Transcript Slide 1

Creating The Business Case
for A Gigabit Network
In Your Community
Communities Can Make Gigabit Networks Happen
• The All-Fiber Business Case At First Appears
Challenging
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Capital requirements are substantial
Capital must be expended up front
Competition for services often exists
Demand is uncertain
As a result, for a private entity, the payback on the investment may not be
sufficient…and government subsidies are limited
• But Communities Can Make It Happen By Using
Their Unique Assets To Enable FTTH Deployments By
Private Providers, Public-Private Partnerships, or
Public Entities
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Communities Can Make Gigabit Networks Happen
Any
community • The barrier is not
that wants
technology or economics
its residents • The barrier is organization;
specifically, organizing
to have
demand and the better
access to a
use of underutilized assets
Gig can do
so
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Returns May Challenge Private Investors
The investment equation usually looks like this:
C + O > (1-r)R + SB + (-CL)
C – Capital Expenditures
O– Operating Expenditures
r – Risk
R- Revenues
SB- System Benefits
(Benefits that drive increased revenues outside
the communities where the new or incremental
investments are made.)
CL- Losses due to competition
For FTTH Capex is high and Opex is significant; but while
the System Benefits are great, they accrue both to the
network operator and the community and private
investors only care about the operator’s returns
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Government Can Alter The Investment Equation
Sector
/opportunity
Ecosystem change
Telco
Grant of monopoly
Cable
Grant of monopoly,
pole attachment law,
compulsory
broadcast license
CapEx
OpEx
Risk
Revenue
Lower
Raise
Lower
Raise
Rural areas
USF
Wireless
Limited # of licenses
Lower
DBS
Limited # of licenses,
program access
Lower
Broadband
upgrade
Deregulation, two
wire policy
Wireless
upgrade
More licenses,
lowered TAC,
oversight of siting
authority
Lower
Competitive
Losses
Lower
Lower
Raise
Raise
Raise
Raise
Raise
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Communities Also Can Alter The Investment Equation
For instance, Kansas City and Google are
working together to develop a gigabit broadband
network
Sector
/opportunity
Google
Ecosystem change
CapEx
OpEx
Risk
Revenue
System Benefits
Deals with City, State,
and Utilities
Lower
Lower
Lower
Raise
Raise
In other examples, GiG.U is working with 27
research universities to bring gigabit broadband
to their communities
Your community can also alter the equation for
investment
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How Does Your Community Alter the Equation?
C + O < (1-r)R + SB + (-CL)
• Key Elements
• Creating the Plan
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Key Elements to Changing the Equation
Reduce Cap Ex
• Build to Demand Model
• Access to ROWs, Facilities
• Reduce Regulatory Time
Reduce Op Ex
• Access Payments
• Reduce Ongoing Regulatory Costs
• Utilize Existing Billing Platforms
Reduce Risk
• Build to Demand
• Standardize Functions Across Areas,
Vendors
Increase Revenues
• Demand Acceleration
• Marketing Platform
• New Services
Increase
Ecosystem Benefits
• Distributed Innovation
• Seeding Long-Term Growth
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Community Points of Leverage
• Demand:
Expected
Benefits
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Anchor institutions
MDU’s
Enterprise users
Residential
• Assets
Expected
Costs
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Availability of fiber / access to
dark fiber
Access to ducts/conduit/poles
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Expedited permitting
Joint marketing efforts
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1. Assess and Aggregate Demand
• Demand (current and projected) for the proposed service
area is critical for the business case
• Communities should quantify for prospective providers
amount of revenue
– Location and type of users including anchor tenants such as
local government and school systems
– Current broadband services (cost/type/length of contracts)
– Applications currently being offered and considered
• Communities should conduct a demand aggregation survey
of their citizens as part of this process
– Each state has some sort of technology development service that
can assist in developing demand surveys
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2. Inventory Assets
• Communities should leverage assets that are
readily available, obtainable and valuable, which
will reduce the overall cost of financing
• The first step is to create an inventory of such
assets, which can include those that belong to
the community or that the community can
influence
• Count both physical assets and “soft” assets
which can reduce development costs and build
awareness
– Civic groups
– Educational institutions
– IT/GIS professionals
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Examples of Community Assets
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Rights of Way – used to expedite/reduce cost of conduit placement
Ongoing or pending Capital projects – can tie in fiber builds to water, road
construction etc
Municipally owned utilities – assets, customer base, back office operations can be
leveraged for partnerships
Existing vendor relationships – leveraged to provide enhanced or expanded
services
Land
Ongoing/planned first responder communications upgrades – for economies of
scale
Permitting – provide expedited treatment
Franchise agreements/contracts - offer favorable terms
IT professionals
Existing mapping (GIS) resources
Educational institutions – sources of student labor and expertise
Civic groups/volunteers – source of support and labor for community oriented
activities
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3. Supplement Funding
• Communities should work with potential providers in
identifying and seeking supplemental funding for the
project
– Federal
• RUS loans and grants
• EDA loans and grants
• USF support for Schools, Libraries and Rural Health
– State
• Many states have specific Broadband funds
– Hawaii – Gigabit to Anchor Institutions
– Illinois – Gigabit Incentive Fund
• Many states also have economic development initiatives and/or
infrastructure funds that would be applicable
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Next Steps
• Once your community has:
– Collected the demand data leading to estimated initial
revenues
– Forecasted area growth and application needs leading to
future revenue growth
– Developed the list of assets you can bring to the table that
reduce capital and operating expenditures
– Determined supplemental sources of funding
You are now ready to develop your
Request for Proposal
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