Anna Maria Doose, Dieter Elixmann, Stephan Jay
"Broadband/Bandwith for all": Costs and Financing of a National Infrastructure
No. 330 / December 2009
Summary
In recent years, many countries have announced far-reaching strategies to promote the growth of high bit rate broadband access network (Next Generation Access, NGA). In parallel, a number of studies have dealt with the viability of the specific development projects concerned. Issues addressed in this context include e.g.: What is the scope of a market-driven deployment of infrastructure, i.e. for a viable business case? What is the capital budget required for the implementation of a specific broadband infrastructure in a country? Which options regarding financing are available?
Against this backdrop, the present study focuses on the following issues: (1) Analysis and comparison of the essential elements of broadband development projects in various European and non-European countries; (2) evaluation of empirical studies addressing the cost of broadband deployment; (3) approximate empirical estimation of the capital cost of a nationwide NGA deployment in Germany. With regard to issues (1) and (2) the study is based mainly on desk research. For issue (3) we applied the (in principle generic) WIK-Consult bottom-up cost model for NGA architectures.
The case studies focusing on European countries comprise Finland, Greece, Great Britain, Sweden and Germany. Outside Europe, the analysis covers Australia, Japan, New Zealand, Singapore, South Korea and the United States. The case studies in particular describe the ways in which each the government in each of these countries – in addition to its role as legislative body and regulator – takes up functions regarding financing and/or deploying/operating the new infrastructure or with respect to stimulation of demand. Though the cost studies evaluated provide evidence of the cost level and major cost drivers in the respective countries, they do not offer a relevant basis for an assessment of the German situation.
Examining the investment budgets for a nationwide deployment of next generation access networks in Germany, we have taken account both of a FTTC/VDSL and a FTTH Point-to-Point architecture. The calculations are based on a "scorched node" assumption, i.e. the current number of main distribution frames and street cabinets is the basis, however, the model rests on the assumption that the network has to be rebuilt completely. Moreover, the model assumes that no existing ducts or dark fiber can be used. Given these assumptions, we calculate capital costs of approx. 41 billion Euros for the nationwide deployment of an FTTC/VDSL network in Germany. The respective capital costs of an FTTH/P2P infrastructure are estimated at approx. 117 billion Euros. In practice, existing infrastructure would be available. The empirical evidence provided in the present study therefore should not be interpreted as the actual expected costs of a nation-wide broadband deployment. Such an estimate will be subject to more realistic modelling. We expect that the actual investment cost level at least for FTTC will be significantly lower.
(Full version only available in German language)
Discussion Paper is available for download.