Oxera Report Suggests CityFibre's Anchor-Tenant Approach can Contribute Towards Increased Investment

Feb. 19, 2013 - PRLog -- CityFibre and Oxera have today published a report that assesses the feasibility of a shared fibre access model in UK towns and cities, and undertakes an economic review of CityFibre’s anchor-tenant model in comparison to the co-investment concept previously developed by Oxera.

The Digital Agenda for Europe has set targets for EU Member States to provide all Europeans with access to 30Mbps or faster broadband by 2020, and for 50 per cent of households to subscribe to ultrafast services of 100Mbps or faster.

The UK government has placed emphasis on its goal to have ‘Europe’s best superfast broadband network by 2015’; but despite significant public funding, the UK continues to lag behind its European counterparts and there are increasing concerns that the status quo regime may not be delivering the desired outcomes. The CityFibre anchor-tenant model provides a viable way to access increased private investment to address current under-investment and help make the vision a reality.

The CityFibre anchor-tenant model seeks to address many of the issues associated with the UK’s incremental roll-out of NGA, by providing an alternative, yet complementary approach to incumbent telecoms networks. CityFibre builds, owns and operates shared fibre networks without the need for ownership participation by the incumbent or service providers. Instead, commitments to use CityFibre networks are obtained through contractual arrangements between CityFibre and anchor tenants, facilitating private investment. This model is unique in the UK and could transform the landscape of the industry.

Greg Mesch, Chief Executive Officer at CityFibre commented: “CityFibre is providing towns and cities with a real, future-proof, competitive alternative to an incumbent-led monopoly infrastructure. This report has emphasised the strength of our model, and the benefits it provides to all stakeholders. Importantly, cities will benefit from ubiquitous fibre infrastructure which puts the foundations in place for business growth and job creation, as indicated by other studies which estimate that a fibre-rich city can increase its annual GDP by up to 2%. In order to understand the potential of the model, you need only look at the success of the Google Fiber project in Kansas City, and Gigler in Bournemouth. True gigabit level services are just around the corner, if service providers have the courage to see what’s inevitable.”

Oxera’s report is a continuation of the research undertaken on the co-investment model (NetCo), and strengthens Oxera’s contribution to the wider debate on the funding of ultrafast broadband networks, with a particular focus on alternative investment models.

The report published today shows that there is a strong economic case for CityFibre’s investment model, and appropriately implemented, presents the same risk-reducing, pro-competitive features envisaged in the NetCo model. The CityFibre model represents a variant of co-investment, and builds on principles consistent with the NetCo model. The design of contracts is key to replicating mechanisms of NetCo’s equity-led model, while reducing the threshold of participation of service providers with limited resources for large-scale CAPEX commitments. Furthermore, CityFibre’s model is based on the principle of non-discrimination and can therefore provide significant benefits for the economy and to a wide range of industry stakeholders including service providers, local authorities, policy-makers, investors and consumers.

The report also suggests that the CityFibre model can be a catalyst that could result in a longer-term reshaping of the industry towards a NetCo-like structure, providing significant ultrafast network coverage in the UK.

Felipe Flórez Duncan, Oxera Managing Consultant, added: “There has been overwhelming interest in the co-investment idea since our ‘NetCo’ report was published. As companies such as CityFibre demonstrate, variants of risk-sharing business models are emerging, building on economic features similar to those of the NetCo model. Policy-makers can play a role in encouraging these innovative investment models, given EU and national objectives for the deployment of future-proof broadband infrastructure.”

The report can be downloaded here: http://www.oxera.com/Publications/Reports/2013/A-shared-fibre-access-model-in-UK-towns-and-cities.aspx