FTTHForum 2011 Marco Forzati, Acreo

Socio-economic impact of FTTH in Sweden crister.mattsson@acreo.se marco.forzati@acreo.se 2011-11-14 Crister Mattsson Acreo 14/11/2011 #1 Part of Swedish ICT

Europe and Sweden Sweden 9,2 million Sahara Europe Population density 14/11/2011 #2 Part of Swedish ICT

44 per cent of all households and businesses in Sweden have access to at least 100 Mbps broadband 34 % of the homes have possibility to connect to fiber Fiber coverage 0- 83 % 40 municipal. have less than 1 %.14/11/2011 #3 Part of Swedish ICT

Business ModelsRSP RSP RSP RSP RSP RSP RSP RSP RSP Single OPCO OPCO OPCO Operator OPCO OPCO NetCo Netco Netco 14/11/2011 Traditional #4 Part of Swedish ICT

Urban Networks with competition 90 85 80 74 70 63 60 Procent Percent 50 45 40 30 20 10 2004 2006 2008 2010 Year År 14/11/2011 #5 Part of Swedish ICT

14/11/2011 #6 Part of Swedish ICT

Do we need Fiber ?14/11/2011 #7 Part of Swedish ICT

14/11/2011 #9 Part of Swedish ICT

Value for who ?Financial ? Society ?14/11/2011 # 11 Part of Swedish ICT

Investment decisions Un- captured values Roll Telco Roll out roi out cost cost Telco return yes No, but should be yes14/11/2011 # 12 Part of Swedish ICT

FTTH deploymentincreased use of ICT services lower New infrastructure Very high access speed prices Direct economic activity for services Sensor Competition New/better reduced Increased networks new business between SPs services traffic market value lower Power grid congestion model entry True cloud reduced possible low upfront efficiency Video barriers computing ènvironment Functional investment surveillance impact learning Videoconf separation for NP and curvesTelepresence Distance SP working Virtual labour HD and 3D mobility Profitability TV VoD higher of NP and SP Network employment Profitability gaming Perceived lower publ Of PIP quality RoW E-health of life spending revenues higher tax revenue e-learning E- Education lower burdengovernment efficiency quality and Logistics, of reduced in PA cost prod, bureaucracy forced transparency corruptionmanagement migration in PA discouraged GDP Democracy Ease to do strengthened business productivity ICT New ICT and Dev. of new traditional competencetechnologies companies HR pool Customers ICT Maturity: for entrepreneurship 14/11/2011 digital natives # 13 Part of Swedish ICT new services

Is it possible to calculate the society ROI for fiber ?Cost for FTTH deploymentEffects of the Investment 14/11/2011 # 16 Part of Swedish ICT

Cost of FTTH deployment o Boundary conditions: • Cost dependent on time, learning curves, technological developments, regulation, etc. • Passive infrastructure dominates upfront investment • Active equipment dependent on technology choice, is dominated by opex and needs to be installed/upgraded whether fibre or copper is used o Hence, assumptions: • Indicative average cost figures from the industry; no considerations on inflation and cost of capital, calculations in SEK 2011 • Passive infrastructure only14/11/2011 # 17 Part of Swedish ICT

Cost of FTTH deployment o How: fast-deployment scenario • Year 1: 40% • Year 2: 30% • Year 3: 20% • Year 4: 10% o What: all households not yet connected • 18 kSEK (€2000) to connect a SDU • 10 kSEK (€1100) to connect a household in a MDU • 30% home connected in 2011 o 39 billion SEK (€4.2 billion) o source: PTS, companies active in FTTH installation in Sweden14/11/2011 # 18 Part of Swedish ICT

Return on investment• calculated year by year, 1–5 years: o economic activity directly related to construction Method: input-output multiplier approach Source: Katz et al. for broadband upgrade in Germany 14/11/2011 # 19 Part of Swedish ICT

Return on investment o savings in the municipal and regional-government costs for data and telecommunications: • Around 50% savings when FTTH is deployed Sources: Stockholms kommun, Jönköpings kommun, IT Norrbotten , Stockholms län • Yearly cost conservatively estimated to 1.5 billion SEK; • Total savings around 540 million SEK (€59 million) yearly at full deployment Method: linear extrapolation (first-order approximation)14/11/2011 # 20 Part of Swedish ICT

Return on investment o increased GDP due to increased employment • Short-term effect can actually be measured • Data for all of Sweden’s 290 municipalities Method: multivariate regression analysis Sources: SCB, PTS14/11/2011 # 21 Part of Swedish ICT

Return on investment o added value for end users • Proxy available: agreement between tenant association and housing companies on increased value of apartment • 46 SEK per household connected • 1.6 billion SEK (€175 million) per year Method: extrapolation of rates14/11/2011 # 22 Part of Swedish ICT

Return on investment Other effects… o Enhanced population growth is also quantified, but is not translated in terms of economic returns. o Longer-term induced effects harder to measure as of todayCausality was taken care of by introducing a time delay betweenfibre deployment and observed effects14/11/2011 # 23 Part of Swedish ICT

ROI on FTTH investment Summing up the effects analysed in the pre-study o Direct ROI at year t o Indirect- and induced-effect ROI at year t o Total ROI at year t14/11/2011 # 24 Part of Swedish ICT

Investment and return, years 1–5 (MSEK) 18000 16000 14000 12000 10000 return 8000 investment 6000 4000 2000 0 year 1 year 2 year 3 year 4 year 5 14/11/2011 # 25 Part of Swedish ICT

Direct and indirect return, years 1–5 (MSEK) 18000 16000 14000 12000 10000 "ind. return" 8000 "direct return" 6000 4000 2000 0 year 1 year 2 year 3 year 4 year 5 14/11/2011 # 26 Part of Swedish ICT

Acc. Investm. and return, years 1–5 (MSEK) "accumulated return" 70000 "accumulated investment" 60000 50000 40000 30000 20000 10000 0 year 1 year 2 year 3 year 4 year 5 14/11/2011 # 27 Part of Swedish ICT

ConclusionsIncreased fiber penetration gives significant impact on severel indicators as population and employmentMunicipalities and regions can lower the communicationscostsWe need the championsMDU are drivers 14/11/2011 # 34 Part of Swedish ICT

FTTHForum 2011 Marco Forzati, Acreo

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FTTHForum 2011 Marco Forzati, Acreo — Presentation Transcript