Posts Tagged ‘business case’

Do you need a “survey” or another “study” for your broadband initiative?

As a local leader or elected official, you may need to decide whether or not you need a survey, or a study for your broadband initiative. If the value isn’t clear, or if it doesn’t get you closer to your goal, why spend time and money on a ‘survey’ or another ‘study’? Don’t do it just because another community has.

Understand which communities have achieved their broadband goals and how they got there.

If you have areas that are unserved or underserved with broadband, private sector providers have not seen enough of a business case for them to invest. Low density, tough terrain, insufficient take rates to make a business case, etc. are realities that must be overcome and will require more than re-packaging of your market, or expounding on ‘we have a great community’. If service providers have a better return on their investment elsewhere, that is where they will invest.

To get broadband deployed to your unserved or underserved areas there are generally three options going forward – 1) entice a provider to deploy in your area by subsidizing their business case; 2) build your own network to compete directly with other incumbent providers; or, 3) build your own digital infrastructure which multiple providers can then use to provide services (like municipal roads which are built, owned and maintained by the municipality, but anyone can use them).

Regardless of which option communities choose, elected officials would want to be in the best position to negotiate and to decide the best path forward for their community by understanding the broadband investment options, the market potential, and the community returns on investment (ROI).

As a builder of broadband networks explained, ‘take rates’ and ‘revenue generation’ are really the opposite of what a community wants to achieve. A community needs to focus on the development of a sustainable model that does not restrict, but enables sustainable future growth. What communities nor providers don’t know is what broadband can do to sustain and grow what the community already has, as well as how that growth has been suppressed by lack of or slow broadband investment

For these reasons assessing broadband demand is not a survey, but necessary due diligence on the market potential and choosing your broadband strategy (bringing providers to serve your areas, or building your own) while ensuring the best return for your community.

We know that providers already have their expected take rates and will use their spreadsheets in developing their own business case. However from SNG’s extensive research, the majority of the community benefits from broadband are off-balance sheet to providers – which means providers under-value their return on investment as compared to community returns on investment (i.e. community benefits). We call this an economic case for investing in broadband – some people call it a government business case. It’s the same reason we have public investment in roads.

For those considering a public-private partnership, if you know that you have a strong market potential (current and future demand) for broadband and value-added services, this will strengthen your position on negotiating how much your community needs invest to make a successful business case. On the other side, if your unserved and underserved areas do not show a strong demand then you may want to limit your risk, or take actions to build up demand. It is also possible that some areas have higher demand than others, which can allow you to be more tactical with the timing and prioritization of broadband deployments.

Data points on market potential inform your investment case for whether you choose to negotiate with an ISP by developing an RFQ or RFI for a public-private partnership, or if you decide to build your own digital infrastructure. We’ve written about this issue in our recent post: Where do we put our efforts to get connected with broadband?

SNG has recently launched the Digital Economy Demand Checkup offering with a regional ISP (who were the ones that requested we do this) and we think it will be of interest to communities everywhere because it:

  • Gives local residents and businesses a vehicle to express their need and willingness to sign-up for better connectivity – contact lists for those who want to sign-up can be shared with the provider, finance last mile deployment, inform broadband deployment priorities, etc.
  • Provides elected officials with proven tools to collect needed data points to answer the following questions:
    • What is the current broadband demand as compared to expected demand from provider’s spreadsheets?
    • What is the potential demand that can drive additional revenues for providers, as well as community benefits?
    • What are the issues or barriers that need to be overcome to drive demand and meaningful use so that local businesses and residents fully leverage technology?

We are able to address these fundamental investment case issues in a cost effective way with our Digital Economy Demand Checkup. Not only do we identify current demand, but also potential demand and market potential. We don’t know of anyone else that can benchmark demand to increase service provider revenues and maximize local economic impacts. For example, with a municipal service provider we identified a 64% increase in revenues for no additional capital investment. This represents an increase of 47% in Average Revenue Per User (ARPU).


FEATURE ARTICLE – Taking Control of your Broadband Future

How can communities take control of their broadband future?

Many communities continue to struggle with inadequate broadband for their community. Residents and businesses cannot get the quality broadband they need, or any broadband at all. Municipalities are impeded or prohibited in providing new services and the local economy and overall community vitality suffers. Commercial ISPs are unwilling or unable to improve local broadband and yet resist attempts by communities or regions to take control of their broadband future.

Standing still is not an option. The status quo will not change unless communities take the initiative. However, the most common approach to solving the problem is for municipalities to build and operate their own municipal broadband network. Credit to those that do this, but in many cases this becomes a continual struggle to avoid operating losses and recover the investment, while operating in the face of strong resistance and competition.

Here is the root problem. Commercial ISPs do not invest in network expansion or upgrades because there is not enough of a business case to do so for your area. They do not see the payback they need from that investment and they have already captured the most lucrative part of your market. This model of replicating the traditional ISP model and competing in the free market, albeit with more robust broadband, is really an ‘old school’ approach and one that will always be a struggle. You need to ask yourself …

“Can we really build and operate a profitable, competitive network when the incumbent providers, who already have networks and customers, don’t see the business case to invest any further?”

Fortunately, there is a better way available to any locality serious about owning its broadband future. It starts by recognizing and embracing broadband as the essential infrastructure of the 21st century. This approach is now possible because of maturing technologies that allow you to build open access virtualized networks that not only provide the digital infrastructure your community needs, but also is a platform that opens a marketplace for internet service providers. You put local users in control rather of their future than having them held hostage to whatever is available, and you can do this without becoming an internet service provider yourself.

Let’s go out on a limb and say that there is no municipal leader who wakes up one day and says, “What I really want to do is to become an ISP”. This is only a means to achieve your true goal, which is to ensure that everyone in your community can get affordable, quality broadband if they want it. It is about providing internet access, but it is also much more than that. It is about everything you can do with digital infrastructure and smart community services that will make your community a desirable place to live and do business.

It is time for a new approach … to change the paradigm based on a broader vision. To find out more read the full article “How can municipalities take control of their broadband future?