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Broadband: value chain, actors & business models

Different business models are available to public authorities and other market actors in broadband development.

Rede Aberta: The first CEBF-funded project in Galicia, Spain

A business model defines the roles and responsibilities of different actors in the broadband value chain with a specific focus on the public authority.

The broadband value chain

A broadband network consists of 3 layers: passive infrastructure, active equipment technology and delivery of services. The three layers are characterised by different technical and economical features. These layers are:

  • Layer 1: Building and operating of the passive infrastructure (network set-up).
  • Layer 2: Building and operating of the active infrastructure (network operation).
  • Layer 3: Offer and distribution of services (services).

The three layers depend on each other, meaning that layer 2 can only be realized upon completion of layer 1, and layer 3 requires the infrastructure from layer 2.

Business roles and actors

For the three layers, three main broadband business roles can be identified:

  • The physical infrastructure provider (PIP), which owns and maintains the passive infrastructure.
  • The network provider (NP), which operates (and typically owns) the active equipment such as incumbent operators, new independent operators, broadband companies.
  • The service provider (SP), which delivers the digital services. For example: for e-health, elderly care, TV, Internet, phone, video-conferencing, entertainment, teleworking, smart monitoring and so on.

Depending on the business model, it is necessary to clarify on which level of the value chain municipalities, municipal enterprises, special purpose associations and/or private companies take over tasks.

Besides the three provider groups, end users and wholesale customers complete the list of actors and their roles typically involved in broadband projects.

Basic business models

The actors can take over different roles, thus defining the broadband business model which applies for the respective broadband project. The difference between the two broadband business models is that a vertically integrated model has one market actor taking all three roles and for open networks the roles are separated.

Three open network broadband business models can be identified:

  • Passive-layer open model (PLOM), where one entity deploys the passive infrastructure, the other layers are open for other providers
  • Active-layer open model (ALOM), where one entity provides the passive and active infrastructures in layers 1 and 2, the service is provided by other entities
  • Three-layer open model (3LOM), where all three layers are provided by different actors.

Carrier model options

In addition, there are more carrier model options that go beyond the basic business models and serve as an alternative solution for regions where neither public or private actors are active:

  • Public carrier (public DBO model).
  • Private carrier (private DBO model).
  • Bottom-up approach (NGA bottom-up model).
  • Public-private-partnership (PPP).

Choosing the business model

Depending on its level of involvement, a public authority will have more or less "say" in the definition of the business model. Demographic, commercial and cultural conditions also play a role in the selection of the model. In general, a business model that allows for a win-win situation for all stakeholders will increase a project’s chance of success. Some of the questions that should be answered in the process are:

  • How densely populated is the region? How is the population distributed?
  • Is the physical infrastructure allowing for easy end-user access at physical layer for a number of operators? Is the market big enough to make this business case (PLOM)?
  • Is significant amount of infrastructure owned by an operator already active as a service provider? What business model is it operating?
  • Is there enough technical competence within the public authority to take up the NP role? Are there sufficient economies of scale?
  • Are there market actors interested in taking up the NP role?

Latest

European Commission joins forces to help bringing more broadband in rural areas

The European Commission together with the Member States have set up Broadband Competence Offices to advise local and regional authorities on ways to develop broadband, and help citizens and businesses get better internet. At the same time the Commission presented a 5 point toolkit on how to bring better broadband in rural areas of the EU.

Winners of the European Broadband Awards 2017

European Broadband Awards 2017 winners were announced at the Award Ceremony on 20 November. The European Commissioner for Regional Policy Corina Crețu and Commissioner for Agriculture & Rural Development, Phil Hogan awarded the five winners in Brussels. The five projects were selected in five categories focusing on innovative models of financing, cost reduction, territorial cohesion, socio-economic impact and competition. These projects are exemplary projects for the other regions and organisations planning broadband rollout.

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Broadband project planning

The Broadband planning section, along with the Broadband investment guide aids municipalities and other entities in their planning of successful broadband development projects.

See Also

Broadband: Carrier models

Municipalities, municipal companies, joint ventures, and private companies can be involved in one, two or all three stages of broadband development.

Broadband: Plan definition

The key to successful regional broadband development lies in defining a plan that includes goals, collaborations, and specific needs and stakeholders.

Broadband: Action plan

Broadband project plans help you map infrastructure needs, plan financing and deployment, monitor progress, find stakeholders, make the right choices and more.

Broadband: Technology overview

An overview of different wired, wireless and upcoming broadband technologies and a description of their advantages, disadvantages and sustainability.

Broadband: Investment models

Investment models present interesting involvement opportunities for a public authority that engages in regional broadband development.

Broadband: State aid

State aid for broadband may be necessary in some places where the market does not provide the necessary infrastructure investment.

Broadband: Network and topology

A broadband network consists of geographical parts. The topology of a network describes how the different parts of a network are connected. The most relevant topologies for the backbone and area networks are tree topologies, ring topologies and meshed topologies. For the first...

Broadband: Choice of infrastructure

Broadband networks require different infrastructure types based on different logistic, economic or demographic conditions. Use the questions to help choose.

Broadband: Technology comparison

A comparison of broadband technologies presents features of each solution and helps decisions on the best solution for different regions.