Economics of fixed broadband access network strategies

Abstract

This article presents a comprehensive techno-economic evaluation of two upgrade strategy cases for broadband IP services for residential and business customers, and illustrates their respective merits and pitfalls, allowing the definition of a reasonable investment policy. The work should enable establishment of guidelines for broadband infrastructure upgrade strategies from the incumbent operator's view. Following the definition of appropriate service sets, and taking into account demand scenarios established within the project, this work has been focused on developing a techno-economic model, based on the TONIC tool. Tariff structures have been applied to compute the key economic indicators, net present value, internal rate of return, and payback period. This investment analysis was carried using the tool, which was developed by IST-TONIC. The results show that the choice of technology (Ethernet or ATM) has almost no effect on the cost level and profitability of the cases. For the suburban area, a fiber to the cabinet solution is too expensive due to heavy infrastructure investments; for dense urban and urban areas the FTTC solution is worth the investments. The FTTH/office deployment scenario is only profitable in dense urban areas (>5000 potential customers/km <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">2</sup> ) and already highly risky in the urban area.