Breakout session day 2 ftth business case birger hauge
Accelerating FTTH rollout with ICH By Birger Hauge - senior consultant for GlobalConnect FTTH Europe Conference February 11th, 2011
The FTTH Challenge• Building FTTH networks is CAPEX intensive• FTTH roll out is slow (compare to mobile & DSL)• Many FTTH operators have difficulty in competing• Socio-economic benefits are slow to arrive• Is new regulation the way forward? … we think YES.
Digging is everywhere• Dug infrastructure works represent billions inCAPEX• Thousands of miles are dug every year for: Modernizing the electrical grid Water & sanitation projects Gas & heating Transport infrastructure• The CAPEX is in the digging…• So why should we dig again for FTTH?
The ICH Solution• ICH means Infrastructure Clearing House• ICH is a new regulatory structure: 1. All public or private dug infrastructure works must include empty cable conduit deployment 2. Empty conduits are paid for & owned by ICH 3. Conduits can be bought but must be shared 4. ICH prices are regulated 5. ICH is a regulated public/private fund
How ICH works• ICH pays a fixed price per dug empty conduit meter• Any operator can buy dug empty conduit from ICH • ICH gets 50% & the deployer gets 50%• Any other operator can buy cable space in conduit • ICH gets 33% & the conduit owner gets 66%• Result: Everyone benefits
ICH cash flow He who buys Deployer He who buys cable space conduit ICH Fund Operator 1 Operator 2 Operator 2DeploymentcompensationBuying conduitBuying cablespace .. if you’re still confused we put all this math into a model
Cost of deployed FTTH conduit* 20 19 Compare to average price 19 at 50 EUR/meter:EUR/meter 18 Savings of more than 60% 18 17 17 16 1 2 3 4 5 Year Assumptions: • 20% of total conduits purchased per year *Shows average price per meter • Conduit pay-out: 5 EUR/meter of deployed conduit for operator • Conduit pay-in: 20 EUR/meter purchasing conduit from ICH • Cable space price: 16 EUR/meter
ICH fund example ICH finances & cash flow 150,000 100,000Thousand EUR 50,000 Conduit pay-out Conduit pay-in Cable pay-in - Net cashflow 1 2 3 4 5 6 7 8 Financing need -50,000 -100,000 Year Assumptions: • Conduit pay-out: 5 EUR/meter •20.000 km conduit in year 8 • Conduit pay-in: 20 EUR/meter •20% conduit sold per year • Cable space price: 16 EUR/meter •10% cable space sold per year
ICH benefits• Faster FTTH rollout (estimated 3-4 times)• Incentivize public & private organizations to dig• Maintain broadband competition• ICH applies to all dug telecoms infrastructure• Say goodbye to copper sooner rather than later• Significant socio-economic benefits
Why ICH?• Clearing house models work • Also worked for e.g. mobile number portability• Everyone benefits! • Except perhaps monopolistic incumbents…• Next steps: Explore ICH funding options • Public • Private • Public/private partnership