DAB Network Architecture Investments and cost drivers ITU/NBTC Workshop 16 December 2014 Peter Walop International Telecommunication Union International Telecommunication Union Presentation Overview 1. Introduction o o o Scope LRIC Cost drivers 2. CAPEX 3. OPEX 2 1. Introduction 3 1. Introduction – scope • Satellite distribution network In scope: o Encoding in studio broadcaster Recording Editing Studio feed (VPN) Multiplex centre o Studio feeds o Encoding & multiplexing of Micro wave links studio feeds Scheduling Play out broadcaster Station Multiplexing o DAB+ compliant Recording services Editing Scheduling Play out o Service providers Distribution of Transmission Network operator(s) = Network Access Point = Point of Service 4 1. Introduction • – Long Run Incremental Costs The cost of the (minimum) service comprises: o Capital expenditure (CAPEX) and Operating expenditure (OPEX) directly relevant to the provision of (minimum) service; o Reasonable (??) return on capital, calculated on the basis of weighted average cost of capital (WACC); o Common cost relevant to the business operation but cannot be directly or indirectly allocated to minimum service – mark-up model (EPMU) • WACC can vary from 10% - 25% depending on the risk profile o Country and industry specific o Market structure and offer o Size of operations/company 5 1. Introduction • – cost drivers For any terrestrial broadcast network the technical cost drivers are: 1. Network topology = Number of sites and power (ERP) per site 2. Number of multiplexes 3. Level of redundancy • In terms of service offering these drivers are: 1. Population and geographical coverage 2. Number of services, type and quality of service 3. Service availability/reliability • Service requirements should be matched with: o Business case (at industry level and per market player) o Finance capacity (risk profile) o Service deployment phases/timing of investments 6 2. CAPEX 7 2. CAPEX – scenarios DAB CAPEX Dashboard Forecast Total # sites Theoretical 502 Number of National MUX (layer) Number of Local MUX (layer) Number of Local areas 4 4 39 Number of audio services in national ensemble Number of audio services in local ensemble 9 18 % greenfield sites Redundant encoder Redundant multiplexer Redundant distribution Redundant transmitter Pop coverage 95% 61,750,000 40% National yes Local yes yes no yes yes Source: ITU 8 2. CAPEX – network operator (in m$) 600 541 500 400 300 CAPEX per NO National 278 CAPEX per NO Local Total CAPEX all networks 231 230 200 184 113 94 100 90 76 74 35 30 27.3 69 66 27 1 0.86 0.79 0.8 2.4 2 1.9 1.8 (1,1, mux r) (2,1, mux r) (3,1, mux r) (4,4, full r) (1,1, mux r) (2,1, mux r) (3,1, mux r) (4,4, full r) 0 70‐80% 95% Source: ITU 9 2. CAPEX – service provider (in m$) 0.06 0.05 0.04 0.03 CAPEX per SP National CAPEX per SP Local 0.02 0.01 0 (1,1, mux r) (2,1, mux r) (3,1, mux r) 70‐80% (4,4, full r) (1,1, mux r) (2,1, mux r) (3,1, mux r) (4,4, full r) 95% Source: ITU 10 3. OPEX 11 3. OPEX • – categories OPEX can comprise the following costs categories (design dependent): • o Distribution (satellite transponder rental) o Energy (feeding TX and cooling) o Floor and tower space (of Facility license holder) o Service & maintenance costs (including spares, staff & contracts) o License fees (NBTC) OPEX is periodical cash-out and has a different risk profile for investors 12 3. OPEX • – example 18 radio services/same coverage – energy savings Source: Harris Broadcast 13