Editor’s Note: This Practice Note is based in large part on a discussion paper entitled Extending Open Access to National Fibre Backbones in Developing Countries prepared by Dr. Tracy Cohen and Russell Southwood for the 8th ITU Global Symposium for Regulators[1].
One of the compelling reasons for facilitating the sharing of core infrastructure of broadband fibre networks relates to the high cost of network rollout. The passive component of broadband fibre networks is estimated to constitute 40 per cent of the total capital costs, with the active component constituting 60 per cent. But fluctuations in property, steel and cement prices also affect the capital costs of passive infrastructure relative to active infrastructure, which is currently declining due to price reductions of electronic components.
Site acquisition and preparation costs account for approximately 20 per cent of capital costs for broadband fibre networks, and the cost of setting up towers in rural areas tends to be approximately 30-40 per cent higher than in urban areas, given that these towers generally have to be ground-based and consume more materials. Estimates suggest that the cost per kilometre of laying fibre overland is approximately USD 15,000-17,000 if the cable is buried directly at 1.2 m depth. The price increases considerably where the cable is being laid in hard rock, and it decreases slightly when doing so in loose sand. If, however, the fibre is strung in urban areas on poles, the amount per kilometre is closer to USD 2,000, but the maintenance cost will be much higher. One study estimated that after 10 years, both methods amount to approximately the same cost.[2]
Analysts examining the Middle East and North Africa (MENA) region have suggested that telecommunication operators will increasingly use infrastructure sharing as a strategy for new revenue generation and cost optimization. After all, infrastructure sharing can help reduce capital expenditure components by as much as 40 per cent.[3] In the liberalized MENA markets -- for example, Bahrain, Egypt, Morocco and Saudi Arabia -- growth and success rely extensively on sharing the incumbent's local loop, given the difficulty of rolling-out competing access networks. Market reports indicate that, since local loop unbundling was enforced in Morocco earlier this year, the broadband market grew 19 per cent in a period of six months.[4] So, although local loop unbundling is a regulatory remedy, it is clear that the strategic impact of overcoming bottlenecks in infrastructure is market growth.
END NOTES
[1] For more information about the GSR, see www.itu.int/ITU-D/treg/Events/Seminars/GSR/index.html;
For a direct link to the GSR Discussion Papers 2008, see: www.itu.int/ITU-D/treg/Events/Seminars/GSR/GSR08/papers.html.
[2] ITU World Telecommunication/ICT Indicators Database 2008.
[3] When looking at the case of two specific mobile operators in the MENA region, savings of USD 250 million over a period of 3 years can be expected should these operators decide to join forces in deploying their respective networks, See Booz Allen Hamilton Inc,"Telecom Infrastructure Sharing – Regulatory Enablers and Economic Benefits", November 2007, available at: www.boozallen.com/media/file/Telecom_Infrastructure_Sharing.pdf.
[4] Booz Allen Hamilton Inc,"Telecom Infrastructure Sharing – Regulatory Enablers and Economic Benefits", November 2007, available at: www.boozallen.com/media/file/Telecom_Infrastructure_Sharing.pdf.
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