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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

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Content

Analysis / Business Models2

Analysis / Business Case 3

Main results4

Introduction and Background1

Next Steps and Conclusions5

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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

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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

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Content

Analysis / Business Models2

Analysis / Business Case 3

Main results4

Introduction and Background1

Next Steps and Conclusions5

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Verticaly Integrated

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� 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

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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

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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

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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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Content

Analysis / Business Models2

Analysis / Business Case 3

Main results4

Introduction and Background1

Next Steps and Conclusions5

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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