Economic issues of (broadband)

access networks

C. Courcoubetis

Economics of access - 2C. Courcoubetis

Topics

Broadband access networks*

Economics of deployment*

Municipal access networks

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* WIK Consult: The economics of NGA

Economics of access - 3C. Courcoubetis

The importance of access networks

For providers: it is the most expensive portion of their infrastructure, thus making the right access architecture investment is critical to their ongoing business success

Wireline networks: cost for trenching, ducting, strands of copper/coax/fibre,… to customer premises

Wireless networks: license for spectrum, antennas, …

– Less cost but limited bandwidth

For regulators: open access to the incumbent’s “last mile” is critical for competition to flourish

LLU (Telecom Act of 1996),…

“Investment Ladder” concept

For users: traditionally it poses performance constraints to those that expect advanced services

Architecture

Economics of access - 5C. Courcoubetis

Broadband access network architecture

FTTC - VDSL

FTTH Passive Optical networks (PON)

FTTH Point to Point (P2P)

Economics of access - 6C. Courcoubetis

NGN/NGA architecture

Economics of access - 7C. Courcoubetis

FTTC-VDSL

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FTTH-PON model

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WDM PONs

Economics of access - 10C. Courcoubetis

FTTH Point-to-Point model

Economics of deployment

Economics of access - 12C. Courcoubetis

Economic issues for NGA

NGA technologies considered: FTTC, PON, P2P

Interesting business cases: what are the conditions

under which NGA deployment is viable?

Under what conditions it is replicable? (second mover)

Standalone operators acting as first movers

Second movers

Different assumptions of regulatory intervention (% of

shared infrastructure with first mover)

Key factors: market share (cost per subscriber depends

on population density), ARPU (average revenue per

user)

Economics of access - 13C. Courcoubetis

Cluster definition

The model will determine the minimum market share/cluster

Economics of access - 14C. Courcoubetis

Example: Germany

Economics of access - 15C. Courcoubetis

Results

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Results

Economics of access - 17C. Courcoubetis

Germany

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Itally

Incumbent

Second mover

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Europe

Economics of access - 20C. Courcoubetis

Analysys reportGeneric model of ROI fro an operator in a typical European country 10m

Business models for municipal access

networks

Economics of access - 22C. Courcoubetis

Municipal access networks

The ultimate goal from a public sector point of view is to create a

situation in which access and services are offered by a number of

competing service providers, driving down costs for consumers and

businesses and generating a broad range of high-quality, innovative

broadband services.

Broadband is a “moving target”; currently can be considered as

symmetric connectivity at 4Mbps or over

Economics of access - 23C. Courcoubetis

Factors to be considered

The geological/geographical situation of the city or region (e.g. rural mountain area vs.metropolitan area);

Demographics and concentration of population / businesses in given geographical areas;

The amount of dark fiber infrastructure already in the ground and/or the availability of civil infrastructure which can host fiber (e.g. pipes and ducts used for water, gas or electricity);

Local expertise in operating broadband infrastructure, managing access and providing services;

The degree of existing competition in telecommunication services and the strategy of the main telecommunication provider in relation to the provision of real broadband;

Economics of access - 24C. Courcoubetis

Broadband Building Blocks Building Block 1: Passive Infrastructure is the

physical infrastructure that is used to provide the broadband connectivity and may consist of fiber optic or copper cable.

Building Block 2: Active Infrastructure consists of the elements used to transmit, forward and route information data packets over fiber optic or copper cables. The main elements are switches and routers

Building Block 3: Service Offerings are the actual services offered to customers.

Building Block 4: Operating Company is the company that maintains and operates the active and passive network elements.

Building Block 5: Existing Telcos and Content Providers

Building Block 6: Public Sector, Residential and Business Customers

Economics of access - 25C. Courcoubetis

Equal Access

City utility builds passive infrastructure

Active elements are added and operated by an operator

Providers of services and content buy (wholesale) access service

Low barriers to entry stimulates competition and creation of advanced services

Economics of access - 26C. Courcoubetis

High Level Functional Diagram of Equal

Access Business Model

Operating company maintains a portal of available service and content offerings

Customers select offerings from portal and billing data are passed to the respective provider

Customers pay their provider directly

Economics of access - 27C. Courcoubetis

Variations of the Equal Access Model

Public-Private Partnerships –

PPPs orchestrated

•City utility acts as the coordinator

and adds infrastructure where

needed

•A joint venture manages the

aggregated passive infrastructure

as a single asset

•Case-study: Amsterdam city (NL)

Public Sector Telco

•Public sector takes responsibility

for the active infrastructure as

well as providing the passive

infrastructure

•Case study: Catalonia (ES)

Economics of access - 28C. Courcoubetis

Sole Private Service Provider

City utility builds passive infrastructure

Operating company does both network management and service provision

Temporary solution until critical mass of customers is achieved

Case study: Stockholm (SE)

Economics of access - 29C. Courcoubetis

Full Public control through Public-

Private Partnerships –PPPs

Public involvement in all aspects of the project including the infrastructure (passive, active) and services.

The case for remote or rural communities, where no service providers is willing to invest

Case study: Siena (ITA)

Economics of access - 30C. Courcoubetis

Four Stage Roadmap for a Broadband City