I've been trying to calculate the time to break even on the project, and come up with the following wrong answer:
a) Need to recover £1,000 per home passed.
b) At 30% takeup, this recovery becomes £3,333 per home connected.
c) Most takeup will be from the lowest package. GC offer 50/50 at (ex-vat) £34pm.
d) If all the £34pm can be used towards a break-even, then it will take 98 months, or 8 years
e) In a BT-oriented wholesale setup, Openreach get around half of the (ex-vat) money paid for a line with GEA broadband service.
f) If only half of the £34 is available for a break-even, then it will taken 196 months, or 16 years
This calculation is wrong, because it doesn't take account of the "cost of capital" element. That's essentially the "interest" an investor might expect back on his money.
g) The recent talk of splitting Openreach put a "Cost of Capital" rate at 8.5%
h) That means the "CoC" for each £3,333 connected home is nearly £24pm.
i) If all the £34pm can be used towards a break-even, then (via the MSE mortgage repayment
calculator) it will take 16 years
j) If the cost of providing a retail service is around half of the monthly cost (as in step f), then GC wouldn't be earning enough to pay the cost of capital. It will have £17pm but will have a CoC cost of £24.
k) If GC can provide service for just £5, then it has £5 to use towards the break-even. The same mortgage calculator tells us that it would take around 20 years
Am I calculating that "cost of capital" element in the right way?
And does anyone have a better idea of how much it might cost GC for core interconnect and admin per month?