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Utilities: the gold is underground
|12 сентября 2011|
With fibre network roll-outs on the rise globally, utility companies are sitting on an asset that – if appropriately identified, managed and valued – could enable them to reap significant benefits.Civil engineering costs (for example, digging new trenches) are often the main barrier to fibre network roll-out. However, most utilities already own a number of underground ducts, whose primary use includes power supply, district heating, street lighting and so on, but which are also suitable to deploy fibre (provided there is sufficient space). Forcing utilities to give away duct space may not be the solution, as there is a win-win scenario for both the telecoms and the utility sectors.
Most utilities’ investments in ducts should by now be fully sunk (and possibly already amortised); therefore, any possible additional use of the ducts would represent “sweating the asset”. Utility ducts are particularly interesting to lay fibre as they are often far more capillary (in terms of reaching every street in a given city) than the ducts belonging to incumbent operators. Another interesting aspect to bear in mind is that as fibre cables become thinner and more flexible, mass-market deployments need much less duct space than before – particularly in the case of GPON architecture. Therefore, established duct infrastructure can often provide the space that is required for fibre roll-out.
Over the last decades, many utility companies in Europe (as well as other continents) have themselves rolled out a fair amount of fibre, typically for their own use (for example, for connectivity between their own sites). Some utility companies have taken a step forward by running their own telecoms division, leveraging their fibre assets to sell services to third parties (often with an opportunistic, rather than focused, approach).
Fibre access network services have been given primary importance in the recent definition of policy objectives at the European level (for example, in the Digital Agenda) to enable countries to regain economic competitive advantage. Suddenly, utilities’ assets have become even more valuable: fibre cables already laid can be fully utilised with a more structured commercial approach, but (most importantly) the ducts can be leveraged for large-scale deployments of fibre-to-the-home networks (adequately complemented with digging in out-of-reach areas). Furthermore, the utilities’ networks are local to specific cities, and thus can play a strong role in the roll-out of 'smart city' projects in close cooperation with municipalities.
In order to maximise the value of the ducts and fibre assets belonging to utility companies, a few technical aspects need to be considered.
Where are the utilities’ assets?
- Ducts need to be exactly mapped first. In fact, often they have been laid decades ago, so imprecise or outdated mapping may result in an understatement of the real potential that utilities have underground.
- Ducts should allow reaching buildings through appropriate drop ducts, and this should be feasible on both sides of each street.
- Ducts need to be reachable through new manholes, in order to allow manoeuvre and spilling, and the existing manholes should allow high-capacity enclosures.
What condition are they in?
- Ducts need to provide sufficient available space for laying fibre cables (which are however progressively becoming thinner and more flexible). In fact, the ideal condition would be to have ducts that would be fully available for telecoms uses (such as spare ducts used for manoeuvring).
- Ducts need to be in good condition: they should not be compressed by road traffic at street level, or filled with mud or dust. Else, they will need to be sanitised (which still represents a saving, compared with digging from the scratch).
- Having clarified the technical/infrastructural aspects that need taking into account, a more in-depth analysis of the market scenario and the context helps in understanding the real value of utilities’ assets.
How can utilities’ assets be used and their full value extracted?
- Utilities need to understand the extent to which their fibre assets or ducts can be leveraged for backbone or access networks, and what proportion of residential and business buildings, PoPs and BTSs they can pass and/or connect.
- Utilities need to understand the competitive pressure from alternative duct and fibre owners (incumbents, alternative operators, other third parties e.g. municipalities), as this indirectly informs the value of their own ducts and fibre assets.
- Utilities need to assess the cost and logistic complexity of complementing these ducts with whatever is needed to deploy large-scale fibre roll-outs (for example, additional digging is often needed to complement the coverage).
- The property of these ducts, and the contractual means by which these can be used for fibre purposes, needs to be clarified.
- The utility staff base might not have the skills and the time needed to support a proactive commercial approach in a dynamic environment such as the provision of fibre-based services.
- Finally, a roadmap needs to be developed to extract the full value out of the utilities’ assets, either through a divestment of the ducts and/or of the fibre assets, or through an organic expansion of the current fibre assets and services within the utilities themselves (for those that have a telecoms strategy as part of their future roadmap)
Elia Mariani, Manager, AnalysysMason