Digital Cities and Regional Networks

1
Digital Cities and Regional Networks

• Technologies, Risk and Return on Investment

Tony van Horik, MD, AAS (NZ)
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Technologies

• Fibre Optics this is where the real opportunity
  lies for Municipal Networks provides endless
  capacity
• Copper Cable traditional telco deployment and
  useful for the mass market provides moderate
  capacity and still developing
• Wireless (CDMA, 802.11,WiMAX) good option for new
  carriers for lower cost entry where there is no
  access to cable systems provides limited
  capacity
• Satellite more expense for the end user but is
  available anywhere and doesnt require the
  establishment of expensive cabling systems
  (prices are dropping).

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Why should Local Govt Invest?

• Facilitate the spawning of new social and
  commercial initiatives (e.g. collaborative
  administration across the region, image sharing
  for healthcare, security cameras etc )
• Enhances productivity and opportunities for
  existing industry
• You are in the box seat to leverage off community
  owned resources and infrastructure
• Carriers are reluctant to provide low cost, high
  bandwidth services

4
Leverage off existing infrastructure is critical

• Without leverage projects are even less viable
  and no advantage gained over a normal carrier
• Existing assets such as unused ducting and pipes,
  overhead cabling etc should be used.
• Co-ordination of civil works activities such as
  road construction and water pipe laying used to
  lay common ducting systems
• Use of Municipal buildings to house equipment
• All infrastructure providers should be invited to
  participate

5
Carriers Reluctant to Provide
Why?

• Are driven by short term return on investment and
  are currently risk averse
• They are commercial companies driven by
  shareholders and cannot bank social and
  commercial benefits for the end user - only
  direct service revenues count toward service
  viability and their ROI
• The margins on infrastructure are generally lower
  than on end user services carried by that
  infrastructure therefore why give it away to
  your competition

6
We must break the stalemate
How?

• By a collaborative approach for the most
  efficient use of exiting infrastructure (NZ isnt
  big enough to have under utilised high cost
  assets)
• Those receiving the benefits, either directly or
  indirectly, should be encourage to contribute and
  provided the vehicle with which this can occur
• Making it easier not harder for carriers to
  be successful in areas of high risk investments

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Quantifying the Return
A Suggested Process

• Identify the key Regional tenants (initially
  Municipals, Universities, Schools, and Hospitals
  (MUSH)) for which Open Access broadband is a
  potential enabler for new business activities)
• Qualify this potential by approaching key people
• Aggregate the demand potential - this is the
  baseline
• Assess the potential for regional growth and
  categorise as benefits
• Red Benefits - these deliver hard tangible
  outcomes measured in Dollars (i.e. Cost Savings)
• Orange Benefits intangible gains readily
  converted into Dollars (i.e. productivity gains)
• Green Benefits not readily convertible to
  Dollars but a benefit nevertheless (i.e. social
  inclusion, innovative business opportunities,
  regional leadership)
• The total return is the sum of the baseline
  revenue plus the benefits

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Evaluation of Risks ?
Two parts to assessment

• Assess the Risk / return profile of creating a
  Open Access Broadband Network? AND equally
• The risk / return profile of doing nothing?

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What are the Risks

• Technology failure low. Use robust public
  network grade technology
• Business failure high. No one will get rich in
  selling high capacity bandwidth. Set the business
  up for longer term success.
• Lack of, or exit of anchor tenants. Ensure
  services and price match their expectations
  (including service level expectations)
• Competitor reaction ( even though their prices
  may be higher, telcos can still invest more and
  provide higher value and quality services)
• Political criticism answerable to rate payers
  and Government. There will be the knockers
• Project failure through lack of capability sound
  partners required which understand technical,
  commercial and operational requirements of this
  business

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Risk Mitigation
Some Recommendations

• Build upon existing initiatives
• Use the leverage of being a Local Authority
• (i.e. lay ducts when roads are opened)
• Identify and partner with quality providers/
  suppliers
• Structure the network legal entity carefully
• Adopt industry best practices installation,
  operational
• Apply a consistent solution - dont build network
  islands
• Assess the market needs (demand) accurately
  develop the need with anchor tenants
• Create a five year business model (always
  consider the ongoing costs, exit strategy etc )

11
Reflection

• This is about getting cheaper, faster broadband
  now.
• If we hadnt got involved in power, water, and
  gas (and telecommunications) 100 years ago it
  wouldnt be there now