FTTH infrastructure roll out - Sensitivity analysis of monthly termination end point fees

Abstract:
Fiber-to-the-home solutions are expected to meet the bandwidth requirements for future access networks. While reliable estimates of expenditures for the network build-up are available, analyses of the interrelation of important parameters influencing revenues are scarce. Our model takes nine parameters into account that have significant impact on the deployment business case. Unlike most other studies, cost of capital is part of the model as well. We used typical parameter values for incumbents like BT or Deutsche Telekom as reference and analyzed the interrelation of the parameters in a sensitivity analysis. We find that cost of capital, depending on its height, has a strong impact - so have revenue streams early in the given period. Customer penetration curves have strong influences as well, especially the penetration rates at the beginning of the roll out phase. Finally, passive infrastructure components make out the largest part of the investment, leaving the providers of active equipment room for a small share of the monthly fees only.