Programme Delivery Model
Broadband Delivery Programme
Demand for Broadband Services
This section describes issues which are relevant to increasing the demand for broadband services. Demand can be seen as coming from three areas:
Consumers buying services from service providers;
Businesses using the network and buying services from service providers; and
The public sector using the network and buying services from service providers.
This section will focus on the actions that the Broadband Delivery Programme, local bodies, communities and suppliers can take to stimulate demand for consumers and businesses. Actions that the public sector can take to maximise their use of the network and to potentially act as an „anchor tenant‟ to increase the viability of provision of broadband services is covered in sections 13.9 and 14.7.3.
The importance of demand
A key issue that makes it uneconomic to upgrade the broadband infrastructure in many areas could be said to be demand – essentially there are not enough people in the area prepared to pay enough money for an upgraded service to cover the cost of implementation. There is a direct relationship between the number of people who want broadband in an area (and the amount they want to pay for it) and the level of public subsidy that will be required.
In general terms, the commercial judgement for a supplier to invest in the upgrading of broadband infrastructure in an area will look at the balance of costs, both for implementation and the ongoing operation of services, and the potential revenues. Revenues will come in the form of subscriptions for retail broadband services from consumers and businesses, through service providers who will purchase access to wholesale broadband services from suppliers.
A key focus of the Broadband Delivery Programme is encouraging the stimulation of private sector investment in the final third of the country. Stimulating demand is important in two phases for local broadband projects:
During the development of a project prior to the commencement of any procurement, and up to a date in the procurement process (normally when final bids are requested from suppliers). The more potential demand that can be demonstrated (see section 9.4 below on demand registration), the more attractive the project will stand as a potential investment opportunity for suppliers. Local bodies will be responsible for demand registration during this phase but should look to mobilise community and business champions to support this where possible. Suppliers would not be expected to take responsibility for such activities whilst they are still bidding; and
From the date of award of a contract for the delivery of broadband service, the local body together with its contracted supplier will be responsible for encouraging demand and the actual level of achievement of take-up. The responsibilities of each party should be clearly allocated under the contract for broadband services, and the commercial model should incentivise behaviours.
One significant factor in the number of customers (both consumers and businesses) who subscribe to broadband services will be the availability of service providers, the packages they offer and the potential for bundles (e.g. broadband together with other services). 31