Fibre Investments for Greece

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Fibre Investments for Greeces Recovery

• Christos J. Bouras
• Professor
• University of Patras Research Academic Computer
  Technology Institute
• http//ru6.cti.gr/bouras/

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The impact of Telecommunications on the Economy
and Growth

• 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

• Jobs Growth
• 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

• 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

• 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
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Network Readiness Index (NRI) e-readiness for
Greece

• Network Readiness Index (NRI) for Greece
• 2004-2005 ? 42nd place
• 2005-2006 ? 43rd place
• 2006-2007 ? 48th place
• 2007-2008 ? 56th place

• e-readiness for Greece
• 2003 ? 26th place
• 2004 ? 27th place
• 2005 ? 28th place
• 2006 ? 29th place
• 2007 ? 32nd place
• 2008 ? 30th place

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Greeces Regulatory Scorecard

• Greece is lagging behind in terms of regulatory
  performance as measured by ECTAs 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 NGNs
• Regulatory framework in the deployment of NGNs

The provision of innovative bundled services to
the whole population is directly related to the
development of NGNs
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Loop Length vs Bandwidth
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Limitations in Bundled Services Provision due to
the Local Loop length

• 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 (NGNs)

• Basic Principles of NGNs deployment
• 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

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The Economics of Next Generation Access -
Regulatory Aspects

• The effect of regulatory policy in the growth of
  NGNs
• The following conclusions have resulted from a
  study () performed by WIK-Consult
• on behalf of ECTA with regard to the economics
  NGNs
• (1) NGA fibre roll-out (FTTH as well as FTTC)
  needs substantial investment
• FTTC in Germany for 37 of population 4,8
  billion
• FTTH in France for 7 of population 3,4 billion
  
• 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
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The Effect of Regulatory Policy in the Deployment
of NGNs (1/4)

• (3) Without regulatory intervention, degree of
  replicability of NGA even for one operator is
  rather limited
• 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.
• Replicability of FTTH is viable in France only in
  case of infrastructure sharing/regulated access.
• NGA in Sweden is only profitable in urban areas
  which account for 8 of potential customers. FTTH
  is not replicable.

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The Effect of Regulatory Policy in the Deployment
of NGNs (2/4)

• (4) Regulatory intervention and proper access
  products needed for a competitive NGA market
• Duct and dark fibre access increase
  replicability, but not sufficient for viable
  competition
• Fibre full local loop unbundling and sub-loop
  unbundling increase scope for competition
  significantly
• Fibre LLU and SLU generate replicability wherever
  a first mover rolls out FTTH

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The Effect of Regulatory Policy in the Deployment
of NGNs (3/4)

• (5) NGA will require a change in regulatory
  paradigms
• So far How to provide access to existing network
  elements?
• NGA How to structure new network elements for
  efficient access opportunities so as to enable
  and not to foreclose competition?
• 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
• 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.

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The Effect of Regulatory Policy in the Deployment
of NGNs (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

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How to Maximize Economic Benefits of Broadband

• 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

• 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.
• 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.

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The role of broadband in coming out of the
recession

• 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.

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Next steps

• 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
• 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)

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Advantages

• The advantages of this approach are
• Accumulation of a critical mass of users
• Networks 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

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Preconditions for success

• The preconditions for success of the business
  schemes include
• Proper organisation Capable and versatile
  schemata for intensifying technological expertise
• 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)
• Ensuring adequate funding
• 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
• 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

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Jobs creation (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.

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Jobs creation (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.

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Direct jobs

• 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
  projects duration).

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Indirect jobs

• 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

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Induced jobs

• 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.

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Network effect

• 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).

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Jobs created or retained for one year by a 4
billion Euro investment in FTTH

• Direct jobs 070.000 080.000
• Indirect jobs 006.000 010.000
• Induced jobs 114.000 135.000
• Network Effect 038.000 045.000
• Total jobs (for one year) 228.000 270.000

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Workers and employees during the deployment and
initial operation period

• Years 1 2 3 4 5 6 7 8
• ?? ??
• Direct and indirect jobs 15.200 18.000
• (lasting over the 5 year deployment period)
• Induced jobs 22.800 27.000
• (lasting over the 5 year deployment period)
• Network Effect 12.650 15.000
• (lasting over the 3 first years of the initial
  operation period)

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• Thank you.

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