Guide to broadband investment

1. Presentation for QITCOM 2012
Guide to broadband investment
5th March 2011 • Pat Kidney
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2. 2
Contents
Introduction to Analysys Mason
Aims of the guide to broadband investment
Stages of investment planning
Choice of investment model
Overall recommendations
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3. 3
Analysys Mason has considerable global experience in undertaking
and assessing national broadband plans
Wales 2004 -2010: Commercial and Ireland 2006-12: Malta 2011: Techno-economic feasibility of UK 2008: Broadband stakeholder
UK 2005-2006: Development of
technical strategy, business planning, Design, procurement and a national FTTH network group models for efficient public
broadband scenarios for the BSG
procurement and implementation implementation support sector interventions in next
in the UK
support as part of National fibre for the EUR 234m UK 2001 onwards: Broadband generation broadband
broadband initiative National Broadband planning for regional development Wales 2006: Study to
European Commission 2010- Scheme agencies on the UK UK 2008 onwards: support
to Cornwall council in its promote public intervention
2011: Developed a guide for EU 2011 onwards: Socio-economic
Next Generation Broadband in “second generation
investment in broadband benefits of broadband in 27 EU
project broadband” market
infrastructure, covering small countries and private sector funding Thailand 2009:
regional roll outs and national analysis Development of
interventions alike national broadband plan
Western Europe 2004: Brunei 2009-2010:
Analysis of Internet Development of
access prices in national broadband
Western Europe strategy
Singapore 2005-2006:
UK 2010 onwards: Cost modelling Provided support on Next
of next-generation broadband and Generation Broadband
regional funding allocations Network Initiative
Malaysia 2002-2003: National
broadband policy development
US 2002-2003 : Study of US
broadband policy for TechNet Gulf 2010: Regulatory support
in major Gulf country to define
Chile 2007-2009: Broadband Morocco 2011: three- year internet
promotion study in Chile National action plan development plan
New Zealand 2010 - 2011:
Libya 2009: Provided for the development
Technical and cost reviews
commercial and technical fixed of broadband
underpinning the Government’s
and wireless licence bid support
national Ultra-Fast and Rural
addressing i.a. national
Broadband strategies
broadband requirements. Italy 2001-2002: Analysis
Norway 2002: Assessed EMEA 2011: National Israel 2011: Technical audit of national
of government intervention
the potential social and broadband market broadband solution used to evidence
mechanisms and
economic benefits from a assessment, international competitiveness and Australasia 2010- 2011: Operator
prioritisation for broadband
scheme to provide benchmarks and sufficient investment capability to the support to become national partner
task force
broadband to selected forecasts Government for ultra- fast broadband solution.
Egypt 2008: Provided India 2010: Strategic
public sector sites commercial and technical fixed Lesotho 2012: Australia 2009: STEM Subsequently carried out review of
road- mapping and
licence bid support addressing Development of license, training and solution and identification of global
assessment of drivers for
i.a. national broadband national modelling assistance for best practice
the deployment of a
requirements. broadband plan national fibre- optic National Broadband
RefNo | Commercial in confidence project
backbone in India

4. 4
The guide provides best practice in planning
a broadband investment
 Affordable, good quality and open ICT
infrastructure for all will support
cohesion, innovation, and social,
economic and political change
 details planning and procurement issues
that must be considered for broadband
infrastructure investment
 Important resource for meeting
broadband targets
 Essential for managing authorities to
prioritise the long term socio-economic
benefit of citizens over short term private
financial gain
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5. Stages of investment planning 5
The guide sets out seven key questions for
planning a broadband investment
Why should I invest in Define project aims to tackle market failures and/or
broadband? deliver socio-economic benefits what and why?
What type of network Understand the costs and benefits of different kinds
infrastructure should I invest in? of infrastructure
Understand the merits of each investment model
How should I invest?
and what might work best for you
How do I manage/monitor the Ensure successful delivery and operation, and
outcome? provide evidence for audit
What can be done to ensure Understand the commercial case and your potential
demand for services? role on the demand side
What can be done to reduce the Include measures to reduce costs and manage risks
cost and manage risks?
What are the next steps that need Contribute to hitting the DAE targets by using EU
to be taken? funds quickly and effectively
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6. Choice of investment model 6
Five investment models provide a broad
spectrum of funding options
Group of end users oversee the
contract to build and operate
Bottom-up their own local network
Public
Public Private Managing
sector design build design build Authority
owns and and operate and operate provides a
operates a
5 models grant to
network private sector
without any to assist in
private deployment of
sector new network
assistance
Joint Public
venture outsourcing
Ownership of the network is split Single contract for construction and
between the public and private operation of network, but public sector
sector retains ownership and some control
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7. Choice of investment model 7
Each investment model will be applicable in
different situations
Summary of pros and cons of investment models
Model Advantages Disadvantages Recommended use
Bottom up • Long term, non- • Localised • Targeting localised areas
profit view deployments • Leveraging small scale
• Focuses demand • Differing technologies funding
Private DBO • Larger scale • Funding threshold • Sufficient funding to attract
• Low public burden • Limited control operators
• Effective transferral of risk
Public • Public financial • Reduced benefit to • Requirement for on-going
outsourcing stability with private private sector control
expertise • Additional • More conservative
• Greater control bureaucracy operators
Joint Venture • Risk sharing • Potential conflicts of • Public/private interests
interest closely aligned
Public DBO • Public organisation • Size and scope limited • Requirement for absolute
has full control by public expertise control
• Inspirational investment
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8. Choice of investment model 8
The guide is illustrated with findings from
operational projects
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9. Overall recommendations 9
Overall recommendations are focused on
delivering maximum benefit to end users
 Socio economic benefit must be managed alongside project
sustainability to deliver long term benefits
Long term control by public sector can protect end user benefit,
however the private operators can bring invaluable expertise
Sustainability is critical as socio-economic benefits will take time
 The bottom up model may suit small scale fibre projects
Long term non-profit view of end users suits the fibre business
case, but this may be difficult to leverage on a large scale
 Small investments can provide a catalyst through partnerships
 Open and non-discriminatory access to infrastructure supports
effective competition
However, the investment requirements for passive and active
access must be carefully considered
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10. Overall recommendations 10
The guide also covers funding, state aid and
the steps to broadband delivery
EU funding
application
Preparation
Procurement Procurement Contract Broadband
and
design activity award delivery
planning
State aid
compliance
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11. 11
Contact details
Pat Kidney
Senior Manager, Head of Ireland
pat.kidney@analysysmason.com
Analysys Mason Limited
Suite 242, The Capel Building
Mary's Abbey
Dublin 7, Ireland
Tel: +353 1 602 4755
Fax: +353 1 602 4777
www.analysysmason.com
Registered in Ireland IR304061
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12. Investment model summary 12
Bottom-up model
Overview of model
 Group of end users oversee the contract to build and
operate their own local network
Advantages Disadvantages Recommended use
 Long-term, non-  Difficult to replicate  For targeting
profit view, suitable local “intensity” on a localised areas and
for high-cost large scale for gaining the most
infrastructure (e.g.  Localised benefit from small
FTTH) deployments, with amounts of funding
 Focuses demand risk of differing
and encourages technologies
local social cohesion
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13. Investment model summary 13
Private design build and operate model
Overview of model
 Managing Authority provides a grant to private sector to
assist in deployment of new network
Advantages Disadvantages Recommended use
 Larger scale (than  There is a minimum  Larger-scale
bottom up) funding threshold to  Where the level of
 Low public burden, attract private funding attracts
which can lead to interest private interest
faster deployments  Limited control over  Where the network
operations may operations (and risk)
reduce the socio- can be transferred to
economic impact private sector
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14. Investment model summary 14
Public outsourcing model
Overview of model
 Single contract for construction and operation of network
but public sector retains ownership and some control
Advantages Disadvantages Recommended use
 Public financial  Reduced financial  Where Managing
stability with private benefit to private Authority requires a
expertise high level of control
sector (compared to
over the network
 Greater control (than private DBO)
 Where private
private DBO)  Additional operator has a more
bureaucracy conservative view of
risk than the private
DBO model
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15. Investment model summary 15
Joint venture model
Overview of model
 Ownership of the network is split between the public
and private sector
Advantages Disadvantages Recommended use
 Potential financial  Potential conflicts of  Where the interests
benefit for both interest may block of the public and
parties private sectors can
creation / successful
 The use of special- operation of the JV be closely aligned
purpose vehicles
can make the model  Few examples of
very scalable, and implemented JVs to
allow alternative indicate best
investment sources practice
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16. Investment model summary 16
Public design build and operate model
Overview of model
 Public sector owns and operates a network without any
private sector assistance
Advantages Disadvantages Recommended use
 Managing Authority  Size and scope  Where a Managing
has full control to limited by public Authority needs
promote competition absolute control
expertise
and enforce over network
standards  Potentially excludes operations
 Managing Authority private sector  Where targeted
can ensure socio- expertise investment will
economic benefits inspire investment
are prioritised from private sources
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