The latest update of the Australian National Broadband Plan might suggest the financial risks fiber to the home networks represent, even in a scenario where there is a monopoly national wholesale network that sells capacity to all the country’s retail service providers. The plan now envisions a seven percent internal rate of return.
In other words, it is worth doing, if the underlying assumptions are correct, and IRR winds up being a positive integer, not a negative number. In principle, one might ask whether the opportunity cost is too high (would a higher return be possible from an alternative investment), but that is another issue.
The obvious danger would arise if the underlying assumptions are mistaken, such as costs being underestimated, or revenue overestimated, and by what magnitude.
The NBN will build a single national wholesale fiber to the home network between now and 2020, allowing all retail service providers to buy wholesale broadband and voice services.
The latest version of the business plan does suggest that the actual direct financial return from a fiber to home access network, built on a continental scale, is relatively small, at about a seven percent internal rate of return, despite its societal and economic importance.
A reasonable observer might simply note that there is little room for error where it comes to the base assumptions. Lower takes rates, lower average revenue per user or unexpectedly higher operating costs are some of the dangers embodied in the three decade assumptions.
Wednesday, September 19, 2012
Australian National Broadband Plan Doesn't Have Much Room for Error
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Subscribe to:
Post Comments (Atom)
Consumer Feedback on Smartphone AI Isn't That Helpful
It is a truism that consumers cannot envision what they never have seen, so perhaps it is not too surprising that artificial intelligence sm...
-
We have all repeatedly seen comparisons of equity value of hyperscale app providers compared to the value of connectivity providers, which s...
-
It really is surprising how often a Pareto distribution--the “80/20 rule--appears in business life, or in life, generally. Basically, the...
-
Is there a relationship between screen size and data consumption? One might think the answer clearly is “yes,” based on the difference bet...
No comments:
Post a Comment