cg 00 36

Broadband Fixed Wireless Access 40GHz BFWACG(00)36Market and financial modelling Preliminary Findings : Industry Consultative Group 14 July 2000 Broadband Fixed Wireless Access 40GHz BFWACG(00)36 Market and financial modelling Preliminary Findings


Contents : Contents Background 40GHz BFWA market Market & financial assessment Conclusions Next steps


Study objectives : Study objectives The objective of this study has been to assess whether a market for 40GHz in the UK is viable. This has been carried out through: consultation with operators, vendors and other interested parties market modelling - estimating potential revenues from businesses and households at a detailed county level financial modelling - to determine the extent that the overall 40GHz business will be profitable for operators


Conclusions from phase one : Conclusions from phase one INDUSTRY CONSULTATION There is interest in the market The 40GHz market appears to be broader than 28GHz with both business and residential segments and telecoms and broadcast services Internet is expected to be the key revenue driver by most respondents and broadcast revenues also expected to be important But the overall service composition appears uncertain No respondent suggested delaying the licensing There is still uncertainty about timing, equipment costs and when and if economies of scale will be achieved MARKET ASSESSMENT Total revenues for 2004 were estimated (indicative only)


Contents : Contents Background 40GHz BFWA market Market & financial assessment Conclusions Next steps


Market definition : Market definition 28GHz 40GHz Data rates > 64 kbps > 64 kbps Services voice, data (internet) voice, data (internet), Broadcast Target customers business and residential - size: SMEs and medium to large corporates - region sub-urban and urban Availability Q1 2001 Q1 2002 Technology PMP PMP Geographic coverage UK UK Usage access only i.e. no backhaul access only i.e. no backhaul business - size: focused on SMEs - region: sub-urban The KPMG market assessment model assumes 40GHz BFWA will address the following: Characteristic Our market assessment also assumes: that 40GHz provides complementary services to 28GHz i.e. does not take market share from 28GHz the cell radii or reach of the two technologies are the same


BFWA addressable market : BFWA addressable market Residential Very Small Small Medium Large Urban Suburban Rural BFWA speed of roll-out cost availability cost? ADSL bandwidth speed of roll-out cost speed of roll-out bandwidth availability cost 40GHz 28GHz SATELLITE CABLE FIBRE


Contents : Contents Background 40GHz BFWA market Market & financial assessment Conclusions Next steps


Slide9 : Market and financial model overview Revenue per subscriber & Number of subscribers Business model county industry sector size of business SOHOs coverage of fibre, cable, ADSL, BFWA & Satellite potential market market share average business spend number of business units revenue per customer average price Residential telecoms model county household coverage of ADSL, BFWA & cable potential market - broadband telecoms market share average b’band internet spend number of households revenue per household average price Residential broadcast model coverage of ADSL, BFWA, cable & DTT potential market- pay TV pen. market share average pay TV spend number of households revenue per household average price Level of analysis Key inputs Outputs Key inputs Outputs county household


Market model results : Market model results


Market model base case results : Market model base case results substantial revenues projected for business telecoms market SOHO telecoms market revenues significant residential market revenues sizeable (broadcast and telecoms)


Financial model : Financial model


Slide13 : Key changes to 28GHz methods Broadcasting costs introduced e.g. server, head end, set top boxes and programming costs New costs associated with residential customers e.g. launch costs Increase in business capacity requirements from 2mbps to 4mbps Base station expenditure increases


Slide14 : Results - medium market scenario Business telecoms - profitable Business and residential telecoms - marginally profitable Business, residential and SOHO telecoms - positive IRR Total telecoms residential broadcasting - negative IRR


Contents : Contents Background 40GHz BFWA market Market & financial assessment Conclusions Next steps


Conclusions : Conclusions Business telecoms appears to be a profitable market The addition of SOHO and residential markets under both base and high case scenarios result in businesses where it appears difficult to realise significant profits, given current cost assumptions The financial model results are highly sensitive to the costs of CPEs, base stations and launch. Equipment costs and base stations are especially uncertain


Contents : Contents Background 40GHz BFWA market Market & financial assessment Conclusions Next steps


Next steps : Next steps Further sensitivity analysis Discuss results with RA Finalise results Regional analysis