|
Number |
Work package title |
Deliverable |
|
1 |
2 & 8 |
|
|
1.1 |
Collection of broadband demand data and modelling the demand |
|
|
1.2 |
||
|
1.3 |
||
|
2 |
1 |
|
|
2.1 |
3 & 11 |
|
|
2.2 |
5 & 9 |
|
|
2.3 |
4 & 12 |
|
|
2.4 |
Economic viability of broadband services in non-competitive areas |
6 & 13 |
|
3 |
||
|
3.1 |
7 |
|
|
3.2 |
||
|
3.3 |
||
|
4 |
10 |
|
|
4.1 |
||
|
4.2 |
||
|
4.3 |
14 |
Work Package 1: Market modelling
Activity 1.1:Collection of broadband demand data and modelling the demand will develop demand forecasting models for wide and broadband services for the residential and business markets.
The first step is to establish a list of sources to be used for market research and data collection. The next step is to extract demand data from the sources:
the access services offered (up and down stream capacity)
the tariffs
the demand
The data will be collected for US/Canada and the countries represented in the consortium (Finland, Norway, France, Germany, Portugal, Greece, and Switzerland) as well as the UK and Italy.
The third step is to develop forecasting models for access services. The models will be based on the benchmarking of the situation in Europe and the United States. They will integrate predicted application and tariff evolution, and a set of key drivers for broadband growth and competition. The demand models will reflect substitution effects between capacity classes and the evolution from asymmetric to a higher degree of symmetric accesses. An overall forecasting model will be developed for broadband access. The overall forecasting model is segmented in different capacity classes with separate forecasts for each capacity class.
There is a large set of forecasting models available. The TONIC project will examine different classes of forecasting models to find the best models for forecasting broadband services. The selected class of models must have the ability to make long term forecasts based on limited historical data. Long term forecasts means, in the context of broadband cases studies, a 5 -10 year period.
The collected data are used in order to fit the forecasting models by use of statistical estimation procedures.
The applications for the business and residential markets will not be identical and will generate different network requirements. Similarly, different applications for the mobile and fixed networks will emerge and satisfy different needs. Lastly, the demand for PC-centric and TV-centric services will be evaluated and modelled. To satisfy TV-centric demand it is estimated, for example, that access capacity of about 10 Mbit/s is needed.
The future broadband market will be more complex than the existing market. There will be many players with different roles. Portal implementation is also likely to bring new subscribers and to keep them. Moreover, on-line sales will increase demand for broadband services. A completely new mobile broadband market will be created when UMTS is introduced. Demand forecasts will be developed taking into account the broadband need in the mobile and fixed market reflecting fixed mobile convergence and seamless services.
Broadband service demand will be strongly affected by service bundling. Cable operators are bundling ordinary telephony, Internet, broadband and TV/interactive TV. Introduction of digital TV will also impact broadband demand. Demand forecasting will take this "bundle effect" into account.
The forecasting models developed are used to make forecasts for different geographic areas reflecting a various mix of residential and business customers. The penetration forecasts will vary between classes of countries in Europe. The business cases have to select some specific geographic areas (urban, downtown, suburban, rural) and one or two country classes.
Activity 1.2: Modelling the tariff evolution will develop models for IP broadband tariff structures.
The first step is to analyse the collected tariff data from US/Canada and the countries represented in the consortium (Finland, Norway, France, Germany, Portugal, Greece, Switzerland) as well as the UK and Italy. Sources are the web sites of different operators, those of national regulation agencies, as well as consultants' data bases (Tarifica, for example). The tariff data includes installation and monthly tariffs consisting of network operator and service providers' charges as well as combinations where the installation tariff is deflated. The next step is to develop a tariff structure based on a set of access capacity classes for up- and downstream. Tariffs will reflect European wideband/broadband charges while taking into account the tariffs in the US and Canada. The model includes traffic charges for accesses requiring enhanced quality of service (QoS) mainly demanded of the business sector. The effect of new tariff principles where the use of the services will be paid by third parties (like advertisers) will also be evaluated. In addition, network usage tariffs applied to service providers or "virtual network operators" will be collected, as input to WP2, activity 2 "Economic viability of MVNOs". Sources are principally the consortium members. As these tariffs concern 2nd generation networks, information taken from the TERA results on 3rd-generation mobile network costs will be used to deduce tariffs for the 3G context.
The third step is to develop a prediction model for the tariff evolution. When tariff data is collected the first years, there will be large variations between countries, mainly because the commercial introduction of the service may occur at different times, the competitive situation may be different, some national variations may occur, etc. The best way to establish a reference tariff is to use the median, which is a much more robust estimator than the mean value. A model will be developed based on a set of reference tariffs for different capacities. The model predicts the tariff evolution during a given study period. The tariff increase will be identified by following factors: Study of the tariff decrease in North America (fixed network), study of tariff evolution of similar services and by performing techno-economic calculations. The techno-economic calculations will give some indications of reasonable tariff evolution to achieve acceptable economic profit in the long run.
The last step is to evaluate the predicted tariffs by techno-economic calculations to ensure reasonable return on investments and rollout for good business cases. There may be a feedback process for between techno-economic calculations and tariffs predictions for tuning the predicted tariff on the right level.
To get consistency between evolution of tariffs and demand the first years, a demand curve will be established. The model describes how the demand changes with the tariffs. The demand curve will change when the new service get additional functionality, new and enhanced applications. The market share in the case studies will be fitted to the relevant tariffs. In addition, risk analysis will be performed since there are uncertainties in the predictions.
Activity 1.3: Modelling uncertainties in the market evolution will establish models for estimating uncertainties in evolution of market share, tariffs and demand for services in the mobile and the fixed network, and analyse the risks associated with the different business cases.
The first step is to develop and use models to characterise uncertainties in the used as inputs (essentially, the forecasted and predicted variables) for the techno-economic calculations. The next step is to perform risk and sensitivity analysis to study and evaluate different types of uncertainties. The last step is to apply the risk and sensitivity analysis on the business cases.
Work package 2 includes four activities, which consist of business case studies. The topics of the business cases were selected on the basis of previous work performed in the TERA project, with a view to integrating current concerns such as UMTS/Wireless LAN roaming, new "virtual operator" business models, and hybrid techniques for fixed broadband access, particularly to non-competitive areas. The business cases are the following:
Seamless mobile IP service provision economics
Economic viability of 3G Mobile Virtual Network Operators (MVNOs)
Economics of fixed networks for broadband IP services
Economic viability of broadband services in non-competitive areas
The business calculations integrate the services, demand, tariffs, and network costs as well as the sensitivity and risk assessments. They will be performed using the methodology and tool developed in the TERA project. The methodology is illustrated in next Figure.
The methodology and tool referred to by the different successive projects TITAN, OPTIMUM and TERA are continuously improved versions of the same fundamental methodology and tool. The tool itself consists of a general-purpose economic project calculation model, which is very easily controllable by inserting test values. The tool has built-in optional geographical models for calculation of cable lengths and duct lengths, cost models, and models for operations and maintenance, which the users are free to apply if they wish. The different geographical models have been validated in serious studies within the different partners' organisations and benchmarked with alternative calculations. The models have also been analysed in detail by the telecom partners (in close co-operation with the planning departments) in the four EURESCOM projects P306, P413, P614 and P901.
In addition, the tool has been applied in a wide range of network migration (upgrade) studies, and has been benchmarked and tested internally by partners like Nokia, KPN, CSELT, France Telecom, Telenor, T-NOVA, OTE and TeleDenmark.
Activity 2.1: Seamless mobile IP service provision economics. This business case will focus on advanced services offered over UMTS networks, including seamless handover to and from fixed Wireless local areas networks (LANs).
This work will be carried out in co-operation with the BRAIN/IST-1999-10050 project particularly regarding the technical infrastructure. Following the definition of appropriate service sets based on those envisioned for UMTS, and taking into account the demand scenarios established within WP1, the activity will focus on developing a model for the dimensioning of the network and service resources. The model for the UMTS access network will be a refined version of that developed previously in the TERA project. The model for the fixed wireless LAN architecture will be based on deliverables from the BRAIN project. The tariff structures defined in WP 1 will be applied to compute the key economic indicators, NPV, IRR, and payback period.
Service scenarios, e.g., video telephony dominated or Internet browsing/E-commerce for example, will be investigated to determine the major factors impacting the economic performance of this type of investment. Initial analysis will be followed by risk analysis to identify the most critical parameters influencing the profitability of this business case.
Activity 2.2: Economic viability of 3G Mobile Network Operators
Mobile virtual network operators, or MVNOs, are beginning to appear in the 2nd-generation (GSM) mobile communications market; they form partnerships with infrastructure owners or rent network resources and focus on developing their own service offerings, essentially in content and portals.
Illustration of MVNO network (source: Oftel 1999)
A mobile virtual network operator provides cellular services without owning spectrum access rights. To customers, an MVNO looks like any other cellular operator. But an MVNO does not own or operate base station infrastructure. The above figure illustrates the MVNO idea in the context of GSM. The main components of an MVNO are on the right hand side. Significantly, an MVNO has control over switching and authorisation.
This activity will consider the business of a virtual service provider in the context of 3rd-generation mobile networks, specifically those to be deployed in Europe, based on Wideband Code Division Multiplex Access (WCDMA). It will take into account revenue streams from subscribers, advertisers, and e-commerce actors paying commissions on sales. Specific demand scenarios will be built in WP1 for this business case. The costs comprise service platforms and possibly middleware investments, as well as yearly expenses for capacity rental, which can be derived from the network costs computed in activity 2.1., as well as commercial and customer care costs. This business case seeks to evaluate the economic feasibility of service operators, whether they are independent or within a network operator group owning the infrastructure.
The attractiveness of an MVNO depends critically on three factors: infrastructure cost, route to market and interconnect cost. The cost of equipment for new entrants may be relatively high, particularly if they are unable to obtain volume discounts that are available to larger players. Route to market is about the way in which services are brought to consumers. Acquiring customers is expensive and marketing is a large component of entry costs. The third factor is the cost of interconnection, which is related to regulatory decisions among European countries. Different profiles will be investigated in order to achieve the most reasonable and economically viable development path for an MVNO.
Commercial opportunities should provide incentives for network operators to facilitate MVNOs, and there is certainly a future for MVNOs. In third generation networks we will likely see more MVNOs because there will be many content providers seeking to use mobile networks to access customers. With the limited number of UMTS licences available, this business case should provide valuable information to potential virtual operators seeking to rent capacity in order to offer their own next-generation mobile services.
It will also interest the suppliers of network capacity, providing valuable indications for the establishment of fair pricing schemes.
Activity 2.3: Economics of fixed networks for broadband IP services
This activity will involve the description and characterisation of the network areas with respect to subscriber density, loop lengths, geographical and market characteristics. Such areas can be found in any European country.
It focuses on possible and relevant technical solutions, which are:
The techno-economic analysis will examine scenarios in which new technologies are phased in, replacing older technologies. The timing and extent of rollout of different technologies, depending on market demand and area type, will be studied, to determine the optimal strategy.
Risk calculations will be performed to identify the economic risks based on uncertainties in market share evolution, predicted tariff evolution, demand forecasts and costs. Based on techno-economic analysis, the different optical feeder solutions mentioned will be compared within the "Metro Access Area". Within this context, the development of wavelength-division multiplexing (WDM) technologies will be considered.
Lastly, some services such as tele-medicine require high quality of service in terms of reliability, security, confidentiality, bandwidth, latency, communication errors, data transmission, etc. Providing such a quality of service within IP can involve upgrading the initial network infrastructure, or integrating software solutions. Both solutions will imply different cost and revenue structures. One business case option will consist in evaluating the business prospects of service quality differentiation.
Activity 2.4: Economic viability of broadband services in non-competitive areas. The non-competitive (rural) network areas will be described with respect to subscriber density, loop lengths, and geographical and market characteristics.
According to the service sets offered, the following solutions will be investigated:
ADSL and combination with broadcast networks;
Inverse multiplexing techniques (IMUX);
LMDS solutions;
Satellite based solutions;
FTTH with recently developed civil works techniques.
Externality models will be applied for evaluation of the potential effect of public support on profitability of broadband deployment in those areas. In this modelling, the willingness to pay for the given service sets will be taken into account.
The cost and net present value will be calculated, as well as the necessary public funding for establishing broadband services in the non-profitable area types identified.
Risk calculations will reveal the economic risks based on uncertainties in area and market characteristics, demand forecasts and cost.
This business case will provide information on the cost of providing broadband access as a commodity, or Universal Service. It will interest public policymakers and operators responsible for ensuring broadband services in non-profitable areas.
The economic calculations performed within TONIC rely on the tool developed under the AC364/TERA project. It is therefore essential for the tool to be upgraded to follow changes in the software environment. Similarly, the cost data base should reflect the most up-to-date equipment and operating costs. This work is carried out within three activities.
Activity 3.1: Maintaining and upgrading the TERA tool to the latest software environment
This activity involves an upgrade of the TERA tool from the Microsoft Office 97 environment to the Microsoft Office 2000 platform. As part of the upgrade, some minor enhancements are likely to be implemented (automatic handling of equipment physical lifetime, for example). This first activity, in coherence with the activity 3.3. will also play the role of a "fire brigade" in case of unexpected problems with the tool.
Activity 3.2: Maintaining and updating the cost data base for network components
This activity, aimed at collecting and maintaining information in the cost database will provide essential techno-economic inputs for the tool.
Activity 3.3: Supporting the application of the TERA methodology and the tool within TONIC, IST projects and other TONIC co-operating entities.
This activity assists the business cases in use of the tool. As not all participants are initially expert in the use of the tool/ software, efficient guidelines and recommendations must be provided to end users. Moreover, as other IST projects could need some information for the use of this tool, limited support to get started could be found here.
WP4 will consolidate, condense and rationalise techno-economic guidelines. It will plan and organise sessions at international conferences focused on techno-economics of telecommunication services and networks. This task is in continuity with respect to TERA, which conducted a Special Business Application Session (SAS) at the International Conference on Communications (ICC 2000). In addition, TONIC will intensify the publication of quantitative techno-economic results in IST, international journals and conferences as well as on the web.
WP4 will support the promotion and dissemination of techno-economic results through three main activities:
Activity 4.1: Publication of results at major international conferences and in leading journals
This activity will make sure that the results of the TONIC project are effectively and thoroughly disseminated in different forums, e.g. major international conferences and journals. By doing so, the activity enables the real exploitation of the project results. Once brought to the knowledge of different actors in the telecommunications field, the results are effectively put into use at the very same moment. By showing which of the analysed solutions can be economically viable and under which circumstances, the results influence the way members of the audience view the topic. Many times, these results are a valuable complement to in-depth technical studies which characterise much of the research and development efforts in telecommunications.
Activity 4.2: Workshop on techno-economics of IP based services and networks
TONIC will organise the fourth European workshop on Techno-economics. This will be dedicated to techno-economic aspects of advanced IP services and will address strategic issues faced by actors involved in telecommunications, such as infrastructure providers, network providers, network operators, service providers and application service providers, user associations, regulatory bodies and equipment manufacturers. Invited speakers and TONIC members will introduce current and evolving issues in IP service economics. The various experts selected by the technical committee will tackle key issues such as:
Market Analysis and Demand Forecast
Cost/benefit assessment from the user's viewpoint
Techno-economic Methodologies and Modelling
Future Services
Economic Aspects of selected services
Study of specific business cases
TONIC intends to encourage relevant demonstrations from various players in the domain of Internet; this will offer the opportunity to European SMEs to present their developments to a wide forum. This workshop may also organise a training session for those interested by the use of the techno-economic tool. Based on past experience (the last workshop in Aveiro had about 70 participants), this event can be expected to attract close to 100 people, mainly from Europe but also from overseas, including managers and decision-makers as well as component and system researchers interested in the economic performance of advanced IP services.
TONIC will issue a "Workshop report" with the proceedings, organisation, attendance etc. This report will be made available on the TONIC server. The Techno-economic workshop will be held in the second year of the project and is a major event for exchange and effective dissemination and exploitation of results.
Activity 4.3: Techno-economic recommendations and guidelines from TONIC
This activity will consolidate the results from several TONIC business cases and draw a set of common conclusions based on these results. The conclusions and recommendations will be presented in the final deliverable (Deliverable 14).