moving from policy to practice

Charles Watt

What we do

• Independent, not for profit, partner, focused on major EU ICT and FI initiatives

• Creating beneficial outcomes for citizens, businesses, patients and learners across Europe

• Improving the role and contribution of ICT enabled Government and Public Services

• Working with over 10,000 organisations and individual contacts across Europe

• Services include : Knowledge Management, Collaborative Projects, Marketing and Communications Support, Events, Thought Leadership, Research

Key issues about FTTx projects

• Separate infrastructure from services

• Argument is not about competition on services but who does Civil Works (sewers, roads, water)

• 70% of cost is civil works

• Service providers operate in a heavy fixed cost environment (that’s why they want to “sweat the assets”)

• Disruptive technologies eliminate competitive advantage

• We are re, re, re re inventing the wheel (EBP) • Workshops

• Wherever possible get the Service Providers on board

• Customise your messages for different audiences

12 October 2009 3

EUROPEAN BROADBAND PORTAL

EBP Broadband Blueprint – concept diagram

Create our goals & organise resources to achieve them

Understand the roles & relation ships with

stakeholders

Set up the initiative - Manage Stakeholders and Strategy

Measure and report on progress / manage audit

12 October 2009 5

Bottom-up broadband blueprint – concept diagram (to be read “bottom-up”)

Create our goals & organise resources to achieve them

Understand the roles & relation ships with

stakeholders

Manage Stakeholders and Strategy

Measure and report on progress / manage audit

10, Develop the commercial model

9, Develop the financial plan (s)

8. Define the “2b” technical

architecture

7. Understand current supply &

demand

6. Develop the overall plan

5. Define the operating model

4. Develop a communication

plan

3. Engage Stakeholders

2. Economic rationale to invest

in context

Develop the solution – diagnostic “where you are in the process” and “what to do next” – supported by knowledge resources

1. Clarity of purpose

12 October 2009 6

Bottom-up broadband blueprint – concept diagram (to be read “bottom-up”)

Create our goals & organise resources to achieve them

Understand the roles & relation ships with

stakeholders

Manage Stakeholders and Strategy

Measure and report on progress / manage audit

10, Develop the commercial model

9, Develop the financial plan (s)

8. Define the “2b” technical

architecture

7. Understand current supply &

demand

6. Develop the overall plan

5. Define the operating model

4. Develop a communication

plan

3. Engage Stakeholders

2. Economic rationale to invest

in context

Develop the solution

1. Clarity of purpose

Implement / Operate the solution – build the capacity, capability and structure to deliver

Commercial know how Marketing know how Service delivery know how

Infrastructure Services Resources Finances Regulation Management

Operating know how

12 October 2009 7

Bottom-up broadband blueprint – concept diagram (to be read “bottom-up”)

Create our goals & organise resources to achieve them

Understand the roles & relation ships with

stakeholders

Manage Stakeholders and Strategy

Measure and report on progress / manage audit

10, Develop the commercial model

9, Develop the financial plan (s)

8. Define the “2b” technical

architecture

7. Understand current supply &

demand

6. Develop the overall plan

5. Define the operating model

4. Develop a communication

plan

3. Engage Stakeholders

2. Economic rationale to invest

in context

Develop the solution

1. Clarity of purpose

Implement / Operate the solution

Commercial know how Marketing know how Service delivery know how

Infrastructure Services Resources Finances Regulation Management

Operating know how

I keep pace with improvements

My issues are resolved

I enjoy great services

I sign up for services

I’m inspired and engaged

I’m aware of opportunities

Marketing access and services

Manage Customers

My needs are understood

12 October 2009 8

Emerging models

Public Sector DBO

Private Sector DBO

Public Sector

Outsource

Bottom Up Broadband

Joint Ventures /

PPP’s

Public Sector DBO

Description – Tactical programmes funded by public investments where the market cannot provide. Often focused on more sub-urban / rural areas Scale – Investment in €bn’s. Wide range of scale from municipal, to regional and national investments Pro’s – Wide coverage, enforced and sometimes “visionary” standards and open access for services. Can focus on social benefits Con’s – Limitation of public sector expertise, poorly marketed / take-up lower, prone to later “sell off” to private sector

Private Sector DBO

Description – Large programmes funded by private investment and underpinned by grants. More interest in urban / high profit areas Scale – Investment in €bn’s. Large scale / national Investment Pro’s – National programmes, wide coverage, private sector expertise, low public burden Con’s – Typically not ‘open access’, cherry picking / slow roll-out, shareholders interests come first

Public Sector

Outsource

Description – Public owned but operations outsourced to private sector. Focus on a good urban / rural mix as fast ROI is less of an issue Scale – Investment in €100m’s. Wide range of scale from local to regional operations Pro’s – Can enforce “open access” with infrastructure ownership remaining in public hands. Combines private sector expertise and innovation with public sector funding stability Con’s – Time to commission work and added bureaucracy. Less incentive for private sector profit

Bottom Up Broadband

Description – typically long term / not for profit, community led deployment that focuses on an Urban or Rural community. Filling in (or accelerating the development of) the white spots left behind by private or government programmes. Scale – Investment in €100k’s. Smaller scale often very localised initiative. Pro’s – Mainly “open access” with infrastructure ownership remaining in community hands. Focused on local needs and provision of local services Con’s – Hard, but not impossible to scale up. Fragmented so risk of incompatible technologies. hard to get funding. Demands local expertise / leadership

Joint Ventures /

PPP’s

Description – Rare, highly scalable, partnerships delivered through Special Purpose Vehicles that bring together expertise and funding from public and private sources Scale – Investment in €100k’s to €bn’s Can equally apply to local up to international initiatives Pro’s – Would hopefully support “open access”, and brings together expertise from multiple industries Con’s – Hard to establish / needs to build on closely aligned public and private sector interests.

Emerging models

Public Sector DBO

Private Sector DBO

Public Sector

Outsource

Bottom Up Broadband

Joint Ventures /

PPP’s

Conclusions from analysis of models •Funding application process •Very large scale (Public / Private DBO) -Typically not ‘open access’ •Remaining 3 meet requirements •Public Sector outsource – sweep up unused funds •Bottom-up Broadband plug Rural / Urban gaps •Joint Ventures / PPP’s models for the future

Would have a payback period of x years and an NPV of y

Revenues and EBITDA Margin

10

20

30

40

50

137 200 0

754 713 673 636 599 571 498

418 354 229

EBITDA Margin

Revenues

800 600 400

Launch Year 1)

100

0

Cumulative Cash Flow

-100

-200

0

Free Cash Flow

84 75 65 53 35 72 71

18

-165

67

-183

Free Cash Flow

Payback

Key Benefits

17

Would potentially deliver a 12% growth in sector NPV, x Billion in GDP increment and would add value to “Telco”

Sector Benefits

Sector NPV (2010 - 2015)

Broadband Penetration (2015)

Government Royalties &

License Fees (2010 - 2015)

Incremental Yearly Contribution to GDP

(2015)

+12%

NGN

45.8

Base Case

40.8

+20%

NGN

92%

Base Case

77%

+8%

NGN

5.0

Base Case

4.6 4.1

0.0

NGN Base Case

Assuming a 2% GDP Multiplier

on GDP

Telco would experience a positive impact on NPV

Higher revenues (higher broadband penetration, stabilization of broadband ARPU)

Lower CapEx (limited or no deployment of access - cost shifted to OpEx)

Ability to diverge investment to other strategic priorities

17

12 October 2009 18

Reasons why Service Providers should embrace FTTx

• Alternative is to go out of business profitably • Move from fixed cost to variable cost • New larger and growing market • Higher margins

12 October 2009 19

Risks

• Loss of market share (versus zero market share) • Greater competition • New market (canal operator or train company)

What we need to do… •Bring together key stakeholders to discuss the opportunities from fast broadband solutions at a local, regional or national level. •Create the local vision and get government, business and citizen buy-in •Build awareness with consumers while appointing your leadership team to “make it happen” •Consider the regional or national ROI. Build the outline business case •Seek for appropriate funding support •Initiate your plan

Help is at hand… •Through the European Broadband Portal we can support local initiatives with:

•Assessments •Facilitated Stakeholder Workshops •Support to access funding / develop funding applications •Help with marketing and communications to get your project underway •Further research into investment ROI

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Erisa Office 24, Boulevard de l’Empereur, B-1000 Brussels

Tel: +32 2 230 03 25 – Fax: +32 2 230 92 01 E-mail: info@erisa.be - www.erisa.be

moving from policy to practice