Profitable Broadband Deployment and its Limits

Transcription

1 Profitable Broadband Deployment and its Limits International WIK Conference on National Strategies for Ultrabroadband Infrastructure Deployment: Experiences and Challenges April 26th 27th, 21, Berlin Dr.Thomas Plückebaum wik-consult GmbH

2 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 1

3 Under which circumstances is a roll out of broadband fibre access networks profitable in a competitive environment? Clusters with decreasing subscriber density Geotype Urban Suburban Dense Rural Different FTTx architectures (FTTC/ VDSL, FTTH PON and P2P) (assumption; FTTB somewhere inbetween) Rural (1) (2) (3) (4) (5) (6) (7) (8) Cluster Dense Urban Urban Less Urban Dense Suburban Suburban Less Suburban Rural Subscriber density per km 2 > 1. > 6. > 2. > 1.5 > 1. > 5 > 1 1 Different regulatory measures (duct access, dark fibre, fibre LLU/ SLU) Multifibre approach FTTx Inhouse Profitable area Backbone Aggregation Net MPoP Fiber SC DP Fiber/ Copper Fiber Inhaus CPE Splice Aktive Active Systems Technik 2

4 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 3

5 Bottom-up LRIC model Greenfield assumption First and second movers, incumbent as first mover Steady state no ramp up one period (year) Long term consideration Fttx replaces copper Scorched node: MDF as active (1%) or passive (9%) network nodes Private and business customers with service mix (single triple play): Type of subscriber Average Revenue per Subscribe r (in ) Share of the Total Customer Base (in %) Accumulated % Single Play Double Play Triple Play Example: Germany Business Total

6 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 5

7 The critical market share is the market share needed by an operator in order to just achieve profitability Determination of the critical market share for a single cluster: illustration Total cost per subscriber and month, (cluster urban cluster 7) Average revenue per subscriber and month in in ARPU cost = revenue % 1% 2% 3% 4% 5% 6% 7% 8% 9% market share Market share 6

8 A 1% fibre roll out is not profitable, for none of the Fttx architectures Critical market shares of an incumbent rolling out Fttx Critical Market Share 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 15% 1% 18% 2% 27% 34% Accumulated Customer Base (in millions) Mio.) VDSL FTTH-PON FTTH-P2P Falling customer density 78%.3% 2.4% 13.7% 18.5% 25.1% 37.4% 71.5% Source: WIK-Consult, The Economics of NGA, Brussels 28, German Case 7

9 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 8

10 Even the cheapest architecture (FTTC VDSL) has limited viability in all countries In no country is FTTC/FTTH roll-out profitable for all homes - 25 % FTTH viable in France - 72 % VDSL viable in Germany Profitable investments in NGA require substantial market shares Viability of NGA roll-out for incumbents across countries and technologies Network Type DE FR Country SE PT ES IT VDSL PON P2P 71.5% n.r. 18.3% 39.% 67.4% 1.% 25.1% 25.2% 18.3% 19.2% 12.2% 17.6% 13.7% 18.6% 18.3% 19.2% 12.2% 12.6% Percentage of population viably adressable n.r. not realisable Source: WIK-Consult, The Economics of NGA, Brussels 28, German Case 9

11 There is poor replicability for any of the architectures in any country Even when a second mover has access to ducts of the incumbent replication of infrastructure is rarely viable Replicability of NGA roll-out for a second mover, 8 % access to existing ducts at current cost-based prices Network Type VDSL PON P2P Country DE FR SE PT ES IT 18.5% n.r. n.v. 39.% n.r. 17.6%.3% 6.8% n.v. n.v. n.v. 1.6%.% 6.8% n.v. n.v. n.v..2% n.v. not viable n.r. not replicable Source: WIK-Consult, The Economics of NGA, Brussels 28, German Case 1

12 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 11

13 Regulatory measures help to improve the situation of replicability, but not in covering the whole country Impact of regulatory measures on the critical market shares of alternative operators in the urban cluster (PON architecture) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % FR DE IT ES PON own infrastructure using 8% infrastructure sharing (duct access) Fibre SLU with limited (2%) dark fibre and duct access Fibre SLU with 8% dark fibre and duct access Source: WIK-Consult, The Economics of NGA, Brussels 28, German Case 12

14 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 13

15 Multi Fibre the idea to save cost per operator Total 11% - 13% Each 55% - 65% Each 36% - 43% 1% 1% Costs Single Model Overall costs Cooperation Model Scenario: 2 Partners Scenario: 3 Partners Source: WIK-Consult, The Economics of NGA - Addendum, Brussels 29, (German Case) 14

16 Multi Fibre Cooperation improves the coverage of profitable fibre roll and its replicability, but not reaching 1% (here: P2P MPoP) Critical Market Share 1% 9% 8% 7% 6% 5% 4% 3% 38% 56% 78% 82% P2P SF P2P MPOP MF 1 Op P2P MPOP MF 2 Op P2P MPOP MF 4 Op 2% 1% % Accumulated Customer Base (in Mio.).3% 2.4% 13.7% 18.5% 25.1% 37.4% 71.5% Source: WIK-Consult, The Economics of NGA - Addendum, Brussels 29, (German Case) Each Eachof of the the2/ 2/ 4 operators operatorshave haveto to achieve achievethe thecritical criticalmarket marketshare sharefor forprofitability! 15

17 4 cooperation partners make handover at MPoP more profitable than at DP for both PON and P2P (here: PON 4 Op_DP vs. MPOP) Critical Market Share 1% 9% 8% 7% 6% 5% 4% 3% 2% 33% 49% 67% 7% 85% DP MPoP PON SF PON DP MF 4 Op PON MPOP MF 4 Op 1% % Accumulated Customer Base (in Mio.).3% 2.4% 13.7% 18.5% 25.1% 37.4% 71.5% 1 % because the commonly used feeder infrastructure (DP MPoP) is cheaper per operator than 4 individual separate ducts ( at least, if they do not already exist for free). Source: WIK-Consult, The Economics of NGA - Addendum, Brussels 29, (German Case) 16

18 Unequal market shares suffer from high entry barriers, the major cooperation partner will be subsidized Single fibre + unbundling Multi-fibre case Incumbent Altnet Incumbent Altnet Market share 1 % 8 % 6 % 5 % 4 % Cost per line Market share % 2 % 4 % 5 % 6 % Cost per line Market share 1 % 8 % 6 % 5 % 4 % Cost per line Market share 2 % 4 % 5 % 6 % Cost per line Assumptions: (1) Only shared investment considered (8 % - 85 % of total invest) (2) Two cooperation partners considered (3) Investment multi-fibre model = 12 % investment of single fibre model (4) Sharing rule: 5:5 (5) Numbers are for illustration purposes only Source: WIK-Consult, The Economics of NGA - Addendum, Brussels 29 17

19 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 18

20 The less dense populated, the higher the invest per home, FTTH/P2P invest larger than FTTC Investition per pro home Home passed Passed (in Euro) Invest per pro home passed 5% market share FTTC FTTH/P2P With homogenous market share of 5% Without CPE & Inhouse Cabling Source: WIK-Consult, Breitband Bandbreite für Alle, Diskus 332, Bad Honnef, 29 19

21 Total investment in Germany varies with architecture FTTC: ca. 41 Mrd. Euro FTTH/P2P: ca. 117 Mrd. Euro Invest per pro home passed Durchschnitt Average of all aller clusters Cluster at bei homogenous einheitlichem market Marktanteil share of von 5% 5% > 95% of invest is for passive infrastructure (trenches, ducts, cables, distribution frames, manholes, sleeves, ) 5 FTTC FTTH P2P without CPE & Inhouse Cabling 2

22 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 21

23 Outlook: Different approaches of subsidies may be applied in oder to increase the viability of a broadband roll out Profit and loss per customer and month Price differentiation per cluster may enlarge coverage ARPU needed for profitability ARPU A universal service contribution as surcharge on fees may enlarge coverage Cluster Additional investment needed for viability 18' 16' 14' 12' 1' 8'142 8' 6' 4'532 4' 2'883 2' 1'249 1' '411 Investment subsidies per customer access or per cluster may enlarge coverage Tausende Cross subsidies: remaining profit and loss 3' 2' 1' 99 11'455 16'69 19' Cross subsidies from profitable clusters into deficit clusters may enlarge coverage 1' 2' 3' 14'258 25' ' 5' 39'912

24 Agenda 1. Introduction 2. Model approach 3. Critical market share 4. Country results 5. Impact of regulatory measures 6. Multi Fibre approach 7. Nationwide investment 8. Outlook: subsidies 9. Summary 23

25 Summary A nationwide broadband roll out is not viable for any of the current fixed network architectures Regulatory measures (duct and fibre access) improve the viability and replicability, but are not sufficient for nationwide coverage Only fibre LLU may improve replicability up to the coverage of the first mover Multi Fibre approaches increase total investment and reduce investment per operator, increasing coverage but tending to discriminate market entrants. Handover at MPoP/ MDF site better than at Street Cabinet/ Manhole/ Distribution Point Enduring bottlenecks persist Subsidies in a variety of approaches may help to enlarge the coverage up to nationwide access to broadband networks 24

26 Dr. Thomas Plückebaum WIK-Consult GmbH Postfach Bad Honnef Deutschland Tel +49 () Fax +49 () t.plueckebaum@wik-consult.com www. wik-consult.com

27 2. Modelling Approach (5) We consider three access network technologies VDSL Backhaul Feeder Drop MCL Fibre MDF Fibre SC Cu Metro Core Location Ethernet Switch, ODF DSLAM FTTH PON MCL Fibre MDF Fibre Fibre 1:64 SC Fibre ONU Splitter opt. Metro Core Location Ethernet Switch, OLT, ODF Splitter, OSDF opt. FTTH P2P Fibre 1:1 MCL Fibre MDF Fibre Fibre Metro Core Location Ethernet Switch, ODF Handhole/ Sleeve Traffic concentration now on a higher level than MDF Active Electronic Equipment 26

28 2. Modellansatz (6) Multi Fiber schließt eine Wohnung mit mehr als einer Faser an und teilt die Investitionen mit möglichen Kooperationspartnern FTTx Inhouse Fiber Fiber/ Copper Fiber Inhaus Backbone Aggregation Net MPoP SC DP CPE Splice Aktive Active Systems Technik 27

29 Co-investment arrangements Modelling the multi-fibre case FTTH Point to Multipoint (PMP), (PON) Inhouse Feeder Cable Drop Cable OLT Fibre 1:x Fibre Fibre Inhouse Aggregation Net MPoP SC DP 2nd 4th Splice CPE ONT Operator Splitter/ OSDF Aktive ActiveTechnik Technique FTTH Point to Point (P2P) Inhouse Fibre 1:1 Fibre Fibre Inhouse Aggregation Net MPoP SC DP CPE 2nd 4th OSDF Splice Operator Aktive Active Technique Technik Multifibre: 4 Fibres per Home 28

30 FTTH PON is more profitable than P2P in both handover scenarios (DP resp. MPoP), (here: 4 Op_PON MPOP vs. P2P MPOP) 1% 9% 8% 85% PON SF P2P SF Critical Market Share 7% 6% 5% 4% 3% 2% 33% 49% 67% 7% PON MPOP MF 4 Op P2P MPOP MF 4 Op 1% % Accumulated Customer Base (in Mio.).3% 2.4% 13.7% 18.5% 25.1% 37.4% 71.5% 1 % but may be seen less furture proof (asymmetric, limited bandwidth, exchange of network components for upgrades, ). Because of less fibres needed in the feeder segment (DP MPoP) PON often suits better in brownfield implementations. 29

31 2. Modelling Approach (6) Access opportunities Regulatory means which can be modelled FTTC/vDSL scenario - Sharing of street cabinets - Use of existing empty ducts or dark fibre for backhaul FTTH PON scenario - Fibre SLU (sub loop unbundling) - Sharing of OSDF (concentration point equivalent to street cabinet) - Duct access or dark fibre for backhaul or full loop FTTH P2P scenario - Fibre LLU at the Metro core location - Duct access or dark fibre Means of construction - Use and sharing of aerial cable - Common construction of trenches/ ducts 3

32 2. Modelling Approach (9) Operator Models First Mover Incumbent (sells MDF sites) Second Mover (here 1% less ARPU) - 2 % Infrastructure Sharing (ducts, aerial cabling) 8 % Infrastructure Sharing (ducts, aerial cabling) - 2 % Dark Fibre Access 8 % Dark Fibre Access - 2 % Dark Fibre / Duct Access 8 % Dark Fibre / Duct Access - VDSL: SLU PON: own fibres or fibre SLU P2P: own fibre or fibre LLU 31

33 3. Model results (5) Table of viability and replicability PON - DE Cases First Mover Cases Second Mover Cases 8% 2% SLU + 8% SLU + 8% SLU + 2% SLU + 2% Cluster Accumulated Stand Alone Incumbent Infrastructure Infrastructure Dark Fibre Dark Fibre Customer Base Sharing Sharing Dark Fibre and Infrastructure Sharing Dark Fibre and Infrastructure Sharing Dense Urban,3% 33% 3% 35% 38% 8% 8% 2% 2% Urban 2,4% 48% 44% 5% 55% 11% 11% 3% 3% Less Urban 13,7% 65% 6% 65% 73% 12% 12% 33% 33% Dense Suburban 18,5% 69% 63% 69% 78% 17% 17% 38% 38% Suburban 25,1% 83% 77% 83% 94% 22% 21% 5% 49% Less Suburban 37,4% n.v. n.v. n.v. n.v. 36% 27% 66% 61% Dense Rural 71,5% n.v. n.v. n.v. n.v. 61% 81% n.v. n.v. Rural 1,% n.v. n.v. n.v. n.v. n.v. n.v. n.v. n.v. n.v. = not viable 32

34 Rural clusters need the largest share of investment, with FTTC even more than with FTTH/P2P 1% FTTC 43 Mio 41 Mrd homes passed 117 Mrd 1% FTTH/P2P 43 Mio homes passed 75% 5% 88% ,8 63% 75% 5% 79% ,8 63% 25% % 9% % Invest (mn ) 1,1 5,9 24% 14% Customer base (mn "homes") "Rural Clusters" "Suburban Clusters" "Urban Clusters" 25% 15% % 5% Invest (mn ) 1,1 5,9 24% 14% Customer base (mn "homes") Homogenous market share of 5%, without CPE & Inhouse Cabling 33

35 3.6 Grundversorgungsbetrachtung des Glasfaserausbaus Gewinn und Verlust pro Kunde und Monat (in CHF) Durch Preisdifferenzierung ließe sich die Ausbaugrenze ausdehnen 34

36 3.6 Grundversorgungsbetrachtung des Glasfaserausbaus Für Kostendeckung benötigter ARPU pro Kunde und Monat (in CHF) ARPU Cluster Für profitablen Vollausbau erforderlicher ARPU ( CHF) pro Kunde und Monat Modell relevanter ARPU (84.98 CHF) pro Kunde und Monat Durch "Grundversorgungsabgabe" ließe sich die Ausbaugrenze erweitern 35

37 3.6 Grundversorgungsbetrachtung des Glasfaserausbaus Erforderlicher Investitionszuschuss pro Kunde im Subventionsfall (in CHF) 18' 16' 16'411 14' 12' 1' 8' 6' 4' 2' 8'142 4'532 2'883 1'249 1'

38 Erforderlicher Investitionszuschuss im Subventionsfall (in Mio. CHF) Millionen 3' 2'5 2'785 2' 1'865 1'5 1'138 1' Quelle: WIK-Consult 37

39 3.6 Grundversorgungsbetrachtung des Glasfaserausbaus Verbleibender Gewinn und Verlust pro subventioniertem Cluster bei Quersubventionierung (in CHF) 3' Tausende 2' 19'783 16'69 11'455 1' ' 2' 14'258 3' 25'624 4' 5' 39'912 Durch interne Subventionierung unprofitabler Gebiete durch profitable Gebiete lässt sich die Ausbaugrenze (deutlich) erweitern 38