Tuesday, June 28, 2011
Digging further into "Propel Northants"
Trying to untangle the loss making assumptions behind the DCF analysis of the "Propel Northants" project I have observed the following questionable assumptions :-
- Take-up aspiration is very low - "a total connection rate of 30% of the total private sector premises passed in year 2026"
- Rate of take-up growth is abysmal - "2% of all existing Private Sector premises (B Type and non B type) passed are connected each year"
- A wholesale only "Open Access" model is used, with a modest proportion of revenue captured as a result - "it is assumed that the wholesale network operator takes 50% of the total retail revenues achievable"
- Retail pricing model is unambitious, matching first generation broadband pricing with a SOHO office internet / telephony bundle at £35 per month
- Large parts of potential market are excluded - "Other Public Sector premises (i.e. Education and Health) do not connect to the network and procure their telecom services via an alternative route"
The network is a substantial investment and isn't going to be achieved by community activists digging trenches - 110 km in 10 distribution rings are proposed, connecting to 224km of core fibre ring with 8 points of presence.
Capital costing is in line with corporate civil engineering costs, as one would expect from a report prepared by Atkins and The University of Northampton. The figure of £1,309 per business and public sector premise passed is perhaps not unreasonable, but escalates to an eye-watering £7,644 per premise connected when the low takeup assumptions are factored in.
"Propel Northants" could represent a good launch platform for further growth of FttH services in Northamptonshire, but its current economics leave it stillborn.
Can the above weaknesses be realistically addressed to make the project an attractive investment ?