Business phone & broadband, Ethernet
May 2016
1 One all IP, scalable network with 96% population coverage › LLU enabled a total of 3,037 BT exchanges › Including 99.8% of BT’s Wholesale Broadband Connect (WBC) exchanges › Largest IP voice network in the UK (over 2.5bn fixed line voice minutes per month) › One of the most extensive DLE connected voice capabilities in the UK Built for resilience, innovation and quality of service for residential and business customers Flexible network architecture drives lowest contention in the UK Strong assurance platforms and capabilities providing multiple services Significant opportunity to drive seamless connectivity and capitalise on technology innovation Designed to enable fixed-mobile convergence Foundation for future SDN/NFV evolution
2 High barriers to entry and sustainable cost advantage: At the heart of our network is the unbundling equipment (digital subscriber line access multiplexers, multi-service access nodes and Ethernet switches) that we have installed in over 3,000 BT exchanges, covering c96% of all UK homes – the largest such deployment in the UK and a significant barrier to entry. This allows us to take control of the copper line that connects customer premises to the exchange at a regulated price that has fallen over time.
Collector nodes allow efficient re-direction from edges: The exchanges are connected via collector nodes that aggregate all of the 3000+ exchanges and connect these to the core network. The equipment in these locations (a mixture of BT Openreach exchanges and our own data centres) is owned by TalkTalk. The nodes are connected by 10 Gigabits per second circuits to the core network for delivery of voice and data services. These circuits are either leased bandwidth or leased dark fibre.
Extensive all-IP national backbone: Our dark fibre core optical network is the fundamental underlay of the network - a high-speed, high-capacity all-IP national backbone that enables efficient and flexible routing of voice and data traffic. The size and all-IP nature of this network allow it to be scaled very efficiently for growing usage, enabling it to support growing customer demand for high speeds and greater data consumption.
Regulated access with falling input costs: Access to the copper infrastructure that connects UK premises to BT’s nationwide exchange footprint is price regulated by Ofcom, while fibre backhaul (the process of transporting data via exchanges to the Group’s core network) and dark fibre (the Group’s collector ring and core network) are leased on competitive terms from multiple providers. Access to BT’s fibre-to-the-cabinet (GEA) product, for on-sell to our customers, is provided by BT OpenReach. Input prices for ethernet and dark fibre are falling and regulatory wholesale local access review likely to reduce LLU and VULA (fibre to the cabinet) charges from FY18
Capex at 6-7% of revenues (c£120m-£130m): A defined programme of investment in the network to improve capacity and efficiency in line with the expected growth in demand for high speeds and data consumption. In FY16 we completed the first phase of our backhaul upgrade to deliver significant improvements in network performance for fibre customers. Over the next two years we will invest further in enhancing the capability of our next generation access and edge networks, which will reduce our costs to serve for all our customers, and drive significant further improvements in customer satisfaction. In addition we have designed the investments in the network to future proof 3 priority areas; 1) the growth in fibre from FTTC to FTTP 2) the best Ethernet business network of choice and 3) mobile expansion.
Reducing the marginal cost of capacity and further strengthening the economics of carrying data traffic
3 Services to consumers TalkTalk provides value-for-money phone, broadband, fibre, TV, and mobile to UK homes, differentiated by a clear and simple tariff structure, low prices, flexibility and the inclusion of valuable services, such as unlimited broadband usage and HomeSafe™, our market leading network-based security service. We also offer mobile services to our phone and broadband customers through an MVNO agreement with Vodafone that will transition to a new MVNO relationship with Telefonica UK during 2017. Our TV proposition, which is uniquely non-subscription based, includes access to the TalkTalk TV Store for all broadband customers and a free YouView set top box for those customers taking our bundled phone, broadband and TV packages. YouView is an internet enabled television service with differentiated catch-up and on-demand services, and an open platform for future application driven innovation.
Services to businesses TalkTalk Business (“TTB”) serves the needs of over 180,000 businesses from national retailers to sole traders and public sector customers nationwide. TTB offers a wide range of voice and data connectivity products to business customers. TTB is also one of only two network providers in the UK to offer wholesale connectivity services, with large national ISPs such as the Post Office and Telecom Plus amongst its customers TTB also offers competitively priced high speed connectivity products such as Ethernet and Ethernet in the First Mile (EFM) that exploit the Group’s significant network capability and reach. Data revenues are the fastest growing product set by revenue in the Group’s offering to corporates, with a significant and accelerating pipeline. TTB’s voice offer comprises legacy revenues and the Group’s newly launched, next generation voice over internet protocol (VOIP) product. TTB also offers interconnect services to mobile operators.
4 Core National Optical Network Owned equipment in 2 separate national networks with regional Collector 8Tbps (Huawei) and 1,6Tbps Owned equipment in Nodes to extend reach (Infinera) capacity 3,000+ Unbundled of Core Network Exchanges
Ethernet Exchange
Collector Node Street cabinet
Fibre to the Cabinet
Exchange Backhaul Owned Equipment in Regulated copper 1-10Gbps optical circuits Collector Ring - 10Gbps optical circuit or dark fibre supplied Fibre supplied by BT Openreach or Virgin media by BT, SSE, GEO, VM and Eirecom
Dark fibre sourced under long term leases in a competitive market with no capacity constraints
5 TalkTalk On-Net TalkTalk On-Net Broadband Ethernet
• Voice • Next Gen Voice • Data • Data • TV • SIP (Apps & PABX) • SIP (Apps) • Managed services
FTTC ADSL2+ Annex M 10 Meg 100 Meg Gig & EFM ADSL2+ QoS & Enhanced Ethernet Ethernet Ethernet (Standard) Assure B’width Upstream EoFTTC
Contended Uncontended
Standard Enhanced Care Levels Business-Grade SLAs ATM / AAL5 Delivery (Asynchronous, Increased Ethernet Presentation (Synchronous; Low Overheads) Overhead) Copper Delivery Fibre Delivery
6 Ethernet/EFM POPs Ethernet/EFM POPs
Largest unbundled network in the UK with the largest Ethernet Enabled footprint
MPF 3037
SMPF 3037
Covering 96% of the population with MPF and SMPF broadband on a core network that ensures speed and reliability.
7 Bandwidth is increasing significantly across the network driven by the continuing trend of video
1Gb 400
10Gb 650
To cope with this we are installing more and more backhaul to ensure we We are re-architecting a simpler more scalable network do not congest our customers
8 Moving content closer to the customer we are improving the customer experience for people streaming YouTube and Netflix and also saving bandwidth utilisation across the network.
We are building a full strategy on Dark Fibre usage based on the elements of the network to enable us to scale more effectively with a flatter cost model.
9 c1m on-net phone and broadband customers through direct sales & 20 wholesale partners Over 100 Ethernet and EFM data customers taking between 4-25 circuits each
10 3000+ Exchanges 3000+ Unbundled enabled for Ethernet Exchanges LLU exchange Services Planned LLU exchange Nodes 40 Gbps rings 2900+ Exchanges 1.6 Tbps rings 96% UK Coverage 3.6 Tbps rings enabled for FTTC
2.35Tbps of 2.7bn Minutes of Bandwidth Peak Voice per Month Utilisation
74,000+ FTTC 85 Collector Nodes Enabled Cabinets around the UK
11 Partnering with BSkyB (Sky) and CityFibre (CFH) to build the UK’s first ultrafast FTTP network delivering 1 Gig services to consumers and businesses JV will build the network, TalkTalk and Sky will offer competing retail propositions Why York: › Existing metro layer network in place, owned by CFH › Strong local enthusiasm for high speed connectivity › Representative demographic and market shares
12 Today - FTTC The Future - FTTP
No MPF COST TO TALKTALK MPF + GEA = c£17 Line rental equivalent to GEA
50% lower than FTTC Lower than copper but still COST TO SERVE Independent of weather and weather dependent BTOR
Dependent on distance from CUSTOMER cabinet 1 Gig (1,000Mbps) EXPERIENCE Up to 76 Mbps for £15 premium
A premium product for A mass market product for POSITIONING customers with poor everyone broadband speeds
13 Progress to date 8,000 homes passed and ready for service Costs significantly below plan (<£500 per home) Customer trial completed at end of March › Excellent feedback on product, service and process › 90% of trial participants chose to stay and pay £21.70pm (two-thirds were not originally TalkTalk customers) › Commercial sales to date have delivered c7% take- up in 2 months Next steps Voting in other areas of York for next phase of build Expect to trial poles using Openreach passive access Delivering take-up (30%-40%) Review next phase roll-out in H2 Longer term Potential to roll-out to c10m homes in 2nd tier cities with population 50k-150k
14 To provide a world-class 4G/LTE service for all TalkTalk customers, residential and business: In-Home Small Cells › Repurposed DECT Guard Band • 3.3MHz in the 1800 MHz › LTE femto cells built into next band generation CPE in all TTG locations • 15Mbit/s throughput • 16 concurrent devices › Voice and data offloaded onto TTG • 40m+ radius fixed line network
To carry as much voice and data traffic on the TalkTalk network as possible
source: Qualcomm, Inc.
15 LAA/LWA combines a licensed band with unlicensed 5GHz spectrum to boost our LTE capacity over 20x Throughput jumps from 15Mbit/s to over 300Mbit/s, ideal for use with TalkTalk Ultrafast FTTP Timetable: 3GPP release 13 2016, products in 2017
source: Qualcomm, Inc.
16 TalkTalk Business
Voice and Data over WiFi + In-premise 4G 1Gig Fibre Fibre Backhaul Fibre Ultrafast Cabinet Ultrafast POP Collector Node
1 Gig Fibre Voice and Data over WiFi + In-premise 4G TalkTalk Consumer
17 Extensive, high quality fixed line network asset › All IP Next Gen network with near 100% population coverage › Economical capacity expansion › High barriers to entry B2B scale and growth opportunity › Organic and inorganic drivers to create a £1bn revenue business › Highly profitable leverage of network scaled for evening peak usage Mobile › 700,000+ mobile customers, new extensive MVNO agreement with TEF (UK) › Small cell network in due course will allow in-home offload via LTE across 4m homes Fibre To The Premise › BT-independent national network capable of bringing seamless gigabit connectivity at mass market pricing › JV with Sky and CityFibre overcomes key take-up hurdle faced by previous infrastructure builds – existing customers
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