FTTH Business Guide - AWT.be

Access to capital: There will be a high level of capital expenditure in the early
years. Assuming the money can be obtained, it is the cost of money that counts,
specifically the weighted average cost of capital (WACC). This will depend on the
nature of the project and the source of funds – more information in Chapter 7.
Construction methodology: Connecting a central office to individual homes and
businesses is a major part of the capital expenditure in an FTTH network. The way
that the fibre is routed, as well as the construction method – shallow or deep
digging, existing duct or large conduit, or aerial cable – will have a major impact on
construction cost. The influences on construction cost are discussed in Chapter 5.
Housing density: Whatever the method of building fibre around a town or city, the
average length of fibre per home passed will have a serious impact on the
financing. Individual homes will clearly be the highest cost to connect whilst large
apartment blocks will be the cheapest.
Ease of deployment: We do not believe that construction often runs to time and
budget so there is no green segment on this scale. This may be unnecessarily
pessimistic so feel free to add a green option in your own assessment, particularly
if you have access to utility or other infrastructure that takes your fibre directly to
where it is needed.
Access to homes: This is about trying to connect up homes for the lowest possible
cost per home. There are costs associated with marketing to the customer,
drawing up contracts, and gaining access to the building to carry out the
installation. Please see Chapter 5 for more information.
Management team: An experienced management team will make better choices
and save money compared to complete newcomers. The better the management
team understands the mechanics of fibre industries, the better they are likely to
perform. As in any company, a commercial and customer focus is vital.
IT systems: IT is another area in which we are pessimistic. We have seen many
larger operators spend millions on IT systems and still not be able to operate in
the way they wish. For smaller FTTH projects it is less of an issue but with multiple
partners or your own services to develop, there is potential for an awful lot of
complexity which generally means large fees to IT consultants.
Complexity of Services: In addition to direct IT costs, there is a hidden cost of
complexity faced by multi-service operators. As more services and more
variations are added, customer support and billing become more complex, and the
overall potential for errors goes up. For these reasons, the simpler the
competitive environment you are entering, the easier it will be for your project.
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