Post on 22-Nov-2014
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© 2009 Associated Network Partners, Inc. All rights reserved.
BIP/BTOP & the Rural Telco
Threats and Opportunities
Ohrtman farm near Ringsted, Iowa
Ohrtman farm near Pomeroy, Iowa
© 2009 Associated Network Partners, Inc. All rights reserved.
BIP/BTOP Bragging Rights
$27 million in grant/loan applications in Round One
3 applications/3 states
2 WISPs, 1 Indian tribe
© 2009 Associated Network Partners, Inc. All rights reserved.
BIP/BTOP Round One
2200 applications totaling $28 billion
880 (18 per state) applications for infrastructure
Applications for every state of the union plus territories, etc
© 2009 Associated Network Partners, Inc. All rights reserved.
What’s the threat to telcos?
New market entrants take your market share• WISPs
Neighboring telco takes market share
Whoever it is takes your subsidies; your USF money becomes their USF money
One grant/loan recipient per service area. If they get grant/loan, you don’t;
Your DSL doesn’t compete with their wireless service
© 2009 Associated Network Partners, Inc. All rights reserved.
How will we know who might be coming to our market?
Federal Register: Awards to be announced 07 NOV 2009
Incumbents will have 30 days to contest awardees contentions of unserved or underserved status of proposed funded service areas
Incumbents will have to provide broadband speed and location information at census block level plus take rates
• Greater than 40%? Please document…
Broadband Mapping?
© 2009 Associated Network Partners, Inc. All rights reserved.
Broadband Mapping
Good idea to participate and share info
If you don’t, mappers may assume there is no broadband in your market leading to federal funding of a competitor
FCC Form 477 not considered credible
• Defines broadband as 200 Kbps down; new definition is 768 kbps down and 200 kbps up
• Service providers not identified
© 2009 Associated Network Partners, Inc. All rights reserved.
Attachment K:$1 service/$3 subsidy
Local Voice Service 0 0 13560 38974 30123 32668 31596
Broadband Data 0 0 115500 662720 2E+06 3E+06 4E+06
Universal Service Fund 0 0 22800 93600 85200 90000 84000
BIP Eligibility Map: non-pink is eligible for BIP grant/loan
Hypothetical Example
Calhoun County Iowa• 570 square miles• 4,500 households
Calhoun County Iowa• 570 square miles• 4,500 households
One base station covers all of Calhoun County
Base station on grain elevator
© 2009 Associated Network Partners, Inc. All rights reserved.
Do the math:
Base station with backhaul: $20,000
Households: 4,500
Square Miles: 570
Infrastructure cost per household reached: $4.44
Cost per square mile: $35
Cost of CPE: $400 • Can be included in the grant/loan application
• Lease to subscriber at $X/month
© 2009 Associated Network Partners, Inc. All rights reserved.
Advantages
Wireless broadband county-wide; everybody gets it :)
No 15,000 ft DSL limitations
No in-town only cable TV limitations
“Real” broadband (at least 768 Kbps down, 200 Kbps up)
© 2009 Associated Network Partners, Inc. All rights reserved.
Wireless: “shovel ready” projects?
© 2009 Associated Network Partners, Inc. All rights reserved.
Speed of Deployment
5 days to deploy a 3-sector base station
1 day to deploy a backhaul link
1 hour to deploy CPE
Assuming no new tower construction, no shovel required
© 2009 Associated Network Partners, Inc. All rights reserved.
“What if”: BIP/BTOP Lessons Learned
USDA takes notice of low cost per household reached of wireless vs. fiber
• A few hundred $ vs. a few thousand $
Reviewers may favor wireless applications as delivering broadband to the greatest number of households at the least cost to the taxpayers
Congress may inquire about what’s “reasonable” for broadband grant/loan programs
© 2009 Associated Network Partners, Inc. All rights reserved.
Do the math (cont.)
Low barrier to entry, especially with “free” CAPEX
Creates new business models for rural telecom services
© 2009 Associated Network Partners, Inc. All rights reserved.
Wireless Backhaul
Gigabit to 5 miles
500 Mbps to 20 miles
Spectrum license on demand ($2,000)
Install on existing towers/grain elevators/water towers/silos, etc
Eligible for Middle Mile Infrastructure grants/loans
Rural telco is no longer the “bottle neck” sole source of connectivity (i.e. T1 to the WISP, etc)
© 2009 Associated Network Partners, Inc. All rights reserved.
VoIP and WiMAX
QoS as good as copper
Latency at <20 ms over the air
Vonage, skype, etc over wireless broadband are now your indirect competitors
“Free” long distance is attractive
Lose the line, lose the subsidy
© 2009 Associated Network Partners, Inc. All rights reserved.
3.65 GHz: “free” spectrum
5 minutes and $60 for my nation-wide license
Great compromise in spectrum
Not expensive like 700 MHz/2.5 GHz
Not commonly used like 2.4 GHz, 5.8 GHz, etc
Spectrum is not a barrier to entry for wireless competitor
© 2009 Associated Network Partners, Inc. All rights reserved.
“Free” Sales and Marketing $
Broadband Adoption grants
• $ to hire trainers, buy equipment
• Educate public and business leaders on benefits of broadband
Public Computing Centers
• $ for broadband connected computers in libraries and community centers
• Grow more subs
© 2009 Associated Network Partners, Inc. All rights reserved.
Broadband and Education
E-Rate for schools
WiMAX and “the 5% solution”
• Netbook lease and WiMAX at home enables 7x24x365 instruction for school kids
• Cost is 5% of annual per student allocation
Another anchor tenant lost to new competitor?
© 2009 Associated Network Partners, Inc. All rights reserved.
BIP/BTOP: Open Networks Provision
Grant/loan awardees must offer open networks
Applies to both Last Mile and Middle Mile applications
Could lead to “subcompetitors” entering your market via virtual network operators entering your market
© 2009 Associated Network Partners, Inc. All rights reserved.
10-year Provision
NOFA dictates that while funded assets are the property of the awardee, they cannot be sold in less than 10 years without federal permission
Awardees must be in the venture for the long haul, ie they are not going away soon…
Previous impact of wireless:Telcos losing landlines at 7%/year
Its not just the big city...
© 2009 Associated Network Partners, Inc. All rights reserved.
Threat Summary
Competitor can enter your market with “free” CAPEX
Competitor could qualify for the subsidies you are now receiving; depriving you of same
Competitor could take your anchor tenants leaving you with low margin accounts
If competitor is using BIP/BTOP $, you can’t get BIP/BTOP $ in later round
Competitor could deploy 4G network that offers superior performance and reach over your network at very low cost per sub, i.e. low barrier to entry
© 2009 Associated Network Partners, Inc. All rights reserved.
What’s the opportunity?
If you can’t beat ‘em, join ‘em
You get the grant/loan so no one qualifies for a grant/loan for your market
You get the grant/loan so no one gets subsidies for subs in your market
You get the grant/loan for a Middle Mile Infrastructure network
© 2009 Associated Network Partners, Inc. All rights reserved.
Upgrade your existing plant
Awards are for CAPEX only, your OPEX growth is probably a small increment (if any) over current levels
May be a good opportunity to “future proof” your existing network
New routers, softswitch, etc are eligible expenses
© 2009 Associated Network Partners, Inc. All rights reserved.
What’s your expansion plan?
Death of distance: with IP, geography is meaningless
Limitations of copper wire no longer protect your market
Grow or die? How do you grow?
Move into neighboring market before it moves into yours? (“clecing”)
Neighboring telco is weak, not upgrading to meet demands of broadband users, community needs, needs for education, healthcare or public safety, etc
© 2009 Associated Network Partners, Inc. All rights reserved.
Apply for BIP/BTOP
If you don’t, someone else will
Of 880 infrastructure grant/loan applicants, one of them may have designs on your market
May not be an opportunity like this again in our working lives or the life of your telco
Low cost wireless infrastructure and IP brings change to the industry; can you change with it?
© 2009 Associated Network Partners, Inc. All rights reserved.
Who wins the grants/loans?
Incumbent service providers because
• Track record, financial and service
• Know the community, got their support
• Know the business for their markets
• Bonus points for previous RUS borrowers
• Bonus points for remote market applications
• Already support the 5 statutory purposes of the ARRA 2009
© 2009 Associated Network Partners, Inc. All rights reserved.
What’s the next step?
Have a plan you are enthusiastic about
Start “penciling” it out for your grant application
Online Mapping Tool: be prepared to list your desired market down to the census block level
Attachment C - Broadband penetration: what is the percentage of households with broadband in the desired market?
Attachment G: Bill of Materials what do you need and what will it cost
© 2009 Associated Network Partners, Inc. All rights reserved.
What’s the next step?
Deadline for Round Two TBA (probably late NOV/early DEC)
Awards for Round One out NOV 07
Round Three: may not be a Round Three
© 2009 Associated Network Partners, Inc. All rights reserved.
Thanks!
Frank Ohrtman720-839-4063Frank@wmxsystems.comwww.wmxsystems.com
ANPI877-FON-ANPImarketing@anpisolutions.com www.anpisolutions.com
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