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Connected Life Exchange

By Howard Baldwin, Contributing Columnist

When most of us were in school, our teachers instructed us to “show our work.” It wasn’t enough that we came to a conclusion; we had to demonstrate how we had arrived at that conclusion.

That’s why this October 2011 report on the socioeconomic effect of fiber to the home (FTTH), sponsored by the Swedish government’s broadband council, Bredbandsforum, is so interesting: the authors, Marco Forzati and Crister Mattsson, show exactly how they arrived at their numbers — achieving a positive payback of 1.5:1 in five years.

The aim of what the authors called a “pre-study” was to put a figure on the return of every krona invested in FTTH. The study estimates the need for investment to achieve 100% fiber penetration, identifies and quantifies a number of significant effects of fiber deployment, and then calculates the return of investment (ROI).

While the conclusion was that more data was needed for an exact estimate, the study showed that even considering a limited number of factors, Sweden could reach a socio-economic break-even point after three to four years. Within five years, it could get 50 percent returns, with much larger returns expected in the longer run.

Total Economic Impact Assessment

Unlike most forecasts, the authors include their formulas and calculations in the report. Even better, the authors noted, “We expect that the returns to be greater than that, due to other effects that are difficult to quantify.”

Forzati and Mattsson wanted to calculate the benefit of FTTH with a different spin. They believed that “the business case for broadband access and FTTH is often evaluated from a traditional telecom perspective, in which investment decisions are made based on what the average consumer is willing to pay for a specific set of services.”

But in reality, they argued, it is important to look at a wider spectrum (pardon the expression) of ancillary benefits, those that accrue to citizens, businesses, and society in general. “[Those benefits] may be more difficult to evaluate, and yet should be considered in the cost/benefit calculation when making the investment decision.”

To determine the one-, two-, and five-year payback of one euro invested in FTTH, they set up three criterions:

The goal was to combine real numbers — installation process and costs, based current and previous fibre penetration — and potential socio-economic indicators. To determine their results, they calculated the direct, indirect, and induced effects of FTTH. These include:

Direct:

Indirect:

Direct and indirect effects in turn impact what the authors call induced effects:

Advancing both Short-Term and Long-Term Outcomes

Among these induced effects are subsequent benefits for broadband service providers and the ICT sector, assuming the government makes the initial investment: “if network and service providers are freed from the heavy upfront investments required to deploy the passive infrastructure, they can scale investments with the number of users served, and therefore achieve profitability in the short-medium term.”

In the long term, such entities may be able to offer services to the home that either represent a low percentage of usage now or tend to be restricted to businesses, such as video-on-demand and videoconferencing.

The authors were lucky in that Sweden is more advanced than most European countries, giving them “rich and updated databases on key economic figures on the municipal level, which allows for quality statistical analysis.”

A five-year ROI of 150 percent for broadband development is enticing — but the numbers won’t do any good until governments and carriers start working together to get them translated into real construction and real results. As frequently happens in technology, the actions of people is just as important, if not more so, than the advancements.

Learn more about progress in Sweden, view the following video “The BAS Network” story. Bredband för alla i Skåne (BAS) is a project to bring broadband to everyone in Skåne, the southernmost county in Sweden. With a population of roughly 1.2 million, Skåne County covers around 3 percent of Sweden’s total area.

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2 Comments.


  1. Well I agree, in reality the collaboration of Goverment with Cell Phone carriers will make these results possible. Anyways a ROI of 150% for broadband development is very lucrative for both public sector and private sector investment.

       0 likes

    • @Usman, thanks for sharing your perspective. I would anticipate that the results of the market study in Sweden will help broadband advocates in other nations, and local policymakers, advance their investment plans.

         0 likes

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