the realized value of fiber infrastructure in … · the realized value of fiber infrastructure in...
TRANSCRIPT
Bento J. Lobo, Ph. D., CFAFirst Tennessee Bank Distinguished
Professor of Finance
THE REALIZED VALUE OF FIBER INFRASTRUCTURE
IN HAMILTON COUNTY, TN
2 May 2017
Broadband Communities SummitDallas, TX
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Hamilton County: Profile
Pop: 350,000 ; Density: 568 / mile 8,838 establishments dominated by
Professional and business services Retail trade Education and health services Leisure and hospitality Financial services
Major Employers BlueCross BlueShield Hamilton County Department of Educ Erlanger Health System Tennessee Valley Authority Amazon Unum Volkswagen
Median income: $47,880 Median age: 39.4 years
Lobo, Novobilski & Ghosh (2006)
Provide an approach to quantifying the economic effects of current first generation broadband availability in Hamilton County
Findings:
FGB expenditures over the period 2001-2005 supported 548 jobs and contributed $109.8 million in income and taxes to Hamilton County.
A new SGB-FTTH project would cost $195.5 million over a ten year period, or $167 million in present value terms.
Net incremental benefits of SGB = $438 million + 2638 new jobs
Like standard public infrastructure such as good roads, schools, and hospitals, cutting-edge broadband infrastructure is crucial to economic development and to the quality of life in the county.
Gig Timeline
2008:
EPB issues $220 million revenue bonds to finance the $169 million cost of the fiber network and to finance other electric system improvements. Construction of fiber network begins.
2009:
EPB is awarded a federal stimulus grant in the amount of $111 Million from the Department of Energy. The grant accelerates the build-out of the fiber network.
2010:
In June, EPB offers the nation's only symmetrical 150 Mbps residential Internet service.
In September, EPB becomes the first community in the United States to make symmetrical 1,000 Mbps Internet available for all customers.
2011:
EPB completes the last of its fiber network.
2012:
EPB installs the final smart switch, creating the nation's most automated Smart Grid network.
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2,275 2,295 2,332 2,444
12,714
31,465
41,560
52,379
63,448
73,612
84,000
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Fiber Customers
Scope of the study
To discover the realized benefits of the fiber infrastructure built out in the EPB footprint
high-speed internet access (100 Mpbs and higher)
Smart grid
To compare the realized benefits to those forecasted in previous studies
Current values based on realized benefits from 2011 to 2015 – exploratory and data driven
Organized by: Household, Community, Business and Utility Effects
Organization of Effects
Community, Households, Businesses, Utility
Non mutually exclusive; Merely for expositional convenience
Household effects are those that can be attributed to bill savings of individual households
Community effects, by contrast, accrue to the community-at-large but cannot be directly linked to individual household bills
Business effects, however, overlap community and household effects since benefits to local businesses benefit the local economic landscape
Utility effects strongly overlap community effects because the utility is city owned
Household Net Benefits
Consumer Surplus
Based on work done on the value of the internet
Willingness to pay
Time Savings from Search
$29.3 to $76.2 million
Customer Savings
Lower power bills (may not be available everywhere)
Lower prices due to competition
$45.5 million
What competition does to products and pricing
June 2015: Comcast to offer 2 gigs @ $299.95 / mo
Oct 2015: EPB to offer 10 gigs @ $299 / mo
Community Benefits
Publicity/Media Coverage
Advertising-equivalency value = $24.3 million The Guardian – How One City’s Super-Fast Internet is Driving a Tech Boom
New York Times – Fast Internet is Chattanooga’s New Locomotive
CBS Morning News – Which City has the Fastest Internet in the Nation?
Al Jazeera English – New Technology to Protect US Grid
Thomas Friedman column in the New York Times - Obama’s Moment
CNBC – Rebooting Chattanooga’s Fortunes
Atlanta Journal Constitution – Technology Thriving
Wired – Where High Speed Internet Meets Smart Grid
Fast Company – A Small City with a Smarter Grid
GreenTech Media – Top 10 Utility Smart Grid Deployments in North America
The Economist – The need for speed
Wall Street Journal – Cities start own efforts to speed up Broadband
Wall Street Journal – Getting “Smart” on Outages
Forbes – The New Metropolis: The New Urban Pioneers
Community Benefits contd.
New Investments and Jobs (2009-2014)
Chamber data on announced investments and jobs
Assumed Realized = 10% in year 1, 20% in year 2, etc
New tech jobs ≈ 1024 (≥ 91 startups)
Realized (upper): $461 million and 5200 jobs
Realized (lower): $198 million and 2800 jobs
Taxes
In-lieu of taxes contributed by EPB Fiber Optics
Evolution of an Entrepreneurial Ecosystem
Venture Capital in the city: $46.1 to $53.6 million
Community contd.
Telecommuting
Travel time savings
Travel cost savings
Reduction in congestion
$11 million
Telemedicine: ROC Case Study
Table 12. ROC Telemedicine Summary
Number of patients tele-consulted Savings
Site Distance
(miles)†
2009 -
2012
2013 2014 2015 Total
Hours
Time
Savings
Avoided
Miles
Miles
Savings
Other 82.79 5,822 NA NA NA 20,736 $311,449 964,007 $530,204
Blairsville,
GA
100.1 NA 264 396 94 3,208 $48,177 150,951 $83,023
Blue Ridge,
GA
80.5 NA 373 541 130 3,623 $54,413 168,084 $92,446
Calhoun,
GA
51.3 NA 534 396 142 2,468 $37,066 109,987 $60,493
Cartersville,
GA
75.7 NA 733 564 48 4,409 $66,222 203,633 $111,998
Cleveland,
TN
31.6 NA 212 396 7 931 $13,985 38,868 $21,377
Cookeville,
TN
101 NA 555 403 131 4,672 $70,171 219,978 $120,988
Jellico,
TN
166.4 NA 95 128 15 1,644 $24,687 79,206 $43,564
McMinnville,
TN
74.1 NA 947 1023 260 7,167 $107,652 330,486 $181,767
Winchester,
TN
64.4 NA 396 275 103 2,187 $32,854 99,691 $54,830
TOTAL 5,822 4,109 4,122 930 51,044 $766,675 2,364,891 $1,300,690
Community Benefits contd.
Education
Teacher productivity: 1 hr per day per FTE
Hardware upgrades avoided due to cloud storage
UTC re-keying benefit
HC after-school literacy program savings (Lexia)
$9.9 million
Civic Services
Intelligent Traffic System
No benefit attributed here yet
Business Benefits
Efficiency gains: 5% per day per firm
Disaster Recovery Services
Consumer Surplus
Bandwidth cost savings
VLAN cost savings
$237 - $274 million
Smell TestIs this
economically plausible?
Utility Benefits
Smart Grid BenefitsChart code
Annual Average
2012-2015Total
Reduced operating and maintenance costs O&M $1,600,000 $4,800,000
Avoided manual switching costs AMI $40,000 $120,000
Automated switching: Fuel and Labor cost savings AMI $1,800,000 $5,400,000
Reduced outage minutes Outage $43,500,000 $130,500,000
Major events (1 per year) MajEvt $23,209,664 $69,628,991
Reduced peak demand (DSM) DSM $2,285,340 $9,190,688
Reduced theft Theft $5,419,990 $16,259,970
Reduced Greenhouse Gas and Criteria Pollutant Emissions Pollution $455,324 $1,821,295
TOTAL $78,310,317 $237,720,943
Benefit Contribution
Realized benefits (March 2015)
❖ Jobs ≈ 2800 - 5200
❖ Income ≈ $865- $1,321 million
Realized benefits set to exceed projected net benefits and at a quicker pace
Realized-to-Projected Net Economic & Social Benefits: 127% – 194%
Realized-to-Projected Jobs: 100% – 180%
Consumer Surplus
5%Customer
Savings4%
New Investments
30%
Taxes4%Publicity
2%
Venture Funds
5%Telecommuting1%
Healthcare2%
Education1%
Business Efficiency
24%
Smart Grid22%