Game-Theoretic Optimization of a Fiber-to-the-Home Municipality Network Rollout

Abstract

Rolling out fiber to the home (FTTH) is very cost intensive, and typical figures mention around 1500euro ($2000) to add one house to the network. The viability of a FTTH project largely depends on the take rate and as such on the competition with other operators. In this paper we investigate a case in which a municipality rolls out FTTH in competition with another network operator upgrading its infrastructure. We construct an economic model for both operators, including the effects of competition, on which we apply game theory to find the optimal strategies. We complete the results using sensitivity analysis. The final results show how a municipality FTTH rollout drives the existing operator into a more aggressive competition and how FTTH favors industrial sites and densely populated areas.