Feasibility
For more than 40 years, IBM dominated the computing business. IBM maintained their dominance in part by tying application software to hardware and individual hardware components together in tightly controlled proprietary packages. In the mid-1970’s, IBM misread the growing demand for smaller, more accessible computing services. A grass roots revolution to create “personal” computers with interchangeable components and application software that could run on multiple vendors’ hardware platforms grew in basements and garages across the country. This “open” model was a disruptive force in the computing world and ultimately led to the marginalization of mainframe computers and of IBM as a computer manufacturer.
Today, a similar revolution is growing in the telecommunications industry. For decades, Bell Telephone, the “Baby Bells” and a handful of cable providers have maintained federally supported monopolistic control of telephone, cable, and data networks throughout the country. While the components to build a telecommunications network cannot easily be stored in one’s garage, many municipalities, cooperatives and other organizations are recognizing the growing grass roots demand for true consumer choice on true broadband networks. Financially responsible ubiquitously deployed public/private partnership open access fiber to the premises networks represent a disruptive model well suited to meet this grass roots demand and revolutionize the delivery of telecommunications services.
Public/private partnership fiber to the premises may very well determine the course of broadband deployment and services convergence and may make the difference between economic success or failure of a community. Much like the rail systems of the late 1800’s, today’s advanced communications infrastructures represent a means by which communities may participate in, or find themselves left out of, the global economy. Many communities are discovering that critical telecommunications needs in their business and residential markets are going unmet, and since these advanced communications infrastructures are essential for the current and future economic vitality of their communities, they have begun to act on these needs. Just as city councils have traditionally grappled with municipal infrastructure issues including, roads, electricity, and water, they now find themselves adding broadband availability to that list.
Unfortunately, the public good often lies crossways with the interests of incumbent private network owners. The private sector typically under-invests in infrastructure – to the point of developing their economic models around the management of scarcity. Government, on the other hand, has historically provided the infrastructure to support business and residents: directly, as in the case of highways and airports, or indirectly through the support of monopolies such as industrial revolution era railroads or the 20th Century telephone companies. The reason for the different approaches to infrastructure between the public and private sectors is easy to explain: return on investment. Private companies are often driven by their quarterly reports; those capital investments with slow returns, such as telecommunications infrastructure, are usually abandoned in preference for those with higher and more rapid returns. Governments, by contrast, measure returns differently, looking at community impact and accomplishment of public policy objectives rather than profit.
Many communities have determined that it is in the best interest of their residents to build power plants, airports, garbage collection, and other utility services that are sometimes operated by the government and other times offered as a wholesale platform to retail providers. In this 21st Century information economy, municipalities, counties, and other governmental entities must determine if deploying a telecommunications infrastructure is in their best interest. This determination may require one or more feasibility studies.
This document lays out the elements of a typical feasibility study. Click the expander button...  ...to see more on each topic.
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Broadband Deployment and Public Policy
Any community considering a publicly owned or operated telecommunications solution must do so within the context of the community's public policy goals. We have studied the public policy implications of municipal broadband and can provide a general overview or a study that applies knowledge gleaned from other communities to the study community's specific goals and objectives. With our extensive public policy experience, we can even help a community develop policy goals and measures directly relative to the municipal network project.
In a feasibility study environment, we must reach a clear understanding of the policy objectives. When we do feasibility studies for private companies, the profitability of the proposed system is usually the sole factor weighed in the build decision. Communities, however, have other "bottom line" goals that may weigh as heavy as or heavier than system profitability.
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Current State Evaluation
Every network project starts from an existing base. In some cases, communities need only repurpose existing services and better utilize private providers in order to meet their public policy objectives. In other cases, policy objectives or existing infrastructure (both public and private) may be such that a complete rebuild or ubiquitous overbuild may be required.
Before feasibility can be determined, the current state must be identified, inventoried, and evaluated as a resource towards meeting objectives.
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Potential Models and Available Technology
Based on the study organization's objectives and the current state, we survey potential models and available technology.
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Comparison of Wholesale vs. Retail Models
We have worked with municipalities who have chosen to be sole providers of retail services on the municipal network, who have chosen to offer retail services in competition with other providers, and who have chosen to offer wholesale services only. We understand the primary factors affecting the wholesale/retail decision include state and local laws, public policy, financial considerations, and operational capabilities.
- We foresee addressing legal questions around the wholesale vs. retail question in our review of potential roadblocks and legal issues.
- Many communities we have worked with have approached the deployment of municipal fiber to the premises without recognizing the public policy implications of their decision. We can help identify or develop public policy objectives and translate them into actionable items fully supported by the wholesale vs. retail decision.
- To many communities considering the options to provide wholesale versus retail fiber services, the financial considerations are the most pressing. While important, financial considerations are the easiest to evaluate. To help evaluate the financial ramifications, we use a tool we have developed based on the research done by Anupam Banerjee and Marvin Sirbu from Carnegie Mellon University and available here.
- While deciding between offering wholesale and retail services, the organization must consider its operational readiness to offer either. Further, the operational readiness of potential service providers in a wholesale model must be considered.
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Retail Market Potential
Until crystal balls are perfected, forecasting market penetration will always involve a certain degree of uncertainty. Factors such as demographics, regional expectations, and competition can all cause dramatic swings in projected market penetration. We have developed five levels of market penetration forecasting with each level adding accuracy to the previous level's work. We help the client select the level that best meets their schedule and budget.
We will not start market research from scratch. Any existing research will be incorporated as a starting place.
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1 - Remote Research
The first level involves conducting research using Internet databases and other tools to discover basic information about the community, market, competition, and other variables. Remote research may also involve telephone interviews with project team members and other key stake holders in the community being researched.
The results of remote research are typically quite generalized.
2 - External Demographic Indicator Survey
Through extensive research, we have identified a series of demographic indicators of potential market penetration visible from outside the premises. An external demographic indicator analysis adds a drive-by survey to the data collected doing remote research.
Conducting an external demographic indicator survey makes the forecast more specific but is still a rough rule of thumb indicator. |
3 - Multi-Variant Demographic Analysis
A multi-variant demographic analysis adds scientific accuracy to the external demographic indicator survey. Using multi-variant demographic analysis methods, we collect data in the target communities and similar communities in the region and elsewhere. We then use the data from similar communities to project market penetration into the survey area.
A multi-variant demographic analysis produces a fairly accurate picture of the potential market in a community. Nonetheless, results are still estimates based on what is thought to be known about the market and its similarity to other markets.
4 - Market Survey
Market surveys add to the information collected at the previous levels survey instruments and focus groups. These tools validate or belie the assumptions derived from the data collected in the lower level efforts.
5 - Pre-Committed Sales
Even at a market survey level, market penetration forecasts are still just hoped for. To ensure certain market penetration, customers can be committed to subscribe to the network in advance of construction. Completing pre-commitment sales is not part of a feasibility study but the pros and cons of doing so are usually addressed in the survey.
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Competition and Potential Partnerships
Competition and potential partnerships dramatically affect potential penetration rates and the feasibility of a project.
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Future Broadband Trends
Deploying a municipal fiber to the premises network represents a long-term investment in the future of broadband. The 21st Century is proving to be a hugely dynamic time in broadband technology and policy in the US. We have no interest in recommending technologies or business solutions on the short path to obsolescence. In any feasibility study we take time to identify future broadband trends in technology, business models, regulatory environments, and along other axes.
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Ten Year Deployment Plan with Budget and Staffing
Developing the ten year project plan and budget and staffing requirements requires answering important questions suggested in other requirements of the feasibility study. For example, staffing requirements are directly affected by the wholesale/retail split and budgeting is a direct function of market penetration (as well as other variables).
Rather than creating a single static plan in the evaluation phase of a project, we typically develop interactive pro-forma models that allow the municipality to evaluate ranging "what-if" scenarios.
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Potential Roadblocks/Impediments and Potential Legal Issues
Potential roadblocks and impediments may come in the form of construction obstructions, community resistance to a municipal network, legal challenges, competitive responses, or from any number of other sources.
As part of a feasibility study, our right of way and environmental teams will conduct preliminary screenings of the proposed project area. These preliminary screenings will expose high risk permitting and environmental issues.
While we perform the other work associated with the feasibility study, we will keep a log of other potential project impediments and help devise strategies to mitigate or avoid them.
We will also have our legal analysts review pertinent law in conjunction with the municipality's legal team to identify potential legal risks to the project.
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21st Century telecommunications needs may very well demand that municipalities build networks in an open access or private model in order to compete in a global information economy. A thorough feasibility study should not only address the financial implications of the community's decision but should also take a look at the public policy objectives being addressed. We commend communities for taking the very important step of studying the issue and working to reach an informed decision.
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