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Feasibility issues for Metro Ethernet
Revenue issues
Cost & Regulatory issues
Competitive issues
Feasibility issues for Metro Ethernet
Metro Ethernet gives infrastructure and technology companies a
scalable, high performance broadband platform that supports next-generation
voice, video, Internet access, ecommerce, entertainment and education
applications. The growth and revenue opportunities are particularly
significant considering that Metro Ethernet is a proven technology
that can be deployed rapidly and with reasonable capital and operating
costs. For organisations that are interested in joining the Metro
Ethernet movement, the first step is a feasibility study that focuses
on one or more target metropolitan areas.
Some of the key feasibility issues covered below includes potential
revenues, potential costs, competitive climate and regulatory factors.
Given the currently tight capital markets and the need to carefully
justify all telecommunications investments, feasibility analysis
should be carried out first at the city level, and then again for
focused areas within each city. In each city there is typically
a wide variation in feasibility for different city districts.
According to an insightful report on Metro Ethernet feasibility
by The Yankee Group*, it’s often advisable to analyse the
ROI potential of individual buildings within a district. With the
'micromanagement" approach that The Yankee Group describes, a detailed
business plan can be created for each potential multi-tenant building
under consideration. This is the most assured way to proceed, given
the diversity of tenant densities and tenant telecoms requirements
within cities and districts. Consequently, feasibility should be
a three-level exercise that starts with an analysis of cities, then
districts, then specific multi-tenant buildings within districts.
Looking across the EMEA (Europe, Middle East, Africa) region, there
are hundreds, perhaps thousands of metro districts that are economically
feasible for Metro Ethernet - given the right business model. Some
of these areas are feasible because they have a dense mix of high-tech
business and high income residences that spend large amounts on
internet and information services. Other areas may have less lucrative
customers but they are feasible if a utility, property company or
municipality uses its rights of way and infrastructure assets to
lower CAPEX costs. Another major influence on feasibility is the
welcome emergence of government broadband networking mandates that
set up favourable conditions for large-scale rollout of Metro Ethernet
services.
Early EMEA adopters’ feedback and financial models available
show that in cities with a good industrial base, 500,000 inhabitants
or more, and a mix of residences and enterprises/shops co-located
in highly densely populated MxUs, positive EBITDA can be achieved
in 24 and 36 months. But this is a very general figure and ROI period
can be much shorter in some cases, particularly in buildings with
multiple high-tech enterprise or SMB customers. Based on the experiences
of at least one EMEA provider, FastWeb of Italy, breakeven point
for specific properties with good demographics can be in considerably
less that a year. One large influence on time-to-ROI is the distance
between a building and the nearest backbone network access point
(breakout).
There are nearly as many models for Metro Ethernet deployment as
there are different types of metro areas. The generally positive
outlook for feasibility in many cities and districts is driven by
several factors, including Metro Ethernet’s…
- comparatively low capital equipment and operating costs
- long lifecycle for equipment and fibre infrastructure
- support from a diversity of public and private stakeholders
- applicability to wide range of business and residential needs
- support for multiple applications, services and revenue streams
Each city and each district within a city has its own unique set
of variables so there is no easy shortcut to determining which areas
are the most addressable. Consequently, it’s important that
feasibility analysis include all the revenue, cost, competitive
and regulatory variables that can influence a Metro Ethernet deployment.
* Report title: " Metro ROI Case Made to Go the Last Meter" ,
November 2002, Justin Neville-Rolfe, Yankee Group, yankeegroup.com
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