Possible strategy on how to finance a national broadband program FCC Broadband workshop Aug 13 Bill St. Arnaud [email_address]

The challenge How to finance national broadband when the government, at all levels, has huge deficits and private sector business case is extremely tough Unlikely governments are going to invest billions into broadband National broadband must take a lower priority to paying down the deficit Competitive broadband with multiple facilities based providers is the ideal solution But private sector business case for multiple facilities based competitors for residential broadband is extremely tough (if not impossible) A new business model is needed, especially one that deals with issues such as: Triple play revenues are trending towards zero for traditional services such as voice, TV and Internet Fiber to the homes requires significant capital investment Allows for multiple competitive facilities based providers

How to finance national broadband when the government, at all levels, has huge deficits and private sector business case is extremely tough

Unlikely governments are going to invest billions into broadband

National broadband must take a lower priority to paying down the deficit

Competitive broadband with multiple facilities based providers is the ideal solution

But private sector business case for multiple facilities based competitors for residential broadband is extremely tough (if not impossible)

A new business model is needed, especially one that deals with issues such as:

Triple play revenues are trending towards zero for traditional services such as voice, TV and Internet

Fiber to the homes requires significant capital investment

Allows for multiple competitive facilities based providers

Need new broadband business models Current FTTh business plans are predicated on triple play with following minimums 40% takeup $130 per month revenue per customer Even Verizon FiOS only intends to service about 40% of customers in service area FCC should undertake program to encourage new business models for broadband e.g. Google “Home with tails” (customer owns the last mile) CANARIE “Green Broadband” (cost of fiber bundled with energy bill) Voluntary structural separation – KPN and Reggenfiber Condominium business fiber partnerships – Swisscom and local energy companies Encourage and promote what America is best in the world Ingenuity and entrpreneurism

Current FTTh business plans are predicated on triple play with following minimums

40% takeup

$130 per month revenue per customer

Even Verizon FiOS only intends to service about 40% of customers in service area

FCC should undertake program to encourage new business models for broadband e.g.

Google “Home with tails” (customer owns the last mile)

CANARIE “Green Broadband” (cost of fiber bundled with energy bill)

Voluntary structural separation – KPN and Reggenfiber

Condominium business fiber partnerships – Swisscom and local energy companies

Encourage and promote what America is best in the world

Ingenuity and entrpreneurism

Thank you For more details please see http://free-fiber-to-the-home.blogspot.com/ http://green-broadband.blogspot.com/

For more details please see

http://free-fiber-to-the-home.blogspot.com/

http://green-broadband.blogspot.com/

One Alternate Business Strategy Offer consumers special deal on long term power contracts bundled with FTTh in partnership with retail energy companies The loss leader is free broadband, telephony, cable, etc offered by service provider Customer agrees to pay premium on gas and electric energy bill of a few pennies per KwH or cubic foot of gas Profit for service providers is made on energy consumption rather than fickle triple play Customers or encouraged to save money through reduced energy consumption Higher premium for “Green Broadband” will be an incentive to reduce consumption May end up paying substantially less then they do now for gas + electricity + broadband + telephone + cable And thereby also reduce greenhouse gas emission Customer (or electric gas retailer) can also earn dollars for CO 2 credits on energy savings Customer (or their employer) can also earn dollars for CO 2 credits for Tele-commuting

Offer consumers special deal on long term power contracts bundled with FTTh in partnership with retail energy companies

The loss leader is free broadband, telephony, cable, etc offered by service provider

Customer agrees to pay premium on gas and electric energy bill of a few pennies per KwH or cubic foot of gas

Profit for service providers is made on energy consumption rather than fickle triple play

Customers or encouraged to save money through reduced energy consumption

Higher premium for “Green Broadband” will be an incentive to reduce consumption

May end up paying substantially less then they do now for gas + electricity + broadband + telephone + cable

And thereby also reduce greenhouse gas emission

Customer (or electric gas retailer) can also earn dollars for CO 2 credits on energy savings

Customer (or their employer) can also earn dollars for CO 2 credits for Tele-commuting

Who are electric & gas resellers (ESCOs)? Gas and electric resale is a multi-billion business with hundreds of companies across North America Industry was created when structural separation was mandated for gas and electric distribution Gas and electric resellers purchase energy directly from gas fields, power generations or energy futures markets and then resale power to residential and commercial customers over infrastructure provided by utilities They make money on the arbitrage between wholesale and retail price Utilities do the billing on behalf of the resellers – but price and terms are established between the reseller and customer Most gas and electric resellers over a variety of marketing bundles including appliances, home renovation, free long distance etc So why not FTTh?

Gas and electric resale is a multi-billion business with hundreds of companies across North America

Industry was created when structural separation was mandated for gas and electric distribution

Gas and electric resellers purchase energy directly from gas fields, power generations or energy futures markets and then resale power to residential and commercial customers over infrastructure provided by utilities

They make money on the arbitrage between wholesale and retail price

Utilities do the billing on behalf of the resellers – but price and terms are established between the reseller and customer

Most gas and electric resellers over a variety of marketing bundles including appliances, home renovation, free long distance etc

So why not FTTh?

Direct Energy One of North America’s largest ESCOs

Advantages for “FTTh Co” “ FTTh Co” installs and manages fiber and relationship with customer and service providers Partners with energy retail companies to deliver “Green Broadband” Customer pays for broadband as part of energy bill sent by utility by purchasing premium “Green Broadband” NO sales costs, customer billing, accounting or receivable costs Energy retail sales team markets Green Broadband as an inducement to get customer to sign long term contract for retail power Payment made by utility direct to power retailer and FTTh Co monthly Long term contracts for power mean little churn FTTh Co can earn additional money by: partnering in arbitrage of sale of power and earning CO 2 credits sell additional strands to other service providers sell colo space and backhaul “bitstream” transport to service providers

“ FTTh Co” installs and manages fiber and relationship with customer and service providers

Partners with energy retail companies to deliver “Green Broadband”

Customer pays for broadband as part of energy bill sent by utility by purchasing premium “Green Broadband”

NO sales costs, customer billing, accounting or receivable costs

Energy retail sales team markets Green Broadband as an inducement to get customer to sign long term contract for retail power

Payment made by utility direct to power retailer and FTTh Co monthly

Long term contracts for power mean little churn

FTTh Co can earn additional money by:

partnering in arbitrage of sale of power and earning CO 2 credits

sell additional strands to other service providers

sell colo space and backhaul “bitstream” transport to service providers

Win-win Win for customers as cost of broadband bundled with energy may be cheaper than what they currently pay for energy + triple play Win for service providers as this produces sustained revenue stream based on customer’s energy consumption rather than fickle triple play Win for government as national broadband can be achieved without government financing Win for competitors as now broadband is a loss leader to promote energy conversation Win for the planet as this will help reduce CO2 emissions

Win for customers as cost of broadband bundled with energy may be cheaper than what they currently pay for energy + triple play

Win for service providers as this produces sustained revenue stream based on customer’s energy consumption rather than fickle triple play

Win for government as national broadband can be achieved without government financing

Win for competitors as now broadband is a loss leader to promote energy conversation

Win for the planet as this will help reduce CO2 emissions