Workshop Lisbon 2010

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FTTH Council Europe Conference 2010 - Workshop Slides

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Workshop Lisbon 2010

  1. 1. experience - knowledge - action Business Drivers for FTTx Richard Jones Richard Jones richard@venturateam.com
  2. 2. We are CONSULTANTS Improve business performance – helping organisations deliver products, services and revenues faster Develop and implement the right business strategy Define the right technology strategy Build realistic, flexible business cases and models – showing realistic costs and revenue scenarios Win telecoms licences against tough competition - at the right price Carry out better due diligence – saving clients from costly errors Launch new operators – getting to revenues faster Copyright Ventura Team LLP 2010 richard@venturateam.com
  3. 3. We are CONSULTANTS Improve business performance – helping organisations deliver products, services and revenues faster Develop and implement the right business strategy Define the right technology strategy BUT Build realistic, flexible business cases and models – showing realistic costs and revenue scenarios Win telecoms licences against tough competition - at the right price Carry out better due diligence – saving clients from costly errors Launch new operators – getting to revenues faster Copyright Ventura Team LLP 2010 richard@venturateam.com
  4. 4. We are also CONSULTANTS… …who started up our own operator in Sweden to demonstrate our capability …so we also pass on our experience as an OPERATOR with 80,000 subscribers now Copyright Ventura Team LLP 2010 richard@venturateam.com
  5. 5. Our startup operator in Sweden is at an interesting point It has grown with our help (but very little finance) to: 80,000 subscribers Residential and wholesale FTTH services include residential: 100 mbps symmetric >$12 in some cities Internet, voice and TV 1,500 pops FTTH, xDSL and WiMAX 750,000 homes passed Copyright Ventura Team LLP 2010 richard@venturateam.com
  6. 6. But aside from the numbers, it is also one of the most efficient operators in the world …with 2,500 subscribers per employee Copyright Ventura Team LLP 2010 richard@venturateam.com
  7. 7. These are challenging times Fibre trenches… Copyright Ventura Team LLP 2010 richard@venturateam.com
  8. 8. These are challenging times …can seem more like these trenches So what’s important in building up a business case? Copyright Ventura Team LLP 2010 richard@venturateam.com
  9. 9. You need to build strategies and business cases using knowledge and experience gained ‘on the ground’ You need to be FAST: You never get enough time There may be 100 iterations and scenarios Copyright Ventura Team LLP 2010 richard@venturateam.com
  10. 10. You need to build strategies and business cases using knowledge and experience gained ‘on the ground’ You need to be ACCURATE: If you don’t really know what you’re doing - errors can cost 10’s or even 100’s of millions of Euros Copyright Ventura Team LLP 2010 richard@venturateam.com
  11. 11. We created a simple project assessment tool for the FTTH Council Inputs Overview Overall Report Simple Questions Market Size Channels or Existing Customer Base Market Prices Management Team Competition Market Maturity Access to Capital Complexity Construction of Services Method Building IT Systems Density Management Ease of Team Deployment Access to Home Overview of Capex Derived Requirements Opportunity Size Opportunity Assessment Market Prices Results Revenue Potential Revenue to Capex Ratio Margin Potential Copyright Ventura Team LLP 2010 richard@venturateam.com
  12. 12. Then we modified the criteria some more….. Price for BB <10 10 - 20 20 - 50 50 – 100 >100 ($) - monthly Subscriber <5k 5k – 20k 20k – 50k 50k – 100k >100k Target Current/ Existing fibre Some fibre Good DSL WiMAX and ‘Bad DSL’ and Planned or fast cable and/or ‘bad DSL’ 3G Technologies significant VDSL Density of <10% in 10 – 25% in 25 – 50% in >80% medium >80% large Housing apartments apartments apartments apartment apartment blocks block Routing fibre No ducts and No/low ducts Some ducts Good duct High high cost to and high dig and/or access and percentage of dig costs medium cost low dig costs ducts digging available TV High High 15 - 50% <15% Very low satellite/cable satellite/cable satellite/cable satellite/cable satellite penetration + penetration + penetration penetration piracy + piracy content laws Copyright Ventura Team LLP 2010 richard@venturateam.com
  13. 13. This is only a first step…. TV PRICING Gaining funding requires detailed and defendable business cases ROUTING TECHNOLOGIES FIBRE HOUSING TV DENSITY Good News Minor Issue Problem Copyright Ventura Team LLP 2010 richard@venturateam.com
  14. 14. … but this approach gives you a first indication about your project… TV PRICING ROUTING TECHNOLOGIES FIBRE HOUSING TV DENSITY Copyright Ventura Team LLP 2010 richard@venturateam.com
  15. 15. What are the biggest drivers on your business case? The simple answer is: dig cost per metre distance of street dug per home passed IP transit costs Penetration ARPU Let’s look at some of these in more detail Copyright Ventura Team LLP 2010 richard@venturateam.com
  16. 16. DIG COSTS Copyright Ventura Team LLP 2010 richard@venturateam.com
  17. 17. If your infrastructure is cheap – fibre is an easy win! Copyright Ventura Team LLP 2010 richard@venturateam.com
  18. 18. Fibre cannot be deployed everywhere unless you have significant advantages/help!!! 2,500 Passive Infrastructure CAPEX (GBP) per Home Passed by Geotype and Technology for Sweden 2,000 1,500 1,000 FTTC/VDSL FTTH (GPON) 500 FTTH (PTP) - Source: Ventura Team LLP Copyright Ventura Team LLP 2010 richard@venturateam.com
  19. 19. Is it economic to do a whole country? Answer: Only 50%-70% homes are economic Estimated Total CAPEX (GBP m) for Greenfield GPON in Sweden 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Ventura Team LLP Copyright Ventura Team LLP 2010 richard@venturateam.com
  20. 20. You can’t build everywhere in a city because of the costs of low density areas. A represents the cost for a rollout in The cost for 400,000,000 an area where 33% A of people live in outside plant 350,000,000 (OSP) increases 300,000,000 A apartments TRENCHING COST - OMANI RIALS as the density of 250,000,000 population COSTS decreases 200,000,000 B Fewer 150,000,000 apartments 100,000,000 B (and so more 50,000,000 villas) mean - more street dig 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100% to pass each PERCENTAGE OF POPULATION IN MULTI-DWELLING UNITS Percentage in Multi-Dwelling Units potential B represents the cost where 90% of subscriber people in an area live in apartments Copyright Ventura Team LLP 2010 richard@venturateam.com
  21. 21. The density of housing has a major impact EUROPE At 3m of street per home passed DIG CAPEX = 20 months ARPU Copyright Ventura Team LLP 2010 richard@venturateam.com
  22. 22. For comparison purposes, Dubai does not represent the ‘typical’ Gulf country Copyright Ventura Team LLP 2010 richard@venturateam.com
  23. 23. If you have to dig in roads/pavements, things get far worse GULF 15m/home passed (mainly in roads/pavements) DIG CAPEX = 140 months ARPU Copyright Ventura Team LLP 2010 richard@venturateam.com
  24. 24. Choosing where to dig within each city is vital There are several approaches If you have GIS data combined with census information Copyright Ventura Team LLP 2010 richard@venturateam.com
  25. 25. Choosing where to dig within each city is vital You can identify roads to pass by 25 looking for blocks of a reasonable size identifying all the 25 homes passed on 70 these roads 25 40 40 calculating the distance dug compared to the homes passed 25 40 25 70 40 50 25 Households per block Copyright Ventura Team LLP 2010 richard@venturateam.com
  26. 26. This example shows the impact of selecting roads based on the largest block size HIGHLIGHTS 875k homes – 4.4m/home 582k homes – 2.6m/home Do you need: big subscriber numbers? OR better profitability? Smaller and more focussed deployments are needed if competition is fierce or economics are poor Copyright Ventura Team LLP 2010 richard@venturateam.com
  27. 27. If you don’t have GIS then in some countries you can use Excel!! The diagram on the right represents a block style city layout Villas are shown with a V and apartment blocks (MDUs) with an A By approximating the number of apartments per MDU you can estimate the street length needed to pass a certain number of homes Copyright Ventura Team LLP 2010 richard@venturateam.com
  28. 28. Otherwise use Google Earth Zoom in on ‘typical’ areas to sample and Count the houses Count the apartments Measure the street length Copyright Ventura Team LLP 2010 richard@venturateam.com
  29. 29. Make sure you understand how your Outside Plant costs will influence final connection costs One GPON vendor had an Outside Plant design terminated with a four way block in the street. Seems okay right? HOMES (20m frontage) Termination Block Copyright Ventura Team LLP 2010 richard@venturateam.com
  30. 30. Make sure you understand how your Outside Plant costs will influence final connection costs The problem is that you have to dig the street again to connect to homes (SUB’s) HOMES (20m frontage) SUB SUB SUB SUB That’s another 140m of dig! Copyright Ventura Team LLP 2010 richard@venturateam.com
  31. 31. Now let’s look at the sensitivity to the dig length and cost in this model EXAMPLE 50,000 homes passed 5 metres of street dig per home passed 30% penetration first year 60% final penetration Broadband 20 Telephone (rental and calls) 10 TV 12 Security or other misc items 2 Avg Rev / Home / Month 44 Copyright Ventura Team LLP 2010 richard@venturateam.com
  32. 32. ARPU Copyright Ventura Team LLP 2010 richard@venturateam.com
  33. 33. What is your market’s ability and willingness to pay? Factor How do we think about this factor? Affordability Look at spending as percentage of GDP – compare to benchmarks. Is your market under-spending or already above expected values? Compare prices to similar markets Do market surveys However… in some countries, the lack of alternative entertainment mean that the Internet can take further share of ‘wallet’ Competition You can’t turn back time If prices for equivalent services are below your target ARPU then you won’t achieve your objectives Copyright Ventura Team LLP 2010 richard@venturateam.com
  34. 34. What is your market’s willingness to pay? Factor How do we think about this factor? Take up There is a natural distribution of prices that people are willing to pay. If 80% of people would pay for a service below X then don’t expect your’s to sell at 2X 100 Customers Willing to Pay Price (%) 90 80 70 60 50 40 30 20 10 0 100 120 140 160 200 220 240 260 300 320 340 360 400 180 280 380 0 20 40 80 60 Price Per Month …this will impact the subscribers you can win and hence overall revenues Copyright Ventura Team LLP 2010 richard@venturateam.com
  35. 35. Revenue has an enormous impact on performance….no, really!! Once your core costs are covered then incremental revenue above variable cost is profit Copyright Ventura Team LLP 2010 richard@venturateam.com
  36. 36. You can try to launch more products to boost ARPU Product & Brand Lifecycle Services Buying Activating Using Paying Contacting Change Awareness Availability Corp Product Sales Sales Sales Sales Comms Marketing Mar CRM/BSS Care Care Care Care Comms Networks Retail Retail Retail Retail Dealer Billing And Problem Dealer Management Collections Management Management CRM/BSS CRM/BSS CRM/BSS CRM/BSS CRM/BSS Order Order Order Management Management Management OSS OSS OSS OSS OSS OSS Departments Copyright Ventura Team LLP 2010 richard@venturateam.com
  37. 37. Lifecycle But each one needs to be properly managed Buying Activating Using Paying Contacting Leaving Order Processing Activate Voice Quality & Information Deactivation & Rating & Fulfillment Voice Availability Requests Termination Servicing Activate Internet Quality & Account & Service Retention & Follow Invoicing Customers Internet Availability Management Up Outbound Activate TV Quality & Customer Problem Collection Campaigns TV Availability Management Complex Activate Data Quality & Billing Dunning Sales Bundle Availability Enquiries Contact Center Dealer Activate VAS Quality & Adjustments & Information & Sales VAS Availability Amendments Interaction Outbound CPE Customer Logistics Notifications Outbound Surveys Process Proactive Service Improvements Copyright Ventura Team LLP 2010 37 richard@venturateam.com
  38. 38. …and so getting more products to Launch Readiness will require many resources and take up huge amounts of management time Program Inputs Deliverables Management Branding & Business Plan Product Development  Detailed Product  Key Milestones e.g. RFS, Positioning Refinement & Strategy Definition Soft launch & Full  Product Launch Commercial Launch  Detailed Product Management Framework  Market Assessment dates Definition (product)  Management Reporting  POS Production  Business Model  Pricing  Customer needs  High Level Launch Plan  Communication  Partner Model  Promotional & POS Campaign  Target Segments  Service Rollout Strategy  Key Business Collateral Guidelines  Value propositions  Go To Market Strategy Assumptions  Channel Approach  Resourcing Plan  Market Data/Segment Plan  Organizational Design  Branding Brief Business Business Process Network  Process Framework Infrastructure & IT Strategy development  Communication Plan  Network Rollout Strategy, Plans & Capabilities  Customer Experience  Overlay  IT Strategy & Capabilities  Billing & Collections Framework  Space Building  Local Access  Quality Management Plan Requirements  CRM  Product Performance  International Access Reporting  Any key  Organizational Design  Call Centre Regulatory/Compliance  Interconnect  Commercial Calendar  People Policies  Service delivery dates  Switch Technology  Attention & Engagement  Business Systems  Inventory  IN Architecture Models Copyright Ventura Team LLP 2010 richard@venturateam.com
  39. 39. Overview of the PLM - Process Master Architecture Product Lifecycle & Innovation Management Process Idea Assessment Market Generatio & Development Management n Idea Initial Detailed Business Implementation Market Termination Definition Description Description Case Management Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 GATE 1 GATE 2 GATE 3 GATE 4 GATE 5 GATE 6 GATE 7 Go for Initial Go for Detailed Go for Go for Go for Go for Go for description description Business Case Implementation Launch Product Change Termination Sales, Build IT Build Prop Marketing, Build Operate / RUN Plan Deployment Wholesale Network Assess Sunset The process is structured into six stages plus innovation pre-phase. Seven gates are defined in order to help steering decision-making process. Copyright Ventura Team LLP 2010 richard@venturateam.com
  40. 40. …and in the end, creating too many products hurts your business Creating more products Creates service change calls Creating more Creating more scope for engineering errors actions/visits Creating complaint calls Damages reputation Copyright Ventura Team LLP 2010 richard@venturateam.com
  41. 41. PENETRATION Copyright Ventura Team LLP 2010 richard@venturateam.com
  42. 42. …and where fibre is competitive on price – it kills DSL Where fibre is available at comparable prices, it will displace xDSL and WiMAX as the preferred home technology A number of FTTx projects have taken 70% or more share of homes passed These cases have benefitted from one or more of the following factors: 30%+ bundle price discount Killer content Great demographics and strong desire for true broadband High dissatisfaction with existing providers Local loyalty Copyright Ventura Team LLP 2010 richard@venturateam.com
  43. 43. …but how sensitive are cases to penetration? EXAMPLE Broadband 20 Telephone (rental and calls) 10 50,000 homes passed TV 12 Security or other misc items 2 5 metres of street dig per home passed Avg Rev / Home / Month 44 Copyright Ventura Team LLP 2010 richard@venturateam.com
  44. 44. What if your market is very competitive? If prices have hit a ceiling then Business Value you need to concentrate on: Flattening out Achieving a critical size through acquisition Higher growth Buying as a group (to achieve better discounts) High growth Concentrating on customer per service reputation sub Driving down internal costs Asset value only 0 10 100 250 Number of Subscribers (k) Copyright Ventura Team LLP 2010 richard@venturateam.com
  45. 45. So how do you get it right? Change the rules…..use whatever means you can to reduce cost Share ducts, dig as consortia, use utility companies’ asset Choose the right towns and cities and then the optimum parts within them You can only do ubiquitous services in very high density towns or with external assistance (i.e. government) Beat xDSL speeds but do not go straight to your fastest potential speed immediately Changing speed/service provides opportunities for PR and marketing advantage You may not be able to afford to give subscribers ultra fast, unlimited connections Your business strategy and model need to be very carefully refined – probably across multiple technology offerings in many cases Copyright Ventura Team LLP 2010 richard@venturateam.com
  46. 46. Thank you… richard@venturateam.com Market Experience Operator Experience Includes: Investor Experience Please leave me your Egypt Telecom Egypt Apax card is you want a Qatar Vodafone (various operations) RBS copy of: Oman Atheeb Consortium (Saudi) Regulator Experience Saudi Arabia Millicom International Cellular Ofcom this presentation Dubai Batelco DCMNR our current white Colt Communications Poland Egypt NTRA paper on ‘The 9 BT Biggest Mistakes Ireland Vendor Experience Pipex in FTTH’ UK Huawei Riksnet German ZTE future white papers Nordisk Mobiltelefon Group Alcatel Mali Eircom Ericsson Sweden Turk Telekom See us in the Analyst Motorola Hungary Bulgarian Telecom Partners booth WiPRO Greece Invitel+Pantel Industry Clients France Neuf Telecom FTTH Council Europe Rwanda Deutsche Telekom GSM Association Estonia MLL Telecom Copyright Ventura Team LLP 2010 richard@venturateam.com

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