Transcript Fibre Investments for Greece`s Recovery

Fibre Investments for
Greece’s Recovery
Christos J. Bouras
Professor
University of Patras & Research Academic Computer
Technology Institute
http://ru6.cti.gr/bouras/
The impact of Telecommunications on
the Economy and Growth
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Investments in the telecommunication sector represent almost the 0,5% of GDP
while revenue in the telecommunication sector represent more than 3,6% of GDP.
Source: EC Commission , “Progress Report on the Single European Electronic Communications Market 2008 (14th Report)”, March 2009
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Broadband and Growth
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Jobs & Growth
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According to a study prepared for the
European Commission, broadband
development would contribute to the
creation of more than 1 million jobs in
Europe and a broadband-related growth
of the economic activity of €849 billion
by the year 2015, when broadband
household penetration is expected to
reach 81%.
Source: Micus Management Consulting, “The Impact of Broadband on Growth and Productivity”, Study on behalf of the European Commission, 2008
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Bundled offers Subscribers as % of
Population
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Bundled services gain ground continuously
Source: EC Commission , “Progress Report on the Single European Electronic Communications Market 2008 (14th Report)”, March 2009
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Broadband Penetration Towards
Convergence
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The degree of broadband penetration in Greece has increased substantially in the past few years and is from the
highest in the EU. This fact that has led to the provision of innovative broadband services to a big part of the
country as well as to the reduction of access prices is mainly owed to the existence of competition. However this
rate of growth should be retained in the next years so that we can reach the EU average. The question is how we
can ensure that?
Source: EC Commission , “Progress Report on the Single European Electronic Communications Market 2008 (14th Report)”, March 2009
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Broadband penetration – Greece vs. EU
average
Network Readiness Index (NRI) &
e-readiness for Greece
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Network Readiness
Index (NRI) for Greece
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2004-2005  42nd place
2005-2006  43rd place
2006-2007  48th place
2007-2008  56th place
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e-readiness for Greece
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2003  26th place
2004  27th place
2005  28th place
2006  29th place
2007  32nd place
2008  30th place
Greece’s Regulatory Scorecard
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Greece is lagging behind in
terms of regulatory
performance as measured
by ECTA’s regulatory
scorecard in 2008
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Limitations in the deployment of
Broadband networks
Certain issues that limit the development of broadband networks:
Average length of local loop in Greece
 Rights of Way
 Deployment cost and viability of NGN’s
 Regulatory framework in the deployment of NGN’s
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The provision of innovative bundled services to the whole population is directly
related to the development of NGN’s
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Loop Length vs Bandwidth
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Limitations in Bundled Services Provision
due to the Local Loop length
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The average length of the local loop (especially in Greece) constitutes a restrictive
factor for xDSL network deployment and the provision of IPTV services.
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Next Generation Networks (NGN’s)
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Basic Principles of NGN’s deployment:
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Technological neutrality and open access
Possibility of equal-base access to telecommunications operators
Cost-oriented pricing policy
Safeguard competition
Simplification of concession processes for rights of way and unified
procedures for fees
Regulation for internal networks of electronic communications
Facilitate the interconnection with existing operator telecom networks
SLA's (Service Level Agreement) for the maintenance and fault restoration of
fibre networks
Avoidance of depreciation and obsolescence of existing investments in
broadband and LLU infrastructures
Provision of collocation space for operator equipment
Secure future network expansion option
Enhancement of demand for the provision of FTTx services for the networks
deployed by municipalities and the existing or under construction FTTx
networks
The Economics of Next Generation
Access - Regulatory Aspects
The effect of regulatory policy in the growth of NGN’s
The following conclusions have resulted from a study (*) performed by WIK-Consult
on behalf of ECTA with regard to the economics NGN’s :
(1) NGA fibre roll-out (FTTH as well as FTTC) needs substantial investment
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FTTC in Germany for 37% of population: 4,8 billion €
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FTTH in France for 7% of population: 3,4 billion €
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Nationwide NGA roll-out not profitable in any of the six countries that were
examined in the study (Germany, France, Italy, Portugal, Spain, Sweden)
(2) Incumbents benefit from lower costs and are better placed than entrants to
make these investments on a large scale
(*) WIK Consult, “The Economics of Next Generation Access“, Study for the European Competitive Telecommunication Association (ECTA), September 2008
The Effect of Regulatory Policy in the
Deployment of NGN’s
(1/4)
(3) Without regulatory intervention, degree of replicability of NGA even for one
operator is rather limited
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Under rather optimistic assumptions: Second mover FTTC (VDSL) in Germany
would achive reach of 13,7% of population at the maximum; while this
percentage 2,4% for two or more entrants.
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Replicability of FTTH is viable in France only in case of infrastructure
sharing/regulated access.
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NGA in Sweden is only profitable in urban areas which account for 8% of
potential customers. FTTH is not replicable.
The Effect of Regulatory Policy in the
Deployment of NGN’s
(2/4)
(4) Regulatory intervention and proper access products needed for a competitive
NGA market
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Duct and dark fibre access increase replicability, but not sufficient for viable
competition
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Fibre full local loop unbundling and sub-loop unbundling increase scope for
competition significantly
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Fibre LLU and SLU generate replicability wherever a first mover rolls out FTTH
The Effect of Regulatory Policy in the
Deployment of NGN’s
(3/4)
(5) NGA will require a change in regulatory paradigms:
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So far: How to provide access to existing network elements?
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NGA: How to structure new network elements for efficient access opportunities so as
to enable and not to foreclose competition?
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Example: Total investment for new street cabinets for two operators nearly
doubles if the regulation, design and implementation is performed Ex post
instead of Ex ante
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NGA architecture of Point-to-Point (P2P) is considered more consistent with open
network principle than PON (Passive Optical Network) architecture
(6) Risk of NGA investment, different costs in different regions can only be coped
with if alternative operators can choose between different access opportunities.
The Effect of Regulatory Policy in the
Deployment of NGN’s
(4/4)
(7) Incumbents can reduce their own risk and cost of rolling out NGA by
sharing infrastructure with or provide access to alternative operators
(8) Open NGA networks expand the scope for investment in NGA
(9) Many areas remain unviable without subsidy; in case of subsidies
effective tender process and regulated open access is of vital importance
How to Maximize Economic Benefits
of Broadband
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In order to maximize the economic benefits of broadband according to the Micus
study, action at the political level is necessary:
Develop the broadband infrastructure. E-inclusion in the less-advanced
European regions and the development of the fibre-to-the-home (FTTH)
infrastructure in the most advanced areas are major challenges for a successful
development of the knowledge society in Europe.
Rely strongly on education for a long-term development of the knowledge
society. Spread IT skills within the population and increase autonomy in the
learning process by developing the online availability of educational and
technical resources.
Foster the use of online technologies in businesses, public services and by
individuals. E-government should become the rule, not the exception, for the
exchange of information between public services and companies (B2G) as well
as within public services (G2G).Business services providers and professional
organizations should be incited to play a role in the adoption of online services
in SMBs.
Promote the development of innovative online services. Innovation policies are
key to maximizing the benefits from broadband development by increasing
internal markets for online services and exporting high value-added
technologies and services to the rest of the world.
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Broadband as a new public infrastructure
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The Knowledge Society needs the existence of a new public
infrastructure. This new infrastructure is of equivalent importance and
usability as highways, ports, airports, and electricity.
This new public infrastructure, one of the public goods / commons of
the Knowledge Society is the fibre optic networks. The fibre must reach
out to homes, to businesses, to public services. It must reach out
everywhere.
Our country needs today a large infrastructure development project that
will provide fibre optic connection to homes, schools and universities,
across the public administration and health, and to businesses in all
towns.
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A project to develop new public infrastructure with public goods / commons
features: open architectures, serving the public without speed restrictions,
with continuous opportunities to develop new applications.
These infrastructures are the determinant for the development of open
schools, energy saving, development of new electronic services, but
mainly they contribute to building platforms for innovation in the private
and public sectors.
The role of broadband in coming out of
the recession
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The big bet in this recession is not for the country to just endure. It must come
out stronger and competitive with a productivity growth.
The Knowledge Society and the Information & Communication Technologies
give this opportunity, if this new infrastructure emerges and evolves.
This, of course, should be done through a large Public Investment Program, but
integrated into a different type of Financial Management, which foresees and
invests in the new infrastructure of the 21st century
This intervention will help the country emerge from the recession, if
accompanied by appropriate fiscal policy, and ensure that after the recession
the country is stronger, competitive and productive.
Such a project represents an investment of around 4 billion Euros in competitive
infrastructure and it will create the conditions for new models of development
and social participation.
The research and education networks that already operate in the country, show
us that there are local forces which, in cooperation with local authorities, can
plan and support such a project.
Sweden, France, South Korea, the USA are just some of the countries that
invest strategically in these new infrastructure.
Next steps
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The next steps for the completion of the infrastructures, that started to
be implemented with the broadband metropolitan fibre optic networks of
the various municipals, are:
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1st phase: Successful and immediate completion, maintenance and
productive operation of the municipal broadband infrastructures.
2nd phase: expansion of the municipal broadband infrastructures targeting
the support of more users and the coverage of more areas
3rd phase: Interconnections of the various metropolitan fibre optic networks
with each other, and possibly with other broadband networks, in order to
create a national backbone network. (For the effective use of existing
municipal broadband infrastructures they should be linked with the National
Network of Public Administration «Syzefxis», the schools network, etc.)
4th phase: Provision of Fibre to the Home/Building (FTTH/B). Provision of
dark fibre to every home/apartment/building.
In the next phase 5 regional schemes should be formed, based in the 5
regions of NSRF (as with LOCALRET, in Catalonia)
Advantages
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The advantages of this approach are:
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Accumulation of a critical mass of users
Network’s neutrality
Accommodation of the local needs
Economies of scale
Special leverage for negotiations with customers and
suppliers
Sufficient human resources – Potential of collaboration with
Universities and Research Centres
Regional nature of the development planning, in the EU
Preconditions for success
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The preconditions for success of the business schemes include:
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Proper organisation: Capable and versatile schemata for intensifying
technological expertise
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Ensuring adequate funding
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Capable personnel of only a few persons (engineers, economists, lawyers)
Acceptance of the fact that ICT projects are different from traditional projects
(roads, water, sanitation)
Possible contribution of the Local Governments
Preparation of a prototype business plan for the utilization of each Scheme, in
order to submit proposals for funding of the Schemes by the NSRF, public funds,
and the European Investment Bank
Create demand / a critical mass of users
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Enable citizens and small businesses, in order to stimulate demand for such
services by them (emphasis on promotion actions, marketing, etc.)
«Open Access» (transparency, cost-oriented pricing) to the infrastructures by all
the service providers
High Quality Service, Low Prices
Jobs creation
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(1/2)
Investments in Broadband infrastructures will have a greater
positive impact on jobs, while at the same time laying the
groundwork for sustained productivity and innovation.
More specifically investments in FTTH infrastructure projects:
 contribute to significant immediate direct and indirect job growth
in the national economy;
 create a “network effect” throughout the economy that creates
additional jobs; and
 provide a foundation for longer term benefits, including
government cost savings, economy-wide productivity, and
improved quality of life for all.
In essence these investments not only can provide an important
short-term boost to the national economy; it also can lay the
groundwork for long-term economic growth, international
competitiveness, and significant improvement in quality of life.
Jobs creation
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(2/2)
FTTH infrastructure investments will create direct, indirect and
induced jobs.
 Direct jobs are those created specifically by new spending (e.g.
the workers and the technicians hired to open the trenches and to
lay the ducts and the fibre cables).
 Indirect jobs are those created to supply the materials and other
inputs to production (e.g. the ducts, micro-ducts, cables, ODFs
etc.).
 Induced jobs are those created by the newly employed (or
retained) workers spending their income (creating jobs in e.g.
retail stores etc.)
An investment of 4 billion Euro will support an estimated 228.000
– 270.000 new or retained jobs for one year.
It should be pointed out that the above figures are for one year
only. If we want the number of workers we should distribute these
figures over the investment and an initial operation period.
Direct jobs
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Direct jobs are created as additional workers and
frontline technicians are hired to install the FTTH
networks and a host of employees are hired or
retrained to fill back-office functions.
Approximately 50 percent of the cost of deploying
fibre optic broadband networks is in the labour
component. Therefore, a 4 billion Euro investment is
expected to create approximately 70.000 – 80.000
jobs for one year (distributed over the project’s
duration).
Indirect jobs
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The balance of the cost is in capital equipment (the actual fibre
optic cable, ducts, ODFs etc.). Jobs are created in the industries
that manufacture these products, as demand increases for the
telecommunication equipment needed to deploy broadband. In
this industry approximately 35 percent of the cost to the industry
is in workforce compensation.
Thus, a 4 billion investment would create approximately 24.000 –
28.000 jobs for one year.
Unfortunately, a large percentage of the demand will be satisfied
by imported equipment, and that means that most of these jobs
will leak outside the Greek economy. However, if an approximate
one fourth to one third of these goods are supplied by the
domestic industry, then the estimated number of job created (or
retained) is 6.000 – 10.000 jobs for one year.
Improving the percentage of goods by the domestic industry will
improve the number of jobs
Induced jobs
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The above direct and indirect jobs created
support additional jobs throughout the
economy in the form of induced effects.
Although it is difficult to estimate these
effects, studies suggest that jobs in the
communications sector have an employment
multiplier of up to 2,5 for the induced jobs.
Using a more conservative factor of 1,5 we
estimate an additional number of 114.000 –
135.000 induced jobs for one year.
Network effect
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The increased deployment of broadband
infrastructure creates a network effect multiplier. The
reason is the broadband itself increases business
productivity, spurs upstream investments, and
contributes to the creation of new industries (e.g. in
the services sector).
The network effect multiplier can exceed 1,0.
However, using a more conservative factor of 0,5
(on the direct an indirect jobs) we expect the
network effect to add 38.000 – 45.000 more jobs,
over a slightly longer term (i.e. after the completion
of the projects and the increased use of broadband).
Jobs created or retained for one year by a 4
billion Euro investment in FTTH
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Direct jobs
Indirect jobs
Induced jobs
Network Effect
070.000 – 080.000
006.000 – 010.000
114.000 – 135.000
038.000 – 045.000
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Total jobs (for one year)
228.000 – 270.000
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Workers and employees during the
deployment and initial operation period
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Years
1 2 3 4 5 6 7 8
←————→ ←——→
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Direct and indirect jobs
15.200 – 18.000
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Induced jobs
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(lasting over the 5 year
deployment period)
(lasting over the 5 year
deployment period)
Network Effect
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22.800 – 27.000
(lasting over the 3 first
years of the initial operation
period)
12.650 – 15.000
Thank you.
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