the economic challenges of reaching broadband ubiquity

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The economic challenges of reaching broadband ubiquity

Speeding up NGN ubiquity: a pillar for digital growth

Athens, 13 February 2014 • Dr Matt Yardley

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Introducing Analysys Mason

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▪ EC – Digital Agenda (costs, benefits, funding models, incentive policies)

▪ ITU – PPPs for universal broadband

▪ EIB – market development and funding models

▪ Operators – NGA strategy

▪ Governments – national broadband plans and state aid

▪ Regulators – competition issues in NGA

▪ Investors – NGA transactions

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Ubiquity costs

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First 75% homes

Last 25% homes

€ N bn

€ N bn

Source: Analysys Mason, typical fixed NGA cost analysis

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Rural costs vary strongly depending on technology – fixed vs wireless …

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70% 75% 80% 85% 90% 95% 100%

Wireless

Fixed

Cos

t

% of homes covered

Indic

ative

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… and these two critical aspects are highly market-dependent

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70% 75% 80% 85% 90% 95% 100%

Wireless

Fixed

Cos

t

% of homes covered

Indic

ative

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The final 5% is now a hot topic in the UK

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UK Government target

Government funding

Coverage (premises)

Broadband service specification

End 2017 target

£250m committed

95% Superfast (>24Mbit/s)

End 2018 target

Not yet committed

At least 99%

Not yet definedGovernment will explore how to solve this with industry using “more innovative fixed, wireless and mobile technologies”

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UK FTTC speed variability is narrower than in1st gen. broadband – good news for the DA

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Source: Ofcom data, 2013

0

5

10

15

20

25

30

35

40

Spe

ed (

Mbi

t/s)

8-10pm weekdays

30.6

3.5

24 hours

30.9

3.5

Max

33.1

3.0

Av min

Av variance

81% of headline

0

10

20

30

40

50

60

70

80

8-10pm weekdays

59.3

3.4

Spe

ed (

Mbi

t/s)

24 hours

60.4

3.5

Max

64.2

3.3

Av variance

Av min

78% of headline

38Mbit/s packages 76Mbit/s packages

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Outcomes will also depend on how Member States implement policy▪There is some latitude in interpreting the DA targets which will

impact solutions across Member States

–A very rigid view on 30Mbit/s, i.e. to all users under all conditions, would effectively eliminate wireless (by driving up costs to levels higher than fixed)

▪There is an inherent tension between playing it safe with incumbent operators vs stimulating new competition

–The sustainability risks are greater in rural areas – driven by cash-flow issues more than set-up costs

▪Member States need to think hard about geographic carve-ups

–This can have unintended consequences

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Public policy questions still remain

▪Funding: Our EC work suggests a funding gap of €60 billionto meet DA 30Mbit/s coverage & 100Mbit/s take-up targets

▪Demand-side:

–Connecting “the unconnected” (see below) remains a major challenge, with multiple issues involved

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Source: Ofcom CMR 2013

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These are exciting times!

▪Future of UHF radio spectrum (EC High Level Group)

▪Media consumption uncertainties:

–Broadcasting to mobile networks

–Prospects for linear TV distribution on fixed networks(e.g. using multicast)

▪Drivers for QoS in networks (e.g. cloud, public services) and business model implications

▪Growing day-to-day reliance drives need for resilience – perhaps less well understood that it should be

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Thank you

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Dr Matt YardleyPartner (UK)

matt.yardley@analysysmason.com

+44 7766 058 242