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8/8/2014

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  1. Broadband Networks in Austria – Models of Cooperation and Financing for the Deployment of Next Generation Access Networks Dr. Ernst-Olav Ruhle DI Wolfgang Reichl, Dipl.-Vw. Matthias Ehrler, Mag. Jörg Kittl, Dr. Igor Brusic SBR Juconomy Consulting Paper presented at 18th ITS Biennial Conference, Tokyo, 28–30 June 2010 8/8/2014

  2. Content 1 Background 2 Realization Concepts 3 Financing 4 Austrian Broadband Market 5 Conclusions 8/8/2014 2

  3. The Broadband Discussion Innovation Competition Sustainability Welfare What? • 128 kbps, 10 Mbps, 100 Mbps or more Who? • Network operator • Public sector • Housing industry/society • Utilities Key aspects • Stakeholders • Financing • Regulation • Access to networks • Public intervention Where? • Densely populated areas • Remote areas Models • Open access • Vertical integration • Regulated access How? • Investments in passive infrastructures • PPP models • Structural separation • National BB plans Framework • Regulatory • Competitive • Geographical 8/8/2014 3

  4. From Copper to Fiber Fibre optic access network Increase of bandwidth  shorter distances  smaller cells (Femto Cells) Increase of fibrenetwork elementsin the access part MobileBroadband (HSDPA, LTE, etc.) Cable networks (DOCSIS 3.0) Decision Usage of other technologies • Costs for operation and maintenance of PSTN/ ISDN • Limited bandwidth • Bottleneck in the access net Copper Access network 8/8/2014 4

  5. Content 1 Background 2 Realization Concepts 3 Financing 4 Austrian Broadband Market 5 Conclusions 8/8/2014 5

  6. Vertical Integration Services • Classical Network Operator • owns the infrastructure • administers / operates the network • provides services to end users • Revenue from products/Services contribute to financing the infrastructure and the operation • Wholesale possible on different levels • Investors require short term ROI • Different regulatory remedies Distribution Company Vertical Integration O&M Network 08.08.2014 6

  7. Open Access Dienste Dienste Services Dienste Dienste Services • Level 3: Retail Services • Each provider has (open) access at non-discriminatory conditions • Digital market place Development of innovative services Horizontal Frontiers • Level 2: Network operation (OpCo) • Lightening of the fibre and operation of active equipment • Wholesale products for service providers • No retail services! • Local utilities, Telecom operators O&M Network / active infrastructure Horizontal Frontiers • Level 1: Infrastructure (NetCo) • Use of existing infrastructures(Dark Fiber, ducts, sewerage) • Optical fibre as natural monopoly? • Municipalities, Cities, Utilities as new players Network deployment Network / passive infrastructure 08.08.2014 7

  8. Elements of Value Chain Passive Infrastructure Active Infrastructure Services AB Stokab Dark Fiber Provider 1 Many Plenty ndix Digital Market Place Provider 1 Plenty Singapur NetCo OpCo RSP (Retail Service Provider) Provider 1 1 Plenty Schwerte Integrated Offer Provider 1 08.08.2014 8

  9. Cooperation Models & Drivers Telecommunications Operator & Telecommunications Operator Contribution to Broadband Achievements Time for Implementation Boost for Innovation Service Provider & Utility Regional Economic and Sociopolitical Impact Implications for Competition and Market Structure Technology Neutrality Real Estate Developer & State Aid Transparency Structure of Cooperation Regulatory Necessity Telecommunications Operator & Co-investing Enterprise Compatibility with Competition Law Significance and Contribution of Cooperation Partners A Telecommunications Operator is a vertical integrated operator providing infrastructure and services. 08.08.2014 9

  10. International Experiences 8/8/2014 10

  11. Content 1 Background 2 Realization Concepts 3 Financing 4 Austrian Broadband Market 5 Conclusions 8/8/2014 11

  12. Financing Strategy • Financing through different stakeholders • “Classic” and alternative ways of financing • Lack of sustainable long term business case of operators requires alternatives • Purely privately financed deployment not achievable • Project financing and/or PPP projects • Joint deployment of operators, utilities and others • Joint usage of passive infrastructure • Sharing of costs of civil works • Support by public institutions and/or local authorities • Municipalities • Developers / real estate • Standardized models do not exist Main Aspects 8/8/2014 12

  13. Financial Scope vs. Realization Funds Infrastructure Deployment Network Operation Institutions Banks & Savings Banks Private Investments “State Aid” Banks Telecom Operators PPP-Models Public Spending Programs Cities & Municipalities 08.08.2014 13

  14. Content 1 Background 2 Realization Concepts 3 Financing 4 Austrian Broadband Market 5 Conclusions 8/8/2014 14

  15. Austrian Broadband Market Source: RTR • Dynamic development since opening in 1998 • Bitstream Access and Unbundling with less importance (and decreasing figures) • Consequently, competition based on fixed technologies is being reduced • Broadband via CATV has remain more or less static since Q1/2008 • Fiber optic based broadband access de facto not yet available 8/8/2014 15

  16. Austrian Broadband Market Source: EU/RTR • Mobile broadband has become the largest single technology for broadband access but also cable operators in certain areas have become very strong • Austria leads Europe in terms of mobile broadband penetration • Development initiated by mobile broadband  heavy impact on fixed broadband  Telekom Austria reduced prices and launched new bundle products. Effects:Telekom Austria regained market share, it is now the alternative Fixed ANO who suffer. 8/8/2014 16

  17. Key Indicators • Interaction between private enterprise and state as well as political stakeholders • Regulatory framework as a precondition for successful implementation Stakeholders • Adaptation of the regulatory framework • Regulatory remedies in case of lack of market access and supply of services Regulation • Governmental participation • Higher risks of new investments require a risk premium or higher cost of capital Financing • Sustainable approach required • Non-discrimination • Multiple-shift and common usage of infrastructures (ducts, trenches etc.) Network Access 8/8/2014 17

  18. Current Situation • Open Access approach has caused a controversial debate. • Incumbent is willing to enter into cooperative models to overcome the situation of insufficient investment in access networks, but the degree of willingness is unclear. • Willingness from other industry sectors to cooperate still not sufficient. • Cooperation between public and private sector is seen skeptically. • Low demand for NGA infrastructures, i.e. for fixed NGA broadband products, in fixed networks has not yet led to substantial NGA investment. • In general mobile broadband is currently seen as satisfactory and is appreciated by the users (but at a low price level) • Ongoing discussions regard a far going structural separation of the incumbent to promote NGA networks. The case of Austria shows a large discrepancy between the potential of cooperation and the expectations regarding financing strategies as well as their implementation. 8/8/2014 18

  19. Content 1 Background 2 Realization Concepts 3 Financing 4 Austrian Broadband Market 5 Conclusions 8/8/2014 19

  20. Conclusions and Outlook - General • There is no way around fibre-roll-out in the access network. This NGA infrastructure will form the basis for fixed network services but also for wireless and cable networks. • The replacement of copper by fibre in the access network requires considerable investment. New, more diversified business models and new players (municipalities,utilities) will be needed to drive investment. • The applicability of regulatory tools like functional separation and new business models like open access and co-operations are discussed by the stakeholders. The analysis showed rather little awareness and controversial positions. • Coverage of rural areas with broadband infrastructure is a critical issue. Co-operation between municipalities and private enterprises is required. • Stakeholders are rather skeptical about the applicability of Public-Private-Partnerships for wide coverage with fibre access networks. 8/8/2014 20

  21. Conclusions and Outlook - Austria • A national broadband plan could be a useful tool in order to make all stakeholders aware of the political and economical priorities. • Where vertically integrated network operators are active with their NGA investments a market analysis could be necessary in order to foster a competitive environment. • Financing is and probably remains a problem. Different solutions should be reviewed whereby a mix of different measures of investment and the contribution of different stakeholders should be analysed. • Fostering open access models seems to be a good idea. • Functional or structural separation remains an issue which is also relevant for the deployment of NGA. 8/8/2014 21

  22. CONTACT Nordstrasse 11640477 DüsseldorfGermany Tel: + 49 211 68 78 88 0Fax: + 49 211 68 78 88 33URL: www.sbr-net.com E-mail: ruhle@sbr-net.com lundborg@sbr-net.com ehrler@sbr-net.com Parkring 10/1/101010 WienAustria Tel: + 43 1 513 514 0Fax: + 43 1 513 514 0 95URL: www.sbr-net.com E-mail: reichl@sbr-net.com kittl@sbr-net.com brusic@sbr-net.com SBR Juconomy Consulting AG