Thursday, January 05, 2006

Paying for Fibre Networks

Capital. The requirement for any major infrastructure project and one of the hardest things to get. Capital remains the major stumbling block to the roll out of fibre optic to provide the last mile. Verizon is reported to be winding back the company's rollout of FTTP. Telstra, Australia's incumbent telcommuincations company, has stated that it will not rollout FTTN without regulatory gurantee to be able to lock out competitors. Clearly fibre last mile systems are expensive, particularly for companies whom stock prices are going down and not up.

Governments can fund the roll out of fibre last mile systems. This is what Amsterdam City council has decide to do. But government funding is not the only means for funding fibre last mile network rollout outside of a large telecommunications company paying for fibre rollout.

The fibre last mile network is an asset with a relatively predicatable income stream. Funding a rollout can be done by creating an income or royalty trust that will own the last mile network. Investors would buy units in the trust and this money would be used to fund the rollout of the fibre. The trust would not lay the fibre themselves but pay a third party company (or companies) to do the construction work. Once the network is rolled out then the trust simply charges telecommunications providers for access to their last mile connection. All telecommunications operators then have equal opportunity for network access.

Using Income/Royalty Trusts to fund fibre rollout has several advantages. Governments don't need to get involved in funding the rollout nor providing regulation to provide equal access to an incumbents network (always a messy business). A single company is not burdened with a very large capital expenditure over a long period of time. The trusts would soak up a lot of the cash that is sloshing endless around the planet causing various problems. The trusts would also create a "steady" income stream for long term investment. I expect that the trusts would sit between bonds and equity in the risk/reward metric. This would provide the pension/super funds with third security for parking cash.

But the main advantage is that the trusts would see last mile fibre networks rolled out now rather than possibly maybe sometime in the future.

Tags: , , , , , , , , ,

2 comments:

Rick J said...

I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.

Take a look at Wallstreetwinnersonline.com

RickJ

Rick J said...

I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.

Take a look at Wallstreetwinnersonline.com

RickJ