Modeling the Effect of Duct Sharing in a NGAN Competition Market

TitleModeling the Effect of Duct Sharing in a NGAN Competition Market
Publication TypeJournal Article
Year of Publication2012
Refereed DesignationDoes Not Apply
AuthorsA. Domingo, and M. Oliver
JournalGlobal Business Issues eJournal
VolumeVol. 2, No. 23
Date Published02/2012
KeywordsFTTH, NGAN, optical fiber, techno-economic
Abstract

Modeling the effect of duct sharing in a NGAN competition market Albert Domingo, Miquel Oliver2 Universitat Pompeu Fabra, Barcelona Next Generation Access Networks, NGAN, are the infrastructures that will allow deploying ultra broadband in houses and companies during the following decades. Nowadays the investments are not speed up because of many reasons. One of them is related to the high-fixed costs that NGAN will require for update all the existing copper-based or even for building new infrastructures. The lack of trustable business models to control its risks and clarify its returns is one of the main reasons that slow down the progress of such networks. 

Sharing infrastructure is a diffuse concept that surely will get down these huge investments and will contribute to clarify the business models to each stakeholder and put some light on it. Sharing infrastructure is supposed to mainly affect the civil-works investments where ducts deployment is one of the heaviest parts of it. Thus, ducts-sharing must definitely be a good policy to alleviate the overall high-costs of NGAN roll out and hopefully will push forward in extending the places where competition is foreseen - called dark and grey areas - shortening the overall returns. The model presented tries to answer the following research question: Is there a price that would allow competition through sharing existing ducts? Under this perspective other derived questions are analysed: Is the neutral-open network the only way to achieve competition in FTTH? Should the regulation of NGAN be set as ex ante to give confidence to investors and operators that are intending to deploy new NGAN networks? Is there a minimum period to maintain those regulations to allow competition in case that ex ante procedure is set? The developed model allows analyzing most of these scenarios including a set of variables that have a direct impact on the last-mile of NGN deployment. The model also includes the main roll-out parameters (demand, cost/revenues, adoption/penetration, costs of deployment -geography rural vs. urban, materials prices, engineering prices, duct sharing price -, the technical design), excluding the ones linked to the backbone network. We assume FTTH as pure-fibre NGN access model. The economical viability is explored through the Net Present Value - NPV - to test the impact of ducts-sharing. 

A conclusion arisen from this work points out that an ideal competition market would be reached through a stable long term regulation of the sharing ducts’ prices, allowing second-operators coming into this market. As a result of this regulatory measure fixing ducts’ sharing price if this are too high (measured with NPV over 20), then the target to attract new actors will surely fail. In this case, the use of a common infrastructure ran by a neutral entity is the best way to achieve it. These results confirms that structural separation, as done with different flavours in many countries (UK, New Zealand, Australia, parts of US or Italy), is an effective policy to allow NGAN competition.

URLhttp://hq.ssrn.com/Journals/IssueProof.cfm?abstractid=1985783&journalid=1775167&issue_number=23&volume=2&journal_type=CMBO&function=showissue