ICT Regulation Toolkit / Practice Notes / Cost Analysis for FTTH

Cost Analysis for FTTH

Cost analysis for FTTH

General Description

Fibre has already become a dominant medium in metro and backbone networks. Fibre-to-the-Home (FTTH) is an umbrella term used for emerging access networks that uses optical fibre in the first/last mile. In techno-economic sense, the advantage of FTTH networks over other telecommunications networks is their long reach and extensive capacity. Fibre has a virtually unlimited bandwidth capacity and is therefore capable of meeting increasing traffic demand of multimedia services and thus providing a “future-safe” medium that outperforms all other know media. With fibre cable prices dropping below that of copper, fibre provide a natural choice for Greenfield deployment.

Figure 1: Active FTTH network overview

Technical Description

Several network architectures and technical implementations of FTTH exist as the technology is still being refined and developed. However, in general, the variants can be categorized as either Active Star, or Passive Optical Networks (PON). The main difference, as the name implies, is that active networks connect each home to electricity fed equipment, such as a switch, while several fibers are passively coupled together in PONs. The PON architecture bears a very close resemblance to that of coax-based HFC, both in geometry and also in many of the protocol details and is the preferred solution of telecoms. Active star is more expensive both in terms of CAPEX and OPEX due to active components in the network but offers a dedicated connection and advantages in Operation & Management (O&M). Another open issue is the question of underlying transmission protocol, where the telecom originated Asynchronous Transfer Mode (ATM) with fixed size cells, competes against packet based Ethernet standards.

Scenario Description

In the remainder of this study we will simulate a Greenfield deployment of an Ethernet based active star network structure. This choice is e.g. taken to reflect the choice of Municipal Electric Companies, which constitute the majority of commercial networks and trials in Scandinavia.

In this scenario, we make the assumption that the municipality has the advantage of existing electricity feeds for aggregation nodes. Additionally, there might be operational synergies that we do not account for, both in deployment (i.e. sharing of ducts with electricity cables) and operation & maintenance.

Main Cost Components

FTTH cost components differ based on the technical solution selected. PON cost components resemble that of HFC while for active star the required investment consists of the following main components:

  • Customer Premises Equipment
    An ONU (Optical Network Unit) terminates the optical signals at the user side. Depending on the solution and services offered, other equipment may be needed.
  • Fiber Access Network
    Cable, ducts and civil work required to connect each home to an aggregation node.
  • Aggregation Node
    Cabinet and Switch that terminates the fiber connection and aggregates them towards a central exchange.
  • Fiber Backbone Network
    Cable, ducts and civil work required to connect aggregation nodes to a central exchange.
  • Service Node equipment
    Core switches and routers for backbone connectivity. Additionally, management system and BRAS are required.

Due to all the hardware spread around the deployment area (i.e., in aggregation nodes), the OPEX of active star is higher than for PON.

The FTTH Model

In this section we will calculate the required CAPEX for a Greenfield scenario. As mentioned above, deployment cost of FTTH networks is sensitive to civil work, ducts, and cables and therefore we will additionally perform a cost optimisation to find the optimal network design.

Cost Structure

When establishing a new FTTH network, the dominant cost component will inevitably be civil work, ducts, and cables. Figure 2 shows, the cost of civil work and cables in the access segment escalates in the suburban and rural scenario, due to longer distances. Additionally, in rural settings, ducts and cables in the backbone segment result in a higher CAPEX than the whole deployment cost of FTTH in urban settings.

FTTH Deployment Cost

Figure 2:Breakdown of cost structures for FTTH greenfield scenario

Cost Optimisation

Generally, when designing and implementing a Greenfield infrastructure there is decision parameters that can greatly affect the cost of the network. For FTTH one of these is the average length of fibre in the aggregation segment. Depending on the cost ration of fibre and aggregation node equipment, there exists an fibre distance that minimises the deployment cost. This length varies for different settings and scenarios. In Figure 3 the deployment cost of the presented FTTH scenario is plotted against the length of fibre to the first aggregation node / street cabinet.

Figure 3: Cost optimization for the design of FTTH

Cost Comparison

When deploying a FTTH infrastructure, all homes in a deployment area are connected with a fiber cable, independent of take-up rate. This means that the dominant cost component of civil work, ducts and cables is fixed. The result is that the more subscribers a FTTH operator can attain, the lower the cost pr. subscriber is. Another way of measuring the cost of FTTH is therefore pr. passed home, rather than pr. subscriber.

Unlike the transmission mediums analyzed in the previous chapters, fiber deployment is unrelated to the amount and type of traffic transmitted as well as distance. As a consequence, we do not differentiate between service profiles in the cost comparison.

Figure 4: Comparison of FTTH CAPEX for different scenarios


Analysis shows that roughly 60% of the CAPEX for FTTH in all scenarios is due to civil work, ducts, and cables. The result verifies the current trend of fiber in areas that for some other reason need to be dug up. The analysis also highlights the need for optimization in network design as well as the effect of take-up rate on the cost pr. subscriber.

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