

Residential Gateway Integrated or Distributed Design Two Early IBM DesignsModular: 800-8,000 sq.ft. house, Serviceapartment, or commercial building Customer PC Gateway Windows XP External View Internal View Ethernet, PCI Bridge, Embedded OS or 1394 Flexible: 8-, 16-, or 32-bit, 64-bit passive backplane Mount Inside or Outside Pluggable Power Supply (-40C - +60C), surface (110v/220v, few/many slots) mount or in-wall Pluggable CPU & Control Logic PCI High-Riser Card

Residential Gateway Integrated or Distributed Design Existing Coax Existing Coax VDSL NI General Instrument’s NEW CABLEN3 Residential Gateway Outputs: RG-6 Coax MPEG Decoder CPU Ethernet Hub Demodulator Supply S-Video Power Cat.5 TTP RF Tuner RCA jacks Fiber Memory HDMI Wireless

Residential Gateway Marketing Challenges Match your Terminology to your AudienceRG benefits span across sectors, so it’scritical to find the right messages for each.IBM had bad experiences in consumermarkets, so any proposal with the termResidential was ignored.Inter|section Gateways, associated with ane-business strategy, was more palatable.Today’s Service Gateway designs are tiedto specific services and use software fromOSGi (the Open Service Gateway Initiative).Consumers want access to All Services – without new devices or wiring for eachService Providers want access to Al Consumers – regardless of their devices, wiring & protocols

Wayne Caswell waynecaswell@cazitech.com 512-507-6011 www.cazitech.com/big_broadband_links.htmAfter retiring from IBM, Wayne Caswell founded CAZITech Consulting and co-founded Homeownersof Texas, a nonprofit consumer advocacy. He is known as a Technical MarketingStrategist, Futurist, and Consumer Advocate. With some 40 years of experience, Wayne is nowolder and wiser but still enthusiastic and physically fit. He keeps learning new things and pushingnew boundaries and is currently studying the intersections of dozens of MiniTrends, looking forinnovative companies with a promising future and a corporate culture he can support and believe in. CONSULTING

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BIG Broadband and Gigabit-to-the-Home

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