Having spent most of my life in Norway, I am used to high costs of goods and services. A beer in a bar? Easily 8 euros. A bus ticket? Normally 4 euros or so. And the same goes for the cost of broadband deployments. James Enck did a nice job in a recent paper where he looked at a number of deployments with a cost range from USD 1 400 (Verizon FTTH) to USD 3 300 per connected home. Most Norwegian FTTH deployments that I know of have a deployment cost per home connected of around USD 4 000. I can think of many reasons for this: Most Norwegian FTTH networks are built in suburban areas with single or two-family homes, and these are inherently more expensive to connect than apartment blocks. Also, the Norwegian FTTH networks are built by newly established operators without the incumbents’ cost advantages.
But a few weeks ago I came across a piece (Norwegian only) that I first found unbelievable and afterwards disappointing. Here’s the story: During the last couple of years, a new Digital Terrestrial Television network has been deployed across Norway. This network covers around 98% of the population. Households not covered by this network get a low-cost satellite subscription. But then there are some 5 200 households that cannot access any of these networks. So it was decided to build a “satellite shadow network” of 500 base stations to cover these people. The cost is 1 billion Norwegian kroner which works out to €23 500 or $32 500 per household. Whoa.
Let’s take a look at what you get for €23 500 per household:
- A one way network
- No internet, no telephony
- Three TV channels and 13 radio stations – all from Norway’s public broadcaster NRK
During the last years, we have worked with the rollout of fiber networks in some areas that could be described as: A most rural area in a very rural county in a rural province in a country that is mostly fjords and forests to begin with. And guess what – the deployment cost per subscriber in these projects hover around €10 000. Expensive? Christ – yes, but doable given the right circumstances (something which I hope to blog about next month).
And what do you get?
- A fiber-based two-way network with nearly unlimited capacity
- Up to 50 Mbit/s symmetric internet speed, easily upgradeable
- IP telephony
- 150 TV channels and video-on-demand services
And for €23 500 per sub I am convinced that we could’ve built all of the above and possibly thrown in a redundant connection as well.
The moral of the story? Well – I think there are several:
- Media organizations, such as NRK, the Norwegian Public Broadcaster who is apparently funding the shadow network using public license revenues, should be very careful when making investments in telecom networks. Building and running a network is very different from their core competency in content creation and management. NRK plans to lay off 100 employees during 2010 due to higher costs than expected. No wonder given their distribution costs.
- Telecom networks built for one specific purpose tend to be hugely expensive and deliver limited value for money.