For the purposes of the present analysis of the retail and wholesale leased lines markets, ICP-ANACOM maintains the generic definition of a leased line as corresponding to a permanent and transparent physical connection between two points, for the exclusive and non-shared use of the user, with guaranteed and symmetric transmission speed and over which any kind (of traffic) of electronic communications is routed 1.
The definition of a leased line (wholesale 2) is briefly recalled, generally consisting of two types of elements (see Figure 1) 3:
- terminating segment (also called a local extension), which corresponds to the physical connection between the installations of the customer and the nearest local exchange of the network supplier, where a node of its transport/transmission network is located - for the effects of this analysis, the local exchange of PTC 4;
- trunk segment (also referred to as main section), which corresponds to the physical connection between local exchanges/ terminating segments 5.
Figure 1 - Leased circuit (schematic diagram) end-to-end
Leased lines may use different supporting technologies and infrastructure (e.g. copper pairs or optical fibre). They can be characterized according to their transmission speed, type of use (e.g. for interconnection of networks or to support the access of end-customers) and quality of service. They can also be characterized according to the locations served and the type and needs of their retail and wholesale customers.
The infrastructure and technology supporting the leased line service are, in the case of higher speed circuits 6 (greater than 2 Mbps) consists in the most part of the optical fibre network and SDH transmission equipment 7 and more recently, Ethernet 8. On lower-speed analogue and digital terminal segments, use is essentially made of the copper pair network and associated technologies (including PDH 9).
On a smaller scale and on network nodes with lower capacity requirements and/or areas with difficult access, microwave (radio link) technologies may be used, and in the case of local terminations, especially of 2 Mbps 10, xDSL technologies may also be used, including HDSL or SHDSL 11.
For large distances, submarine cables can be used. These systems are used in both international lines 12 and in the connections to the Autonomous Regions of the Azores and Madeira. PTC's service of leased line access to submarine cables (terminating in Sesimbra and Carcavelos) is known as "backhaul". The leased lines between the mainland and the Autonomous Regions are known as CAM lines 13.
In schematic form, the technologies used in fixed access and transport networks (which also support leased lines) are, in particular, the following:
Some of these technologies are used together, because they offer specific advantages to the overall system, and also due to issues related to their development and gradual introduction on the already installed network 14. Traditional leased lines are supported using technologies presented on the left side of the diagram 15, but for several years dedicated lines have been offered based on package switching technology (right side of the diagram), with ATM 16 or over Ethernet.
Despite this multiplicity of technologies and types of physical support infrastructure, the provision of leased lines services is transparent to operators and end-users and is conducted in a way that is technologically neutral according to the specifications of the situation (e.g. low-speed analogue or digital circuits are usually supported over the copper access network, while high-speed circuits are supported using optical fibre) 17. The definition given by PTC to the service 18 - "a leased line corresponds to a permanent and transparent physical connection between two points, for transporting voice and/or data traffic, supported over digital or analogue technology, with dedicated and symmetric transmission capacity" - is an important factor for this finding.
It is noted that the EC advocates the same principle (of technology neutrality), taking the position that the markets for services must be analyzed independently from the network or infrastructure used to supply these same services to users.
Leased lines are used by two major types of customers:
- end-customers (retail) 19, which use leased lines in particular for transporting data, voice and/or video traffic between two or more facilities at different geographical locations; and
- wholesale customers (operators providing electronic communications networks and services), which use the wholesale supply of leased lines for the purpose of 20:
- interconnection between fixed, mobile or data networks 21;
- development of operators' own network, required for the provision of other electronic communications services which are purchased downstream by their customers - data transport services 22, Internet access services, fixed and mobile communication services and enterprise solutions (e.g., virtual private networks - VPN), among others; and
- resale (to wholesale or retail customers).
Unlike the retail offers of leased lines aimed at end-users, the wholesale offers to fixed and mobile operators - especially the LLRO 23 and, more recently, wholesale Ethernet offers (such as PTC's "Rede Ethernet PT") - have, due to the specific characteristics of this business, been used primarily in developing own networks and seldom for the resale of leased circuits, with the exception of PT Prime, a company of Grupo PT which is a leading reseller of leased lines at retail.
Leased line wholesale products and services for are therefore elements that enable the delivery of symmetrical, dedicated and transparent transmission capacity at wholesale and retail level. These features characterize the services provided, regardless of the technology used to deliver them.
As such, leased lines remain a fundamental tool for the development of the markets for electronic communications services, also to a large extent driving the development of transport and access networks (broadband) throughout the national territory.
Finally, reference is made to some general data related to leased lines:
- The number of analogue lines is still relatively high compared to the total number of lines, although a substantial and sustained reduction has been seen in recent years 24, especially at retail level, and are offered almost exclusively by Grupo PT. At wholesale level, less than a hundred analogue lines are provided by operators outside of Grupo PT. The revenue earned through the leasing of these lines is marginal, particularly in relation to total revenue obtained from leased lines - in the wholesale market in 2008, these revenues amounted to about 5% (compared to total leased lines revenues).
Graph 1 - Evolution in total retail and wholesale leased lines volumes contracted between 2003 and 2008 25
- The number of terminating segments is much higher than that of trunk segments, particularly due to the high number of short-distance lines (local loops) or part and interconnection lines 26.
- The number of low-capacity analogue and digital lines (up to 2 Mbps) is significantly higher than the number of lines with capacity exceeding 2 Mbps. The number of leased lines with very high capacity (155 Mbps and higher) is almost residual at retail level and inexpressive in wholesale markets 27, although their importance has increased significantly since 2005 - an increase of about 50% from 2005 to 2008 in the volume of lines with capacity exceeding 155 Mbps. This trend should continue in the future, given the growing demands for bandwidth by end-customers, including with respect to wireless broadband.
- There are currently several operators and concessionaires of public services which are wholesale suppliers of passive optical infrastructure 28, i.e. dark optical fibre, with more than 40,000 km currently contracted for the construction of transport networks and the offer of wholesale and retail leased lines.
- Currently all operators active in the retail and wholesale leased lines markets make use (in whole or in part) of their own networks and only one retail operator uses third party networks (wholesale) on an exclusive basis.
- In general, with only a couple of exceptions, the number of lines (especially trunk segments) leased by PTC to operators outside of Grupo PT has seen a slight reduction 29.
- In the case of the PTC offer, an increase in use is reported by other operators of part circuits and interconnection internal extensions, rather than end-to-end lines, and at the end of 2008, over 40% of lines leased by operators are lines of this type.
1 The capacity of leased lines can be dedicated or shared on the network supporting them, depending on the associated technology.
2 Retail leased lines do not typically have any segmentation, i.e., they are marketed as dedicated connections between two sites (extremes).
3 Leased lines can have different configurations, for example, there may be lines consisting solely of terminating segments (if the customer's premises are located in the same exchange area) or a terminating segment and a trunk segment (e.g., for interconnection of networks). The tariffs for leased lines (wholesale) usually reflects this segmentation.
4 More precisely, according to PTC, the local exchanges, considered as the points terminating the terminating segments (local extensions), correspond to the Main Access Points as well as the buildings where the PGI Nacionais of PTC are located (Boa-Hora, Picoas, Batalha e Devesas). In the case of leased lines services, these local exchanges comprise the location of the nodes of the transport/transmission network of PTC.
5 Or between a terminating segment (which terminates in a local exchange) and a node of the transport network (local or transit exchange) of an operator.
6 In the case of digital leased lines, speeds range from 64 Kbps up to 2.5 Gbps (or more in the future), so that 2 Mbps can be considered as a level marking a transition between low and high speed, both in terms of the set of lines and in terms of the actual supporting technologies.
7 SDH - Synchronous Digital Hierarchy, technology mostly used in transport networks, as well as in high-speed access networks, (normally at speeds exceeding 2 Mbps).
8 In particular through the commercial offer of PTC, "Rede Ethernet PT", currently a non-regulated wholesale offer.
9 PDH - Plesiochronous Digital Hierarchy, technology proceeding SDH technology (which is substituting it on the transport networks), primarily used in access networks and lower speed circuits.
10 Possibly even higher, depending on the number of copper pairs allocated to a determined connection and the xDSL standard used.
11 x Digital Subscriber Line - Digital subscriber line technologies, generically termed DSL, which are capable of transforming copper lines (for example common telephone lines) into high speed digital lines capable of supporting advanced services of greater bandwidth, such as fast Internet access and Video-on-demand. HDSL (High-bitrate DSL), SHDSL (Symmetric HDSL) and ADSL (Asymmetric DSL) or VDSL (Very high-bitrate DSL) are some of its variants.
12 There is also considerable terrestrial infrastructure (optical fibre) between Portugal and Spain supporting international leased lines.
13 CAM Lines: Mainland- Azores - Madeira.
14 For example, PDH or STM over SDH or Ethernet over DWDM, etc. See glossary given in Appendix I.
15 Circuit-switched technologies in static mode, PDH and SDH supported over optical fibre cables or radio relay.
16 Using, in particular, "circuit emulation" techniques.
17 Indeed, in certain segments, particularly in remote areas, various types of infrastructure and technology can be used simultaneously (e.g. radio link and optical fibre transmission technologies - e.g. SDH - and over copper pairs).
18 See LLRO.
19 SME or large companies, private or state (including, notably, the Public Administration).
20 According to the LLRO, "Leased lines are specifically suited to the establishment of point-to-point links, public electronic communications networks, access connections, security systems and private electronic communication networks, providing features which enable fitting levels of availability, protection and performance".
21 Including lines for interconnecting traffic with PTC, including "interconnection lines" and "interconnection internal extensions", or connections between operators within the exchanges of PTC.
22 For example, ATM, broadband technology designed for switching and transport of different voice, data and video services.
23 The current version of the LLRO covers the following services (see section 4.1 for more details):
- Leased lines, including end-to-end and part circuits;
- Lines for traffic interconnection with PTC, including interconnection lines and interconnection internal extensions;
- Submarine cable access lines (backhaul);
- Links between operators inside PTC exchanges.
24 Wholesale analogue lines accounted for around 29% of all lines in 2006 and approximately 19% in 2008.
25 Source: State of Communications 2008 (see State of Communications 2008https://www.anacom.pt/render.jsp?contentId=965304).
26 Given the larger extent of transport networks of the alternative operators which reach a larger number of PTC local exchanges. The part or interconnection lines are types of leased lines where, usually, the operator does not rent the trunk segment because it is co-located in the local exchange itself. In these cases, PTC interconnection traffic is supported over an "internal extension", i.e. a link inside this exchange.
27 Likewise, the set of installed international lines (analogue and digital) has little relevance.
28 In particular, the [Start of Confidential information - hereinafter SCI] [End of Confidential information - hereinafter ECI].
29 For example, according to monthly data from the PTC, the volume of trunk segments contracted by other operators from PTC fell by 12% between 2006 and 2008.