CUSTOMER PROFILE

Oulu Telecom – Building Broadband Finland Cisco Real Broadband technology is enabling Oulu Telecom to offer ‘triple play’ bundled services, including digital TV and fast Internet connectivity

Background For a country with a relatively low population, Finland has a surprisingly competitive telecommunications marketplace. The northern city of Oulu in “Our business is particular is a centre for innovations in technology – the ‘Silicon Valley’ of Finland. A local company, Oulu Telecom, is the largest service provider in the Finnet investment-oriented consortium, and is responding quickly to broadband demand in the area, and high-risk. developing the country’s first-ever high-speed, synchronous broadband offer.

Oulu Telecom believes Challenge The city’s people have a reputation for demanding the best technology solutions. Ethernet is one of the Too small to compete on price alone, Oulu Telecom is innovating by using its core services of the existing copper infrastructure to provide high-bandwidth connectivity and other services. The challenge is to offer higher performance and more exciting services future, and we expect to its local customer base, to protect the company from outside competition, to see ROI in only and to do it affordably. five years.” Solution ® Two Cisco solutions – Long-Reach Ethernet (LRE) and IP Multicast – are helping Oulu Telecom provide high-speed synchronous broadband and digital TV services Pekka Väisänen to its customers. Crucially, Oulu Telecom is able to use its existing copper Marketing Director infrastructure to deliver these services, eliminating the costs associated with Oulu Telecom full-scale infrastructure rollout. The company is also developing local partnerships to embed its offer deeper into the community.

Results Oulu Telecom is leading the large residential and small and medium-sized enterprise (SME) market in Oulu. To date, more than 90 percent of the households in the region have already joined Oulu’s cable television network, and the company enjoys an 80-percent share of the Internet service provider market. It expects to see a return on investment (ROI) in only five years. CUSTOMER PROFILE: Oulu Telecom

Local Service Provider Recently, the demand for residential There are three major incumbent broadband has increased significantly, operators in Finland: Sonera, Elisa, and Kolehmainen continues – thanks to Finnet. Finnet is a consortium of more falling prices, superior applications, and a than 30 local city-based service providers, broader understanding on the part of created to help localised players consumers of the power of broadband. interconnect each other’s networks. With From the late 1990s, competition from out a €63 million turnover in 2002, 125- of town drove Oulu Telecom to develop year-old Oulu Telecom is the largest more exciting and higher-performance company in this consortium. Internet services, as well as new digital TV Situated in northern Finland, Oulu city is offers, to protect its market share. The the sixth-largest in the country. Oulu is company needed to offer residential and also the fastest-growing city in Finland. It commercial clients these new services at has a population of over 120,000, which aggressive pricing but, as a local company has grown by more than 4000 people a with finite resources, had to do so without “Our strategy has year for the past four years. Oulu incurring the prohibitive expense of constantly evolved...we Telecom is the local telecommunications creating an entirely new infrastructure to company, serving business and residential support them. are driven by our customers in Oulu and its outlying Oulu Telecom had been providing its towns. The company’s philosophy is to customers with ADSL broadband customers.” work closely with the local community to connectivity but, like other ATM-based develop relevant and appealing services to access technologies, ADSL was expensive Tuomo Kolehmainen these markets. Research and Development to maintain and possessed inherent Residential broadband is in demand in Manager bandwidth limitations. The company had a Finland, and especially in Oulu, which few options: it could build an optical fibre Oulu Telecom could rightly be dubbed the ‘Silicon Valley’ network to extend Ethernet cabling to its of Finland. With Nokia and Ericsson both customers, or it could better utilise the among the hi-tech companies in Oulu, copper wire backbone already in place. residents tend to be technology-savvy and anxious for the latest solutions, whether Long-Reach Ethernet Internet connectivity or digital TV. To be As an existing customer of Cisco ® competitive, companies serving the area Systems , Oulu Telecom knew already must meet the demands of these customers. that the company’s technology was world-class. Oulu Telecom’s ADSL Evolving Strategy solution was based on Cisco technology. “Oulu Telecom has always been at the So when in mid-2001 Cisco introduced head of Internet, data, and security its LRE solution, Oulu Telecom took the services,” says Oulu Telecom Research opportunity to begin trials, hoping to and Development Manager Tuomo develop a ‘real broadband’ service giving Kolehmainen. “Our strategy has constantly 5- to 15Mbit/s symmetrical connectivity evolved: We were the first ISP in Finland in over its existing Category 1/2/3 copper 1991, and we were the first to develop wire infrastructure. commercial ADSL (Asymmetric Digital Subscriber Line) services in 1999. We are driven by our customers.”

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“We had worked with ADSL for some Dramatically Extended Capabilities time, but the limitations on scalability In early 2002, Oulu deployed Cisco LRE, and the bandwidth ceiling made us look dramatically extending the capability of for something else – Very high bit-rate the company’s copper wire backbone. Digital Subscriber Line (VDSL),” The solution is comprised of Cisco 7600 Kolehmainen explains. “We were seeking Series Internet routers and Cisco Catalyst to be able to provide 10Mbit/s 6500 Series switches in the core network symmetrical services so that we could and Cisco Catalyst 4000 and Catalyst begin to offer ‘triple play’ bundled 3500 Series switches at the edge. The “Quite simply, Cisco services, including digital TV and fast access solution is based on Catalyst 2950 leads the market and Internet connectivity. But we had first to switches for areas with Category 5 ensure that the two key criteria for cabling and Cisco Catalyst 2950 LRE the company's delivering LRE over copper were met. switches for areas with Category 3. solutions are best in Our copper network had to be of “In some ways, the Cisco LRE sufficient quality; and the distances from class.” technology is superior to Ethernet the local loop had to be less than because there are fewer distance 1.5 kilometres.” limitations than with traditional Pekka Väisänen With help from Cisco, in the form of a Ethernet,” Kolehmainen explains. Marketing Director strong account team backed by Cisco “This has allowed us to maximise use Oulu Telecom service engineers and Ethernet specialists, of our existing cables in large multiunit Oulu Telecom tested and developed an buildings.” LRE offer which it discovered could Oulu has also deployed Cisco IP reach 75 percent of Oulu’s population multicast, a bandwidth-conserving and an even higher proportion of its technology that dramatically reduces existing residential and SME customers. traffic by selectively delivering a single By December 2002, it placed an order for ® stream of information from the closest both Cisco Catalyst LRE and IP backbone switch to end users. Multicast solutions. “When a residential customer selects a Pekka Väisänen, Oulu Telecom’s television programme, they automatically marketing director, recalls some of the subscribe only to that stream, with no key milestones of the early engagement. need to stream the other channels,” “We’d known and trusted Cisco solutions Kolehmainen explains. This allows Oulu since 1995. Quite simply, Cisco leads the Telecom and its content providers to offer market and the company’s solutions are a virtually unlimited number of channels best in class,” he explains. “In 2000, our without the worry of data bottlenecks. relationship grew closer with the signing of an agreement between the two Oulu is now able to deliver symmetrical companies, with Cisco committing to connections of up to 15Mbit/s, enough to help Oulu across all business areas, stream digital television to its customers’ including technology, support, marketing, PCs and still have sufficient bandwidth and research and development. This remaining to run high-speed Internet really secured a trusting bond between applications and services simultaneously. us, and in particular this close “It’s a low-cost alternative that gives us relationship enabled us to take immediate Ethernet-like performance without having advantage of the Cisco LRE offer as soon to rewire buildings with Ethernet-grade as it was launched.” cabling,” Kolehmainen explains.

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Beating the Competition In working with Cisco to develop its LRE In addition, through careful service Oulu Telecom’s residential offer provides offer, Oulu Telecom was able to capitalise construction, pricing evaluation and 10Mbit/s symmetrical Internet on leading Cisco expertise in the area – targeted marketing, certain portions of the connectivity at €50 per month. This is both from a business and technology company’s customer base are fast significantly less expensive than the perspective. Väisänen explains the most becoming incredibly effective new sales offerings of its nearest competitors, who valuable aspects of the relationship: channels. Two of these companies are are charging the same prices for a “Cisco is the market leader and has more Oulu Information Technology – a 256kbit/s asynchronous connection. The experience in this area than anybody else. company providing data and connectivity service uses Point-to-Point Protocol (PPP) Cisco overcame technical challenges services to the city’s schools and other authentication for access control and without fuss, helped with business government organisations, and Oulun service permissions. Additional services modelling and marketing and shared its Sivakka – the city’s housing corporation. available include broadband digital TV other customers’ experiences and its using Motion Picture Experts Group 2 global knowledge freely. Oulu Information Technology (MPEG2) encoding, which offers Pekka Packalén, director of Oulu “We don’t have any other vendor’s customers a 12-channel service via a set- Information Technology, says: “We are a equipment in our network and neither do top box. In the near future, Oulu service company that provides the basic many of our business customers – Telecom will offer additional IP TV infrastructure to support the Oulu meaning that our network is getting channels and video on demand (VOD) Corporation (Oulu’s local government and easier, not harder, to operate and manage. using the new Cisco 7325 Content local schools’ administration). We’ve been Cisco has shown us a lot of support, Engine. Gaming on demand is currently around for 30 years and the corporation evidenced by the close relationship we being piloted and will be launched later accounts for 96 percent of our revenue.” now have. There certainly wasn’t any in 2003. Oulu Telecom is also working The company provides a range of services, other company in Finland who could closely with Cisco to develop a residential from data connectivity and IT support to have provided what Cisco has given us,” IP telephony model. hardware and software services and Väisänen concludes. hosting. The residential service has attracted more than 7000 customers in a very short time, Factors Accelerating Take-up Oulu Information Technology’s primarily in multidwelling buildings In particular, there are two factors relationship with Oulu Telecom goes back where Oulu Telecom uses a fibre accelerating take up of Oulu Telecom’s to the very beginning. Connections connection to a Cisco switch located in LRE offer. The first is Oulu’s early focus provided by Oulu Telecom were based on the cellar of these buildings. on content, giving it immediate appeal copper. Fifteen years ago the service Multidwelling customers are viewed by with its residential target market and provider first agreed to provide leased fibre the company as a particularly attractive encouraging much higher average revenue lines to support Oulu Information market because many of the costs of per user (ARPU), simultaneously locking Technology’s customers’ requirements. delivering services to separate customers in these customers and boosting Oulu’s Previously this required significant are combined, which lowers the capital revenue without increasing operational investment on Oulu Information and operational expenditures required to expenditure. install and deliver the service. Technology’s part, and meant that some Oulu Telecom is working directly with its customers relied on slow dialup Using VDSL, G.SHDSL (Symmetric High- own and other local cable operators, and connections. But since Oulu Telecom’s LRE bit-rate Digital Subscriber Line), and pure has issued a challenge to national content service, Oulu Information Technology has fibre over Ethernet, the company’s SME providers to invest in the area and seen a measurable increase in service offer delivers a wider range of services provide content to its LRE customers. performance combined with a rapid rise in including Internet connectivity, LAN-to- This is helping the company enhance its customer satisfaction. “Thanks to Oulu LAN services, hosting, VPNs, centralised offer, increase the use of its services, and Telecom, the fast broadband service we firewall, data centre services, virus consequently generate higher revenues. now offer our customers is changing the scanning, and e-mail. The service is way they do business,” says Packalén. available at every bandwidth increment from a symmetrical connection of “For our part, we can now host our 256kbit/s through 10Mbit/s to Gigabit customers’ servers anywhere in the city and Ethernet. Three-thousand customers are give them a minimum of 10Mbit/s access already benefiting from the solution. to the information on that server – at least a tenfold improvement on the previous situation,” he continues. 4 CUSTOMER PROFILE: Oulu Telecom

“We have the freedom to investigate, Oulun Sivakka is also differentiating itself develop, and implement a much wider from other apartment rental agencies in number of applications to our customers, the city. “Customers see our company as “Thanks to Oulu and are developing a range of innovative much more innovative, modern, and solutions that can now be offered forward looking, which is especially Telecom, the fast remotely due to this improved important in a city such as Oulu with a broadband service we connectivity and performance. And in large population of young and one or two years’ time new IP telephony technically-aware people. now offer our services will be perfectly placed to replace “I would unhesitatingly recommend this the corporation’s existing PBX customers is changing service to any company developing or infrastructure, generating great savings building management rental properties in a the way they do for the city of Oulu and easier metropolitan area,” Schavikin concludes. business.” management for us.” The project has been such a success that Oulun Sivakka Oulun Sivakka will include Oulu Pekka Packalén Oulun Sivakka, the Oulu Corporation’s Telecom’s broadband offer in all its new Director housing arm, owns and manages nearly buildings, and also intends to retrofit its Oulu Information Technology 6500 rental properties in the city. existing properties with LRE broadband Väisänen quickly recognised the synergies and digital TV. Väisänen is pleased with between its LRE offer and Oulun the result. “Cisco helped us see the Sivakka’s activities: “In targeting a possibilities not just in what we could do company such as Oulun Sivakka, Oulu with the technology, but how we could Telecom is opening up a whole new use the offer to develop new markets “Now we are offering market and revenue stream without which didn’t previously exist. All of having to go out and target the Oulun Sivikka’s customers are now our preinstalled fast individuals themselves,” he says. customers, because we were able to partner with a company that saw the Ethernet broadband “Oulun Sivakka is a perfect partner for future as we did.” connectivity as part of us in terms of how we benefit, but the best thing of all is that both it and its A Growing Customer Base our overall offer, and customers benefit enormously too. Oulun Oulu Telecom’s residential customers Sivakka increases its credibility and brand we are attracting a lot now number 7000 and growing. Its SME image through offering synchronous customers number 3000. Customers in of interest. We have broadband at low cost. Its customers both markets are eagerly awaiting the benefit hugely though renting high-tech more satisfied new applications that will become apartments that are preconnected with available in the next 18 months. customers, and the broadband, as though it were a utility number of people on such as water or electricity.” “Residential broadband is a big issue in Finland,” Kolehmainen says in summary. Maritta Schavikin, service manager at waiting lists for rental “There is a lot of demand and players have Oulun Sivakka, says: “Today in Finland, to meet it. The market is also tending more properties with the loans are cheaper than ever and people to data services. Being able to offer are tending to buy their own properties broadband connection bundled Internet, TV, and telephony all rather than rent, which has put a strain over one infrastructure is where we are has gone up sharply.” on our business. Now we are offering heading, because this is what customers preinstalled fast Ethernet broadband want. As we’ve discovered with our Maritta Schavikin connectivity as part of our overall offer, delivery of the Cisco LRE solution, it and we are attracting a lot of interest. Service Manager makes financial sense for service providers We have more satisfied customers, Oulun Sivakka to do so. More than that, we believe it’s a and the number of people on waiting lists financial imperative.” for rental properties with the broadband connection has gone up sharply.”

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One of the only technical challenges for Now busy developing relationships with Oulu Telecom has been maintaining content providers to add new services to enough capacity on its network to cope its broadband offering, Oulu Telecom is with the extra demand. It is currently also assessing means of more tightly “I would unhesitatingly engaged in a continual rollout of new integrating services offered by its own infrastructure to bring its innovative telecommunications and television recommend this service to more and more Oulu residents. subsidiaries. The company recognises that service to any it is only through investing time and “Cisco has cooperated very closely with commitment to partnerships with company developing Oulu in continuing the rollout, providing companies like Cisco that its profits will the right expertise and the right people. or building continue to rise and its reputation grow. Since implementing the Cisco solution, management rental network management has been so Winning Over Hearts and Minds straightforward compared to before that properties in a “Oulu Telecom is succeeding because we’ve seen our operating costs fall by we’ve differentiated ourselves from the somewhere approaching 50 percent,” metropolitan area.” competition,” Väisänen says. “We’ve won says Kolehmainen. over the hearts and minds of our Maritta Schavikin customers, and they are willing to pay Real Broadband Service Manager more because of the performance, Oulu Telecom uses the term ‘real Oulun Sivakka richness, and potential applications for broadband’ to describe its service offering, the service, and this has in turn boosted which reflects the ability to provide our ARPU. The average revenue per user connectivity that is the same upstream and is certainly much higher than before and downstream. “This is a big plus for us and without question it is far higher than our a big differentiator,” Väisänen says. “None “Since implementing competitors’. of our competitors are able to offer a the Cisco solution, symmetrical broadband service, let alone “Because connectivity costs are still offer one as competitively priced as ours. dropping, the only way to build secure network management Our 10Mbit/s synchronous residential future profit is to offer value-added service costs the same as a 256kbit/s services, and we have a much better has been so asynchronous service from our closest opportunity to offer new services over the straightforward competitor, plus we’ve seen a reduction in same connection – such as gaming and operating and network management costs. richer digital TV services – which help to compared to before build a loyal customer base. We chose “No other company but Cisco could have that we've seen our Ethernet technology because we believe provided such a solid foundation for our strongly that it will have a very long life operating costs fall by success with LRE. We needed a cycle, and our choice is being proved technology partner that presented us with somewhere absolutely right,” he concludes. the least risk and as the leader in its field, approaching 50 Cisco was always the best choice.” percent.”

Tuomo Kolehmainen Research & Development Manager Oulu Telecom

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