Executive Summary

One of the significant challenges facing network operators today is the high capital cost of deploying next generation broadband network to individual homes or schools. Fiber to the home only makes economic sense for a relatively small percentage of homes or schools. One solution is a novel new approach under development in several jurisdictions around the world is to bundle the cost of next generation broadband Internet with the deployment of solar panels on the owners roof or through the sale of renewable energy to the homeowner. Rather than charging customers directly for the costs of deployment of the high speed broadband network theses costs instead are amortized over several years as a small discount on the customer’s Feed in Tariff (FIT) or renewable energy bill. There are many companies such as Solar City that will fund the entire capital cost of deploying solar panels on the roofs of homes or schools, who in turn make their money from the long term sale of the power from the panels to the electrical grid. In addition there are no Energy Service Companies (ESCOs) and Green Bond Funds that will underwrite the cost of larger installations.

For further information and detailed business analysis please contact Bill St. Arnaud at bill.st.arnaud@gmail.com.

Tuesday, June 23, 2009

Open Access Fiber Infrastructure makes economic sense for carriers

[Benoit Felten, an analyst at Yankee Group has recently published an excellent report on the economics of FTTh, and why an open access infrastructure makes business sense for cariers like that being deployed by KPN in Netherlands (in partnership with RegenFibe and CityNet) , Swisscom and others.

He notes in his report that “ The business model for fiber to the home (FTTH) is a tough one to make fly. Despite the increasing pressure (competitive and political) for wireline copper operators to upgrade their networks to FTTH, the economics of the business model scare both the telcos themselves and their shareholders or financiers… It’s virtually impossible for FTTH to pay for itself in less than five years unless takeup is at least 30 percent, and even then a time frame of seven to eight years is more realistic considering known conditions in most developed markets” This bleak assessment of the business case for FTTH applies not only to carriers but also to municipal fiber builders as well.

However M. Felten clearly demonstrates that “Although it might be perceived by most incumbents as going against the grain, opening up a new FTTH network to competitors is actually an efficient way to increase takeup without sacrificing strategic positioning. It has a significant impact on the reduction of the payback as it generates additional revenue from low ARPU but high-margin wholesale customers.”

I would also add that if the carrier deploys point to point open access fiber infrastructure it opens up new business opportunities such as customer owned fiber (as advocated by Google and others) and bundling cost of fiber and Internet with customer’s energy bill, as in the case of Swisscom. For more details please contact Benoit Felten at Yankee Group BFelten@yankeegroup.com or visit his excellent blog on the subject http://www.fiberevolution.com/ -- BSA]

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