FTTHForum 2011 Marco Forzati, Acreo

14/11/2011 # 1 Part of Swedish ICT

[email protected]

[email protected]

Socio-economic impact of FTTH in Sweden

2011-11-14 Crister Mattsson Acreo

http://www.acreo.se/


Sweden 9,2 million

Europe and Sweden

Sahara

Population density Europe


44 per cent of all households and businesses in

Sweden have access to at least 100 Mbps

broadband

34 % of the homes have possibility to connect

to fiber

Fiber coverage 0- 83 %

40 municipal. have less than 1 %.


Business Models

Single Operator

OPCO

NetCo

RSP

RSP

RSP

Netco

OP

CO

R

SP

RSP

RSP

Netco

OP

CO

OP

CO

OPCO

RSP

RSP

RSP

Traditional


Urban Networks with competition

85

74

63

45

10

20

30

40

50

60

70

80

90

2010200820062004

Procent

År

Pe

rce

nt

Year


Do we need Fiber ?


Value for who ?

Financial ?

Society ?


Investment decisions

Roll

out

cost

Telco

roi

Roll

out

cost Telco

return

Un-

captured

values

yes No, but should be yes


increased

use

of ICT

services

Competition

between SPs

reduced

forced

migration

ICT

competence

HR pool

Ease to do

business

FTTH deployment

Very high access speed New infrastructure

Direct economic activity

True cloud

computing

HD and 3D

TV

VoD

Videoconf

Telepresence

E-health

E-

government Logistics,

prod,

management

Sensor

networks

Democracy

strengthened

transparency

in PA

efficiency

in PA

Distance

working

reduced

traffic

congestion

Network

gaming

Dev. of new

technologies

Customers

for

new services

corruption

discouraged

lower publ

spending

higher tax revenue

productivity

learning

curves

lower

prices

for

services

lower

entry

barriers low upfront

investment

for NP and

SP

Functional

separation

new business

model

possible

higher

employment

Virtual labour

mobility

entrepreneurship

e-learning

Profitability

of NP and SP

Profitability

Of PIP RoW

revenues

reduced ènvironment

impact

GDP

lower burden

of

bureaucracy

Perceived

quality

of life

Video

surveillance

Power grid

efficiency

New ICT and

traditional

companies

New/better

services

Education

quality and

cost

ICT Maturity:

digital natives

Increased

market value


Is it possible to calculate the society ROI for fiber ?

Cost for FTTH deployment

Effects of the Investment


o Boundary conditions:

• Cost dependent on time, learning curves, technological

developments, regulation, etc.

• Passive infrastructure dominates upfront investment

• Active equipment dependent on technology choice, is

dominated by opex and needs to be installed/upgraded

whether fibre or copper is used

o Hence, assumptions:

• Indicative average cost figures from the industry; no

considerations on inflation and cost of capital, calculations

in SEK 2011

• Passive infrastructure only

Cost of FTTH deployment


o How: fast-deployment scenario

• Year 1: 40%

• Year 2: 30%

• Year 3: 20%

• Year 4: 10%

o What: all households not yet connected

• 18 kSEK (€2000) to connect a SDU

• 10 kSEK (€1100) to connect a household in a MDU

• 30% home connected in 2011

o 39 billion SEK (€4.2 billion)

o source: PTS, companies active in FTTH installation in Sweden

Cost of FTTH deployment


• calculated year by year, 1–5 years:

o economic activity directly related to construction

Method: input-output multiplier approach

Source: Katz et al. for broadband upgrade in Germany

Return on investment


o savings in the municipal and regional-government costs for

data and telecommunications:

• Around 50% savings when FTTH is deployed

Sources: Stockholms kommun, Jönköpings kommun, IT

Norrbotten , Stockholms län

• Yearly cost conservatively estimated to 1.5 billion SEK;

• Total savings around 540 million SEK (€59 million)

yearly at full deployment

Method: linear extrapolation (first-order approximation)



o increased GDP due to increased employment

• Short-term effect can actually be measured

• Data for all of Sweden’s 290 municipalities

Method: multivariate regression analysis

Sources: SCB, PTS



o added value for end users

• Proxy available: agreement between tenant association and

housing companies on increased value of apartment

• 46 SEK per household connected

• 1.6 billion SEK (€175 million) per year

Method: extrapolation of rates



Other effects…

o Enhanced population growth is also quantified, but is not

translated in terms of economic returns.

o Longer-term induced effects harder to measure as of today

Causality was taken care of by introducing a time delay between

fibre deployment and observed effects



ROI on FTTH investment

Summing up the effects analysed in the pre-study

o Direct ROI at year t

o Indirect- and induced-effect ROI at year t

o Total ROI at year t


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

year 1 year 2 year 3 year 4 year 5

return

investment

Investment and return, years 1–5 (MSEK)


0

2000

4000

6000

8000

10000

12000

14000

16000

18000


"ind. return"

"direct return"

Direct and indirect return, years 1–5 (MSEK)


0

10000

20000

30000

40000

50000

60000

70000


"accumulated return"

"accumulated investment"

Acc. Investm. and return, years 1–5 (MSEK)


Conclusions

Increased fiber penetration gives significant impact

on severel indicators as population and

employment

Municipalities and regions can lower the

communicationscosts

We need the champions

MDU are drivers

FTTHForum 2011 Marco Forzati, Acreo

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