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How Can the Stokab Model beReplicated?Benoît Felten, CEObenoit@diffractionanalysis.com
Context• In late 2010, Google contacted Diffraction Analysis asking for an examinationof the Stokab project.• The main que...
A Short History of Stokab                                          Stokab Investment and Profit (1994-2012)               ...
Stokab in Numbers Today    600                            100 EmployeesNetwork Nodes         105 Operator         1 250 00...
Stokab’s Market• Stokab sells one product and one product only: point-to-point dark fibercircuits.• By not offering any fo...
Stokab’s Pricing• Stokab’s pricing has two essential components:    • Set-up fees dependent on the location to be connecte...
How Stokab Benefited Stockholm• Stockholm considerably reduced the amount of telecom related digging work and theassociate...
Innovation: SVT’s live event coverage• For live events in Stockholm (marathon, Stockholm Tennis Open, royalwedding…), SVT ...
Innovation: Stockholm’s 4G coverage• The pre-existence of an extensive fiber network throughoutStockholm has allowed 4G mo...
Innovation: Heating schools• One interesting side-effect of theStokab deployment has been anexperiment in school heating.•...
Key Success Factors              Political                                Marketing                                       ...
Can the Stokab model be replicated ?             Challenges                             Opportunities Existing copper comp...
Thank You!• Visit www.diffractionanalysis/publications for morereports on broadband and NGA.• Contact benoit@diffractionan...
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How the Stokab Model Can Be Replicated

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Presentation for an event organised in Brussels by the Swedish Association of Local Authorities and Regions (SKL) entitled Local and Regional Authorities: Key Players for Broadband Rollout. Note that the white paper mentioned in this presentation can be found here: http://www.diffractionanalysis.com/blog/2012/10/04/white-paper-in-depth-examination-of-stokab.html

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How the Stokab Model Can Be Replicated

  1. 1. How Can the Stokab Model beReplicated?Benoît Felten, CEObenoit@diffractionanalysis.com
  2. 2. Context• In late 2010, Google contacted Diffraction Analysis asking for an examinationof the Stokab project.• The main questions were: • How did it come to be ? • What were the challenges in its inception and growth ? • What were the impacts of Stokab on Stockholm ? • Could other cities follow in Stockholm’s lead ?• In order to answer these questions, Diffraction Analysis went on a researchtrip in Stockholm and met with Stokab, the City, Stokab’s customers andvarious politicians who were involved in the decisions to launch the project.• This in turn led to the release of a white paper entitled Stockholm’s Stokab:A Blueprint for Ubiquitous Fiber Connectivity?
  3. 3. A Short History of Stokab Stokab Investment and Profit (1994-2012) (Millions of SEK) First customers (city, hospitals, universi First deals with600 housing ties) sign up. City of First (and only) loss Stockholm IT bill goes companies and in Stokab history down by 40%. communications post 1997, due to500 operators for Stokab announces Stokab announces over-expansion residential a residential an expansion of without Stokab purchases service. deployment plan to the residential plan400 commensurate inner city duct ultimately cover to 40 000 single market growth. network to allow 400 000 homes in homes inside Expansion Stadshus AB writes initial deployment. Stockholm. Stockholm.300 starts beyond off SEK 600m of inner city. assets. Jan. 24, 1994, Stockh200 olm City Council Stokab is votes the cash-flow creation of100 positive Stokab. 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-100-200 Investment Profit
  4. 4. Stokab in Numbers Today 600 100 EmployeesNetwork Nodes 105 Operator 1 250 000km of Customers Fiber Deployed800 Customers 1 000 Sub-Contractor 5 500km of Employees Cable Deployed
  5. 5. Stokab’s Market• Stokab sells one product and one product only: point-to-point dark fibercircuits.• By not offering any form of lit services Stokab does only competes in a verylimited way in the retail market. Residential Customer Internet Service Provider Public Businesses Institutions Communications Operator Wireline Mobile Integrators Broadband Broadband Operator Operator Real Estate STOKAB
  6. 6. Stokab’s Pricing• Stokab’s pricing has two essential components: • Set-up fees dependent on the location to be connected and whether it is already on the physical network or not. Multiple fibers and redundant circuits are discounted when purchased at the same time. • Recurring fees based on the straight distance between the two nodes the access lines are connected to. Recurring fees also depend on level of SLA purchased.• Stokab’s pricing is transparent. Only locations that are outside the inner cityand not yet on the network require a specific quotation. All the rest is catalog.• Stokab’s pricing is replicable: any customer purchasing something anothercustomer already purchased will get the same price.• This leaves some latitude for Stokab to innovate on price when it negociatesnew contract types (for example, very short or very long contract terms) butonce a quote is agreed, that sets the price for the future.
  7. 7. How Stokab Benefited Stockholm• Stockholm considerably reduced the amount of telecom related digging work and theassociated costs and disruption for citizens.• Stockholm punches above its weight in international rankings for business attractiveness, due inlarge part to best-in-class Quality of Telecommunications (4th in C&W rankings)• PwC examined the various services available in 26 large cities around the world. It identifiedStockholm as having the best network for schools, the second best broadband quality, and thebest digital economy (PwC Cities of Opportunity, 2011).• Stockholm has become a European IT hub and a welcoming environment for Start-Ups. Venture-capital firm Creandum reports that over the past five years, more than €1.3 billion has beengenerated per year from Swedish tech company exits.• The City of Stockholm has embraced its connectivity. It saved 40% on its IT bill from the first yearonwards, and has been leveraging the network to equip and manage remote locations. Morerecently it launched over 50 e-services thanks to the fact that 90% or more of the population isconsidered online.
  8. 8. Innovation: SVT’s live event coverage• For live events in Stockholm (marathon, Stockholm Tennis Open, royalwedding…), SVT used to send one or more trucks on location to edit the livefeeds.• For the royal wedding, SVT approached Stokab to see if they could rent fiberon location and directly connnect their camera equipment to the editingcenter in their headquarters.• This in turn led to SVT reworking their wholeapproach to live coverage, now edited inhouse. The savings are massive, estimated ataround 40% of production costs.
  9. 9. Innovation: Stockholm’s 4G coverage• The pre-existence of an extensive fiber network throughoutStockholm has allowed 4G mobile broadband competition to adegree not seen anywhere else in the world yet.• Long-term leases of dark fiber by mobile operators was madepossible by Stokab’s latitude to price (provided the pricesbecome replicable).• 4 networks operate in Stockholm: • The incumbent’s, Telia Sonera, • Operator « 3 », • Tele 2 and Telenor who operate their passive infrastructure through a joint consortium called Net4Mobility
  10. 10. Innovation: Heating schools• One interesting side-effect of theStokab deployment has been anexperiment in school heating.• Stokab’s nodes host activeequipment and therefore generateheat. Instead of letting that heatdissipate, Stokab experimented withusing the energy to hear a publicschool in Stockholm.• The program was successful and isnow being expanded to other nodesand other public buildings.
  11. 11. Key Success Factors Political Marketing Focus on passive service offering Consensus accross party lines Neutral and non-threatening position Understanding of infrastructure in the market dynamics Gradual build-up with high revenue Long-term vision and support generators targeted first• Stokab remained a key infrastructure asset for the city despite politicalchanges and even when things turned tough in 2002-2003.• Throughout its history, Stokab was never financed by taxpayers’ moneyexcept for the initial 5000 € to incorporate it.
  12. 12. Can the Stokab model be replicated ? Challenges Opportunities Existing copper competition is alive Technology is mature and costs to and active deploy have gone down considerablyCherry-picking in the business market Awareness for high-speed broadband has already happened in most large services is building cities Operators are more willing to Broadband players are likely to be consider public-private partnerships more aggressive on all fronts • A Stokab-like project in a city the size of Stockholm seems unlikely • However, in Tier 2 cities with operator participation, the model should be successfully replicable.
  13. 13. Thank You!• Visit www.diffractionanalysis/publications for morereports on broadband and NGA.• Contact benoit@diffractionanalysis.com for queries andfurther analysis.• Benoît Felten’s blog: www.fiberevolution.com• Follow Diffraction Analysis: @diffraxion• Follow Benoît Felten: @fiberguy Latest Reports: • The dynamics of Public Private Collaboration in Next-Generation Access Infrastructure • Can the New Zealand NGA Model be Replicated? Upcoming Reports: • Optimizing NGA Service Portfolios • What can we learn from Google Fiber?

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