Ramon Aagarrarius Univ of Pompou Fabra, Ghent 24 Oct 2011
“Ducts, fibers, municipalities, barriers to entry and effective competition: A case study of successful public-private partnership in the provision of neutral FTTX infrastructure in Barcelona”J. Infante, R. Sagarra, M. Oliver, C. MaciánResearch Group on Networking Technology and Strategies Universitat Pompeu Fabra, Barcelona (Spain) Barcelona Council Workshop on Municipal Fiber Networks Ghent, 24 october 2011
Barcelona 22@ Case Study 2/18 PAPER OBJECTIVES • Analysis of the framework for municipal active participation on NGA deployment • Case study for municipal active involvement: 22@ BCN • Benefits analysis for the 22@ study case • Situation as today and challenges • Applicability to other contexts and comparison with other initiatives.
Barcelona 22@ Case Study PASSIVE INFRASTRUCTURE AS A BARRIER TO COMPETITION • A key aspect for economic viability • Long-term sunk investment • High entry barrier for alternative operators. Source: OECD 08 Passive infrastructure sharing is needed for implementing effective competition Source:Amendola & Pupillo, 08
Barcelona 22@ Case Study REGULATORY ISSUES (I) •PASSIVE INFRASTRUCTURE SHARING: • Obligations for the incumbent to share passive infrastructure including ducts, dark fiber and technical rooms on a cost-oriented basis • Almost no reference offer in Europe: will need time and adjustments to be operative. • UNBUNDLING AND BITSTREAM ACCESS: • Different for each context and not extrapolable from the copper case. Less rungs on the ladder of investment
Barcelona 22@ Case Study REGULATORY ISSUES (II) •RIGHTS OF WAY • Municipality manages RoWs. Different conditions for each country/municipality. Ex.: street cabinets. • IN-BUILDING WIRING • Enforcement of in-building passive infrastructure for new premises and incentives for deployment in old ones. • Symmetric regulation for in-Building operator deployments.
Barcelona 22@ Case Study THE ROLE OF MUNICIPALITIES IN NGA DEPLOYMENTS (I) • INTEREST OF LOCAL ADMINISTRATIONS Long Term/Short Term Compromise Cheap and good Urban ordering TELECOMMUNICATION Telco Services(Minimization of civil ACCESS NETWORKS (Promote competition/ works) Deploy when no private Cost offer is available) reduction (RoWs incomes/Minimize municipal spending/Agreggation of public and private demand for passive infrastructure)
Barcelona 22@ Case Study THE ROLE OF MUNICIPALITIES IN NGA DEPLOYMENTS (I) • CAPABILITIES OF LOCAL ADMINISTRATIONS – Specific conditions for RoWs: Established and managed mostly by the municipality (framework provided by national administration) – Deployment of Passive infrastructure for internal use: Corporative data/voice networks, control and monitoring networks, etc. – Know-how on passive infrastructure (but not on sophisticated telco services management) and acts as a “meeting point” for other passive infrastructure needs (electricity, gas, water, etc.) – Financial models and motivations better adapted for long-term investment than alternative operators.
Barcelona 22@ Case Study MODELS FOR PUBLIC/PRIVATE INTERPLAY IN THE NGA CONTEXT • Different levels of involvement depending on the context • Passive infrastructure is a well-known business for municipalities. • Active networks and services need private involvement. + Retail Telecommunication • Complexity services • dynamic market Active networks Wholesale Retail service For residential • Network Active Network And business Dark Fiber segments Technology and Passive Power &AC providing structured telecommunication Tubes services infrastructure Ducts & room transmission capacity for equipments Innovation and Municipal soil and Rights of Ways Trenches buildings Obsolescence - Municipal involvement +
Barcelona 22@ Case Study PRESENTATION OF THE 22@ CASE (I) THE SCALE OF THE PROJECT: · TERRITORY: 198,26 Ha (115 city blocks) · NEW GROSS FLOOR SPACE : 4,000,000 m² • Productive Activities: 3200,000 m² • Housing, facilities and services: 800,000 m² • HOUSING: • Existing housing units: 4,614 • New social housing units: 4,000 (min. 25% rental) · INCREASE IN GREEN SPACES: 114,000 m² · INCREASE IN FACILITIES: 145,000 m² · INCREASE IN JOB OPORTUNITIES : 130.000 · INVESTMENT IN INFRAESTRUCTURES: 180 million €
Barcelona 22@ Case Study PRESENTATION OF THE 22@ CASE (II) Total passive telco infrastructure investment: 10 M€ • Incumbent: 50% (5 M€) • Municipality: 50% (5 M€) • Rental use: 3,3 M€ (70%) • Municipal use/future needs: 1,7 M€ Incumbent Incumbent Incumbent •90% Trenching, Rental use Rental use Municipal use & future needs ducts and technical rooms •10% Fiber and Duct 40 mm. Up to 250 fibers (22@: 144 max) equipment 120 mm.
Barcelona 22@ Case Study PRESENTATION OF THE 22@ CASE (III)
Barcelona 22@ Case Study PRESENTATION OF THE 22@ CASE (II) - Dark Fiber from/to each block/building. - Base price for each block connected (2 fibers): 6,500 €/pair/year -Discounts reaching 50% depending on the contract periods and number of blocks connected. - Clients configure interconnected fibers rings connecting several blocks.
Barcelona 22@ Case Study THE EVIDENCE SO FAR • 40% of the network deployed (32 of 105 blocks) • 6 telco operators using dark fiber services and providing retail business services as well as backhaul for internal use. • Also business clients for premises connections. • Return of investments plan fulfilled better than expected.
Barcelona 22@ Case Study BENEFITS FOR THE PARTICIPATING ACTORS• Win-Win situation Incumbent •New areas: Lower deploymentMunicipalities cost and compatible with strategic• Better subsoil management assets owning• Economy of scope •When already existing• Increase telco competition infrastructure: No benefits for parallel municipal infrastructureAlternative operators deployment• Lower barrier for entry• Fast services provision Quantitative analysis:• Strategy not compromised Annual billing: 600.000 eurosby incumbent infrastructure Return on investment: 7 years
Barcelona 22@ Case Study CHALLENGES TO THE 22@ MODEL • Leverage of funds for municipal long term investment (EFDR/National funds?). • Incumbent involvement and alternative operators compromise. • Potential risk of distortion of private competition. Clear business models and open non-discriminatory models. • 22@ still to be tested on FTTH residential scenario. • Finantial risk transferred to municipality. • New regulation for incumbent passive infrastructure sharing: the model for municipal involvement must be adapted to the new context.
Barcelona 22@ Case Study COMPARISON TO OTHER INITIATIVES • StokAB (Sweden) – Initial reference for 22@ – City dark fibler (1.200.000 km.) in Stockholm and near 30 more cities. In-building deployment (100.000 social housings for 2012) – Differences: • 22@ strictely municipal and to be extended to other new areas of the city, but on a case by case context. • Private-owned housings: strategies for in-building infrastructure are different. Regulation, enforcement and incentives for owners. • The political consensus on public active involvement in the long term is weaker in the spanish case.
Barcelona 22@ Case Study COMPARISON TO OTHER INITIATIVES • PAU-PYRÉNÉES (France) – Rural focus. 14 communes (150.000 inhabitants) – Municipal financing (35 M€) private operated (Axione). Neutral network including active elements and IP services. – Differences: • Rural context is different to city context. • Need of service availability. More municipal involvement needed in the Pau case.
Barcelona 22@ Case Study APPLICATION TO OTHER CONTEXTS • 22@ model suitable for mixed business/residential new areas of the city. • Business model not as clear for less ICT intensive usage new areas of the city, but still a strategic long-term investment for municipal objectives. • Already existing incumbent passive infrastructure: avoid infrastructure duplication and promote private infrastructure sharing among competitors.
Barcelona 22@ Case Study CONCLUSIONS AND LESSONS LEARNT • Passive infrastructure is an essential element for NGA competition but competition should take place on upper more innovation-based layers. • Municipalities: key actor for passive infrastructure deployment, enabling different infrastructure sharing models, demand aggregation and facilitating long-term city competitiveness. • 22@ shows feasibility of municipal active involvement in passive infrastructure deployment for urban expansion/transformation in high ICT usage areas. • New regulation for incumbent passive infrastructure sharing: new models for public/private interplay.