Tài liệu Reducing Financial Risk docx

white paper
Reducing Financial Risk
in DS1 Service Delivery
Executive Summary
When taking into account all costs associated with DS1 service delivery, copper-based systems such
as those using HDSL2 are far less expensive to implement and own than fiber-based systems for up
to eight circuits to a single location.
Data from North American
service providers show that
maintenance costs on copper
circuits are higher than for fiber
circuits. However, the data also
show that capital outlays for
fiber DS1 system hardware and
cabling are higher than that of
copper systems such as HDSL2.
Taken together, the data show a
lower cost of ownership for
copper DS1 circuits.
For network planners, the only sure bet is uncertainty because what the customer orders today may
not at all reflect what that location needs tomorrow. The financial risk of choosing a DS1 delivery
technology based upon an initial
order can actually be enormous
because, from one to eight DS1
circuits to a single location, the
cost difference between copper
and fiber DS1 technologies
varies greatly with the number
of circuits. Given this variable
demand in the segment of
customers using between one

and eight DS1 circuits, copper
solutions are far more
economical and present far less
financial risk than all other fiber-
based solutions.
2
Introduction
DS1 remains a steadily growing business for service providers. In July 2002, Gartner Group projected
a compound annual growth rate for leased T1/DS1 services at 4.1% through 2006. Yet even as DS1
services are deployed, service providers still face important decisions in how those services are delivered
in the access network:
• Does the service provider use copper or fiber infrastructure?
• What is the most cost-effective solution over time?
Answering these questions extends beyond the simple cost of the equipment. Installation costs,
maintenance activity, and pre-existing copper or fiber infrastructure are all factors that drive decisions
on choice of technology for DS1 service delivery. ADC has studied these issues with the help of leading
service providers in North America. This white paper provides an economic analysis of DS1 service
delivery and offers important guidance in network planning.
Assumptions
This paper compares costs for one to eight DS1s to a single remote location at 5kft from the serving
point, using the two predominate architectures and three technologies for DS1 service delivery. Those
two typical networks - extensions from a SONET ring and point-to-point architecture - are shown in
the following two diagrams. The diagrams also illustrate the technologies that include:
• HDSL2, using the embedded copper network.
• Point-to-point optical solutions, termed Fiber Loop Extenders (FLE) in this analysis.
• SONET, including next-generation SONET, over the fiber network.
It should be noted that although minor cost differences are seen at distances other than 5Kft, the data
lead to the same conclusions within CSA (carrier serving area) radii. Six to eight DS1s are generally
considered to be the point at which it becomes economically advantageous for end-users to use a DS3
rather than DS1 services, so this analysis has been limited to eight circuits. Network diagrams are

shown below.
SONET Ring Extension Architecture for DS1 Service Delivery
Using Fiber Loop Extender (FLE), SONET, and HDSL2 Technologies
3
Data collected from major service providers in North America provide the basis for this economic
analysis. The supporting data are grouped into three parts:
• Maintenance costs over a five-year period;
• Capital costs for hardware; and
• Capital costs for cabling.
The next sections of this paper explore those three component costs. Following that analysis, how
those costs comprise total costs for projects are explored in two scenarios - when infrastructure is
available and when it must be built.
Taken individually, each set of data provides only limited insight for network planning decisions. For
example, maintenance costs alone hardly provide adequate basis for choosing between copper and
fiber DS1 technologies. Yet taken together, this validated set of data offers a more complete view of
the costs for copper and fiber options for DS1 service delivery.
Maintenance Costs
The first set of variables for the model describes average maintenance activity on both copper and fiber
DS1 circuits. Maintenance activity is defined as anytime a DS1 circuit is touched or tested due to
alarms, customer complaints, circuit performance, and other instances.
Public data from FCC filings and private data from service providers confirm that copper circuits
encounter maintenance activity at a rate that is typically four times higher than that of fiber circuits.
This higher maintenance rate is not surprising due to age of the copper plant and the inherent
sensitivity of copper cables to environmental factors such as temperature and moisture. A detailed
analysis of the technical factors comprising the copper failure rates is dealt with in a separate white
paper available from ADC.
The model also assumes a different type of dispatch on maintenance activities: copper circuits require
more outside dispatch (75%) than fiber circuits (20%). Outside dispatch typically costs more because
it usually requires both an inside and an outside technician working together. The combination of more
maintenance activity and more outside dispatch on copper circuits results in higher costs for

maintaining copper DS1 circuits. Compared to fiber circuits, copper is more expensive by a factor of
seven.
Point-to-Point Architecture for DS1 Service Delivery
Using Fiber Loop Extender (FLE), SONET, and HDSL2 Technologies
4
Figure 1 shows that copper DS1 circuits
are more expensive to maintain,
especially as the number of DS1 circuits
grows. For example, this chart shows
that over a five-year period maintenance
costs on four DS1 circuits are $1,440 for
copper and $202 for fiber circuits. Refer
to the Appendix of this document for
cost details.
Capital Costs - Hardware
The data show that capital costs for fiber
DS1 systems are much higher than for HDSL2. Using a distance of 5kft, HDSL2 hardware is the
technology for copper. For fiber, capital costs for both SONET and fiber loop extender (FLE) systems
are included in both point-to-point and SONET extension architectures. Equipment hardware costs do
not vary with distances up to about 12kft. (Note: HDSL4 can be used to reach 30% greater distances
without significant changes in the cost analysis.)
It can be seen in Figure 2 that equipment
costs for fiber DS1 solutions are higher
than for HDSL2 for any number of circuits
to a single location at 5kft in a point-to-
point architecture. The data show that
the gap in cost between FLE and HDSL2
hardware narrows a bit at four DS1
circuits. Even so, FLE hardware is more
than double the cost of HDSL2 hardware

($2,752 vs. $1,280) at the nearest cost
point, four circuits. At five circuits, FLE
hardware is nearly three times more
expensive than HDSL2 hardware ($5,504
vs. $1,899).
Figure 2 also shows that SONET hardware is more expensive than HDSL2 hardware. At four circuits,
SONET solutions are over five times as costly ($7,000 vs. $1,280). At best, SONET hardware costs
nearly three times more than HDSL2 hardware ($7,000 vs. $2,469) with seven DS1s.
The same conclusions hold true when
comparing HDSL2 to fiber DS1 systems as
a SONET extension, shown in Figure 3 -
HDSL2 equipment costs less than optical
solutions. The only difference is that the
hardware required for delivering DS1s
over fiber on a SONET extension is now
even more costly than in a point-to-point
architecture, making HDSL2 hardware
even less expensive than fiber DS1
solution hardware. Cost details can be
found in the Appendix of this document.
5
Capital Costs - Cabling
Choices between copper and fiber cabling
can greatly impact the overall cost of a
DS1 delivery system. As shown in Figure 4,
material and installation costs for copper
cabling is significantly less expensive than
that of fiber cabling. For example, at four
DS1 circuits, the FLE fiber solution results
in cabling costs that are 4.5 times as costly

as that of HDSL2 ($4,500 vs. $1,000). At
five circuits, the difference in cost becomes
more dramatic: $9,000 for FLE vs. $1,250
for HDSL2. The details of this cost analysis
can be found in the Appendix of this
document.
Choosing a System for DS1 Delivery
When faced with choosing a technology for DS1 service delivery to a customer, network planners
encounter basically one of two scenarios:
• Infrastructure of copper and/or fiber is available, or
• No infrastructure is available - copper or fiber may be exhausted, or the customer location is in a
new development with no pre-existing infrastructure.
These two situations are analyzed below.
Infrastructure Available - Copper and Fiber
When copper pairs and fiber cables are
available, HDSL2 costs less for one to eight
DS1 circuits when compared to fiber
solutions in a point-to-point architecture.
As shown in Figure 5, the cost differential
is smallest at four DS1s where FLE
hardware and maintenance combined is
$234 more than HDSL2. However, the
cost differential widens at five DS1 circuits
where FLE costs 1.5 times more than
HDSL2 ($5,756 vs. $3,699).
SONET DS1 solutions in a point-to-point
architecture are also more expensive than
HDSL2, as shown in Figure 5. At seven DS1s, where the cost gap is closest, SONET hardware and
maintenance are 147% that of HDSL2 ($7,353 vs. $4,989). If the customer later decreases service to
five DS1s, SONET is now twice as expensive as HDSL2 ($7,252 vs. $3,699).

In fact, SONET equipment and maintenance costs are an average of $4,901 (2.5 times) more costly
than HDSL2 for one to eight DS1 circuits to a single location. On average, FLE solutions are far more
cost-effective and present less risk than SONET, averaging less than 1.5 times (136%) that of HDSL2.
We are faced with the conclusion that, given the changing nature of customer demand for DS1
services, HDSL2 technology delivers the least financial risk when deploying one to eight DS1s to a
single location in a point-to-point architecture.
6
HDSL2 is also less expensive to deploy over
existing infrastructure when compared to
both SONET and FLE fiber solutions in
SONET extension architectures, as shown
in Figure 6. At four DS1s, an FLE solution
costs 31% more than an HDSL2 solution
($3,554 vs. $2,720). The only time SONET
solutions approach the costs of HDSL2 are
in the 6-7 DS1 range while remaining
dramatically more expensive at all other
DS1 counts.
As seen in Figure 6, the hardware and
maintenance cost differential between
HDSL2 and SONET DS1 solutions in a SONET extension architecture narrows with an increasing number
of DS1s to a single location. At two DS1s, SONET is more than 3 times more expensive than HDSL2
($4,601 vs. $1,430). This may be a cost difference that is hard for network planning to justify. There
is a narrowing of the cost advantages of copper HDSL2 solutions at 6-7 DS1s. At a count of six DS1s,
SONET is only 11% more than HDSL2 ($4,802 vs. $4,344), and at seven DS1s SONET actually costs
slightly less ($4,989 vs. $4,853).
Even so, the financial risk of a SONET solution for one to eight DS1s to a single location in SONET
architecture is significant. On average, the SONET solution is $2,089 more expensive than HDSL2 for
one to eight circuits. This $2,089 represents the average financial risk of choosing SONET over HDSL2
technology for a customer in the one to eight DS1 segment. When uncertainty is the only certain

element in network planning for one to eight DS1s, an average $2,089 cost savings makes HDSL2 a
financially less risky choice of technology.
No Infrastructure Available
The other scenario encountered by network planners in choosing DS1 technology occurs when there
is neither copper nor fiber cables available. Now the equation involves not just hardware and
maintenance costs, but also the capital costs of copper or fiber cables. In most cases, when no
infrastructure is available the more likely choice for new cable plant is fiber. The ever-increasing
bandwidth requirements of the access network have resulted in corporate philosophies that fiber, with
its virtually unlimited bandwidth, always be installed to "future-proof" the network even when
foreseeable needs only require copper.
Yet in other cases installation of new copper is a valid alternative. When costs of material and
installation of copper and fiber cables are added to the cost of hardware and maintenance, HDSL2
remains the least expensive DS1 delivery solution for one to eight circuits when compared to fiber
solutions in a point-to-point architecture,
shown in Figure 7.
For example, costs for FLE and HDLS2
systems are closest at four DS1s, as shown
in Figure 7. Yet the different is still large.
At the closest, FLE is double the cost of
HDSL2 for four DS1s in a point-to-point
architecture ($7,454 vs. $3,720).
However, if customer needs increase to
five DS1s, FLE now costs 3 times more to
implement than HDSL2 ($14,756 vs.
$4,949).
7
The story remains the same with SONET
solutions in the point-to-point
architectures as seen in Figure 7. At four
DS1s, SONET costs triple that HDSL2

($11,702 vs. $3,720). The least cost
differential is at seven DS1s where SONET
costs 1.7 times more than HDSL2 ($11,853
vs. $6,739). No matter the number of
DS1s in a point-to-point architecture
where installation of fiber or copper is
required, the economics say copper is the
right choice.
HDSL2 is also far less expensive than fiber
solutions in SONET extension architecture when no fiber or copper is available, as shown in Figure 8.
For example, at four DS1s, FLE is more than double the cost of HDSL2 ($8,054 vs. $3,720). At five
DS1s, FLE costs are more than triple those of HDSL2 ($15,506 vs. $4,949).
With the added cost of cabling infrastructure, HDSL2 is less costly that SONET solutions in SONET
extensions, too. At seven DS1s, where costs are closest, SONET costs 1.4 times HDSL2 ($9,353 vs.
$6,739). The cost gap widens quickly and significantly with more or less DS1s as seen in Figure 8. For
example, at eight DS1s, SONET is 2.4 times more expensive than HDSL2 ($18,403 vs. $7,634).
On average, for one to eight DS1 circuits FLE costs are $7,454 more than (2.7 times) HDSL2 over a
five-year period when no cabling infrastructure is available. SONET costs average $6,026 more than
(2.4 times) HDSL2. In either case, the financial risk of choosing a fiber-based DS1 solution over HDSL2
for customers in the one to eight DS1 segment is significant.
Conclusion
When compared to fiber-based alternatives, HDSL2 is the clear economic choice for delivering between
one and eight DS1 circuits to a single location. This holds true even though the maintenance activity
rate and the cost of maintaining the copper plant are both much higher than that of the fiber plant.
The reason HDSL2 costs less is that in fiber solutions, capital costs for equipment and cable are
significantly higher.
Demand for DS1s in the segment of the market that requires one to eight circuits is variable. A
business that needs five DS1s today may require three or seven in one year. The cost difference
between HDSL2 and fiber DS1 systems is variable, too, at each number of circuits. On average, the
cost for HDSL2 solutions is thousands of dollars less than costs for fiber loop extender (FLE) and SONET

solutions. At four DS1s, paying an extra $234 to deploy a fiber solution might be reasonable.
However, once that fiber solution is installed and the customer wants just one more DS1, paying an
additional $2,057 for the fiber system may not be tolerable.
ADC acknowledges that when faced with the need to install copper or fiber, carriers will most often
choose fiber. The reasons for doing so are completely valid and justified, and are beyond the scope of
this paper. However, the more likely choice to deliver DS1 services is using existing copper versus using
either new or existing fiber. In those cases, the economics become a dominant concern, particularly
in today's ultra-competitive and capital-constrained environment.
Data from service providers show that on average HDSL2 is far less expensive to deploy. Given the
variable nature of customer demand, the only way to minimize expenses and remove financial risk
from DS1 network planning decisions for customers in the one-to-eight DS1 market segment is to
choose HDSL2 technology.
8
Appendix - Assumptions and Calculations
In comparing HDSLx and fiber technologies for DS1 service delivery, the following assumptions were
used:
• DS1 delivery to a single location of up to 8 circuits.
• Maintenance rates and costs calculated over five years.
• Both SONET extension and point-to-point alternatives examined.
• Three solutions are presented at 5kft:
– HDSLx, delivering one DS1 circuit over two copper pairs
– Fiber loop extension, delivering four DS1s over two fibers (FLE)
– SONET extension, delivering seven DS1s over two fibers
Maintenance Costs - Copper
Assumptions
• Maintenance activity rate - 2.0% per month
• Outside dispatch required on 75% of trouble calls
– 4 hours 1 man outside, 2 hours 1 man inside
• Inside dispatch (only) required on 25% of trouble calls
– 2 hours 1 man inside

* Loaded labor rate - $60/hour
Maintenance Costs - Fiber
Assumptions
• Maintenance activity rate - 0.5% per month
• Outside dispatch required on 20% of trouble calls
– 4 hours 1 man outside, 2 hours 1 man inside
• Inside dispatch (only) required on 80% of trouble calls
– 2 hours 1 man inside
• Loaded labor rate - $60/hour
9
Maintenance Costs - Fiber (continued)
Costs for Hardware - HDSLx Systems
Costs for Hardware - Fiber DS1 Systems
10
Costs for Hardware - Fiber DS1 Systems (continued)
Cabling Costs - Copper
Copper cable allocation
• Cost for new copper cable includes material and installation
– 100 pair distribution cable - $2.50/ft
– Allocation for 2 copper pairs - $0.05/ft
Cabling Costs - Fiber
Fiber cable allocation
• Cost includes installation, splicing, and material
• 12-fiber buried cable - $5.40/ft; therefore a single fiber allocation = $0.45/ft
11
Comparing Costs for Copper and Fiber DS1 Systems
12
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