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Construction and operation of NGA networks from
the perspective of non-telecommunications
companies
Dr. Igor Brusic
DiALOG 2011 Telekommunikation Frankfurt, 9 June 2011
2
Contents
Old and new business models 2
Non-telecom companies 3
Financing 4
Introduction 1
Summary and outlook 5
3
Next Generation Access
Definition / Starting point
Why?
NGA = fibre access network (FTTH)
Because a powerful infrastructure is the basis for the development of the information society ...
... and related to the development of the needs all other technologies are only an interim solution ...
... so that every 2-3 years one has to deal with the same subject once again, because there will always be „white spots“.
Consequence The expansion of fibre networks is a pure strategic decision!
FTTH/FTTB EU Ranking 2010
* At least 200.000 households
Source: FTTH Council Europe, June 2010
Economies* with the highest market penetration of Fibre-to-the-Home/Building + LAN
Percentage of households**
** Economies with a penetration of > 1%
Lithuania Sweden Norway
Slowenia Slovakia Denmark
Estonia Bulgaria Finland
Netherlands Latvia
Russia Romania
Italy France
Portugal Czech
Republic 0% 5% 10% 15% 20%
(blue) Fibre-to-the-Home customers (grey) Fibre-to-the-Building customers
4
5
Broadband availability in Germany 2011
0 10 20 30Kilometer
> 95 - 100 %
> 50 - 95 %
> 10 - 50 %
0 - 10 %
nicht besiedelt0 10 20 30
Kilometer
> 95 - 100 %
> 50 - 95 %
> 10 - 50 %
0 - 10 %
nicht besiedelt
Landline ≥1 Mbit/s Landline ≥50 Mbit/s
Source: BMWI, Breitbandatlas auf www.zukunft-breitband.de, 2011
The map for „landline = fibre connection“ would hardly contain green parts
" Existing networks are specialised for certain services
" Currently only a few services require symmetrical connections
" Currently users are satisfied with the bandwidth offered
" Fibre networks compete with existing networks for services which do not yet exist
" … but are measured by existing services (requirements)
" To build a business model with services that do not yet exist is for the private sector (almost) impossible
" „Regulatory uncertainty “ because fibre networks in the access area are a natural monopoly
" … so that the focus is less on new business models in the old environment but more on new business models in the new environment
Challenges of the fibre network
6
7
„Market failure“ for FTTH?
Demand in Germany
The (non)-supply
No mass market for FTTH (yet) Innovators ( technology acceptance model) Companies such as planning offices, laboratories, etc.
Downward spiral: If rural areas are neglected ... ... businesses/ residents move to better supplied (urban)
areas… ... so that the rural areas become even less attractive for
investment! … and regions are decoupled in terms of competitiveness
Discussion
Whoever wants to demonstrate that fibre is not necessary will find arguments.
Whoever wants to demonstrate that fibre is necessary will find arguments as well!
8
Contents
Old and new business models 2
Non-telecom companies 3
Financing 4
Introduction 1
Summary and outlook 5
Telecommunications networks
9
Services
Operation
Infrastructure
Service development Developers do not have to invest in passive or active
infrastructure Very short cycles (< 1 year) 10-15% of total costs
Active network infrastructure Router, switches and other active components OSS / BSS Lifespan of equipment between 3 and 5 years 10-15% of total costs
Passive network infrastructure Cable channels, pipes, cables, cabinets and buildings Diggings and rights of way Lifespan more than 20 years 70-80% of total costs
Business models
10
Diversity of Services
P a s s i v e I n f r a s t r u c t u r e
€
Diversity of Use
€
€
€
Indirect profitability
€
€
€
Vertically integrated
business model
Open Access
Vertically integrated business model
11
Strong focus today Cooperation with Google, Amazon, Ebay etc. ? IMS (IP Multimedia Subsystem) QoS (Quality of Service) / Net neutrality
Diversity of Services
P a s s i v e I n f r a s t r u c t u r e
€
Vertically integrated
business model
Open Access
12
Open Access and Revenue Sharing: ISP, Smart Meetering, e-Health, TV, Security-Services, etc.
Infrastructure owners without retail offers (= they do not compete with service providers!) The fewer obstacles on the part of infrastructure owners, the more rapid the
development But – chicken-egg problem!
P a s s i v e I n f r a s t r u c t u r e
Diversity of Use
€
€
€
Open Access
Profitability
13
Economic location factor Competitive advantages Creation of new jobs Stops the migration of the population Attractive location for private customers (new development areas) Attracts investors
P a s s i v e I n f r a s t r u c t u r e
Indirect profitability
€
€
€
14
Contents
Old and new business models 2
Non-telecom companies 3
Financing 4
Introduction 1
Summary and outlook 5
15
Energy suppliers
Affinity for physical infrastructure
Affinity for the business model
Experience in construction and operation of electricity-, gas-, and water-networks
Often supply of telecommunication services for internal purposes
Increasing role of the convergence of utility networks and services with telecommunications applications (Smart Grids)
Long-term investments Possible focus on „network area“ Direct access to all potential customers Possibility for combining the supply of various
infrastructures/services Telecom/Broadband as „supply concept“
But – also new challenges!
Dynamic retail market Increasingly service-oriented end-users Technology competition (cable, mobile, telecom) Cooperation strategy as an option
16
Local Governments
How is money earned?
Direct revenue through rental of lines (Dark Fibre)
Connection fees of subscribers
Revenue-sharing models with service providers
Indirect revenues (stable value of properties, reduction of migration, business settlements)
CO2-emission trading (low power consumption, teleworking, micro-trenching)
3. Revenue model
What are the benefits of FTTH for the community ?
The supply of broadband infrastructure as an essential factor for the economic and social community development
Prevents the migration of companies and favours the return of young people after their training or study
Prevents the decay of prices of real estate and construction areas
Is an advantage over communities without fibre
1. Value proposition
What benefits are offered in which markets? How and in which configuration will the performance be created (product-/market-strategies)?
Passive infrastructure is offered to all network operators with the same conditions
Non-discriminatory access to the subscriber for all service providers
Every subscriber can use services of any provider in any combination
2. Value chain structure
17
Contents
Old and new business models 2
Non-telecom companies 3
Financing 4
Introduction 1
Summary and outlook 5
18
FTTH Financing
Infrastructure Fund
Examples: Australia, Singapore, Qatar EU: Funding must be notified Conditions
Self-Financing
Example: CIF Infrastructure and pension funds that view FTTH as long-
term investment with secure return options
Public-Private Partnership
Public Funding
Example: CityNet Amsterdam Sharing of risks Improvement of planning, marketing and business model for
fibre-optic networks
Example: Burlington (USA), Blons (Österreich) Bond of the local government Association fees
19
Contents
Old and new business models 2
Non-telecom companies 3
Financing 4
Introduction 1
Summary and outlook 5
20
Summary and outlook
FTTH in Germany
General
Expansion is left to the market economy Currently broadband requirements can be met with
conventional networks
Broadband connection as the primary requirement for the selection of location
Increasing broadband demand/ symmetric bandwidth requirement
Simultaneous use – school, education, entertainment, telework, e-government, shopping, communications, information
Outlook Different business models depending on the documented
value-added step and financing No ready solutions – individual projects Large consulting potential SBR with expertise in business, law and technology
21
Epilog
„Arthur C. Clarke knows exactly, which phases new ideas pass through. First, it is: "It can't be done.“ Later on: "It probably can be done, but it's not worth
doing.“ And finally the initial doubters mean
"I knew it was a good idea all along!"
Source: http://www.spiegel.de/wissenschaft/weltall/0,1518,381747,00.html
22
Contact
Nordstraße 116 40477 Düsseldorf Germany Tel: + 49 211 68 78 88 0 Fax: + 49 211 68 78 88 33 URL: www.sbr-net.com
Parkring 10/1/10 1010 Wien Austria Tel: + 43 1 513 514 0 15 Fax: + 43 1 513 514 0 95 URL: www.sbr-net.com E-mail: [email protected]
SBR Juconomy Consulting AG
INDUSTRY FOCUS
Both firms, SBR Juconomy Consulting AG and SBR Schuster Berger Bahr Ahrens Attorneys-at-Law, specialise in questions of commercial and regulatory law
They are clearly focused on the ICT and network industries
In these segments, we address the following issues in particular:
- Mobile radio | Fixed network | Internet - Regulation - Market analyses - Comparative market studies - Cost accounting - Network access | Interconnection - Project development & management - Frequency management - Fibre optic upgrades | FTTx - Strategy - Business Planning
EXPERTISE
Regulation Telecommunications Broadcasting Post, energy, railways
Wholesale | retail regulation IT | telemedia law Internet | multimedia | data
protection law Competition law Commercial law Company law Contract law Administrative law Outsourcing Contract management (International) arbitration
proceedings Tender/Procurement processes
Market analyses Feasibility studies Cost accounting Cost models Studies | Expert opinions Benchmarks Business planning Price strategies | negotiations Quantitative | qualitative
analyses Outsourcing Regulatory policy | Lobbying Corporate strategy Business Cases
Carrier Management Network access
Interconnection Collocation Business plans based on
technical operating perspective Coordination and selection of
network equipment providers Network planning Frequency planning Numbering plans Project management Fibre optic networks Next-generation networks Intelligent networks IMS
SBR Juconomy Consulting AG
Business Technology Law & Regulation
FIELDS OF ACTIVITY SBR Juconomy Consulting AG provides comprehensive advice to:
- Companies - Regulatory authorities - Institutions - Ministries - Regional and local authorities
Among the clients of SBR Juconomy Consulting AG are: - PICOM | Ministre des Télécommunications, des Postes et de la Communication (Madagascar) - TRA | Telecommunications Regulatory Authority (Bahrain) - TRA | Telecommunications Regulatory Authority (Oman) - ATRA | Afghanistan Telecom Regulatory Authority (Afghanistan) - CITC | Communications and Information Technology Commission (Saudi Arabia) - Minpostel (Ministry for Post and Telecommunications, Cameroon) - Orange - 1&1 Internet AG - Telecom Italia - RomTelecom - Ghana Telecom - QSC - Cell One - INT | Instance Nationale des Télécommunications (Tunisia) - TRA | Telecommunications Regulatory Authority (United Arab Emirates) - Kabel Baden-Württemberg - Associations in the German and Austrian market (BREKO, VATM, VAT ISPA) - RTR GmbH (Austria) - International Telecommunications Union (ITU) - Swisscom - Utilities in Germany and Austria (TeleMark GmbH, TeleData Friedrichshafen, Wienstrom) - ORS (Österreichische Rundfunkservice GmbH) - 1&1 Internet AG - HAKOM (Regulatory Authority of Croatia) - Tele2 Telecommunications GmbH
FIELDS OF ACTIVITY – Companies SBR Juconomy Consulting AG advises telecommunications companies operating in the fixed network, mobile and Internet sectors. Our consulting activities encompass:
Regulation: We represent companies in matters concerning regulatory authorities, including in regulatory proceedings, especially concerning charges and interconnection. We provide support by way of expert opinions, position papers and comments in the context of interconnection, market definition and market analysis procedures
Benchmarks: We produce national and international comparative analyses concerning a variety of issues, including interconnection charges, collocation, unbundling, value-added services etc.
Market analyses: On behalf of our clients, we examine both international telecommunications markets in general, and product and service markets in particular, while providing support with market analyses concerning significant market power (SMP)
Cost accounting and cost modelling: We develop cost models, conduct cost assessments and perform monetary business evaluations of strategic options
Network access and interconnection: We assist companies with interconnection negotiations, collocation and the joint use of technical equipment
Network upgrades: We assist companies with the technical and economic planning of network upgrades, in particular for fibre optic and next-generation network / access (FTTx)
Strategy and Business planning: SBR develops business plans and draws up business strategies with respect to the deployment and rollout of networks and the provision of services, specifically in the area of next generation access.
SBR Juconomy Consulting AG advises regulatory authorities, institutions and ministries on all issues concerning regulatory processes, tenders, and procedural arrangements and implementation, and on aspects of telecommunications law and regulatory policy
Regulation and regulatory policy: We advise on the development and formulation of regulatory directives and ordinances (e.g. on roaming, access, rights of way, joint use) and of regulatory proceedings, including their implementation and execution
Organisation: We offer advice on public authorities' structural and procedural organisation
Training: We offer extensive training on all aspects of regulation
Standard offers: We give advice on the conception and creation of standard offers (interconnection, leased lines, collocation and joint use, submarine cable landing stations, wiring conduits, data products etc.)
Network access and interconnection: In this context, we provide support with implementing the requirements arising from standard offers and with the development and design of processes for offering access products (final mile, collocation, access to wiring conduits and cable ducts) in the upstream segment
Cost accounting and cost modelling: We develop cost models, conduct cost assessments and implement cost accounting regimes
Frequency policy & management: We offer advice concerning frequency policy and management arrangements and on the allocation of spectrums
FIELDS OF ACTIVITY – Public authorities
FIELDS OF ACTIVITY – Regional and local authorities
SBR Juconomy Consulting AG advises regional, district and local authorities on the following issues, among others:
Broadband expansion: We support communities who are without or have only inadequate broadband access at present
Support options: In connection with the expansion of broadband, we indicate the opportunities available for financing, support and cooperation
Network planning and upgrades: We offer technology-neutral solutions for building future-proof and sustainable network infrastructure
Cost accounting and cost modelling: We develop cost models, conduct cost assessments and perform monetary business evaluations of strategic options
Lobbying: We use our contacts in business, companies, institutions and politics in our clients' interests