FTTN vs FTTP (3): is FTTN now better value than FTTP later?

[Best viewed for iPhone in Reader view.]
NBN Co. kindly responded to my analysis, after a Gizmodo request, saying "speed of install and deployment being of greatest importance":

“Our priority is to provide access to the NBN to all Australians as soon as possible in the most cost-effective way with an upgrade path to meet future demand. A faster rollout of the network leads to earlier activations and revenue opportunity.”

“A full Fibre-to-the-Premises rollout will take significantly longer to complete than the Multi-Technology approach. This means delayed revenue opportunity and an inability to take advantage of a ubiquitous network in the next four years.”

Competing Value Demands in the NBN
There are competing value demands in these statements. Let me untangle them. Value types include:
1. Access/Community: to all Australians.
2. Time: as soon as possible
3. Cost: in the most cost-effective way
4. Flexibility: with an upgrade path to meet future demand.
5. Cost/Time: A faster rollout means earlier activations and revenue
6. Time: FTTP is slower to roll out.
7. Time/Cost: Delay in FTTP means delayed revenue
8. Community/Time: lose advantage of a ubiquitous network in four years.

NBN is complex because of these competing value dimensions. A few I can ignore because there is no data to analyse, and estimates are likely to vary substantially. For instance, what is a ubiquitous network worth? How much does a flexible upgrade path cost, both in time, $$ and complexity of systems? What a Government does is set priorities for which type of value is most important. The instructions to NBN Co from the Government set these priorities.

It is possible for me to analyse the Time vs Cost aspects and comment on the "most cost-effective" statement. Two ways of assessing Time vs Cost are: (1) Peak Cash, how much will the Govt have to pay to build and run the network, and (2) Time value of money, that is $100 paid today is not the same as $100 paid in six years time, if you take interest into account you could earn on the money elsewhere.

My previous posts already tell us about Peak Cash. On the figures previously provided FTTP generates more cash than FTTN after six years, if they are installed at the same time.

NB: Also amended figures in first post for a calc error. See original post for details. Overall outcome $ per HH pa appears about the same. There is however a substantial negative effect on FTTN GDP, since both OPEX and Revenue are reduced, doubling the impact on GDP.

1.Peak Cash
From the last post, you can show how much cash is generated by FTTN, FTTP at Yr 10, 20 and based on how much FTTP delay there is (0,2,4,6,8). You can display this graphically to show in which instances FTTP or FTTN is superior.

Negatives in brackets. Rounding. Figures are in $thousands; (Rev - OPEX - CAPEX) total $$ accumulated up until that year. Depreciation excluded. Shaded colour the best performer for Peak Cash.

	Delay = 0yrs		2		4		6		8
NBN Co. CASH	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Yr 10	(1.4)	0	(1.4)	(0.9)	(1.4)	(1.8)	(1.4)	(2.7)	(1.4)	(3.5)
Yr 20	(0.7)	4.3	(0.7)	3.4	(0.7)	2.5	(0.7)	1.7	(0.7)	0.8

Figure 1. Cash created(consumed) by FTTP, FTTN at different FTTP delays. Superior outcome shaded. Outcome for one household eg 4.3 means $4,300 cash generated for NBN Co from NBN services (Revenue less Opex less Capex). A 0 means all CAPEX paid back with Revenue at Yr 10 - the breakeven point.

The table shows, using NBN cash as a proxy for benefit:
- FTTP is superior regardless of delay once reach Yr20.
- FTTN is superior at Year 10 so long as there is four years or more delay to install FTTP
- overall FTTN wins in three scenarios, while FTTP wins in seven.

The same analysis can be done looking at GDP. GDP calculate as Rev + OPEX + CAPEX plus Profit/loss of NBN Co. This reflects total economic activity generated by the NBN. This does not account for multiplier effect (extra benefit through more people using NBN. I have previously estimated that benefit at 1.5% GDP per year. This multiplier is likely to make only a small difference in this case.

	Delay = 0yrs		2		4		6		8
GDP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Yr 10	12.8 / 10**	18	12.8 / 10**	15	12.8 / 10**	12	12.8	9	12.8 / 10**	6
Yr 20	26 / 20**	32	26 / 20**	29	26 / 20**	26	26 / 20**	23	26 / 20**	20

Figure 2. GDP compared by FTTP, FTTN at different FTTP delays. Superior outcome shaded.

Note: ** indicates revised GDP from prior post for FTTN OPEX and Revenue over 1.3, rather than pa. There is a significant impact on GDP, since both Revenue and OPEX are reduced having a double impact.

The table shows, using GDP as a proxy for benefit (undiscounted)(using revised figures):
- FTTP is superior regardless of up to eight year delay, by Yr20
- FTTP is superior at Yr10, so long as delay is no longer than four years.
- FTTN is superior when delay is six or eight years to install FTTP.

2.Time Value of Money
I have updated the model to include a reduction in value of cash the later it is received. So $100 received in ten years is worth less that $100 received today. The difference is the interest rate or discount rate for receiving the money later. I redid the above cash numbers using various discount rates - 0% [same as above], 1%, 3%, 5% and 10%. What rate should be used depends on what the NBN pays to borrow money. Government usually has a lower rate than business. Business could use a 10% rate, while Government might use a 3% rate.

If you discount all the cashflows, a positive cashflow indicates a project worth doing, while a negative would not be. When comparing two projects, you prefer the project with the higher discounted cashflow. I have compared FTTN and FTTP on this basis, and updated the model to include these calculations. This is a bit complex, so there is some chance for error. All errors are mine.

The below tables are results from the model, publically available at: https://dx.doi.org/10.6084/m9.figshare.2008689.v1 The Time Value of Money calcs were added in Version 2 of the model.

	Delay = 0yrs		2		4		6		8
Yr 10	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
0%	(1.55)	(0)	(1.55)	(1)	(1.55)	(1.8)	(1.55)	(2.7)	(1.55)	(3.5)
1%	(1.6)	(0.3)	(1.6)	(1)	(1.6)	(1.8)	(1.6)	(2.5)	(1.6)	(3.2)
3%	(1.6)	(0.7)	(1.6)	(1.3)	(1.6)	(1.8)	(1.6)	(2.3)	(1.6)	(2.8)
5%	(1.7)	(1.0)	(1.7)	(1.4)	(1.7)	(1.8)	(1.7)	(2.1)	(1.7)	(2.4)
10%	(1.8)	(1.7)	(1.8)	(1.7)	(1.8)	(1.7)	(1.8)	(1.7)	(1.8)	(1.7)

Figure 3: Discounted cash generated by one FTTN or FTTP household at Yr 10, given delay of installing FTTP. Shaded column indicates better outcome.

From this table you can see, at Yr 10:
- FTTP is superior while delay is less than four years
- FTTN is superior when delay to get FTTN is four years or more.

	Delay = 0yrs		2		4		6		8
Yr 20	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP	FTTN	FTTP
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
0%	(1.0)	4.3		3.4		2.6		1.7		0.8
1%	(1.1)	3.5		2.7		1.9		1.1		0.5
3%	(1.3)	2.0		1.5		0.9		0.4		0
5%	(1.4)	1.0		0.6		0.3		0		(0.4)
10%	(1.6)	(0.7)		(0.7)		(0.7)		(0.7)		(0.7)

Figure 4:  Discounted cash generated by one FTTN or FTTP household at Yr 20, given various delay of installing FTTP. Note: FTTN same for any delay to FTTP.

From this table you can see:
- in Yr 20 FTTP is superior regardless of delay, and regardless of discount rate.

GDP Calcs (adjusted for time value of money) to follow.... in the next post...

FTTN vs FTTP (2): Fast, cheaper, sooner vs Do it once. Do it right.

NB: Update 7, 8 Jan 16
There is a calc error** that I have amended for in the below figures. See more here. Revisions indicated with **.
==Original post
Last week,  said on 7.30 Report: Leigh Sales posed an NBN question
"So why then do you continue to back a broadband network that relies on a decrepit copper network?" ie FTTN

The Australian PM, Malcolm Turnbull in response said "under the approach we are taking to the NBN, we will get the network completed six to eight years sooner than it would be under Labor's proposed method and $30 billion cheaper or at less expense to the Government, which makes broadband more affordable."

In a previous post, I compared FTTP and FTTN assuming the networks were available at the same time. Here I would like to compare where there is a delay in the availability of FTTP at a household.

Model
I created a model to compare the costs and benefits of FTTP and FTTN, and accounted for the delay.
The CAPEX, OPEX and Revenue come from recently leaked NBN Co. estimates to replace ailing Optus HFC cable with either FTTN or FTTP. All these figures are generated for a single household. To get to a national perspective, multiply the outcome by 2.5M households ie 10M total households by 25% FTTN rollout.

I use four comparisons:

• sales generated over time
• cash generated / expended over time
• profit or loss generated by NBN Co over time, and
• GDP impact ie Sales (customer benefit), OPEX (supplier benefit) and NBN Co profit/loss (shareholder benefit).

The results of the model, show two time frames, after Year 10, and Year 20 for a variety of delays between arrival of FTTP - Yr 0 (at the same time), Yr2 , Yr 4, Yr 6, Yr 8. The last two scenarios being the ones suggested by the PM. The Year 10 and 20 scenarios assume that revenue, and OPEX are consistent over the 20 year timeframe.

FTTP Revenue: $785pa OPEX: $350pa, CAPEX: $4,400
FTTN Revenue: $640pa OPEX: $570pa. CAPEX: $2,100
(NB:** Now revised to FTTN OPEX $440pa Revenue $490pa - amended figures below.)
These figures come from the NBN Co, Optus HFC replacement slides from Delimiter, as discussed in the earlier post.

Output of the Model
All figures in thousands of dollars. Negatives/losses in brackets. Some rounding to whole numbers.
Figures derived from model linked above. Model is in OSX Numbers, and translated in xls.
Revised** numbers only affect FTTN figures. FTTN Revenue / Opex down $150pa, $130pa. But some rounding errors when adding together.

FTTP commences at Yr 8: (Old/Revised**: not amended if diff < 10%;^)

Yr 10	FTTN	FTTP	Yr 20	FTTN	FTTP
GDP	12.8 / 10**	6	GDP	26 / 20**	20
Sales	6.4 / 5**	1.5	Sales	13 / 10**	9
Cash	(1.4)^	(3.5)	Cash	(0.7) / (1.0)**	0.8
Profit/(Loss)	(1.4)^	(1)	Profit/(Loss)	(0.7) / (1.0)**	1.7

FTTP commences at Yr 6: (Old/Revised**)

Yr 10	FTTN	FTTP	Yr 20	FTTN	FTTP
GDP	12.8 / 10**	9	GDP	26 / 20**	23
Sales	6.4 / 5**	3	Sales	13 / 10**	11
Cash	(1.4)^	(2.7)	Cash	(0.7) / (1.0)**	1.7
Profit/(Loss)	(1.4)^	(0.5)	Profit/(Loss)	(0.7) / (1.0)**	2.5

FTTP commences at Yr 4: (Old/Revised**)

Yr 10	FTTN	FTTP	Yr 20	FTTN	FTTP
GDP	12.8/ 10**	12	GDP	26 / 20**	26
Sales	6.4 / 5**	5	Sales	13 / 10**	12.5
Cash	(1.4)^	(1.8)	Cash	(0.7) / (1.0)**	2.5
Profit/(Loss)	(1.4)^	1	Profit/(Loss)	(0.7) / (1.0)**	3.4

FTTP commences at Yr 2: (Old/Revised**)

Yr 10	FTTN	FTTP	Yr 20	FTTN	FTTP
GDP	12.8/ 10**	15.2	GDP	26 / 20**	29.1
Sales	6.4 / 5**	6.3	Sales	13 / 10**	14.1
Cash	(1.4)^	(0.9)	Cash	(0.7) / (1.0)**	3.4
Profit/(Loss)	(1.4)^	1.7	Profit/(Loss)	(0.7) / (1.0)**	4.3

FTTP commences at Yr 0: (Old/Revised**)

Yr 10	FTTN	FTTP	Yr 20	FTTN	FTTP
GDP	12.8/ 10**	18	GDP	26 / 20**	32.2
Sales	6.4 / 5**	7.8	Sales	13 / 10**	15.7
Cash	(1.4)^	0	Cash	(0.7) / (1.0)**	4.3
Profit/(Loss)	(1.4)^	2.6	Profit/(Loss)	(0.7) / (1.0)**	5.2

Analysis
What these figures show, is that:
- FTTP is much more profitable for NBN Co. than FTTN, even when running eight years later. Profit in this case is Revenue less OPEX less Depreciation, where FTTN is depreciated over ten years, and FTTP is depreciated over 25 years. FTTN never makes a profit, nor generates positive cashflow even after 20 years. There is a cash benefit relative to FTTP though. Roughly $2100^ is saved in the case where FTTP starts eight years later than FTTN. But by Yr 20, FTTP has generated $1500 ($1800**) more cash, for the Yr 8 scenario. (Unchanged by Revision**).
- FTTP generates as much GDP as FTTN, so long as FTTP is no more than four (eight**) years later [Revised **]
- the PM is correct. when FTTP is six or eight years later than FTTN, greater customers sales and GDP is generated by FTTN. But a four year delay, makes the outcome by Yr 10 and thereafter almost identical. (Revised**: FTTP generates as much GDP as FTTN, even if eight years late at Yr 20).
- FTTP is generally superior to FTTN whenever the gap between availability is less than four years.
- none of the FTTN scenarios is profitable for NBN Co.

The Yr 10 - 20 figures must be more suspect for FTTN revenue, since the likelihood of revenue stability after the ten year useful life of the FTTN network (especially relative to the FTTP network) must be suspect. The FTTP is upgradeable for the foreseeable future, and likely to Yr 20.

Next
The next step is to compare the $30B statement. Can the PM's statement that $30B is saved by using his MTM (ie FTTN, HFC) rather than FTTP really amount to a $30B saving? That will have to be addressed in the next post.

FTTP vs FTTN; when is spending $4,400 better value than spending $2,100?

NB: Update: 7 Jan 16. 
The Delimiter comment picked up a calc error** in the below post.
I did allocate the FTTN costs/revenue over 1 year not 1.3 years, which inflates the OPEX pa and the Revenue pa for FTTN. The total diff FTTN vs FTTP being about the same, as the Rev and OPEX changes offset. Makes the OPEX diff $5 per month, and the Revenue $25 per month in favour of FTTP over FTTN. So about the same difference overall. Great to see Delimiter readers paying so much attention to the detail. Revisions identified below with **.
Thanks to david 04/01/2016 at 3:55 pm at the Delimiter comments for the catch.
== Original post

The National Broadband Network (NBN) is Australia's plan to connect all Australians to faster broadband. The current Liberal/National government plans to connect about 25% of premises to cheaper to install ($2,100 per household), faster to roll out FTTN. The previous Labor government aimed to connect 93% of premises to more expensive to install ($4,400 per household) and slower to roll-out FTTP.

ANALYSIS
It costs $4,400 to install fibre to the premises (FTTP) but only $2,100 to install fibre to the node (FTTN). Recent figures from NBN Co suggest that when the OPEX (Operating Expenses) paid per year to run these services and Revenue generated from these services is taken into account, then FTTP may be better value than FTTN in as short a period as 6 1/2 years. See the Graph below, which shows Cash generated by FTTP exceeds that generated by FTTN after 6 1/2 years. The graph shows total costs for FTTP and FTTN (including CAPEX and OPEX) become equivalent ten years after installation. Coincidentally, the graph shows FTTP breaks even (total revenue exceeds total costs, including CAPEX), at the same time, after ten years. The equivalent breakeven time for FTTN is 30 years, using the numbers below. This graph does not take into account build time, which I will deal with in a second post. **Cash impact of graph unchanged.

Model online to download at DOI: https://dx.doi.org/10.6084/m9.figshare.2008689.v1

I did some analysis on the recently published HFC slides (pdf; from Delimiter's 25.11.15 page) which compare FTTP and FTTN Capex, Opex and Revenue. I tweeted them recently (on 2 Dec; first, second, third).

Click on image to enlarge 

DATA
The HFC slide analysis indicates:  FTTP $20pm (per household) less OPEX; $10pm more REV (per household) than FTTN. With a $30 per month financial benefit, a $2,300 CAPEX diff pays for itself in 76mths (6 1/2 years). The  $2,300 CAPEX difference is FTTP $4,400 CAPEX/hh, less FTTN $2100 CAPEX/hh (per household). (NB: Calc error Revision**: FTTP $90pa per houshold less OPEX, $300pa per household more Revenue than FTTN).

The analysis is based on: 350k households in HFC slide (see image)
FTTP CAPEX $4400/hh | OPEX $125M pa | REV $275M pa
FTTN CAPEX $2100/hh | OPEX $200M pa | REV $225M pa (NB:** This should be over 1.3yrs.)

If you work out these total costs and revenues per household, that equates to:
FTTP CAPEX $4400 | OPEX $350 pa / hh | REV $785 pa / hh
FTTN CAPEX $2100 | OPEX $570 pa / hh | REV $640 pa / hh  (NB:** Opex $440 pa/hh Rev $490 pa/hh)

This data suggests FTTP is better value than FTTN when you take into account OPEX and Revenue after 6 1/2 years. FTTP is not only cheaper to run per annum (OPEX $220 less for FTTP; $570 vs $350 i.e. close to $20 per month), but generates more average revenue ($785 vs $640, close to $10 per month). This difference totals about $30 per month FTTP > FTTN greater margin per household for NBN Co. This is a total net benefit of $360 per household per year for using FTTP over using FTTN. The CAPEX difference of $2300 ($4400 -  $2100) would be earned back in 76 months i.e. $2300 / $30. Over 25% of say 10M households, that works out in total to be a benefit of $900M per year ($360pa * 10M * 25%). So over the say ten year life of FTTN, the benefit is approaching $9B total. The longer FTTN remains in place, the greater the foregone benefit for not switching to FTTP. (NB:** OPEX $90 less for FTTP; Revenue about $300 more for FTTP; diff about $30 per mth).

This annual and total benefit does not take into account extra CAPEX expense to replace the FTTN with FTTP. This would be an extra difference between FTTN and FTTP.

Thus, assuming these figures are correct FTTP would pay for itself, compared to FTTN within 6.5 years, according to NBN Co's numbers on the slide linked above, based on differences in Opex and Revenue, regardless of nearly 100% greater CAPEX on FTTP.

But this is the first time the HFC slide has brought all those numbers easily together. Such information could have been presented in the cost benefit analysis but these numbers tell such an interesting story, that surely I would have remembered that.

Summary: It makes sense to spend $4,400 CAPEX on FTTP (rather than $2,100 on FTTN CAPEX) when the OPEX and Revenue make the margins much more favourable for FTTP than for FTTN. The OPEX and Revenue figures from the HFC slide indicate about $30 per month margin benefit (OPEX plus revenue difference) for FTTP over FTTN or $385 per annum. This margin benefit makes FTTP more attractive than FTTN after 6 1/2 years of installation.

old/Revised **	FTTN	FTTP
CAPEX per HH	$2,100	$4,400
OPEX TOTAL pa	$200M	$125M
OPEX per HH pa	$570/$440**	$350
Rev TOTAL pa	$225M	$275M
Rev per HH pa	$640/$490**	$785
Margin per HH pa	$70/$50**	$435

My experiences in the innovation sector; challenges, advantages (CC-BY)

It's innovation week in Melbourne next week, and this is my blogpost contributing to that event. So here are a few reflections on my time involved with Innovation.


 Reflections
First, I'll paint a little context about me. I work for ANDS[1], a Federally funded innovation project, to invest in the research data infrastructure of the 21st Century. ANDS encourages researchers to better manage and share research data, and universities to manage research data as an asset. I wrote my Innovation PhD at UQ Business School about understanding innovation in a complex dynamic environment, looking at how and why consumers switched to smartphones[2]. See more of my work and career at LinkedIn[3].

Challenges
Innovation is not simple and easy, involves seeking answers to hard questions, and working towards building a better world. This takes time and effort, and sometimes slow progress. My work relates to industry, research, policy and data and linking all together in a continuing dialogue.

My industry work at ANDS is about helping Universities to transition to managing research data as an asset. This involves training, discussions, and community events. Such events are where people get supported with knowledge delivery, skills building and gently building the business case for ANDS work. We see ANDS work as an innovation that creates value for Universities, researchers and the nation. As a value specialist, I am always pushing for a deeper understanding of what value means for ANDS and those we engage with. This work supports ANDS goal of "more valuable data for Australian research".

About 10% of my time, is spent on research where I focus on questions like: how to measure innovation and value creation? How to manage innovation and value creation? This is tricky since value is much more than tangible assets, and finding ways to measure the intangibles is challenging. See my work on dimensions of value[4]. I found 12 dimensions, such as time, simplicity, need and reliability. This work also involves talking to industry, and other innovation academics (for example, Prof Paul Jensen, Unimelb, Prof Jason Potts, RMIT, A/Prof Tim Kastelle, UQ Business School). I am also working to encourage an ongoing forum, like the ANDS Communities events, to bring Industry, Academics and Government into a regular discussion. I call such a forum, the VCIPP[5] (Victorian Council for Innovation and Public Policy), to explore positive steps in Victoria to better understand, manage and exploit innovations. This is similar to the Victorian Labor policy[6] for Innovation.

Lastly, I am very interested in helping Innovation policy people think about innovation as a complex, dynamic system. Thinking about innovation this way means you need complex concepts like value creation to help understand that type of innovation. Trying to expose where value is created leads me to work creating public datasets that researchers can mine for such information. I see the ATO (Australian Tax Office) as a key data curator of relevant data. Data such as revenue and profit data by industry, location and for both companies and individuals are important proxies for innovation. The company data is public[7] and shows 12 years of Australia's growth over 250 industries. I am working with the ATO to get access to individual data, hopefully by postcode, but more likely by region, where I can show growing and shrinking industries by location as a proxy for innovation.


Advantages

Innovation is a difficult but important topic to understand. Many resources are available to draw on, such as Government policy reports[8][9], Consulting reports[10], as well as academic literature [11], and podcasts discussing innovative industries[12][13]. Navigating this mass of information, I use my Twitter feed to collect and record these useful data sources. This material is endlessly interesting but making sense of it is time-consuming. The world seems to be changing so fast, that our personal area of deep understanding seems to shrink year by year. Yet I am positive about how much difference motivated and interested people can make working together.

I look forward to Innovation Week as an opportunity to have many interesting conversations with many interesting people, to help make Victoria and Australia a better place, through learning, working and engaging around innovation.


For more, you can see my blog[14] which links to my academic writing, see me tweet innovation references on interest (@valueMgmt), or mail me at richard.ferrers@ands.org.au.

1. ANDS (Australian National Data Service) online at: http://www.ands.org.au
2. Ferrers, R. (2013) A consumer 'value' theory of innovation: a grounded theory approach. Online at: figshare. PhD thesis.http://dx.doi.org/10.6084/m9.figshare.680002
3. Ferrers, R. (2015). Online CV at: http://au.linkedin.com/pub/richard-ferrers/27/b1/603
4. Ferrers, R. (2014). What Consumers Value: Learning from Ten Years of Smartphones. Viewed online at: http://ssrn.com/abstract=2512068
5. Ferrers, R. (2015). VCIPP: a proposal for an ongoing engagement around innovation; Victorian Government, Industry and Academia. Online at: http://dx.doi.org/10.6084/m9.figshare.1613328
6. Andrews, D. (2014). Labor's Plan for Innovation. Online at: http://www.danielandrews.com.au/wp-content/uploads/2014/11/Labor’s-Plan-for-Innovation.pdf
7. Ferrers, R., ATO (2014). Australian Company Results by Fine Industry 2000-2012 per Tax Office. http://dx.doi.org/10.6084/m9.figshare.1254213
8. US OSTP (Office of Science and Technology Policy). Online at: https://www.whitehouse.gov/administration/eop/ostp
9. NESTA. Online at: http://www.nesta.org.uk
10. McKinsey & Co (2013). The Eight Essentials of Innovation Peformance. Online at: http://www.mckinsey.com/insights/innovation/the_eight_essentials_of_innovation
11. Research Policy. Online at: http://www.journals.elsevier.com/research-policy/
12. Asymco Critical Path Podcast. Online at: http://5by5.tv/criticalpath
13. Daring Fireball Podcast. Online at: http://daringfireball.net/thetalkshow/
14. Ferrers, R. (2015). Value Management: Innovation 2.0; http://valman.blogspot.com

Movie Value in an era of Piracy

Background: A close friend is a screenwriter with a feature film before Screen Australia. If the Screen Australia Board signs off in April, the movie will go into pre-production immediately to shoot in six months for an Easter release in 2016. They have funding from a major film corporation. The producer has given the writers a share of the producer's profit (a few per cent).
Update: The film is in post-production, with a release date in later 2016.

The film is a romantic comedy ensemble party movie.

The Problem: How does the film make money in a era of easy film piracy? [1] So I wrote a little analysis document thinking through some of the issues. Where I ended up was in thinking of the viewers as a community rather than purchasers. If there are lots of viewers who don't pay for the film, how can the film producers engage with those viewers and bring them into the community?

Recently I found on wikipedia, entries for social television and second screen. This is about community engagement around media events. Twitter for instance is crazy around live events, like the football World Cup, the SuperBowl, and shows like American Idol. But this event is a live event viewed once. A movie is a non-live event viewed by many people at different times. How can we bring the two types together? Social community media around many people watching an event all at different times.

The Solution: I foresee an app where viewers (including of pirate copies) can participate in a community, sharing messages (and audio), synchronised with the media event. This app will simulate the experience of being in a movie theatre, through text and audio, of watching a film in a group, in a crowd, in a theatre. I see three functions, synchronised to the film:
- add a text or audio comment (a few seconds), one word, or a few words
- link to buy/rent the film, and provide a message when the film is available at a viewer requested price (price discovery), to take advantage of the positive mood following viewing a film, to legally own the film
- share a review at the end of the film (text or audio); as the credits start to roll (a longer 30 second sound bite).

In practice: How to share the comments?
I see the text comments could form a subtitle track that flashes up on the screen. Subtitles could be the one word comment, which flash up very quickly, or the longer few word comments.
Subtitles could contain very many comments, so there should be a way to limit the number of comments, by location, by friends, by people following, by recommendation.

I see the audio track reproducing the social experience of seeing a movie in the cinema, with ooohs and ahhs and oh nos.... alongside the soundtrack of the film. The volume of these audio comments could fade in volume based on distance from the viewer (friends, location, recommendations).

Exploiting this idea
I see two ways to commercialise this idea. I pitched this idea to my wife who suggested taking it to the funding film corporation as an example of functions to include in an app for her film. The other option is to take it to a business which looks at many films and make it available as a function within their app, eg Gyde or IMDB.

Update: I pitched the idea to a major film studio, who said "we don't want to invest / assist in any product that improves the experience of consumers, who pirate [our] films".
Update 2: I pitched the idea to a VC, Angel Investor at the ALP Conference, and his response was #disruptive ideas are unlikely to get support from mainstream industry players, and are better exploited as a startup opportunity.
Update 3: I pitched the idea to the Launch Hackathon conference in San Francisco, Feb 2016. This blog post which has been private since Feb 2015, is now public to allow the Hackathon committee to scrutinise the project. This blogpost is the one pager I recommend to entrepreneurs to express their core business concept.

The contents of this blogpost are Commercial in Confidence, and in exchange for reading them confer rights of any exploitation of this idea, to a 10% ownership interest of such exploitation by this author.

Note
[1] (Some) Films are still making a lot of money and having many piracy downloads eg Captain America $714M sales | 0.7M pirate downloads, 22 Jump Street ($331M, 650k downloads), Guardians of the Galaxy ($333M, 1.35M pirate downloads). These films are aimed at a similar audience as the film before Screen Australia ($5M), compared to the $50 - $170M for the above Hollywood films. Piracy download data take from YIFY (yts.re), and Box Office data from boxofficemojo.com.

PhD in the Open... listing all my posts, views, comments, dates...

This is the 99th blog post here: and @notconfusing asked a good question:::

By Auregann (Own work) [CC-BY-SA-3.0  via Wikimedia Commons

@notconfusing -      Should I Do My PhD In The Open?

Some thoughts:
- my blog has attracted 25,000 views (Nov '14; 37k Oct '15; 50k May '16) since I started in 2007... [though there was an even pre-blog webpage here, now at archive.org], but the blog lets me count views...
- Stuff which didn't fit in my thesis had a home. When I went wow(!), I could put that information somewhere, honour it then not have to think about it again

eg Using the Fortune 500 as an indicator of innovation

- my supervisor said "writing is a way of thinking" so I had somewhere I could think out loud, on the blog. I could open up for comment and get feedback.
- my blog has attracted 200 comments.

See also my Twitter: @valuemgmt , LinkedIn: here , ImpactStory: here.

The posts below are mainly outputs. For methodology stuff, go to the pre-blog web archive here.
Now @notconfusing has asked me to list out the blog posts, so here they are:

1. Title:PhD in the Open... Au:Dr Richard Ferrers 0Comment count 0View count Date:2:59:00 PM {ie today}
2. Title:Visualising Discourse: The Discourse of 3G mobile in 3D Dr Richard Ferrers 0Comment count 0View count 2:52:00 PM {ie today}
3. Title:Define: value - What is value? Dr Richard Ferrers 0Comment count 8View count 10/8/14 
4. Title:What consumers value: lessons from ten years of smartphones (Draft for Comment) Dr Richard Ferrers 4Comment count 94View count 4/22/14 
5. Title:The ABCDE of Value Meanings; 12 value dimensions in smartphones Dr Richard Ferrers 0Comment count 59View count 3/6/14 
6. Title:Measuring innovation: tracing progress in Fortune 500 Dr Richard Ferrers 6Comment count 267View count 11/20/13 
7. Title:First postdoc papers on Value; which to tackle first... Dr Richard Ferrers 7Comment count 138View count 8/1/13 
8. Title:Understanding the changing needs of customers: Akoladeanalytics, measuring, Needs, practice, presentation, theory, value Dr Richard Ferrers 25Comment count 527View count 5/24/13 
9. Title:Measuring Innovation: National Value Management Dr Richard Ferrers 10Comment count 114View count 5/1/13 
10. Title:Beyond a linear model of innovation Dr Richard Ferrers 3Comment count 106View count 4/22/13 
11. Title:Set my thesis free... CC-BY... download the pdf... Dr Richard Ferrers 6Comment count 123View count 4/14/13 
12. Title:This blog in a picture: Wordlesimplify, visualize, Wordle Dr Richard Ferrers 7Comment count 179View count 2/28/13 
13. Title:Microsoft: looking internally for value...adapt, Economist, employees, Microsoft Dr Richard Ferrers 1Comment count 50View count 2/24/13 
14. Title:Most read postsmeasure, simplify, Summarise Dr Richard Ferrers 0Comment count 25View count 2/14/13 
15. Title:My thesis 'tis done... the end of the beginning... Dr Richard Ferrers 40Comment count 3113View count 2/14/13 
16. Title:Real-time value management: tools to support hackfestcomment, community, crowd, hackfest, live, management, social, Time, tweet Dr Richard Ferrers 0Comment count 16View count 2/6/13 
17. Title:A thesis in 100 wordssimplify, Summarise Dr Richard Ferrers 1Comment count 37View count 2/6/13 
18. Title:Innovating Innovation@mixprize.org: Judging begins Dr Richard Ferrers 3Comment count 125View count 1/10/13 
19. Title:Value Management in action: NBN Co. talking to Whirlpool Dr Richard Ferrers 5Comment count 97View count 12/13/12 
20. Title:Innovating Innovation Challengechallenge, Hamel, HBR, leadership, prize Dr Richard Ferrers 0Comment count 22View count 12/9/12 
21. Title:Matisse embraces simplicityaesthetic, Apple, Art, Economist, emotional, Matisse, Simplicity, YouTube Dr Richard Ferrers 2Comment count 41View count 12/3/12 
22. Title:Aust. National Research Investment Plan embraces well-being Dr Richard Ferrers 1Comment count 28View count 12/3/12 
23. Title:Microsoft does Scholar.... Visualising Literature... Dr Richard Ferrers 0Comment count 30View count 11/22/12 
24. Title:How to write a PhD? Great PhD resources Dr Richard Ferrers 1Comment count 41View count 11/22/12 
25.  Title:Apple talks Value on Q4 Earnings call Dr Richard Ferrers 1Comment count 34View count 10/25/12 
26. Title:Higher Education facing value shift / disruption from online teachingdisruption, value add, value shift Dr Richard Ferrers 6Comment count 34View count 6/26/12 
27. Title:Unlocking Value; Macro value shiftbaby, value shift Dr Richard Ferrers 4Comment count 77View count 1/4/12 
28. Title:I submitted my PhD on 01.12.11: Now to family....informal Dr Richard Ferrers 1Comment count 25View count 12/20/11 
29. Title:Where does value fit in innovation? Dr Richard Ferrers 1Comment count 70View count 10/15/11 
30. Title:Complex Value Model Dr Richard Ferrers 0Comment count 47View count 9/18/11 
31. Title:Defining Value Dr Richard Ferrers 0Comment count 44View count 8/26/11 
32. Title:Strategyn gets value Dr Richard Ferrers 2Comment count 54View count 6/22/11 
33. Title:Who is doing Value Management? Dr Richard Ferrers 1Comment count 65View count 5/26/11 
34.  Title:Final Thesis Review presentationsconference, mediafire, PDF, references, versions Dr Richard Ferrers 4Comment count 562View count 5/17/11 
35.  Title:Value as a resolution of forces Dr Richard Ferrers 0Comment count 1218View count 5/15/11 
36. Title:Defining Value Meanings Dr Richard Ferrers 5Comment count 69View count 2/21/11 
37. Title:What is Richard Ferrers up to?!  Richard Mooney 3Comment count 78View count 2/11/11 
38. Title:Measuring Innovation in the Fortune 500 Dr Richard Ferrers 0Comment count 166View count 2/8/11 
39. Title:Thesis at a glance: Wordle.net Dr Richard Ferrers 0Comment count 98View count 1/30/11 
40. Title:NBN Value Management Dr Richard Ferrers 1Comment count 526View count 1/13/11 
41. Title:Is Cisco UMI (you-me) the NBN killer app? Dr Richard Ferrers 0Comment count 74View count 12/10/10 
42. Title:NBN Sensitivity Analysis: Cost Benefit Part II Dr Richard Ferrers 1Comment count 63View count 11/18/10 
43. Title:Value Management for Government Dr Richard Ferrers 0Comment count 49View count 11/9/10 
44. Title:What's important (and brief) in a (consumer) value model of innovation? Dr Richard Ferrers 0Comment count 50View count 10/17/10 
45. Title:If the NBN is the solution, what is the problem? Dr Richard Ferrers 1Comment count 73View count 10/14/10 
46. Title:What's important: in a (consumer) value theory of innovation Dr Richard Ferrers 8Comment count 1252View count 10/10/10 
47. Title:Updated NBN Pricing: iiNet breaks $1/Gb barrier Dr Richard Ferrers 2Comment count 344View count 10/5/10 
48. Title:The Overview Model: towards a (consumer) value theory of innovation Dr Richard Ferrers 18Comment count 545View count 9/30/10 
49. Title:How to sell the sizzle of the NBN? Dr Richard Ferrers 0Comment count 134View count 9/6/10 
50.  Title:Ten things I would do with 1Gbps NBN... Dr Richard Ferrers 0Comment count 152View count 8/11/10 
51. Title:Comparing VM with the literature Dr Richard Ferrers 0Comment count 49View count 8/9/10 
52. Title:Resistance to innovation: a value perspective Dr Richard Ferrers 0Comment count 87View count 7/11/10 
53. Title:Innovation: for profit or value? Dr Richard Ferrers 0Comment count 133View count 7/11/10 
54. Title:My Cost Benefit Analysis on the NBN Dr Richard Ferrers 8Comment count 865View count 7/5/10 
55. Title:NBN Early Pricing analysis - Value WATCH (June 2010) Dr Richard Ferrers 5Comment count 145View count 6/21/10 
56. Title:iPad ergonomics poor? How about a lap stand? Dr Richard Ferrers 5Comment count 152View count 5/29/10 
57. Title:When innovation is bad...?!?! Dr Richard Ferrers 0Comment count 12View count 5/11/10 
58. Title:Revising results - AJETS vs now Dr Richard Ferrers 0Comment count 8View count 4/15/10 
59. Title:Institute of Value Management Dr Richard Ferrers 0Comment count 30View count 4/14/10 
60. Title:The Economist debates Innovation Dr Richard Ferrers 0Comment count 9View count 3/26/10 
61. Title:FCC tests broadband barriers in America Dr Richard Ferrers 0Comment count 7View count 2/25/10 
62. Title:Tipping Point found in Value model: Attitude counts Dr Richard Ferrers 0Comment count 158View count 2/1/10 
63.  Title:Revised Value Models: Properties and relationships Dr Richard Ferrers 0Comment count 34View count 9/30/09 
64. Title:Community vs Function: value dimensions contesting Dr Richard Ferrers 0Comment count 36View count 9/29/09 
65. Title:Simplicity: a value dimension Dr Richard Ferrers 1Comment count 33View count 9/27/09 
66. Title:Value model: 2D or 3D? Dr Richard Ferrers 0Comment count 29View count 9/25/09 
67. Title:Youtube monetises free value Dr Richard Ferrers 0Comment count 25View count 9/24/09 
68. Title:France searches for value replacement for GDP Dr Richard Ferrers 0Comment count 26View count 9/18/09 
69. Title:Apple: 'great' 'amazing' - but variety spices life Dr Richard Ferrers 0Comment count 7View count 9/15/09 
70. Title:500 Human Values Dr Richard Ferrers 0Comment count 56View count 9/13/09 
71. Title:The Value of Information Dr Richard Ferrers 1Comment count 21View count 9/1/09 
72. Title:Worse is better, Less is more Dr Richard Ferrers 0Comment count 6View count 8/31/09 
73. Title:Simon de Beauvoir - value in words, truth Dr Richard Ferrers 0Comment count 20View count 8/30/09 
74. Title:BrandIndex Dr Richard Ferrers 0Comment count 13View count 8/30/09 
75. Title:Community Value: OpenStreetMaps (OSM) Dr Richard Ferrers 0Comment count 23View count 8/17/09 
76. Title:iPhone 3Gs - price analysis - Australian Phone companies Dr Richard Ferrers 0Comment count 12View count 7/30/09 
77. Title:Updating thesis - What is value? How does value work? Dr Richard Ferrers 0Comment count 84View count 6/16/09 
78. Title:Assessing the Value of the Australian NBN (National Broadband Network) Dr Richard Ferrers 0Comment count 97View count 4/13/09 
79. Title:Google : function vs aesthetics Dr Richard Ferrers 0Comment count 4View count 3/22/09 
80. Title:Fast Company 2009 Top 50 Most Innovative Dr Richard Ferrers 0Comment count 4View count 2/25/09 
81. Title:Measuring Innovation - UK Stylemeasurement Dr Richard Ferrers 1Comment count 10View count 1/19/09 
82. Title:Imagine. Create. Innovate. Dr Richard Ferrers 0Comment count 5View count 1/9/09 
83. Title:Upside Down-novation (Denovation) Dr Richard Ferrers 0Comment count 21View count 1/9/09 
84. Title:Measuring Innovation - Some 2008 reports Dr Richard Ferrers 0Comment count 4View count 11/10/08 
85. Title:Innovation and the Environment - Economist Debate Dr Richard Ferrers 0Comment count 6View count 8/21/08 
86. Title:iPhone Pricing (Out of this world) - Australia Dr Richard Ferrers 0Comment count 2View count 7/9/08 
87. Title:DRUID poster, Copenhagen Business School (17-20 June) Dr Richard Ferrers 0Comment count 21View count 6/5/08 
88. Title:User Innovation Conference Invitation - Aug '08 Dr Richard Ferrers 0Comment count 19View count 5/26/08 
89.  Title:2% GST to fund - Low Carbon Incentive Scheme - Your say Dr Richard Ferrers 21Comment count 54View count 4/4/08 
90. Title:Low Carbon Incentive Scheme Dr Richard Ferrers 1Comment count 13View count 4/3/08 
91. Title:DRUID Conference - Copenhagen, first Value Management Results paper Dr Richard Ferrers 0Comment count 7View count 3/10/08 
92. Title:Draft results release Nov '07 - another brick in the wall Dr Richard Ferrers 4Comment count 59View count 1/29/08 
93. Title:Virgin Broadband I - Value assessment in action Dr Richard Ferrers 1Comment count 37View count 10/21/07 
94. Title:Beyond Innovation Management - towards Value Management (for MINT) Dr Richard Ferrers 5Comment count 305View count 1/24/07 
95. Title:First industry Value Management document - released for comment Dr Richard Ferrers 0Comment count 37View count 11/26/06 
96. Title:Value Management not possible??? - bring on the impossible Dr Richard Ferrers 0Comment count 6View count 11/23/06 
97. Title:Anonymous comments = ON : building bridgescomments Dr Richard Ferrers 0Comment count 7View count 11/22/06 
98. Title:Adding a comment - let's get our heads together Dr Richard Ferrers 1Comment count 5View count 11/22/06 
99. Title:Value Management - Welcome Dr Richard Ferrers 0Comment count 8View count 11/21/06

Visualising Discourse: The Discourse of 3G mobile in 3D

This is a data release of a 3D visualisation of the data from the thesis.

[you should see embedded java above here...][Link to original page at archive.org]
This information is reposted from an archive copy kept on archive.org here (http://web.archive.org/web/20070830100808/http://www.thejoie.com.au/phd/kinemage/).

What you are looking at is 50,000 words of data analysed through Leximancer software, then processed through Pajek network analysis (free) software, and output as a Kinemage 'kinematic image', using JavaMage (95k) (free) software.

The data itself is made up of two types of information - interviews, and media information. The interviews (about 37,000 words) are interviews of 3G innovator / analysts and consumers, and the media information (about 15,000 words) is news stories from newspapers, and the financial statements of Hutchison (the Australian vendor of 3G) and Hutchison Whampoa (their ultimate owner). This data was stored in four directories and Leximancer has produced a single data point summarising each directory - TG_CONSUMER, TG_MEDIA, TG_ANALYST, and TG_FINSTATE. Out on its own is Q: which were the questions asked in the interviews which are excluded from connecting with the data of the responses.

The data is available to download at:
http://dx.doi.org/10.6084/m9.figshare.973063