Finley / CCG Partnership
More engineering will be required if the project moves forward and you build the network. The goal at the feasibility stage is to make a sound estimate of the cost of the network without spending a lot of project dollars on detailed field engineering. Unless there is something very unique about your community, this high level of engineering is sufficient. We have made numerous estimates of this kind. This preliminary high level design and estimate is not a step you want to skip since it is also used as a starting point when performing the final detailed engineering design for construction. Once it is time for the fiber build-out, the staking engineers will look at every foot of the network as part of the final design. In this case, we are going to make three separate cost estimates for each of the three scenarios.
- We have data that was recently collected from construction projects throughout the US that provides us with the most recent costs for building fiber locally. We will also look at the other assets needed to build a network. This would include such things as the electronics needed to light the network, the drops and electronics needed to serve customers, and the electronics needed to provide the triple play service. Finally, we will look at issues such as whether you need to build a new building to house the business, primary and backup power requirements, as well as the cost of ancillary equipment including vehicles, computers, furniture, software, etc.
- We will also look at the availability of existing fiber leaving the community that could be used to connect to the Internet backbone. These kinds of fiber routes sometimes don’t exist for a community and then the question arises on how the network will connect to the Internet. The other issue with the backbone is redundancy and if it’s possible that there is only one fiber route leaving the area, meaning that every carrier you might buy from would share the same physical cable and there would be no diversity from using two carriers.
- We always build in a construction contingency and we vary this between 10% and 15% percent of the project depending upon how good we feel about all of the assumptions used in the study. We also add something in our business plans (described below) that many other consultants do not; we make sure that we build replacement costs into the business plan so that you will have sufficient cash in future years to cover these routine and predictable events. We know that assets have to be replaced. For example, vehicles rarely last more than five years. The core electronics are going to be obsolete within 7-10 years. The fiber is likely to last far into the future, but there will still have to be repairs made every year.
Finley Engineering will perform the pre-engineering. When preparing a feasibility business plan, we provide a very high level engineering snapshot with the goal of understanding the overall cost of building a broadband network. This sort of engineering is mostly done from our offices and involves only a few days of field work. Our goal with a high level engineering report is to estimate the maximum network cost to make sure we have estimated sufficient dollars for the overall project. We will propose a network cost as close as we can while still staying a little conservative.
The deliverable for preliminary engineering is to produce a detailed cost estimate for each study scenario. The specific deliverables include:
- Review and study the three scenarios described – All-Fiber, Fiber for the Cooperative and to business districts, and the second scenario plus wireless broadband for residential customers.
- The cost to build fiber and other assets is based upon recent actual construction costs from other projects in the area. In this estimate we will include a construction contingency.
- The cost of the electronics needed to light the network and provide the desired services.
- The cost of ancillary assets needed to be in the business such as buildings, vehicles, computers, and the electronics needed to provide the triple play services.
- Review the availability of existing fiber that could be used to provide a connection to the Internet.
- Prepare a separate network design and develop a cost of the network for each of the three scenarios.
- All of the above items will be presented in the form of a written report that will discuss our research, findings and rationale for making the choices we made.
Market Products and Prices. It’s important to identify what people pay for the triple play services in the market today. There is often a big disconnect between what people really pay and the ‘list’ prices of ISPs. We see prices differ significantly from market to market. The approach that we find produces the most reliable results, is to ask customers in your area to send us copies of their bills to analyze. We keep these private and destroy them after analysis.
Quality of Current Broadband. We also like to test the quality of existing broadband to see if people today are getting the products they are paying for. The easiest way we’ve found to do this is to create a site where your customers can take a speed test and tell us the results.
Market Demand. It’s essential to understand how many of your customers are interested in a new broadband solution and if they would change to a new broadband network. The best way we know to do this is by conducting a statistically valid survey. CCG can design a survey that is free from bias and that will provide results that you can believe. CCG has in-house staff that has been conducting broadband surveys for twenty years and who have been praised by their clients for being friendly.
CCG has prepared hundreds of financial business plans for our clients. We have hundreds of clients that currently operate broadband networks and we bring the experience of working with them to make sure that our models consider every cost of operating a broadband business. Our financial models are banker-ready and are detailed at a budgetary level.
We are not satisfied with our models until we’ve really kicked the tires on your opportunity and it’s not unusual for us to create 20 – 30 separate models that examine the impact in your market of the key variables. Ultimately this helps us to fully understand the potential for profitability as well as identify those areas that must be well-managed to be profitable.
We will work with you to see how a new broadband business might roll into your current business. We don’t create generic models, but ones that match the way you might operate a new broadband business. We can also study any other operating model you are considering, such as partnering with an ISP operating partner.
Our models are monthly for the first two years and annual after that. We always look at the business for the anticipated period of financing to make sure there are no long-term hidden weaknesses of the model. We generate a full set of GAAP financial statements. Unlike many consultants, we also provide you with copies of all of our spreadsheets – they belong to you.
CCG has a lot of experience in helping clients obtain financing. We have helped numerous clients raise the money needed to build broadband networks. We work routinely with bankers and other lenders and know what they expect and what they will support.
Our analysis will include an analysis of your funding options. This could include a wide range of funding options including standard bank loans, federal loan guarantees, new financing opportunities like Opportunity Zone financing, assistance from grants, etc. We can also discuss more complex financing that includes an external partner. This analysis will be aimed specifically at your own financial situation with specific recommendations on how to best finance the project.
We can provide the results of our analysis in several formats. At the simplest level we can provide you with a summary of the engineering analysis and our financial spreadsheets. At the other extreme is a full-blown written report that discusses all of the assumptions and results of our analysis. A full written report makes sense when your goal is to educate your board and membership about the broadband opportunity. Our reports are written in plain English with that audience in mind.
Clients have often asked for additional analysis as part of a feasibility study. Below are a few examples of the additional analysis we can undertake:
Benefits of Broadband. We can describe the ways that better broadband can benefit your community.
Legal and Regulatory Analysis. Many of our clients want to understand the legal and regulatory challenges and issues they face if tackling the fiber business. We could provide such an analysis for each scenario we’ve described. We work with a great regulatory attorney who can provide you with the answers to such questions.
Sales and Marketing Plan. Clients who have never been in the fiber business before often want advice on how best to sell such services. We can provide a tailored marketing plan that fits the cooperative and your customer base.
A SWOT Analysis. What are the strengths, weaknesses, opportunities and threats for you in considering the broadband business?
Competitive Analysis. What is the likely reaction of the existing incumbent service providers? What are the potential future technologies that might impact your broadband plans?
Implementation Time Line and Task List. We can provide a detailed time line showing all of the tasks that are needed to implement a fiber business plan as well put the tasks on a time line. We are big believers in the Gantt chart process and would deliver such a product in that format, or in Excel, as you prefer.
Contact The Experts
|Dawson has worked in the telecom industry since 1978 and has both a consulting and an operational background. He and CCG specialize in helping clients launch new broadband markets, develop new products, and finance new ventures. CCG, the largest telecom consulting firm in the country in terms of clients, has a varied telecommunications practice and helps clients with engineering, regulatory, operation and planning issues. Dawson also writes the daily blog http://potsandpansbyccg.com, which covers a wide range of topics for broadband and related subjects. Email >>>|
|Andy Heins serves as Director – Strategy and Operations, for Finley Engineering. Mr. Heins leads strategic discussions and planning with clients across multiple markets and initiatives, from broadband planning, feasibility and implementation to energy integration and planning. Mr. Heins is a veteran of the telecommunications industry and began his career at Finley in early 2009. Prior to joining Finley, Heins was the General Manager of Alma Communications Company in Missouri. While with Alma, Heins assumed various management and operations roles, and in 2006 deployed the first 100% Fiber-to-the-Home (FTTH) network in the State of Missouri. Email >>>|