Sunday, January 18, 2009

Rural Broadband Business Models

There have been many discussions and presentations about which access technology will provide a rural community the most efficient broadband services. But there has been relatively few discussions about which rural broadband business model is appropriate for a rural community. Prior to the deployment of a rural broadband network the rural community should have a complete understanding of the different rural broadband business models. The model selected will ensure the network is economically feasible over the long term. There are four business models that a rural community can adopt to fund a rural broadband network:

1. Non-Ownership Model
Using this model the rural municipality has no direct ownership of the rural broadband network. The municipality releases a Request For Proposal (RFP)giving precedence to one to three Internet Service Providers (ISPs) to provide broadband services to the community. The municipality may partially fund one or all of the Internet Service Providers. The advantage is that the municipality takes on no financial risk for the deployment of the network. The disadvantages are that the rural community has limited coverage (high density areas only) and no guarantees of service.

2. 100% Ownership Model
A municipality decides to implement, manage, and upgrade the rural network. The municipality establishes two departments:
a. Network Infrastructure
b. Internet Service Provider (ISP)
The municipality effectively becomes a communication provider very similar to either TELUS or Bell Canada. This model has a high financial risk because most municipalities underestimate the cost to operate and manage a rural broadband network. The disadvantages are that the rural subscribers can only use a single provider and the municipality must hire component personnel, to design, operate and maintain the network.

3. Single Partnership Model
The municipality uses the Request For Proposal process to select a single service provider. Their role to provide to the Internet Service Provider adequate funding to provide a specified coverage throughout the community. Public funds may also be used to fund all or part of the project. Using this model the municipality uses public funds to give a single ISP a significant advantage over other ISPs serving the community. Public funds should be directed to the creation of true public infrastructure that may be used by all rather than the provision of commercial/retail services that are best left to the competitive application services sector.

4. Open Access Model
An open access broadband network provides supports structural separation between the backbone provider and the retail suppliers. Such an approach ensures no conflict in the value chain and provides the best competition, choice and prices for the end customer. Traditionally it has been shown that public interest is best served when the same company that owns and manages the backbone does not also control the retail access market. Open access in a rural area means affordability, availability, and accessibility. Implementing a open access network will maintain competition in high density areas, ensure that medium to low density areas receive adequate service, will give residences and businesses a choice in broadband services, and will ensure that broadband access services are able to meet the community's coverage and capacity requirements. The advantages of the open access model are:
Public funds are spread throughout the community.
Municipality maintains control of backbone infrastructure

Market forces are maintained in the local access market

Local ISPs are able to compete equally based on cost and services.

In My Humble Opinion (IMHO)
Prior to implementing a rural broadband network rural muniplaities should closely examine which of the four models meets their financial requirements.

4 comments:

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