IRU-based customer right to general use of telecommunication

1
IRU-based customer right to general use of
telecommunication infrastructure with cost-based
upgrade.

• Olaf.Schjelderup_at_uninett.no
• Workshop on CEF Networks, Praha, may 2005

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UNINETT a nordic perspective
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more close look
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UNINETT main topology
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Norway some figures

• Population 4 554 000 (Jan 2003)
• Coastline 25 148 km
• Area 385 155 km2
• Shortest distance north/south 1 752 km (approx 3
  days by car -))
• Lot of mountains, fjords, islands and widespread
  population gives high infrastructure costs both
  roads, railways and telecom.
• Two nation-wide Telecom Carriers BaneTele and
  Telenor. A lot of smaller local or regional
  Telecom Carriers in the bigger cities.
• 4 universities
• About 40 regional university colleges

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UNINETT history

• Research project from 1976
• Operational from mid 80s connecting
  universities, research institutions and some
  colleges.
• Government owned legal entity from 1993, 3
  employees.
• 2004 UNINETT consists of 4 companies, 55
  employees.

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History of UNINETTs network

• In the beginning, from 9,6 kbps to 2Mbit/s.
• 1992 34 Mbit/s capacity between universities
  (Telenor)
• 1995 Transition to 34 Mbit/s ATM (Telenor)
• 1997 Upgrade to 155 Mbit/s ATM, with some
  colleges on lower capacity VCs. (Telenor)
• 1998/99 UNINETT-owned or -leased fiber
  established from several colleges/universities to
  railway stations and power plants gave access to
  several well-priced 155 Mbit/s SDH from the new
  carriers BaneTele and EniTel.
• 2000 Call for Tender Leased 2.5 Gbit/s
  Trondheim-Oslo (Telenor), several leased
  34/155Mbit/s SDH-links. Tendency towards
  acceptable pricing.
• 2001/2002 Huge fiber ring project in Tromsø,
  co-funded by UNINETT. Participants local
  community, municipality, University, College,
  hospital. 14 km ring structure , 96 fibers, abt
  15 drops. Price 1.5 MEuro. Other similar and
  smaller projects in Bergen and Trondheim.
• 2002 EniTel bankrupt and assets bougtht by
  BaneTele. Now only two national carriers
  duopoly, increased cost on leased lines.
  Depressing

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Rethinking the situation ..

• Our own fibers had earlier helped us a lot
  gaining competion in the market.
• There must be a weak point in the duopoly
  situation that we can take advantage of, but
  which? Need for capital?
• Given Norways geographical distance, its costly
  to own national fibre infrastructure by oneself.
  One also need access to local technical knowledge
  all over the country to fix broken fibers etc.
• Longterm agreement do give lower prices our
  main presence point (universities and colleges)
  are geographical very stable in a long time
  scale.
• There exists a lot of unused fiberpairs in
  current national infrastructure not used
  because of marketing judgements. Why etstablish
  new fibre infrastructure when this already
  exists?
• Were a private company, which allow us to loan
  money in a bank.
• There is a need for a clever strategy here

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Call for tender, summer 2002, a new model

• Suggested a 10-15 year agreement with upfront
  payment (IRUIrrevocable Rigths of Use)
• Suggested an initial topology and capacity
• Suggested cost based capacity upgrade and
  possible topology additions/changes.
• Invitated to infrastructure cooperation, not
  competion.
• Clearly defined UNINETTs user groups and market.
• Result Telenor negative. BaneTele willing to
  discuss further. Negotiations for nearly 6 months.

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Agreement with BaneTele, april 2003

• Initial IRU amount yearly OM cost. 15 years
  5 optional years duration.
• 55 initial lines (2.5 Gbit/s wavelengths/transmiss
  ion, local/regional fibers, 155 Mbit/s). Initial
  topology defined.
• Cooperation for maximum redundancy. All fiber
  paths are examined.
• To implement the agreement nearly 30 new local
  fibre loops widespread along Norway was
  established by UNINETT, BaneTele, local power
  plant companies, other 3rd-party during 2003. A
  lot of hectic work (pheew -))
• Upgrade to cost of equipment (share of cabinet,
  linecards, switch, regenerators, etc.) and an
  administrative fee.
• Fiber/Duct-exchange agreement with
  pre-agreed-upon price for fiber. Cooperation in
  new fiber projects, telehousing, issues regarding
  new infrastructure etc.

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Negotiation strategy

• Include as much infrastructure as possible in the
  IRU for as long time scale as possible.
• The IRU must does not demand significant
  investments for the provider in order to
  negotiate the price downwards. Important to know
  the providers infrastructure in much detail.
• Focus on rights to communication.
• Calculate risk of investment/bankruptsy.
• Be a non-profit organization and define your
  market as academic sector and not as a competitor
  to your provider.

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Current situation

• UNINETT has gained more predictable costs the
  coming years. More initial costs now, also a 5
  year bank loan, but this will result in
  significantly reduced cost after end of bank
  loan.
• The 15 year IRU break-evens after short time
  versus leased lined in the market. Cost of leased
  infrastructure are still not falling.
• The network has more capacity and redundancy than
  ever before. (By an agreement with the Norwegian
  Space Agency we also bouth 30 years rigths
  to155Mbit/s to Svalbard in january 2004. Upgrade
  to Gigabit Ethernet late summer 2004 included.)
• More upgrade gives a even more beneficial model
  versus market price.
• And, were upgrading quite a lot ?.

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Questions?