J. Infante, R. Sagarra, M. Oliver, C. Macián

Research Group on Networking Technology and Strategies

Universitat Pompeu Fabra, Barcelona (Spain)

Barcelona Council

Workshop on Municipal Fiber Networks

Ghent, 24 october 2011

“Ducts, fibers, municipalities, barriers to

entry and effective competition: A case

study of successful public-private

partnership in the provision of neutral FTTX

infrastructure in Barcelona”

Barcelona 22@ Case Study 2/18

PAPER OBJECTIVES

• Analysis of the framework for municipal active

participation on NGA deployment

• Case study for municipal active involvement: 22@ BCN

• Benefits analysis for the 22@ study case

• Situation as today and challenges

• Applicability to other contexts and comparison with

other initiatives.

Barcelona 22@ Case Study

PASSIVE INFRASTRUCTURE AS A BARRIER TO COMPETITION

Source:Amendola & Pupillo, 08

Source: OECD 08

• A key aspect for economic viability

• Long-term sunk investment

• High entry barrier for alternative

operators.

Passive

infrastructure

sharing is needed

for implementing

effective

competition

Barcelona 22@ Case Study

REGULATORY ISSUES (I)

•PASSIVE INFRASTRUCTURE SHARING:

• Obligations for the incumbent to share passive

infrastructure including ducts, dark fiber and technical

rooms on a cost-oriented basis

• Almost no reference offer in Europe: will need time and

adjustments to be operative.

• UNBUNDLING AND BITSTREAM ACCESS:

• Different for each context and not extrapolable from the

copper case. Less rungs on the ladder of investment

Barcelona 22@ Case Study

REGULATORY ISSUES (II)

•RIGHTS OF WAY

• Municipality manages RoWs. Different conditions for

each country/municipality. Ex.: street cabinets.

• IN-BUILDING WIRING

• Enforcement of in-building passive infrastructure for

new premises and incentives for deployment in old ones.

• Symmetric regulation for in-Building operator

deployments.

Barcelona 22@ Case Study

THE ROLE OF MUNICIPALITIES IN NGA DEPLOYMENTS (I)

• INTEREST OF LOCAL ADMINISTRATIONS

TELECOMMUNICATION

ACCESS NETWORKS

Urban ordering

(Minimization of civil

works)

Cheap and good

Telco Services

Cost

reduction

(Promote competition/

Deploy when no private

offer is available)

(RoWs incomes/Minimize

municipal spending/Agreggation

of public and private demand for

passive infrastructure)

Long Term/Short Term

Compromise

Barcelona 22@ Case Study

THE ROLE OF MUNICIPALITIES IN NGA DEPLOYMENTS (I)

• CAPABILITIES OF LOCAL ADMINISTRATIONS

– Specific conditions for RoWs: Established and managed mostly by the

municipality (framework provided by national administration)

– Deployment of Passive infrastructure for internal use: Corporative

data/voice networks, control and monitoring networks, etc.

– Know-how on passive infrastructure (but not on sophisticated telco

services management) and acts as a “meeting point” for other passive

infrastructure needs (electricity, gas, water, etc.)

– Financial models and motivations better adapted for long-term

investment than alternative operators.

–

Barcelona 22@ Case Study

MODELS FOR PUBLIC/PRIVATE INTERPLAY IN THE NGA CONTEXT

• Different levels of involvement depending on the context

• Passive infrastructure is a well-known business for municipalities.

• Active networks and services need private involvement.

Municipal soil and

buildings

Passive

telecommunication

infrastructure

Active networks

Retail

Telecommunication

services

Rights of Ways

Dark Fiber

Power &AC

Tubes

Ducts & room

for equipments

Trenches

Wholesale

Active

Network

providing

structured

transmission

capacity

Retail service

For residential

And business

segments

Municipal involvement

-

+

• Complexity

• dynamic market

• Network

Technology and

services

Innovation and

Obsolescence

+

Barcelona 22@ Case Study

PRESENTATION OF THE 22@ CASE (I)

THE SCALE OF THE PROJECT:

· TERRITORY: 198,26 Ha (115 city blocks)

· NEW GROSS FLOOR SPACE : 4,000,000 m²

• Productive Activities: 3200,000 m²

• Housing, facilities and services: 800,000 m²

• HOUSING:

• Existing housing units: 4,614

• New social housing units: 4,000 (min. 25% rental)

· INCREASE IN GREEN SPACES: 114,000 m²

· INCREASE IN FACILITIES: 145,000 m²

· INCREASE IN JOB OPORTUNITIES : 130.000

· INVESTMENT IN INFRAESTRUCTURES: 180 million €

Barcelona 22@ Case Study

PRESENTATION OF THE 22@ CASE (II)

IncumbentIncumbent Incumbent

Rental useRental useMunicipal use

& future needs

120 mm.

40 mm.

Up to 250 fibers (22@: 144 max)

Duct

Total passive telco infrastructure investment: 10 M€

• Incumbent: 50% (5 M€)

• Municipality: 50% (5 M€)

• Rental use: 3,3 M€ (70%)

• Municipal use/future needs: 1,7 M€

•90% Trenching,

ducts and

technical rooms

•10% Fiber and

equipment

Barcelona 22@ Case Study

PRESENTATION OF THE 22@ CASE (III)

Barcelona 22@ Case Study

- Dark Fiber from/to each block/building.

- Base price for each block connected (2 fibers): 6,500 €/pair/year

-Discounts reaching 50% depending on the contract periods and

number of blocks connected.

- Clients configure interconnected fibers rings connecting several

blocks.

PRESENTATION OF THE 22@ CASE (II)

Barcelona 22@ Case Study

THE EVIDENCE SO FAR

• 40% of the network deployed (32 of 105 blocks)

• 6 telco operators using dark fiber services and providing

retail business services as well as backhaul for internal

use.

• Also business clients for premises connections.

• Return of investments plan fulfilled better than expected.

Barcelona 22@ Case Study

BENEFITS FOR THE PARTICIPATING ACTORS

Municipalities

• Better subsoil management

• Economy of scope

• Increase telco competition

Incumbent

•New areas: Lower deployment

cost and compatible with strategic

assets owning

•When already existing

infrastructure: No benefits for

parallel municipal infrastructure

deployment Alternative operators

• Lower barrier for entry

• Fast services provision

• Strategy not compromised

by incumbent infrastructure

• Win-Win situation

Quantitative analysis:

Annual billing: 600.000 euros

Return on investment: 7 years

Barcelona 22@ Case Study

CHALLENGES TO THE 22@ MODEL

• Leverage of funds for municipal long term investment

(EFDR/National funds?).

• Incumbent involvement and alternative operators

compromise.

• Potential risk of distortion of private competition. Clear

business models and open non-discriminatory models.

• 22@ still to be tested on FTTH residential scenario.

• Finantial risk transferred to municipality.

• New regulation for incumbent passive infrastructure

sharing: the model for municipal involvement must be

adapted to the new context.

Barcelona 22@ Case Study

COMPARISON TO OTHER INITIATIVES

• StokAB (Sweden)

– Initial reference for 22@

– City dark fibler (1.200.000 km.) in Stockholm and near 30 more

cities. In-building deployment (100.000 social housings for 2012)

– Differences:

• 22@ strictely municipal and to be extended to other new areas of the

city, but on a case by case context.

• Private-owned housings: strategies for in-building infrastructure are

different. Regulation, enforcement and incentives for owners.

• The political consensus on public active involvement in the long term

is weaker in the spanish case.

Barcelona 22@ Case Study

COMPARISON TO OTHER INITIATIVES

• PAU-PYRÉNÉES (France)

– Rural focus. 14 communes (150.000 inhabitants)

– Municipal financing (35 M€) private operated (Axione). Neutral

network including active elements and IP services.

– Differences:

• Rural context is different to city context.

• Need of service availability. More municipal involvement needed in

the Pau case.

Barcelona 22@ Case Study

APPLICATION TO OTHER CONTEXTS

• 22@ model suitable for mixed business/residential new

areas of the city.

• Business model not as clear for less ICT intensive usage

new areas of the city, but still a strategic long-term

investment for municipal objectives.

• Already existing incumbent passive infrastructure: avoid

infrastructure duplication and promote private

infrastructure sharing among competitors.

Barcelona 22@ Case Study

CONCLUSIONS AND LESSONS LEARNT

• Passive infrastructure is an essential element for NGA competition

but competition should take place on upper more innovation-based

layers.

• Municipalities: key actor for passive infrastructure deployment,

enabling different infrastructure sharing models, demand aggregation

and facilitating long-term city competitiveness.

• 22@ shows feasibility of municipal active involvement in passive

infrastructure deployment for urban expansion/transformation in high

ICT usage areas.

• New regulation for incumbent passive infrastructure sharing: new

models for public/private interplay.