Workshop Lisbon 2010
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Transcript of Workshop Lisbon 2010
experience - knowledge - action
Business
Drivers
for FTTx
Richard Jones
RichardJones
Copyright Ventura Team LLP 2010 [email protected]
We are CONSULTANTS
Improve business performance –
helping organisations deliver
products, services and revenues
faster
Develop and implement the right
business strategy
Define the right technology
strategy
Build realistic, flexible business
cases and models – showing
realistic costs and revenue
scenarios
Win telecoms licences against
tough competition - at the right
price
Carry out better due diligence –
saving clients from costly errors
Launch new operators – getting to
revenues faster
Copyright Ventura Team LLP 2010 [email protected]
We are CONSULTANTS
Improve business performance –
helping organisations deliver
products, services and revenues
faster
Develop and implement the right
business strategy
Define the right technology
strategy
Build realistic, flexible business
cases and models – showing
realistic costs and revenue
scenarios
Win telecoms licences against
tough competition - at the right
price
Carry out better due diligence –
saving clients from costly errors
Launch new operators – getting to
revenues faster
BUT
Copyright Ventura Team LLP 2010 [email protected]
We are also CONSULTANTS…
…who started up our own operator in Sweden to demonstrate our capability
…so we also pass on our experience as an OPERATOR with 80,000 subscribers now
Copyright Ventura Team LLP 2010 [email protected]
Our startup operator in Sweden is at an interesting point
80,000 subscribers
Residential and wholesale
FTTH services include residential:
100 mbps symmetric
>$12 in some cities
Internet, voice and TV
1,500 pops
FTTH, xDSL and WiMAX
750,000 homes passed
It has grown with our help
(but very little finance) to:
Copyright Ventura Team LLP 2010 [email protected]
But aside from the numbers, it is also one of the most efficient operators in the world
…with 2,500 subscribers per employee
Copyright Ventura Team LLP 2010 [email protected]
These are challenging times
…can seem more like these trenches
So what’s important in building up a business case?
Copyright Ventura Team LLP 2010 [email protected]
You need to build strategies and business cases using knowledge and experience gained ‘on the ground’
You need to be FAST:
You never get enough time
There may be 100 iterations and scenarios
Copyright Ventura Team LLP 2010 [email protected]
You need to build strategies and business cases using knowledge and experience gained ‘on the ground’
You need to be ACCURATE:
If you don’t really know what you’re doing -errors can cost 10’s or even 100’s of millions of Euros
Copyright Ventura Team LLP 2010 [email protected]
We created a simple project assessment tool for the FTTH Council
Simple Questions Overall Report
Market Prices
Inputs Overview
Building Density
Access to Capital
Access to Home
Construction Method
IT Systems
Complexity of Services
Ease of Deployment
Management Team
Building Density
Access to Capital
Access to Home
Construction Method
IT Systems
Complexity of Services
Ease of Deployment
Management Team
Market Size
Competition
Market Maturity
Management Team
Channels or Existing Customer
Base
Opportunity Size
Revenue to Capex Ratio
Market Prices
Margin Potential
Revenue Potential
Capex Requirements
Derived
Assessment
Results
Overview of
Opportunity
Copyright Ventura Team LLP 2010 [email protected]
Then we modified the criteria some more…..Price for BB ($) - monthly
<10 10 - 20 20 - 50 50 – 100 >100
Subscriber Target
<5k 5k – 20k 20k – 50k 50k – 100k >100k
Current/ PlannedTechnologies
Existing fibre or fast cable
Some fibre and/or
significant VDSL
Good DSL WiMAX and ‘bad DSL’
‘Bad DSL’ and3G
Density of Housing
<10% in apartments
10 – 25% in apartments
25 – 50% in apartments
>80% mediumapartment
blocks
>80% large apartment
block
Routing fibre No ducts and high cost to
dig
No/low ductsand high dig
costs
Some ductsand/or
medium cost digging
Good ductaccess and
low dig costs
Highpercentage of
ducts available
TV High satellite/cablepenetration +
piracy + content laws
High satellite/cablepenetration +
piracy
15 - 50%satellite/cable
<15% satellite/cable
penetration
Very low satellite
penetration
Copyright Ventura Team LLP 2010 [email protected]
This is only a first step….
Gaining funding requires detailed and defendable business cases
ROUTING
FIBRE
HOUSING
DENSITY
TV
TECHNOLOGIES
PRICINGTV
Good News Minor Issue Problem
Copyright Ventura Team LLP 2010 [email protected]
… but this approach gives you a first indication about your project…
ROUTING
FIBRE
HOUSING
DENSITY
TV
TECHNOLOGIES
PRICINGTV
Copyright Ventura Team LLP 2010 [email protected]
What are the biggest drivers on your business case?
The simple answer is:
dig cost per metre
distance of street dug per home passed
IP transit costs
Penetration
ARPU
Let’s look at some of these in more detail
Copyright Ventura Team LLP 2010 [email protected]
DIG COSTS
Copyright Ventura Team LLP 2010 [email protected]
If your infrastructure is cheap – fibre is an easy win!
Copyright Ventura Team LLP 2010 [email protected]
Fibre cannot be deployed everywhere unless you have significant advantages/help!!!
-
500
1,000
1,500
2,000
2,500 Passive Infrastructure CAPEX (GBP) per Home Passed by Geotype and Technology for Sweden
FTTC/VDSL
FTTH (GPON)
FTTH (PTP)
Source: Ventura Team LLP
Copyright Ventura Team LLP 2010 [email protected]
Is it economic to do a whole country?
Answer: Only 50%-70% homes are economic
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Estimated Total CAPEX (GBP m) for Greenfield GPON in Sweden
Source: Ventura Team LLP
Copyright Ventura Team LLP 2010 [email protected]
You can’t build everywhere in a city because of the costs of low density areas.
The cost for outside plant (OSP) increases as the density of population decreases
Fewer apartments (and so more villas) mean more street dig to pass each potential subscriber
A
B
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
TR
EN
CH
ING
CO
ST
-O
MA
NI R
IALS
PERCENTAGE OF POPULATION IN MULTI-DWELLING UNITS
A
B
A represents the cost for a rollout in an area where 33% of people live in apartments
Percentage in Multi-Dwelling Units
B represents the cost where 90% of people in an area live in apartments
CO
ST
S
0% 100%
Copyright Ventura Team LLP 2010 [email protected]
The density of housing has a major impact
EUROPE
At 3m of street per home passed
DIG CAPEX = 20 months ARPU
Copyright Ventura Team LLP 2010 [email protected]
For comparison purposes, Dubai does not represent the ‘typical’ Gulf country
Copyright Ventura Team LLP 2010 [email protected]
If you have to dig in roads/pavements, things get far worse
GULF
15m/home passed (mainly in roads/pavements)
DIG CAPEX = 140 months ARPU
Copyright Ventura Team LLP 2010 [email protected]
Choosing where to dig within each city is vital
There are several approaches
If you have GIS data combined with census information
Copyright Ventura Team LLP 2010 [email protected]
25 40 5070
704025 40
4025 25
25
25
Households per block
You can identify roads to pass by
looking for blocks of a reasonable size
identifying all the homes passed on these roads
calculating the distance dug compared to the homes passed
Choosing where to dig within each city is vital
Copyright Ventura Team LLP 2010 [email protected]
This example shows the impact of selecting roads based on the largest block size
HIGHLIGHTS
875k homes – 4.4m/home
582k homes – 2.6m/home
Do you need:
big subscriber numbers?
OR
better profitability?
Smaller and more focussed deployments are needed if
competition is fierce
or
economics are poor
Copyright Ventura Team LLP 2010 [email protected]
If you don’t have GIS then in some countries you can use Excel!!
The diagram on the right represents a block style city layout
Villas are shown with a V and apartment blocks (MDUs) with an A
By approximating the number of apartments per MDU you can estimate the street length needed to pass a certain number of homes
Copyright Ventura Team LLP 2010 [email protected]
Zoom in on ‘typical’ areas to sample and
Count the houses
Count the apartments
Measure the street length
Otherwise use Google Earth
Copyright Ventura Team LLP 2010 [email protected]
One GPON vendor had an Outside Plant design terminated with a four way block in the street.
Seems okay right?
Make sure you understand how your Outside Plant costs will influence final connection costs
HOMES (20m frontage)
Termination Block
Copyright Ventura Team LLP 2010 [email protected]
Make sure you understand how your Outside Plant costs will influence final connection costs
The problem is that you have to dig the street again to connect to homes (SUB’s)
SUB SUB SUB SUB
That’s another 140m of dig!
HOMES (20m frontage)
Copyright Ventura Team LLP 2010 [email protected]
Now let’s look at the sensitivity to the dig length and cost in this model
EXAMPLE
50,000 homes passed
5 metres of street dig per home passed
30% penetration first year
60% final penetration
Broadband 20
Telephone (rental and calls) 10
TV 12
Security or other misc items 2
Avg Rev / Home / Month 44
Copyright Ventura Team LLP 2010 [email protected]
ARPU
Copyright Ventura Team LLP 2010 [email protected]
What is your market’s ability and willingness to pay?
Factor How do we think about this factor?
Affordability Look at spending as percentage of GDP – compare to benchmarks. Is your market under-spending or already above expected values?Compare prices to similar marketsDo market surveysHowever… in some countries, the lack of alternative entertainment mean that the Internet can take further share of ‘wallet’
Competition You can’t turn back timeIf prices for equivalent services are below your target ARPU then you won’t achieve your objectives
Copyright Ventura Team LLP 2010 [email protected]
What is your market’s willingness to pay?
Factor How do we think about this factor?
Take up There is a natural distribution of prices that people are willing to pay. If 80% of people would pay for a service below X then don’t expect your’s to sell at 2X
…this will impact the subscribers you can win and hence overall revenues
0
10
20
30
40
50
60
70
80
90
100
0
20
40
60
80
10
0
12
0
14
0
16
0
18
0
20
0
22
0
24
0
26
0
28
0
30
0
32
0
34
0
36
0
38
0
40
0
Cu
sto
me
rs W
illi
ng
to P
ay P
rice
(%)
Price Per Month
Copyright Ventura Team LLP 2010 [email protected]
Revenue has an enormous impact on performance….no, really!!
Once your core costs are covered then incremental revenue above variable cost is profit
Copyright Ventura Team LLP 2010 [email protected]
Buying Activating Using Paying ChangeContacting
You can try to launch more products to boost ARPUD
ep
art
men
tsLifecycle
Product &
Services
Availability
Brand
Awareness
Corp
Comms
Mar
Comms
Product
Marketing
CRM/BSS
Networks
OSS
Sales
Care
Retail
CRM/BSS
Order
Management
OSS
CRM/BSS
Order
Management
OSS OSS
Sales
Care
Retail
CRM/BSS
Dealer
Management
OSS
Billing And
Collections
Sales
Care
Retail
CRM/BSS
Problem
Management
OSS
Sales
Care
Retail
CRM/BSS
Order
Management
Dealer
Management
Copyright Ventura Team LLP 2010 [email protected]
Information
Requests
Account & Service
Management
Customer Problem
Management
Billing
Enquiries
Internet Quality &
Availability
Voice Quality &
Availability
Activate
Voice
Order Processing
& Fulfillment
Servicing
Customers
Rating
Invoicing
Deactivation &
Termination
CollectionTV Quality &
Availability
Activate
Internet
Activate
TV
Dunning
Adjustments &
Amendments
Buying Activating Using Paying LeavingContacting
Activate
Bundle
Data Quality &
Availability
Outbound
Customer
Notifications
But each one needs to be properly managed
Outbound
Campaigns
Retention & Follow
Up
Proactive Service
Improvements
Contact Center
Information &
Interaction
Outbound Surveys
Activate
VAS
Pro
ce
ss
Life
cycle
VAS Quality &
Availability
Complex
Sales
Dealer
Sales
CPE
Logistics
Copyright Ventura Team LLP 2010 [email protected]
…and so getting more products to Launch Readiness will require many resources and take up huge amounts of management time
Program
Management
Business
Infrastructure
Space Building
Requirements
Organizational Design
People Policies
Business Systems
Business Plan
Refinement
Market Assessment
(product)
Customer needs
Target Segments
Value propositions
Product Development
& Strategy
Detailed Product
Definition
Pricing
Promotional & POS
Collateral Guidelines
Channel Approach
Branding &
Positioning
POS Production
Communication
Campaign
Network
development
Overlay
Local Access
International Access
Interconnect
Switch Technology
IN Architecture
Business Process
& IT Strategy
Billing & Collections
CRM
Call Centre
Service delivery
Inventory
Detailed Product
Definition
Product Launch
Management Framework
Management Reporting
High Level Launch Plan
Service Rollout Strategy
Go To Market Strategy
Resourcing Plan
Organizational Design
Process Framework
Communication Plan
Customer Experience
Framework
Product Performance
Reporting
Commercial Calendar
Attention & Engagement
Models
Deliverables
Key Milestones e.g. RFS,
Soft launch & Full
Commercial Launch
dates
Business Model
Partner Model
Key Business
Assumptions
Market Data/Segment
Plan
Branding Brief
Network Rollout Strategy,
Plans & Capabilities
IT Strategy & Capabilities
Quality Management Plan
Any key
Regulatory/Compliance
dates
Inputs
Copyright Ventura Team LLP 2010 [email protected]
Product Lifecycle & Innovation Management Process
Stage 1 Stage 2 Stage 3Stage 0
Idea
Generatio
n
Assessment
& Development
Stage 5 Stage 6
Market
Management
GATE 1 GATE 2 GATE 3
Go for Initial
description
Go for Detailed
description
Go for
Implementation
Go for
Launch
Go for
Product Change
Idea
Definition
Initial
Description
Detailed
Description
Implementation Market
ManagementTermination
Sales,
Marketing,
Wholesale
Build Prop
Plan Deployment
Assess
Stage 4
GATE 6 GATE 7GATE 4 GATE 5
Business
Case
Go for
Business Case
Go for
Termination
Build IT
Build
Network
Operate / RUN
Sunset
The process is structured into six stages plus innovation pre-phase.
Seven gates are defined in order to help steering decision-making process.
Overview of the PLM - Process Master Architecture
Copyright Ventura Team LLP 2010 [email protected]
…and in the end, creating too many products hurts your business
Creating more
scope for
errors
Creating more
products
Creating more
engineering
actions/visits
Creates service
change calls
Creating
complaint calls
Damages
reputation
Copyright Ventura Team LLP 2010 [email protected]
PENETRATION
Copyright Ventura Team LLP 2010 [email protected]
…and where fibre is competitive on price – it kills DSL
A number of FTTx projects have taken 70% or more share of homes passed
These cases have benefitted from one or more of the following factors:
30%+ bundle price discount
Killer content
Great demographics and strong desire for true broadband
High dissatisfaction with existing providers
Local loyalty
Where fibre is available at comparable prices, it will displace xDSL and WiMAX as the preferred home technology
Copyright Ventura Team LLP 2010 [email protected]
…but how sensitive are cases to penetration?
EXAMPLE
50,000 homes passed
5 metres of street dig per home passed
Broadband 20
Telephone (rental and calls) 10
TV 12
Security or other misc items 2
Avg Rev / Home / Month 44
Copyright Ventura Team LLP 2010 [email protected]
What if your market is very competitive?
If prices have hit a ceiling then you need to concentrate on:
Achieving a critical size through acquisition
Buying as a group (to achieve better discounts)
Concentrating on customer service reputation
Driving down internal costs
Number of Subscribers (k)
Business
Value
Asset value only
10 1000250
High growth
per
sub
Higher growth
Flattening out
Copyright Ventura Team LLP 2010 [email protected]
So how do you get it right?
Change the rules…..use whatever means you can to reduce cost
Share ducts, dig as consortia, use utility companies’ asset
Choose the right towns and cities and then the optimum parts within them
You can only do ubiquitous services in very high density towns or with external assistance (i.e. government)
Beat xDSL speeds but do not go straight to your fastest potential speed immediately
Changing speed/service provides opportunities for PR and marketing advantage
You may not be able to afford to give subscribers ultra fast, unlimited connections
Your business strategy and model need to be very carefully refined – probably across multiple technology offerings in many cases
Copyright Ventura Team LLP 2010 [email protected]
Operator Experience Includes:
Telecom Egypt
Vodafone (various operations)
Atheeb Consortium (Saudi)
Millicom International Cellular
Batelco
Colt Communications
BT
Pipex
Riksnet
Nordisk Mobiltelefon Group
Eircom
Turk Telekom
Bulgarian Telecom
Invitel+Pantel
Neuf Telecom
Deutsche Telekom
MLL Telecom
Investor Experience
Apax
RBS
Regulator Experience
Ofcom
DCMNR
Egypt NTRA
Vendor Experience
Huawei
ZTE
Alcatel
Ericsson
Motorola
WiPRO
Industry Clients
FTTH Council Europe
GSM Association
Market Experience
Egypt
Qatar
Oman
Saudi Arabia
Dubai
Poland
Ireland
UK
German
Mali
Sweden
Hungary
Greece
France
Rwanda
Estonia
Thank you… [email protected]
See us in the Analyst
Partners booth
Please leave me your
card is you want a
copy of:
this presentation
our current white
paper on ‘The 9
Biggest Mistakes
in FTTH’
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