image copyright: THINK ENGINEERING GMBH
Beat Fahrni, a BSL MBA student, owns and runs THINK, a company structure that implements fast and innovative communication technologies and advises projects on the development of development zones, settlements, and villages. Discover how his “final mile” mindset helps local communities connect to advanced communication technologies, while maintaining sustainable perspectives for their future.
We often hear that sustainability will create numerous business opportunities. BSL pays special attention to the ways in which entrepreneurs can find (capitalize on?) these opportunities here and now and imagine new business models.
The idea of THINK, created and owned by Beat Fahrni, is a dedicated example of how an entrepreneurial mindset can transform a profit-oriented business paradigm into a responsible use of existing resources to develop the infrastructures that have the potential to redefine the future of local communities.
I have heard the word “Fiber optics” since I was a teenager, so I suspect it was existing for a long time. Yet, I am not sure people really know how it works. Can you explain that to us?
Basically, you have the possibility to transmit information by light waves. Almost exactly 30 years ago, they used it for the first time in Switzerland between two main office centers of telephone systems in Bern. They, Post Telegraph and Telephone (so called PTT’s), introduced this technology as they realized that between two points of presence, it was difficult to give more time slots to customers with the existing copper cables technology. They were looking at using the landline telephone services only for calls. They soon realized there was a maximum value of time available per cable. Having seen that it was possible to increase this time by giving up the copper technology, they started using light waves, which have an immense capacity to transmit information. Much faster speeds (speed of light) with smaller wires over a longer distance.
Since the first trial, fiber optics slowly but continuously evolved mostly on existing telephone networks. About 20 years ago, the PTT switched the internet for use on these networks. However, the current telephone networks were not developed to maintain steady connections, they were developed to have, on average, 3-minute connections and not more. The telephone networks were almost always overloaded by the internet data. The PTT realized they had to look for an alternative architecture and they developed a new type of inner network inside the existing telephone network with practically limitless bandwidth. Be that as it may, these inner networks remained very expensive. They realized it was more efficient to develop a separate network with serial connections, mostly used by big companies, for instance such as banks. This was the birth of separate networks inside each country as we know today. At the beginning, the cost of these networks were substantial, but today, with the amount of equipment that has been produced, has made the cost of equipment for these networks almost negligible. The price to connect a port that transforms light into an electric signal for computers to be able to read has diminished from thousands of francs to less than 30 francs, creating the possibility to expand existing networks.
Was Switzerland pioneering this technology?
No. The technology started with the Transatlantic Communication Cable. Before that, connections were made by satellite. You might remember that during a phone call 30 years ago, there was a delay between the end of your speech and the start of the answer. This delay was acceptable for private use, but it was not acceptable for business calls, for instance if you think of trading. The very start of fiber optics in communication was the setup of the Atlantic cables to connect the very important financial centers.
The separate networks still exist. I think the SBB (Swiss National Railways) has one, correct?
They actually have two. A red and a blue one. They need two to make sure that the connections never go down, network redundancy. Skyguide (Swiss air traffic control) also has more than one network. The Swiss highways also have a separate network. And, of course, the military have their own secure one.
What is the challenge with fiber optic connection in Switzerland?
Today, this is the question of the “last mile”, you called it “final mile”. The last 200-300 meters from a private home to the point of present, that can be a manhole, a cabinet on the street: this is where the connections are missing. The rationale is simple. We don’t have a post, telephone, and telegraph central administration in Switzerland anymore. Since we have ended this administration, development stopped. This is the reason why we now have a very good inner network serving big administration or big companies, but the universal access to it is unfinished.
At some point the idea was we don’t need a wire anymore; we can make everything by mobile connection. Yet, they learned about 3 years ago, or maybe a bit more, that it is not so simple in a country like Switzerland to cover the entire landscape with mobile connections. And the crazy thing is, that for each mobile antenna, you need separate electrical power, and a fiber optical connection. This, I would say, is a kind of misunderstanding caused by the marketing machine telling us you can make almost everything with mobile connections. We know that this is not true because mobile connections are failing reliability and sustainability dimensions. However, we have been told you can do everything with a mobile phone.
An exception is the habit when people enter a private space, is to connect to Wi-Fi access. Wi-Fi access is considered superior to mobile access.
There is however, something to keep in mind. Now in Switzerland, we have 4 mobile networks in service. This means to have to deploy and maintain 4 different techniques. If you think of the operational costs to maintain those techniques and add the operational costs of the copper lines that are still in service, then you realize there is a lot of room for optimization. The sustainable, reliable and performing way is to deploy a wire lines, including the last mile, which combine all together, this is the fiber optical connection.
Let’s take the example of BSL. Now we have a copper wired connection to a fiber optical point of presence, but we could have a fiber optical connection to the fiber optical point of presence. That’s the idea, right?
Yes, I haven’t checked your address, but I guess you don’t have a fiber optical head and fiber line in the BSL building. But, on the roundabout in front of the building, there is cabinet, and surely in that cabinet there is a fiber optical point of presence. The issue is: you need to ask a provider for an offer for a fiber optical connection. This will provide you with much more bandwidth, much more possibilities, and you will be set for the next 30 years.
In a city like Lausanne, what is the percentage of the companies which have a direct fiber optical access? 10% ? 50% ? 90%?
It depends on the address where you are. In Chavannes, they have not equipped every household with fiber optical, unlike other parts of Lausanne. That means you have to equip your building yourself, and usually that means, probably 70% of the companies have done so. If you ask for this equipment for a single building, prices are still quite high, but if you combine your services, the prices can sink.
I have negotiated individual accesses for a village, and the price has gone from CHF 3000.- to CHF 80.- per month. It is a matter of having the right discussion leading in the right direction.
Another example: a company in Interlaken asked me to help them. They gone for an offer to rent the fiber optical from Bern to Interlaken. They were told they could use a point of presence at the railway stations, about 300 meters from their office location.
You only must know where the adequate point of presence is, and that’s precisely what people don’t know. This knowledge allows the customer to ask for a correct offer by the provider.
There is a small village called Ligerz, a municipality in the Biel/Bienne region. I started there. I am the owner of 2500 meters of tubing there, and I am allowed to put fiber to 50 houses. With that, I was able to produce a financial model with which you are able to analyze every commune, and it gives you a first estimation. Normally, in a village like Chavannes, you should not have to pay more than CHF 1800.- for a household to fully equip with fiber optic access.
I can do that with every village and make a quick and precise estimation of the costs for the village to equip every household, how much it would cost them, and how they can finance it.
Let’s take a typical village that has a school, a church, a city hall, and maybe 10 streets of houses. The village I have in mind is in the hilly part of canton the Fribourg. No big roads, no train station. What should we expect? One point of presence already maybe at the city hall? More than that?
This village has electricity. Maybe from Romande Energy or from Groupe E. The village can use their tubes to reach the next Swisscom fiber optical point of presence. In most cases, it should not be more than 10 kilometers away. These 10 kilometers can be covered with the available fibers of the electricity supplier. Then, for 300 households, we will need 16 fiber connections to make sure that each individual household get a synchronous 1 Gbit/s constant connection. This deployment is technically quite straightforward.
If I get you right, there are two problems to solve. Problem one is how to get a fiber optical point of presence in the village. For that, there is a fair chance that something already existing can simplify the process and make it affordable. Problem two is to equip the village itself. You therefore have to build those extra connections, and that’s probably where there is something to do, right? I doubt people in charge have the slightest idea of the work that has to be done, needless to mention the business opportunity.
Yes, these are exactly the two main issues to be solved. First, how the big pipe is coming to the village, and secondly, which is much more difficult, how to distribute to each household. The second is what I normally address. I don’t address long distances because these are mainly already solved. The shorter distance is a more delicate discussion because people think it costs too much. But I you look closely, and if you see what you have already, then there are a lot of resources which could be used.
Many existing tubes are available for fiber optic. You have to understand, fiber is very thin. You can have 200 fibers in a finger-thick pipe. You don’t need a big tube.
This is at times a real pain for a commune. They know that they do not have the proper documentation. Individual houses are documented, but don’t ask what is below the surface. For that, we have a newer solution in the form of a ground radar, which is able to look 2.5 meters deep into the ground, to see where there are manholes, that may not be visible, and where are the tubes.
It is clear that each commune has to do some studies upfront to see what it really means to lay down this last mile themselves.
What is most important is to make people aware that this is something they should start thinking about today. Because if people look to come and live in the village, they will ask what internet connection is available at the house. If there is not, then people get cold feet. Especially, because they also have no idea of the work that needs to be done.
To overcome this difficulty, we suggest to communes to conduct a survey to ask people how much they care about high-speed internet connection. Then, you can explain to people that if the commune runs a systematic connection, individual access will go down from CHF 2’000.- to CHF 500.-
So, the question is to know how financially interesting the investment can be for the commune. For that, you have a complementary solution, which is not technological, but comes in the form of software.
Basically, I started to develop the software because I wanted my first project to bring a plug and play solution. So, I started to cut down all the steps and the related expenses and build the project management side of the software. I listed the tasks to do and I mapped the existing resources digitally.
Based on this first part, I realized I had to start doing some estimations upfront. I just need to know how many plugs I had to set up, a start date, what is the delivery deadline, and over how long is the amortization.
I can use the figures I come out with to benchmark. There are four values in Switzerland that you can compare with. In cities and normal agglomerations, you should not be higher than CHF 2000.- per individual household access. On some more rural places, you can expect to reach CHF 3’500.- per plug. A bit further out in farmlands, you can see values up to CHF 6’000.-. And for unique connections, on a certain peak, it is about CHF 10’000.-.
My software will give a very precise estimation of those costs in a given place.
With your solution, is there a difference you do in those prices?
Yes, what you can do is go and say: I am now distributing the fibers. I am going to discuss with all the providers what they contribute for either the entire village – normally big providers like Swisscom or Sunrise take the entire village – or just a part of the village. If I have that, I can say: your costs for the village are about “x”, but you can be funded by the providers who are ready to pay to subsidize the network to be able to use it. For instance, the providers can pay an amount upfront, and then pay another amount once they start using the infrastructure. This is the normal way this could be happening. The providers get the return on investment by the money they charge monthly to the end-users.
You also mention another business model in which the village can be paid some of the money end-users pay to the providers.
Yes, the business model is the following. If the commune is the owner of all the tubes, until you are on your own land, you can have a contract. Thus, there can be a rental fee per meter. Normally, you can ask for 2 centimes per meter per fiber per month. It doesn’t sound like much, but in a commune with 2000 inhabitants, they may have around 70 kilometers of fiber, with 4 fibers in each tube. This generates a revenue for the commune each year, just from the rental of the tubing infrastructure. This is a model that is already in service in the distribution of electricity. This is nothing new. This is nothing fancy.
This means that part of the money that people pay to go on the internet remains in the village. That’s where you see a big opportunity for sustainable development. We see the possibilities. Can you recap that in a concrete project, or a success story?
Basically, it is like that. In the beginning, you need to have this pre-work made. This pre-work consists of seeing what you have, elaborating what you need and then you have to estimate what is possible to do. The idea is to bring the discussion to the table, so that the commune can vote on the project.
If the commune votes yes, the work can begin. You can take the workforce of the commune or the workforce of a company close to the commune. We prefer to do that. This way, you can get the work started with local resources. This brings jobs to local workers. Also, the infrastructure will belong to the commune and will have to be maintained by the commune, so it is important to create a local know-how. You can do that for the building of the infrastructure, but also for the work to connect the individual households to the new points of presence. Usually, we ask the electrical and digging companies to do this.
We are usually able to form project teams which are mostly with the people of the commune, and maybe with one or two specialists coming from us to make sure the promised way to go is possible. This is how you can form a team for the project with the people and the forces from the commune, so there is already some money coming back to the commune because you generate work.
How does this work financially? What exactly does the provider, let’s say Swisscom, pay? Is this a matter of negotiation?
There are two things. One. If the provider is Swisscom, they want to have all the customers, because they already provide the landlines to the customers. This is a copper network that has costs in order to be maintained, especially because Swisscom is losing the experience with these old networks. That means there is another negotiation possible: if you cut the entire costs of the copper network, then Swisscom can take this out of its books. This generates a revenue stream which can be used to finance the project. In a commune that is completely equipped with fiber optics, one could reduce OPEX costs by 60%. Providers won’t have any more points of presence of the copper lines to pay and they won’t rent space on the copper lines. This is a huge incentive for providers to help the communes cut the copper lines. It is much easier in a village to cut the copper completely than in a city where there are many contracts that depend on the copper line.
I see how you can generate short-term money streams. What is the situation with long-term money streams?
The possibility is the following and it is a third business case. The first is the funding by the providers. The second is the renting of the tubes. This one is the third.
In the third business case, instead of funding the construction directly by the commune using the subsides of the providers, the commune can hope to find investors who are looking at the long term. Let’s say for example, 30 years. It is a very secure investment as a village in Switzerland cannot go bankrupt.
The cost of the network is the critical part, and if you are able to optimize the cost, because you are using already existing infrastructure, then you are able to attract investors.
Out of this initial investment, you can develop new services, and if you think a bit ahead, you will see opportunities. A parking spot in a village, for instance, will no longer be just a parking spot. It must be managed to offer services, such as charging facilities for electric cars. Such smart parking spots will increase the attractivity of the village and create opportunities for more business. A café or a restaurant can benefit from parking places with electric chargers. If you have such forward-looking understanding of future services, you will see the need for an updated communication infrastructure immediately. Therefore, it is important to have a plan to create fiber optic networks.
The revenues generated by these smart services are a fourth business case.
We see why communes need to think different. And your company is there to help communes to think different. If you were to define your company, I see you have technological parts like the ground radar or the knowledge of the tubes, but you also have a very strong consulting part with cost considerations and revenue considerations. How would you define your company?
I don’t like the word “consultant”. I would say we are an agile company advising you and giving you some clear inputs to where you can develop. I am not just going to provide a report and then withdraw. If we come in as a company, we normally work with the entire village, we talk to the people in their language. We try to understand where the pain points are, where the pain is inside the village. Is there a fight going on? Do we have to neutralize something that is already happening? We want to get to the point where the people in the village have trust in our company.
If I say we have a ground radar and are invited to survey a village, like we did in October, we must observe the entire village, in this case, 400 manholes. We don’t drive around, we walk around. People come up to us and ask what we are doing. They start discussing with us and we openly explain what it is that we are doing. This gives us a direct connection to the inhabitants of the village. We simply help move people forward by bringing some competences in. We don’t say: “Look, we are the best.” We say: “We are just looking at what you have.”, and sometimes, people offer to come and help us. We are building closer relations with the people. We are known as the company who walked through the village, who has time to walk.
We want to bring competences to help the people develop what they have and craft their future. For that, we want them to understand why an infrastructure should be owned by a village. You need to hold the infrastructure in your hands, if you want to benefit from its value. Communications pipes are just as essential as water pipes or electricity pipes. I train my people so they have the ability to discuss this with the people.
We see the mission of your company and see the “agile advice” you mention on your website. When I listen to you, I think the idea of the extra mile is a good image to explain what you do, because not only do you have to build the extra mile to connect the villages, you also walk the extra mile, called “final mile”, with the community, so they understand what their best interest for the future is. By building these connections, you also wire their minds differently.
You also build the final mile within yourself; transitioning from engineer to entrepreneur. Can you tell us about your journey?
First and foremost, I am the son of an entrepreneur. My father built his own electrical company, so I have a bit of this mindset. I learned from the way he calculated when we introduced the first computer in his company back in the nineteen eighties. I was impressed that he was able to, just by counting the number of hours, to define how much equipment he need. This got me thinking: there seems to be some logic behind this.
I started electrical engineering because it interested me. Then I moved to the software world. I introduced software solutions in the telephone system. I worked for a Canadian company, Northern Networks, where I learned about the different scenarios and different network layers. I was confronted with all the developments, from the dedicated lines to the internet today. I then transitioned into a company that produced traffic messages in Switzerland: Within that company, I realized there is data in the lines, and data is more interesting than just physical lines, as it is what is in the line that can serve dedicated solutions.
After 20 years of work in the corporate world, I thought I had seen many opportunities and decided not to step in. I decided that it was my last chance to start something on my own as in Switzerland, you have the freedom to play a little bit until you are about 55. After that, you have to be more careful, because of some pension issues.
At age 49, I took almost everything I had and started my entrepreneurial career. I wanted to take the chance to analyze this last mile, because I knew from my experience that we were well behind in Switzerland. So, that’s how I found the need for me to transform myself from an engineer to somebody who understands not only the technical side, but also the financial implications of business.
Then, I looked around for opportunities to see how I could make this could happen, and I decided that a school like BSL was, for me, the best consulting machine. That’s the reason why I chose to step back in to education after 20 years, and to step out of my comfort zone, by sitting at the educational table, listening and being a student once again. This helped me to transform from an engineer into what needs to be done to drive something forward.
I have one final question. There is one element, namely sustainability, that I don’t see in the story. Yet, it is a strong driver now. When did that appear in your personal journey?
I realized that my four kids had no link to any technical issues. They were born with technology, and they use the tools without thinking about what’s behind them. They think everything is simply there and available, that there is nothing, there is no huge effort.
I knew from my experience that building the internet was not so simple. I knew it consumes a lot of energy. We cannot shut all this down, but we can look at what we can do better than what we have done in the past. This means just doing it with fast money is a bit of a pain.
At that time, I owned a seven-floor building and I saw how it was generating money, without people noticing who was doing the job, hence without noticing the business opportunities. I thought something deeper could be done.
I started by identifying the existing resources in villages to bring some “new air” into villages. I saw that there were huge discrepancies in the equipment of the houses. When I was working, I made tremendous effort to help in correcting these discrepancies within companies. I thought it should be possible to do this also for normal households, but not with providers eating up all the money.
I went to Sweden, and there I saw that these projects were supported by the community. This facilitated the creation of some sort of new technology. Everybody contributes.
It is this kind of this idea that gave me the additional vision to help maintain the very nice land in Switzerland. Instead of adding more and more concrete, we should reuse what we already have and inject some new technology instead of increasing antennas. These were the hints that led me to sustainability considerations: my kids are using the technology, and we shall all do more and more, but we should avoid overbuilding.
I like to look forward, and I think we should realize how much we can achieve by putting together what we already have, just like a Lego. Put the pieces together in a new way and do something new. We have it.
The talent is to bring the pieces together, and with that interview, we can really see what pieces you’ve brought together and how you brought them together.