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The December 14, 2003 Issue Provided by System Dynamics Inc.
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Fiber To Every Home In Reykjavik: A Guest Article by Hjalmar Gislason

Note from the Editors: We've been fascinated for some time with Iceland, which has one one of the highest penetrations of home Internet usage. Several months ago we were invited to speak at the Digital Reykjavik conference. Unfortunately, it coincided with the the U.S. Thanksgiving holiday and we had long-standing plans for a family get-together, so we were unable to attend. We did the next best thing, which was to ask the conference organizers to provide us an article summarizing the conference. We appreciate their contribution, which enables us to share the material with you.

Hjalmar Gislason, our guest author, works as an independent IT consultant. He was one of the organizers of the Digital Reykjavik conference, working for fiber-consultancy company Industria. Hjalmar has founded two software companies and worked as a product manager on computer games, multimedia products and mobile phone applications. Working as a free-lance journalist, Hjalmar has been covering IT, science and technology since 1997. If you would like to share your views with Hjalmar, he can be contacted at

A whole society fiber enabled

Reykjavik Energy, a utility company owned by the city of Reykjavik and surrounding municipalities in Iceland, has ambitious plans: to connect every single home in the area with a fiber connection. If the plans are carried out, Reykjavik could become the first city in the world with Fiber-To-Every-Home.

While FTTH projects elsewhere--notably in Japan, South Korea and Italy—already have fiber-connected areas with larger populations than Reykjavik, the Reykjavik plan might be the first where an area that represents a whole society is to be connected with FTTH. Most other projects have selected high-income areas or targeted their implementation to new construction areas. The planned network in Reykjavik surpasses most of these projects in actual reach and advanced technological implementation.

Digital Reykjavik: Exploring the fiber-enabled society

Olafur Ragnar Grimsson, Iceland's President, speaking at Digital Reykjavik --> Click for larger pictureThe Reykjavik plans and similar projects elsewhere were discussed at a conference in Reykjavik, in November. The conference, called “Digital Reykjavik – Society in Light of Fiber” attracted more than 300 industry professionals from around the world.

Organized by Icelandic fiber-consultancy company Industria, Digital Reykjavik gathered speakers from key players in the field such as Fastweb, Telenor, Telecom Italia, Cisco, Microsoft, Intel and IBM. They were joined by analysts from OECD, ITU and Ovum as well as smaller technology and service providers, each airing their views on the state and future of FTTH.

Pall Erland, Director of Operations at Reykjavik Energy presented the company’s FTTH strategy; what has been done so far and possible future plans.

A logical step for utility companies

Already providing the citizens with electricity and both cold and hot water (Reykjavik homes are heated with geothermal water), Reykjavik Energy sees the fiber connection as the “fourth element” in their utility offering. This seems logical for several reasons. They already have a business relationship with every single home in the area.They already have pipes and other infrastructure in the ground that can be utilized when installing the fiber optic network.

The infrastructure for the electrical grid has proven to be of special value. In 1999, following a major revamp of local telecom regulations, Reykjavik Energy decided to enter the telecom market and started implementing an advanced core fiber network. The core network connects 450 substations of the city’s electrical distribution network with fiber optic cables. The distance from each household in Reykjavik to one of those substations is usually less than 400 meters with an average distance of about 200 meters.

Based on this distribution network, Reykjavik Energy offered fiber connections to businesses and planned to offer residential connections over power lines. This plan allowed them to build a distribution layer ready for FTTH when it became viable, yet capitalized on the distribution network right away.

Reykjavik Energy quickly became a major player in connecting businesses with their fiber connections, in competition with the less sophisticated and more diversified network operated by Iceland Telecom (the original state-owned PTO). On the other hand, the power line connections got off to a slow start--initially because of technological issues--and lost the race for residential connections to ADSL lines offered by the country’s two telecom operators: Iceland Telecom and Og Vodafone. Today a majority of businesses in the Reykjavik area are connected with fiber, and over 15% of all households in the Reykjavik area have an ADSL connection with 256 kbit/s or more. Iceland is usually at or near the top of lists for Internet penetration, now with around 70% of the population using it from home.

FTTH trial explores the potential

CPS 200 switches  from PacketFront --> Click for larger pictureLast winter Reykjavik Energy, working with local technology and service companies, initiated an advanced FTTH trial – a predecessor to what is to come when the roll-out starts. 100 homes in three different areas of the city were equipped with 100 Mbps fiber connections. A Customer Premises Switch from Swedish company PacketFront was installed in every one of those homes. This box – a CPE device that looks very much like a wall-mountable Ethernet hub – connects to the fiber on one side and has 8 10/100 Mbps Ethernet ports on the other. The CPS, together with PacketFront’s Access Switching Routers and a network management system called BECS, extend QoS control and user/service identification down to several Ethernet ports in customers home, allowing the connection speed and reliability for each connected device to be set from the network side in real-time, giving the operator unique flexibility.

In the trial, four of the CPS’ ports are dedicated for IP TV set-top boxes, two for Internet access and two for general purpose. Through the TV connections, trial users access and control Video-On-Demand content streaming in DVD-quality. The service includes a broad range of TV broadcast content, all controlled using a single remote control and simple on-screen menus. The Video-On-Demand content is every bit as responsive as playing a movie from a local DVD player, allowing users to pause, rewind, fast forward and locate movie chapters in a familiar manner. If a user switches from a VOD movie to some other content, the movie will be bookmarked and available at the same location when the user switches back to it. An addition currently being implemented in the trial is a network-based DVR service (think TiVo or ReplayTV in the network). The service will record and store the broadcast material from all available channels and allow users to access them up to a week later, mostly depending on agreements with the right-holders.

A DVD-quality video stream requires approximately 4.5 Mbps connection, so with a 100 Mbps connection several family members can easily watch different video streams simultaneously. As for the Internet connection, the standard offering is 2 Mbps scaling in steps all the way up to 100 Mbps for additional fees. At 2 Mbps, the bottleneck is usually not the connection to your home but rather the load on the web server and other servers routing your traffic.

The Self-service Portal

If a user requires more speed, the Self-service Portal – also a part of the trial – comes to the user’s assistance. The Self-service Portal, designed by fiber-optic consultancy company Industria, is the customer's interface to Reykjavik Energy's offering. It displays the services available on the network: different VOD offerings, Pay-Per-View and subscription channels, IP-telephony services, different Internet service packages and other networked services such as networked security systems, energy saving programs and other services that may apply to the household in question.

The Self-service Portal, together with the flexibility of the PacketFront technology, also allows for very interesting service possibilities. Let’s say that a user wants to download an 800MB program file, and feels the 2 Mbps connection is too slow (with 2 Mbps it still takes almost an hour). No problem. Using the Self-service portal he or she buys a “Turbo” package allowing up to 100 Mbps download speeds, charged by the minute.

Portal could play a key role in business strategy

The Self-service Portal could also play a key role in Reykjavik Energy’s business strategy. Whereas typical telecom providers that have started offering broadband tend to provide all the services themselves, the tendency of utility companies – now increasingly entering this field – has been a so-called “open network” strategy. Utility companies like Reykjavik Energy see themselves only as the providers of the infrastructure, not the actual service providers. Anyone that wants to offer services on the fiber-optic network can sign up with the utility company according to a set pricing scheme, regardless of their offering--Video-On-Demand, audio broadcasts, Internet access, networked home appliances or a totally new and innovative service that nobody else has.

Utility companies and telecom operators are also increasingly realizing that when building Fiber-To-The-Home networks, an “overbuild” strategy pays off quickly. Overbuild in this case means not merely connecting the household but actually installing Customer Premises Switches in the passed residential homes--regardless of whether the household has already bought any services that use the connection. If the engineers are in the building to connect one apartment, they connect all apartments in the building at the same time, free of charge to the home-owners. Once the CPS is there, the barrier for the customer to sign up for a service has become miniscule. You might not be able to call the engineers in to wire your apartment before the big game starts in an hour, but if all it takes is plugging into the box already sitting on your wall, it is not only possible but highly tempting.

Once again the Self-service Portal plays a big role. When you plug either your computer or your TV set-top box into the CPE for the first time, the portal is the only thing you’re able to access. The portal lists all the available services that apply to the devices that you have connected to your CPE. If you only have a set-top box connected, it displays the video offerings; if you have a computer hooked up it lists the ISPs and other Internet related services; and if you for instance have a security system, the network detects it and lists the available service plans that apply. As the household is already authenticated and a billing relationship with the utility company is in place, purchasing any service is simply a click of a button.

Once any service has been enabled, the utility company charges the household a low monthly fee -- a fixed price regardless of the number or nature of services being used. The service providers bill the households directly and don’t have to hand the valuable billing-relationship over to the utility company, but instead pay a revenue-share to the utility company for use of their infrastructure.

Also worth noting is that the Self-service Portal and the active equipment on the network apply intelligence to the network, making it literally impossible to steal any services. The reason? It is not the set-top box or the CPE that is limiting the access to services. If your household isn’t subscribed, the network will not send the stream down your pipe. This is true even of multicast services.

Needless to say, this model is also very tempting for service providers. With access to the utility company’s infrastructure, they can dedicate their resources to the equipment and services that are needed to offer their specific service, rather than spending money on catching up with infrastructure already in place by the competition. In many cases this not only makes competition easier, but is in some cases flat out the enabler for any competition to take place at all. Hooking up with a network already installed in a great number of households is far more inviting than starting to dig your own ditches and build your own physical network. Several large service providers have already stated their interest in providing services on the network, ranging from telephony and other basic communication services to security systems, video content, large-scale hosting and more.

Out of Iceland’s 290,000 inhabitants (approx. 100,000 households), almost 200,000 live in the greater Reykjavik area (approx. 70,000 households). My sources claim that every household in the country -- “including Fiber-To-The-Farm and Fiber-To-The-Glacier” to quote one of them directly -- could be fiber connected for less than 200 million USD. This is certainly a large sum for a small society, but still on the same scale as some local road construction projects that are approved quite naturally. As most of the country is sparsely populated, the cost in the Reykjavik area is significantly lower with estimated costs running between 1,000 to 1,800 dollars per household – including CPE – depending on the existing infrastructure in each case and different implementation options.

Fiber isn’t everything

Speakers at Digital Reykjavik reminded the audience that other alternatives to fiber may be applicable in certain cases. Gordon Graylish of Intel said that while FTTH is the “no compromise solution”, wireless solutions such as WiMax may deliver almost the same quality and speed for often only a fraction of the cost. Others, like Fastweb’s Mario Mella and Cisco’s Guido Romagnoli also emphasized that -- at least in the short term -- the only viable solution in most areas is a mixed network, using fiber where it can be implemented, but relying on other technologies such as DSL or wireless links as a compromise solution for parts of the coverage areas. All seemed to agree that nothing was on the horizon that had the same reliability, transmission speed and flexibility as using fiber for the last mile.

The business models were also debated. Fälth Diedrik of Öresundskraft, a Swedish utility company already deploying FTTH in some areas, stated that utility companies would often be aiming for different return-on-investment goals than private telcos and--as they are often state owned--the aim may be not only profit, but also seeing the broadband connection as a quality service to the local community.

The Fiber Connected Society

As its title suggests, the Digital Reykjavik conference was not only about business and technology, but also about how Fiber-To-Every-Home could and would affect society.

The topic of distance education and telecommuting was brought up several times. Despite the potential of telecommunications, keynote speaker reminded everybody that work and education is not a collection of individuals working separately, but heavily involves face-to-face communication that no current or foreseeable technology can replace. Most people speculated on some sort of video services as being the killer app for the fat pipes. Tim Johnson of Ovum was one of the speakers that said he believed that two-way high-definition video telephony was the number one candidate and reminded everybody that for such a service, the connection must be able to carry heavy streams of data symmetrically -- i.e. both to and from the household -- something that many of the aforementioned compromise solutions are unable to deliver.

Gudjon Mar Gudjonsson speaking at Digital Reykjavik --> Click for larger pictureTo Tim’s point and extending it somewhat, Industria’s Gudjon Mar Gudjonsson demonstrated how he set up his own TV channel using his 100 Mbps FTTH connection, his $1,000 digital video recorder, an ordinary $1,500 laptop computer and free software from Microsoft. While the audience listened to his 3 year old son playing the guitar live on the conference room’s large screen, he predicted that in a fiber-enabled society such “home broadcasts” would become as commonplace as home videos are today. With 100 Mbps available everywhere, why not do a broadcast from the daughter’s soccer match or a wedding in the church to relatives that are unable to attend?

Widely available fiber connections surely open a lot of interesting possibilities and, quoting Geoffrey A. Moore, author of Crossing the Chasm and Inside the Tornado, from Digital Reykjavik’s website: “Clearly Iceland is going to be a living laboratory for broadband taken to the next level.”

Reykjavik may not be there yet, but if Reykjavik Energy goes forward with their ambitious plans – a decision that might be made as early as the first half of 2004 – Iceland might soon become an ideal test bed for FTTH services with this advanced infrastructure in an almost “lab-sized” society.

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