Broadband Regulation and the Global Economy

© Copyright 2009. Yankee Group Research, Inc. All rights reserved. www.yankeegroup.com

Broadband Regulation and the Global Economy

Dianne Northfield, Director

Vince Vittore, Principal Analyst

April 28, 2009

© Copyright 2009. Yankee Group Research, Inc. All rights reserved. Page 2April 28, 2009Broadband Regulation and the Global Economy

Agenda

• U.S. broadband stimulus status• Overview of rural broadband

• Usage, adoption and technology choices

• Mapping out the money flow• Broadband, technology and

infrastructure funding opportunities• Global stimulus opportunities• Q&A


American Recovery and Reinvestment Act 2009

• ARRA allocates U.S.$7.2 billion to broadband-related projects

• Award of funds should be prioritized for rural projects and those that would otherwise not be commercially attractive for private operators

• The legislation is technology neutral

• There are significant funds available in related sectors, e.g., health IT, transportation, energy, electricity

• Priority #1 of ARRA: to preserve and create jobs and promote economic recovery


Time Frames, Some Speculative

At present, agencies are reviewing 1,400 submissions

April 8, 2009: FCC NOI on national broadband policy April 13, 2009: Comments period closes on FCC

definitional work for NTIA May 22, 2009: FCC reports to Congress on rural

broadband policyJune 12, 2009: Agencies issue proposed rules and

Notices of Funds Availability (NOFAs)June/July: Project applicationsJuly/August: Agencies rank applicationsFebruary 2010: FCC reports to Congress on national

broadband policy• NTIA must report to Congress within 90 days of

ARRA (May 17) • Agencies must report to Congress quarterly

— Fund recipients will also have to report to agencies quarterly

February 2011: NTIA public national broadband map

Prospective Timing of Fund Release

•Phase I: September 2009•Phase II :December 2009•Phase III:Spring 2010


Poll 1

What impact do you believe the Broadband Technologies Opportunity Program in the U.S. will have on your company?


Overview of Rural Broadband

Source: Yankee Group Anywhere Consumer: 2008 U.S. Penetration and Usage Survey

• Rural availability and penetration in the U.S. traditionally is lower than urban/suburban markets

• Rural markets are NOT allthe same and show greatvariation based on theincumbent service providers

• Municipal models are makinga comeback as more localgovernments begin to viewthe availability of high-bandwidth networks as an economic development issue

• Open access models have not succeeded in the U.S. but are getting a second look due to some spot success in Europe


Rural Technology Options

• Consumption of bandwidth has been increasing at double-digit rates in most markets for the past several years and is likely to continue for the foreseeable future

• Wireline, specifically FTTP, is the best long-term solution, but the business model around rural deployments is difficult at best

• Wireless options represent the best alternative for near-term solution, but could run into capacity issues in several scenarios

Source: Akamai, The State of the Internet, Q4 2008


Mapping Out the Money Flow

• Likely bias toward grants given tight time frames?

• We expect multiple small grants sub-$100 million

• Recipients of RUS funding prioritized—RLECs historically

• ARRA bias to prioritize public entities and public-private partnerships

• Potential bias toward community partnerships and municipalities

• Wholesale business models favored under some of the Act’s priorities

• Credibility in projects that take the NTIA’s 20 percent financial risk

• Both RUS and NTIA guidelines support projects providing “service to the greatest population”

• Applicants must show that projects would not proceed without federal funding


Positioning to Win Broadband Stimulus Dollars

• While we await clarification of multiple terms and the release of NOFA’s, projects that match to the objectives and priorities laid out in ARRA will win more points

• The RUS and NTIA objectives, priorities and gating criteria are different• Applicants will need to consider trade-offs as some of these priorities

are competing or in conflict • RUS offers grants, loans and loan guarantees; NTIA offers grants only

• Projects targeted to unserved, underserved and rural areas and anchor institutions will win more points

• Projects that can demonstrate that they are ready to go and that have hard completion dates will be favored

• Projects must show proven benefits to the economy or society or both, and demonstrate value for money, viability and sustainability


Winners and Losers in the Money Flow

Vendor WinnersAccess/aggregation level vendors already on the RUS approved list of materialsVendors able to guide applicantsWireless infrastructure/municipalWi-Fi vendors

Vendor LosersVendors not on the RUS approved list of materials won’t benefit from early release of RUS fundsNo clear path to revenue for billing/OSS vendors

Wild Cards for Vendors

Interpretation of the Buy American clause?Potential joint ventures with service providers?Preference for projects allowing for “multiple service providers”


Global Economic Stimulus and Broadband

• Global stimulus dollars add up to trillions and are growing

• Broadband is receiving growing attention globally as governmentsrecognize a key role for high-speed connectivity in economy-wide recovery

• There are billions of dollars on the table for broadband projects, many of which are focused on expanded or upgraded access in rural areas

• There are billions more in opportunities for the broadband industry in fiscal packages targeting related sectors with a focus on technology and IT investments

• Infrastructure spending is at the core of many national stimuluspackages

• Funding opportunities are typically “technology neutral,” meaning that all players in the electronic communications ecosystem have opportunities


Billions of Dollars on the Table for Broadband Globally

Funding sources go beyond stimulus plans and show a ramping government commitment to broadband development as part of wider economic recovery


Broadband Stimulus Dollars in Selected Nations

Rural connectivityGovernment54 millionChile

National broadband networkBroadband infrastructure

Government, economicstimulus

2.2 billionMalaysia

National broadband networkGovernment700 millionSingapore

FTTxGovernment900 millionGreece

National broadband networkGovernment30 billion over 8 yearsAustralia

FTTxGovernment102 millionFinland

Advanced networksGovernment938 million over 5 yearsSouth Korea

FTTHEconomic stimulus credit line1 billionPortugal

Subsidies for distribution toEU Member States

Economic stimulus1.3 billionEuropean Commission

Deployment in underservedareas

2009 budget183 million over 3 yearsCanada

Underserviced areainfrastructure

Government, EU and privateco-financing

326 millionIreland

National broadband policycommitment

Economic stimulus227 millionGermany

Grants and loan programsEconomic stimulus7.2 billionUnited States

CommentsSource of FundsFunding Amount (U.S.$)Country


Recommendations

Opportunities are short term and targeted• Vendors and operators must immediately mobilize to identify funding and

incentive targets—broadband and cross-sector. These differ by nation and require detailed investigation and navigation.

• Critical make-or-break decisions will revolve around:• The specification of entities eligible to seek funds• Project obligations• Open access conditions• Co-financing requirements• Project amenability to partnering opportunities• Fund gating criteria

• Maximize project proposals matched to government program objectives.• Look to leverage and replicate successful projects.• Think of short-term stimulus opportunities and longer-term positioning as

governments reshape national broadband policies and funding mechanisms.


Poll 2

Will the stimulus packages around the world have a positive effect on overall connectivity?


Additional Resources

• Yankee Group Research Reports:• Vendor Winners and Losers in the ARRA by Vince Vittore• Broadband and Economic Recovery in the United States by Dianne Northfield• Memo to President Obama: We Need Anywhere for America by Carl Howe,

Jennifer Pigg and Emily Green• Reaping the Benefits of Broadband Stimulus Billions forthcoming by Dianne

NorthfieldDownload at: http://www.yankeegroup.com

• Yankee Group blog:• Hard Times Bring Inspiration for Broadband in the U.S. by Dianne Northfield• Unintended Consequences of the Stimulus by Vince VittoreRead at http://blogs.yankeegroup.com

• Yankee Group podcast: Stimulus Opportunities for Broadband• Vince Vittore discusses the U.S. stimulus provisionsListen at:

http://blogs.yankeegroup.com/2009/03/19/podcast-stimulus-opportunities-for-broadband/


Thank you!• Dianne Northfield, Director, [email protected]

• Vince Vittore, Principal Analyst, [email protected]

• Upcoming webinars:• The Workforce of Tomorrow, May 27, 2009• Fiber to the Home: Making That Business Model Work, June 30, 2009

Broadband Regulation and the Global Economy

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