The business case is driven by a number of factors that could include one or more of the following: increased efficiencies, economic development, and social development and inclusion.  In some instances, replacing legacy communications systems and associated communication links may see a fairly rapid return on investment, whereas in others when dealing with social inclusion issues, it may take a little longer to see the impact and the return is not so easily quantified.  Irrespective of the reason, there has to be a compelling business case to justify the deployment of municipal networks.
 

In developing the business case, it is extremely useful to begin the analysis by using a conceptual framework that can assist in developing and shaping the business case for a municipal network.  As set out in the Appendix, the case for the total segregation of infrastructure from the services, content and applications that run over, is driven by an underlying imperative of the technology itself which has yet to be fully recognised by the converging analogue industries of broadcasting, telecommunications and cable or their regulators.   The case was probably first made in 1985 [1][v] but since then there has been a growing argument for abandoning the vertical ‘sector-silo’ approach to promoting telecommunications competition and moving towards a ‘layered approach’ across all digital sectors.   

One such paper on the subject is entitled “Further Defining a Layered Model for Telecommunications Policy” written in 2002 by Douglas Sicker of the University of Colorado.  As the author states in his conclusion of the paper, “… whether this type of model is every implemented will depend on such factors as resistance of the industry”. [vi] It is now, three years later, certainly being implemented in many local open access networks around the world.  It is also being met with a degree of scepticism if not opposition by the conventional telecoms industry.  However, the ‘underlying imperative of the technology’ is proving unstoppable as innovations such as Skype demonstrate so powerfully that infrastructure and applications/services, which originate at the edge of the network, no longer necessitate a vertically integrated structure to the industry.

As Michael Powell, former Chairman of the US Federal Communications Commission said

"I knew it was over when I downloaded Skype.  When the inventors of KaZaA are distributing for free a little program that you can use to talk to anybody else, and the quality is fantastic, and it's free - it's over. The world will change now inevitably.”[vii]

 
Cisco has developed a very practical model based on this layered analysis that can be used in examining the development of a local access network.[viii]  The analysis consists of examining six Broadband Building Blocks that should be part of the process in developing a digital community plan.  The building blocks are as follows:

Building Block 1: Passive Infrastructure

This refers to the physical infrastructure used to provide broadband connectivity and can include fibre optic, coaxial, and copper cable or wireless facilities.  Local Governments own a variety of facilities that may include telecommunications plant, city owned ducts and poles, buildings, street lamps and utility infrastructure that can be used to deploy local access networks.  The availability and use of these facilities can significantly impact the economics of network deployment for either the city or a potential partner. Depending upon the model, these assets can either be made directly available to the service provider/private sector partner as in the Philadelphia City Wireless project or they can be assigned a commercial value and converted into equity in a new commercial vehicle set up to develop and administer the new community infrastructure.

Building Block 2: Active Infrastructure

This refers to the elements that are required to transmit, transfer and route data over the network infrastructure, and generally consists of switches, routers and radios in a wireless environment.

Building Block 3: Service Offerings

This refers to the services that may be offered to residential, business and/or institutional customers.  The type of services that the network proposes to offer will be a major determinant of the type of network required.  If the intention is to develop a network to interconnect municipal buildings or provide a specialised application like utility meter monitoring, wireless is often an acceptable solution.  However, if the intention is to provide residential consumers with a triple-play service (broadband internet, telephony and video services), this will likely require the deployment of a fibre-optic system. [RF1] 

Building Block 4: Operating Company

This refers to the company that operates and maintains the network.  If the business model of the network owner is that of an open public local access network, the operating company will provide access to ISPs and other service providers who serve the end user.  In other business models, the operator will be the sole provider of retail service to the end customer or it may provide both wholesale and retail service offerings.  In other instances, the operating company may also be the owner of the system and provide services either on a retail or wholesale basis.  This latter example is more common with municipal owned and operated utilities, but there are instances where a private sector firm owns most of the passive and active infrastructure.

(Although Cisco have posed a single solution to the ‘operating company’ structure, it is clear from observing developments in the market that there is no one template for this and that local circumstances must be the prime driver and determinant of how this is structured)

Building Block 5: Telecommunications Services and Content Providers

These are the telecommunications, cable, ISPs and other service providers that provide service in the geographic area covered by the local network.  Depending on whether the business model is that of open access or closed access, this group of service providers are either potential customers or competitors respectively.

Building Block 6: Public Sector, Residential and Business Customers

These are the potential customers that the network is designed to address.  The target audience may only be the local government, or it may be expanded to include business and residential customers. In order to have most impact for the community as a whole, the best solution is for the network to serve all parties and support the varying communication needs both within the local community and indeed outwith of it.
 

This approach of using the building blocks does provide a conceptual model of the type of network required with a definition of the infrastructure to be deployed, the delivery structure, the market to be addressed and the services to be provided. However, there are several other considerations that are required in developing the business case.  These include a thorough examination of technical feasibility, financial feasibility, capital and operating costs, and revenue forecasts of the preferred model.  Finally, there should be an independent validation of the overall business case.

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