The Business Challenge of Fiber to the Home

http://www.heraldextra.com/content/view/263223/18/

A good summary of the business case challenges of FTTH regardless of whether you are a municipality or a telco

....

In 2003, when an 18-city consortium began organizing UTOPIA's build-out, the $400 million network was glowingly seen as serving nearly 249,000 residences and 34,580 businesses. Eventually, the projections were cut roughly in half. Eleven cities in Utah, including Orem, Lindon and Payson, committed to the bonds, pledging $202 million in sales tax revenues over 20 years to pay them back.

Now, unexpectedly low subscriber counts and revenue shortfalls are threatening UTOPIA's ability to continue to make its bond payments. Tax revenues haven't been tapped yet, but if UTOPIA fails, the 11 cities could be on the hook for up to the full $202 million, the Utah Taxpayers Association warns.

To avoid that, UTOPIA wants to refinance. It is asking the cities this week to increase their sales tax pledges and extend their guarantees to 33 years.

The question facing city councils this week is whether UTOPIA's track record gives them enough confidence of future success to commit taxpayers for three decades.

UTOPIA had projected it would bring fiber connections to as many as 70,000 households and businesses in its six member cities, and achieve a subscription rate of around 40 percent by 2008. To date, it has passed fiber connections to about 42,000 households and businesses, with only about 7,200 paying customers. On top of weak customer response, the network's construction costs are above what it had projected.

In iProvo's case, Provo officials had projected that 75 percent of customers would sign up for its top-end "triple-play" -- meaning TV, telephone and Internet services in a single package. They also expected the network, which was built on $39.5 million in sales-tax revenue bonds, to break even when it reached 10,000 subscribers.

Instead, the iProvo triple-play take rate was closer to 17 percent, not 75. And while the network passed the 10,000 subscriber mark late last year, city officials now say they may need as many as 15,000 subscribers to break even because of revenue shortfalls.

Now the city's fiber-optic network is $10 million in the hole, and critics are calling for the struggling venture to be sold.

.....

Google Public Policy Blog: What if you could own your Internet connection?

Google Public Policy Blog: What if you could own your Internet connection?

Customer Owned Fiber Resources

Customer Owned Networks reduce health care IT costs

http://lists.canarie.ca/pipermail/news/2005/000048.html

Another article on customer owned networks and reducing health care costs

http://lists.canarie.ca/pipermail/news/2005/000061.html

Customer Owned Networks for Government

http://lists.canarie.ca/pipermail/news/2005/000070.html

Customer Owned Networks for Hospitals inConnecticut

http://lists.canarie.ca/pipermail/news/2005/000085.html

Buffalo hospitals get connected with customer owned fiber

http://lists.canarie.ca/pipermail/news/2005/000088.html

Museum of Natural History gets connected with customer owned fiber

http://lists.canarie.ca/pipermail/news/2005/000094.html

More companies offering customer owned fiber

http://emperor.canarie.ca/MLISTS/news2004/0077.html

Palo Alto Ftth

http://lists.canarie.ca/pipermail/news/2007/000401.html

Burlington Ftth case study

http://lists.canarie.ca/pipermail/news/2007/000504.html

Barcelona @22 project

http://lists.canarie.ca/pipermail/news/2006/000238.html

Customer Owned (Empowered) Fiber Workshop

http://lists.canarie.ca/pipermail/news/2006/000266.html

Customer Owned Fiber Workshop for Universities

http://emperor.canarie.ca/MLISTS/news2004/0061.html

Customer Owned Networks for schools, universities business

http://emperor.canarie.ca/MLISTS/news2004/0054.html

Larry Lessig article on customer owned networks

http://emperor.canarie.ca/MLISTS/news2003/0139.html

Sarbanes-Oxley driving demand for customer owned networks

http://lists.canarie.ca/pipermail/news/2006/000270.html

More enterprises tap customer owned fiber

http://lists.canarie.ca/pipermail/news/2006/000311.html

More companies specializing in sale of customer owned fiber

http://lists.canarie.ca/pipermail/news/2006/000317.html

Pembina Schools Customer Owned fiber

http://lists.canarie.ca/pipermail/news/2006/000336.html

Innovative fiber networks in New Zealand

http://lists.canarie.ca/pipermail/news/2006/000351.html

FiberCo – customer owned networks for universities

http://lists.canarie.ca/pipermail/news/2006/000352.html

Breaking the enterprise bottleneck with customer owned fiber

http://lists.canarie.ca/pipermail/news/2006/000359.html

Case studies of how customer owned fiber helps business

http://lists.canarie.ca/pipermail/news/2006/000367.html

Customer owned fiber – businesses see the light

http://lists.canarie.ca/pipermail/news/2005/000020.html

First workshop on customer owned networks

http://lists.canarie.ca/pipermail/news/2005/000036.html

How customer owned networks is hurting telco revenue

http://lists.canarie.ca/pipermail/news/2005/000042.html

New York Presbyterian Hospital deploys customer owned network

http://lists.canarie.ca/pipermail/news/2005/000045.html

Carrier Neutral Exchange Points and Customer Owned fiber

http://lists.canarie.ca/pipermail/news/2005/000079.html

Customer Owned fiber market to grow 15% in Europe

http://lists.canarie.ca/pipermail/news/2005/000138.html

Customer owned fiber network for 6000 homes in Toronto

http://lists.canarie.ca/pipermail/news/2005/000142.html

Quebec government to promote customer owned fiber networks

http://lists.canarie.ca/pipermail/news/2005/000145.html

Czech republic deploys 3000km customer owned fiber

http://emperor.canarie.ca/MLISTS/news2004/0119.html

Customer Owned Networks in Australia

http://emperor.canarie.ca/MLISTS/news2004/0111.html

US Gov’t labs acquire customer owned fiber

http://emperor.canarie.ca/MLISTS/news2004/0100.html

More cities deploy optical fiber networks

http://emperor.canarie.ca/MLISTS/news2003/0131.html

Tutorials on Customer Owned Networks at SuperComputing

http://emperor.canarie.ca/MLISTS/news2003/0078.html

Universities in 1o states are acquiring customer owned fiber

http://emperor.canarie.ca/MLISTS/news2003/0011.html

Sunesys Corporation
www.sunesys.com

Black & Veatch
www.bvtelecom.com

Internetworking Atlantic Inc
www.internetworking-atlantic.com

Some excellent reports on investment and economics of FTTH

[In the last few weeks there have been several excellent reports on the investment and economics of FTTH networks. As well the OECD should be soon releasing their annual broadband report on this subject. Gordon Cooks ARCH-Econ list is the source of man of these pointers--BSA]

All the presentations of the OECD workshop on FTTH are now available: http://www.oecd.org/document/56/0,3343,en_2649_34225_40460600_1_1_1_1,00.html

Of particular note is the presentation by Herman Wagter of CityNet of Amsterdam which convincingly demonstrates how separating ownership of fiber from companies who deliver services allows for true facilities based competition where competitors can use different layer 0 technologies for delivering services http://www.oecd.org/dataoecd/36/28/40460647.pdf


Benoit Felten also maintains an excellent blog on the various presentations that were given at the OECD workshop: http://www.fiberevolution.com

Hendrik Rood of Stratix Consulting has just released a very interesting report on FTTH developments in The Netherlands who have one of the highest penetration of FTTH in the world. At the end of the 1st quarter in 2008 the Netherlands had 176 thousand FTTH connections.

Direct link to the Stratix paper:
http://www.stratix.nl/documents/FTTH-B-C%20overview%201Q%202008.pdf

Of particular note the paper goes into considerable detail explaining the arrival of Institutional investors (Pension funds etc.) with a real estate approach in funding open network infrastructure and the recognition by the incumbent operator KPN that this model may suit their business needs as well.

"Market entry by infrastructure facility providers with a Real Estate approach like independent Tower companies for mobile service providers and neutral data centre and telehouse facility owners, the development of FTTH in the Netherlands have shown the arrival of a new kind of market entrant: Real Estate financers investing in local loop networks.

The entry of real estate finance may act as a harbinger of a novel market structure with non-incumbents owning those infrastructure facilities with real estate characteristics. Their market arrival could have lasting consequences for regulatory policy of communications infrastructure.

As the Dutch market is now genuinely warming up to Fiber-to-the-Home, while the new open business models with real estate oriented investors are established, Stratix Consulting expects a new development stage with a run-for-the-market, where the market consists of local FTTH projects. Such a stage has happened before in the 1881-1900 period with telephony roll out and the 1960-1980 period of CATV network deployment.

Local loop economics indicates only one network per area to be feasible, in particular under the open network business models. With financiers stepping in and supply constraints visible in construction, we expect mounting citizenry pressure on municipalities and provinces to lure the projects to their area first, aiding constructors by facilitating community drives.



New ITIF Report: “Explaining International Broadband Leadership”
http://www.itif.org/files/ExplainingBBLeadership.pdf.

The executive summary does not do this report justice. There are dozens of hidden gems within the report. I recommend reading the report in its entirety. I was very pleased to see from the report's regression analysis that price has the strongest correlation with broadband penetration. This is something that I have been claiming, based on a paper written for Scientific American way back in 1993!! This paper demonstrated, for a variety of telecommunication technologies – telephone, cable, PC – price was the single biggest determining factor for adoption rates. Most people are surprised that the telephone took over 75 years to reach 50% penetration. But if you measure the price of telephony in terms of per average per capita income, you discover historically it has been a very expensive technology. And what drives price ?----competition!


"In a new report examining in depth broadband policies in 9 nations the Information Technology and Innovation Foundation concludes that while we shouldn’t look to other nations for silver bullets or assume that practices in one nation will automatically work in another, U.S. policymakers can and should look to broadband best practices in other nations. Learning the right lessons and emulating the right policies here will enable the United States to improve our broadband performance faster than in the absence of proactive policies. The report analyzes the extent to which policy and non-policy factors drive broadband performance, and how broadband policies related to national leadership, incentives, competition, rural access, and consumer demand affect national broadband performance. Based on these findings the report makes a number of recommendations to boost U.S. broadband performance.

Also included in the report are the updated 2008 ITIF Broadband Rankings, a composite measure of broadband penetration, speed and price among OECD countries. When these factors are considered together, the United States ranks 15th out of 30 OECD nations in broadband performance.

The executive summary can be accessed at http://www.itif.org/files/2008BBExecutiveSummary.pdf.

The full report can be accessed at http://www.itif.org/files/ExplainingBBLeadership.pdf."

FTTH allows teachers in Wymong to teach English in Korea

[A great example how broadband provided by FTTH allows new business models to evolve. From a pointer on Gordon Cook's list-BSA]

http://www.app-rising.com/gdblog/2008/05/broadband_enables_wyoming_to_t.html

Broadband Enables Wyoming To Teach English to South Korea

I read a tremendous article found in Jim Baller's [http://www.casperstartribune.com/articles/2008/05/09/news/breaking/doc4824787da7b01237580282.txt] regular email newsletter earlier this week that highlights a number of interesting and important points.

It details an initiative where 150 teachers are going to be finding employment in Wyoming teaching South Koreans how to speak English.

Firstly, it's a tremendous example of the use of broadband as the teaching is conducted via videoconferencing.

Secondly, they specifically mention that what makes this possible is the fact that Powell, Wyoming, where the teachers will be located, is deploying a full fiber network with the capacity to enable high quality videoconferencing.

Thirdly, it's another example of how broadband enables the creation of new jobs that allow people to work from home.

Fourthly, it shows how there are businesses to be made catering to educational pursuits and not just entertainment related endeavors.

Fifthly, it shows how far ahead South Korea is in their use of broadband to enable better education.

Lastly, and unfortunately not necessarily a positive, it highlights the fact that South Koreans are aggressively pursuing applications that can not only be a good business but also benefit society as the money behind this comes not from the US but a South Korean venture capitalist.

Whew, that's a lot of points hit in an article that's not much longer than this post, but there's simply no denying how many relevant points it touches upon.

But what I think I like about it most is that even though it's being funded and driven by South Koreans, it's still creating new jobs here in the US. It's jobs like these that will help us reverse the trend of outsourcing so that other countries can come to rely on the expertise, know how, and hard work of the American people.

And it's important to never forget that this is all possible only through the power of broadband.

More excellent OECD papers on regulation policy on fiber and right of way issues

[Thanks to Rudolf van der Berg the author of this paper for these pointers. An excellent overview of the regulatory and government challenges of deploying fiber networks to create an open and competitive market. The fact that such an august body as the OECD is investigating these issues signifies the growing recognition by policy makers of the incredible economic impact that is possible with a truly open competitive fiber to the home infrastructure. - BSA]


DEVELOPMENTS IN FIBRE TECHNOLOGIES AND INVESTMENT http://www.olis.oecd.org/olis/2007doc.nsf/LinkTo/NT00005E06/$FILE/JT03243516.PDF

PUBLIC RIGHTS OF WAY FOR FIBRE DEPLOYMENT TO THE HOME http://www.oecd.org/dataoecd/49/9/40390753.pdf


The OECD has published a paper titled "DEVELOPMENTS IN FIBRE TECHNOLOGIES AND INVESTMENT". Technically it's an OECD paper and it represents what the OECD finds important, but I spent two months in Paris (dec 2006-jan2007) writing it, so emotionally it's my paper. It was really great that my previous employer assigned me to the OECD for that period. The people at the Directorate for Science, Technology and Industry - Information and Communications Policy are great people and I had great fun working with them. These are the same people who make the infamous OECD Broadband Statistics, which are every time cause for discussion in the countries that are ranked low.

The paper examines developments in broadband technology, going from submarine, wireless, to hybrid (BPL, xDSL and Docsis) and all-fibre networks like (xPON and Point to Point). (Submarine is included because it both shows where the technology will go and the difficulties businesses may face) It describes the relative differences and the effects this has on the way these networks can be used. In one of the figures it shows the difference between the bandwidth on a dedicated link (like VDSL) and a shared link (wimax or Docsis) available to one user and to twenty simultaneous users. The paper is already a year old, so LTE isn't included. Service-wise it works from the idea that users need at least 50Mbit/s downstream capacity in order to be able to freely choose services from a variety of service providers and to be able to run several services parallel.


It also discusses the business case there are for investment in fibre networks and the different positions between incumbents and new entrants. Furthermore there is an evaluation of the possibilities for alternative financing models. It also shows a financial model based on a model for the Dutch Ministry of Economic Affairs. This model developed by Arcadis in the Netherlands is based on real investments in The Netherlands and therefore is quite accurate. When applying it to other countries your mileage may vary. What it does show is that housing density matters as well as penetration. What is also clear is that there is not much room for multiple providers of physical infrastructure in the same region.

The last part goes into the roll of the government as a stimulator, regulator and investor. Some of the things it argues is that first governments should have an idea of what they want to achieve. Second it argues should take away any barriers to entry, but also must be aware that if they stimulate one party that this interferes with competition for others. So if governments stimulate the roll out of a network, they should demand that the network that they have stimulated becomes open to others under equal conditions.

With regards to regulation an important insight is that regulators should provide regulatory certainty with regards to the success of networks, not with regards to the competitive services offered over that network. Also policies should aim at the local exchange of traffic between networks, thereby relieving backhaul networks of unnescessary traffic.

As an investor governments should be cautious and determine the amount of market failure. If they do invest it should be limited starting with i and then if more is necessary moving up to iv.

i) Digging trenches and laying ducts, removing a significant part of the costs of rolling out a network.
ii) Providing passive network infrastructure to which network providers can connect their active infrastructure.
iii) Providing an active network over which others can provide their services.
iv) Providing services over the network to end-users.

All in all it was great fun writing this piece. Another paper was also published called: PUBLIC RIGHTS OF WAY FOR FIBRE DEPLOYMENT TO THE HOME There is a conference in Stavanger next week that will delve much deeper into this topic. I will be speaking there too.

OECD Workshop on Fibre Investment and Policy Challenges

[Thanks to Benoit Felten and his excellent blog FiberRevolution for this pointer -- BSA]

http://www.fiberevolution.com/

This is going to be an exceptional event in more ways than one. First of all, it's organised in Norway where dozens of municipal projects have sprouted all over the country. It's also happening in Stavanger, the hometown of landmark project Lyse Tele. And the speaker roster is to die for, with people from Stokab, AT&T, Amsterdam Citynet, Telefonica, France Telecom, OFCOM, ARCEP, the Japanese Ministry of Information and Communication, and many more. Check out the full program and registration details.


http://www.oecd.org/dataoecd/3/32/40230152.pdf

The aim of the Workshop is to examine fibre investment across the OECD and look for best practices across a range of investment scenarios. After 100 years, the telecommunications industry is moving away from copper to fibre-based local loop networks. Fibre networks offer higher capacities than other telecommunications transport technologies and capacity is easy to expand once the fibre is in place simply by changing electronic components at both ends. Although there is general agreement that fibre local loop networks are important there is less agreement on the best architecture for these networks. Fibre investment choices concerning large metropolitan areas will be very different than those facing operators in rural and remote areas. Therefore, the workshop will also devote attention to investment in large, medium and small communities separately. In addition, the workshop will examine a number of technological and topological options such as FTTH/FTTN and Point-to-point/PON. Finally, the workshop will look at how regulations concerning fibre are evolving in OECD countries and how to ensure that these networks help promote effective competition.