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1
Community owned fibre optic networks –a sustainable broadband future for rural areas in
Croatia?
2010 European Regional ITS Conference in Copenhagen
Igor Brusi ćććć, Martin Lundborg, Wolfgang Reichl
SBR Juconomy Consulting AG
14.09.2010
2Brusic, 9/15/2010 2
Content
Analysis / Business Models2
Analysis / Business Case 3
Main results4
Introduction and Background1
Next Steps and Conclusions5
3
Croatia / General
• 4,5 mio. inhabitans; 56.500 km2; 1,5 mio. households
• Croatian telecommunication market dominated by the Incumbentoperator Hrvatski Telekom (T-HT)– 89% of the broadband access market (January 2009)– Since 1999 owned by DT (Deutsche Telekom)
• ANOs like Optima, Metronet, H1 telekom, Amis telekom and B.netonly 11% of the BB market
• Broaband penetration rate: 11,83% (July 2008)
• Fiber Access Lines: ca. 100.000 (homes passed) and ca. 12.000 homes connected
Brusic, 9/15/2010
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Municipality optical network
� It is one of the very fewinvestments in infrastructurewhich is fincially attractive
� It will be the basicinfrastructure for futuredevelopment of the town and the island
� Because the windows of opportunity is open
3. Why network?
� No operators will do it
� The municipality can build ittogether with otherinfrastructure (streets, canal, etc.)
� Independent of networkoperaters
1. Why municipality?
� It has the best charakteristicsconcerning:
� capacity
� electricity consumption
� insensibillity
� durability
� environmental impact
� The last decades mostoperators are using fibreoptics in fixed networks
2. Why optical?
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Croatia / Island Krk / Town of Krk
Town of Krk with 6.000 inhabitants and 2.200
houses (5.000 households)
Tourism as main source of revenues
At the town council decidion in September
2009:
Collecting information about existing
infrastructure (database)
Future civil work, obligation to collocate empty
duct
Elaboration of a cost/benefit analysis
The study can be downloaded at
http://www.sbr-net.de/fileadmin/sbr-
group/pdf/juconomy/veroeffentlichungen/Cost-
Benefit_Analysis_Town_of_Krk_Draft10_Final_
Version.pdf
Brusic, 9/15/2010
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Content
Analysis / Business Models2
Analysis / Business Case 3
Main results4
Introduction and Background1
Next Steps and Conclusions5
7
Verticaly Integrated
7
� Classical Network Operator
� owns the infrastructure
� administers / operates the
network
� provides services to end users
� Revenue from products / services
contribute to financing the
infrastructure and the operation
� Wholesale offers possible on different
levels
� Investors require short term ROI
� Different regulatory remedies
Company
Network
O&M
Distribution
Services
Ver
tical
Inte
grat
ion
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Horizontaly Separeted
8
Dienste Dienste
Dienste
� Level 3: Retail Services� Each provider has (open) access at
non-discriminatory conditions� Digital market place
Network deployment
O&M
Network / passive infrastructure
Network / active infrastructure
Dienste
ServicesServices
Development ofinnovativeservices
� Level 1: Infrastructure � Use of existing infrastructures
(dark fiber, ducts, sewerage)� Optical fibre as natural monopoly?� Municipalities, cities, utilities as new
players
� Level 2: Network operation � Lightening of the fibre and operation of
active equipment� Wholesale products for service
providers� Open Access = no retail services� Local utilities, telecom operators
Horizontal Frontiers
Horizontal Frontiers
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Source: Benoit Felten, Exploring Open Access Models, 2008
Possible Business Models for Municipalities
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Content
Analysis / Business Models2
Analysis / Business Case 3
Main results4
Introduction and Background1
Next Steps and Conclusions5
11
Calculation
Cost and revenue estimation path
Input parameters
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Cumulated Cash Flow with WACC of 6%
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Content
Analysis / Business Models2
Analysis / Business Case 3
Main results4
Introduction and Background1
Next Steps and Conclusions5
14
Calculation confirmed that Krk is not attractive for classical network operators
For the realisation of 2.000 connections investments of 1,99 mio. Euro
968 Euro per household
9 km of empty ducts are installed in the city and the town is owning a cable TV network
with 1.000 homes connected (70% of the cabeles are in ducts)
Parameters positively influencing the project
Higher income per subscriber
Lower cost of Backhaula (Krk-Zagreb)
Lower cost of capital (WACC)
Lower OPEX
Necessary to optimize the input parameters or changing the business model
Main Results of the Analysis
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15Brusic, 9/15/2010 15
Content
Analysis / Business Models2
Analysis / Business Case 3
Main results4
Introduction and Background1
Next Steps and Conclusions5
16
Elaboration of an master plan
Marketing/educating/convince local companies and inhabitants
Checking posibilities of financing
Checking posibilities of cooperation with (local) private partners
Next Steps
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Business case for municipalities is different than for classical network
operators
Externalities can/have to be added
Each municipality has to be analized separately
City owned ducts and cable TV network - better starting position than other
comparable cities in Croatia
On site support as a key factor!
Public private partnership and open access are highly relevant in future
elaborations
Conclusions
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Contact
Nordstrasse 11640477 DüsseldorfGermanyTel: + 49 211 68 78 88 0Fax: + 49 211 68 78 88 33URL: www.sbr-net.com
Parkring 10/1/101010 WienAustriaTel: + 43 1 513 514 0 15Fax: + 43 1 513 514 0 95URL: www.sbr-net.com
E-mail: brusic@sbr-net.com
SBR Juconomy Consulting AG
Brusic, 9/15/2010
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