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GINA WP2.2
Business Model and Initial Commercial Feasibility StudyNovember 5th 2009
Dublin
GNSS for INnovative Road Applications
GNSS for Innovative road Applications
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Progress Status of D2.2 – Business model and initial commercial feasibility study
19/04/23 Page 2GINA WP2 – Analysis of Applications / Services
• Service concept definition
• Trials sample definition
• Competitive scenario analysis and framework
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
Progress status Remarks
• Completed
• Partnership strategy for EETS provider developed in WP4.2
• EDAS role to be analysed
• Completed
• Completed
• Preliminary costs estimation done with Giroads reference values: analysis to be refined with costs inputs from GINA partners – Capex to be evaluated
D2.2 Chapters
• To be completed after cost structure consolidation
• Defined scenarios for sensitivity analysis
• Completed
• Completed
• Revenues generation potential
• Cost structure definition
• Profitability
• Sensitivity scenarios
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Content
19/04/23 Page 3GINA WP2 – Analysis of Applications / Services
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
• Revenues generation potential
• Cost structure definition
• Sensitivity analysis
Page 420091105_GINA_PM2_WP2.2_v0 GNSS for Innovative road Applications
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High Level Architecture
CENTRAL INFRASTRUCTURE
SERVICE CENTER
GALILEO/ EGNOS
OBUsSERVICE CENTER
SERVICE CENTER
EXTERNAL DATA
SOURCES
Mobile Network
(GPRS/UMTS)
Internet secure
connection
The On Board Units receive the signal from the GNSS system and communicate through GPRS/UMTS signal with the Central Infrastructure, deployed to provide
all basic and common services to the system
Page 520091105_GINA_PM2_WP2.2_v0 GNSS for Innovative road Applications
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EGNOS/GALILEO OPERATING COMPANY
EETS PAN-EUROPEAN SERVICE PROVIDER
Key Economic Flows in Service Provisioning
OPERATING COMPANY
GNSS SERVICE PROVIDER
Guaranteed service
END USER/CUSTOMER(Private + Business)
Service bundle
Service fee
Fee per bundle
*When applicable for the specific type of Service according to Business Model definition
TOLL CHARGER1, 2…N
SERVICEPROVIDER
TELCO
Fee per subscriber
Payment for usage
Fee per subscriber*
Payment for usage
Payment for usage
INFRASTRUCURE OWNER
PUBLIC INSTITUTIONS
Service/product flows
Economic flows
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Content
19/04/23 Page 6GINA WP2 – Analysis of Applications / Services
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
• Revenues generation potential
• Cost structure definition
• Sensitivity analysis
Page 720091105_GINA_PM2_WP2.2_v0 GNSS for Innovative road Applications
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GINA High Level Value Chain
Regulation and Supervisory
Authority
Signal provisioning
and guarantee
Content generation
Service provider
Telecommuni-cation channel
Vehicle / OBU manufacturer
Customers
•GSA
•European commission
•States members
•Operating Company
•GNSS service provider
•EDAS Service Provider
•Roadmap databases
•Navigation algorithms
•Infomobility
•Turistic/ service DB
•Weather information
•Personal data access
•Entertainment
•Vehicle assistance
•Driver assistance
•Wireless transmission of telematics services
•Vehicle integrators
•Car manufacturers
•On Board Unit manufacturers
•Private clients (Consumer and Business)
•Institutional clients
•Road infrastructure management companies
•Police
•Municipalities
Enhancers / Facilitators
Important partnership for the Service Provider
Page 820091105_GINA_PM2_WP2.2_v0 GNSS for Innovative road Applications
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Key Players assessment
Regulation and supervisory authority
Signal Provisioning and guarantee
Content generators
Telco
Vehicle / OBU manufacturer
Customers
Role in the value chainPossible
enhancersPossible
partnership
EETS Service Provider
Public and istitutional clients
•To develop vehicle related contents (roadmap database, navigation algorithms, traffic DB…) and non-vehicle related contents (weather info…)
Standardization and enforcement
•To define the general legislative and regulatory framework, incentivising the use of GNSS technology in the road sector
•To guarantee the signal service
•To allow to EETS users to pay tolls in all EU with a single on-board equipment (OBE) and a single contract
•To make communication channels available at the required SLA
•To make available OBUs according to EETS requirements at decreasing costs
•-
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Content
19/04/23 Page 9GINA WP2 – Analysis of Applications / Services
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
• Revenues generation potential
• Cost structure definition
• Sensitivity analysis
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Potential market- EU Actual Members
19/04/23 Page 10GINA WP2 – Analysis of Applications / Services
• For the addressable market the Business Case has analysed the last available data relevant to the European market of cars, buses, light commercial vehicles, light, medium and heavy trucks, using CAGR of the last 4 years to project data till 2012 and an adjusted value to project data from 2012 to 2022.
• The analysis took into consideration the countries belonging to EU27.
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Forecast for circulating cars in Europe(2008-2022)
19/04/23 Page 11GINA WP2 – Analysis of Applications / Services
0
100
200
€300M
2008
235
2009
240
2010
244
2011
249
2012
251
2013
253
2014
255
2015
258
2016
260
2017
262
2018
265
2019
267
2020
270
2021
272
2022
275
Germany
I taly
France
Great Britain
Spain
Poland
Netherlands
Others
• EU 27 cars market expected to increase from 235 Mln in the 2008 to 275 Mln in the 2022 with a CAGR equal to 1,13%
• Relative weight of the first 7 countries (Germany, Italy, France, GB, Spain, Poland, Netherlands) out of the total EU market decreases from 78% in 2008 to 75% in 2022
Source: Euromonitor + Anfac report February 2009
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Forecast for circulating LCV, Trucks and Buses in Europe (2008-2022)
19/04/23 Page 12GINA WP2 – Analysis of Applications / Services
0
10
20
30
40
€50M
2008
33
2009
34
2010
36
2011
37
2012
37
2013
38
2014
38
2015
38
2016
39
2017
39
2018
40
2019
40
2020
41
2021
41
2022
42
Germany
I taly
France
Great Britain
Spain
Poland
Netherlands
Others
• EU 27 commercial vehicles and trucks market expected to increase from 33 Mln in the 2008 to 42 Mln in the 2022 with a CAGR equal to 1,6%
• Relative weight of the first 7 countries (Germany, Italy, France, GB, Spain, Poland, Netherlands) out of the total EU market decreases from 78% in 2008 to 71% in 2022
Source: Euromonitor + Anfac report February 2009
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Market potential vs Penetration- Private segment
19/04/23 Page 13GINA WP2 – Analysis of Applications / Services
0
100
200
300
0
10
20
30
40%
2008
235,2
2009
240,0
2010
244,1
2011
248,6
2012
250,8
2013
253,0
2014
255,3
2015
257,6
2016
260,0
2017
262,4
2018
264,8
2019
267,3
2020
269,9
2021
272,5
2022
275,1
Data referred to EU27
GINAPenetration (%)
No. of carsin EU27 (Mil)
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Market potential vs Penetration- Business segment
19/04/23 Page 14GINA WP2 – Analysis of Applications / Services
0
10
20
30
40
50
0
10
20
30
40%
2008
33,4
2009
34,4
2010
35,6
2011
36,9
2012
37,3
2013
37,6
2014
38,0
2015
38,4
2016
38,9
2017
39,3
2018
39,7
2019
40,2
2020
40,7
2021
41,2
2022
41,7
Data referred to EU27
GINAPenetration (%)
No. of LCV, Trucks & Buses in EU27 (Mil) Light Commercial Vehicles (W< 3,5 tons)
Light- Medium Trucks (3,5<W<16 ton)
Heavy Trucks (W>16 tons)
Buses
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Content
19/04/23 Page 15GINA WP2 – Analysis of Applications / Services
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
• Revenues generation potential
• Cost structure definition
• Sensitivity analysis
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Price assumptions
19/04/23 Page 16GINA WP2 – Analysis of Applications / Services
• For the private segment, an all inclusive flat fee structure is assumed from the end customer side.
• On the operators’ side, since they can benefit from cost and investments savings, a fee per subscriber can be assumed.
• Since aggressive penetration pricing is a key success factor for the mass market diffusion in the consumer segment as highlighted in previous project (Vert and Giroads), the price can be in the range 6-15 €/month.
• For the business segment a more flexible approach shall be adopted due to the different type of customers to be served, spanning from large delivery companies operating on international basis with hundreds of vehicles to small companies operating on local basis with few vehicles.
• In the preliminary business model anyhow a flat fee is assumed for simplicity reason with a price in the range 100-130 €/month.
• Also for the business segment, on the operators’ side, a fee per subscriber is assumed.
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Revenue stream
19/04/23 Page 17GINA WP2 – Analysis of Applications / Services
0
5.000
10.000
15.000
€20.000M
2011
1.031
2012
1.940
2013
2.310
2014
3.510
2015
5.719
2016
8.609
2017
11.619
2018
14.313
2019
16.479
2020
18.097
2021
19.242
2022
19.772
Consumer BusinessPrice assumptions:
• Price of bundle package for Consumer segment decreasing from 2012 to 2022 from 10 to 6,5 €/month
• Price of bundle package for Business segment decreasing from 2012 to 2022 from 80 to 60 €/month
• Average fees from motorway operators equal to 12 €/year/customer flat from 2012 to 2022
PRELIMINARY
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Content
19/04/23 Page 18GINA WP2 – Analysis of Applications / Services
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
• Revenues generation potential
• Cost structure definition
• Sensitivity analysis
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Cost structure elements
19/04/23 Page 19GINA WP2 – Analysis of Applications / Services
• The cost structure is referred to the GINA Service Provider, i.e. the company that sells the service packages to the final customers by aggregating inputs of specific service providers.
• Costs are evaluated under the hypothesis that the architecture as a whole as well as the single system components change, in terms of costs and performance, with the number of final users.
• The Architecture cost structure assumes to have a “Smart OBU” in order to be compliant with Privacy issues. Main costs element are the following:
Telecomunication costs
EGNOS/Galileo Service costs
OBU costs
SG&A
Operating costs
Depreciation of capital expenditures
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Telco costs
19/04/23 Page 20GINA WP2 – Analysis of Applications / Services
• The communication channel among the OBUs and the main infrastructure will be done by GPRS/UMTS.
• Reports will be sent daily for each vehicle with only the RUC data (smart OBU). This optimizes bandwidth and server usage.
• It should be taken into account that VAS have different communication needs from RUC. Depending on the type of VAS there might be the need of a continuous real-time communication – which would considerably increase the cost for frequent users - (e.g. navigation, traffic information) or information which can occur on-the-spot (e.g. ecall) or can be dumped on a daily basis (e.g. PAYD).
• Communication among service centers will be through a secure internet access.
• For the business plan purpose the following assumptions are made:
Communication process will decrease with subscribers increase due to better tariff negotiation;
Business segment will require higher communication costs vs. consumer segment;
3 hours of communication time per day per vehicle (based on average time of private car usage of 2 hours per day and average time of business segment vehicle usage of 8 hours per day)
Increase factor of 2 for the communication time to take into account peak condition versus average situation
Average of 7 euro/month/subscriber for communication costs
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Signal operating costs and guarantee costs
19/04/23 Page 21GINA WP2 – Analysis of Applications / Services
• About the signal operating and guarantee costs, reference is made to GIROADS study relevant to EGNOS System operating costs, that provides the following figures:
• System operations costs between 30 and 35 million euros per annum (indicative cost allocation for the road domain between 3 and 15 million euros per year);
• Galileo Concessionaire costs for GNSS services equal to 1,5 € per annum per OBU
• EDAS costs have not yet been analysed: input from GINA partners for a cost estimation is necessary
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OBU costs
19/04/23 Page 22GINA WP2 – Analysis of Applications / Services
• Actual costs range for commercial OBUs spans from 175€ to 600€ but a precise benchmark among different vendors has to be carried out
• Price of OBU is highly depending on the overall market quantity since production costs are highly affected by scale economies
• Therefore actual costs/prices of OBU can be used only as reference since strong cost/price decrease is expected along the business plan horizon
• Besides, installation costs (actually around 60€/OBU) could drastically be reduced in case of partnership with car manufacturers since it can be supposed that cars commercialized in the future will be already equipped with an OBU suitable for EETS
• The actual assumption of the Business Case is that at regime condition the cost supported by the EETS provider will be the lease rate for an OBU costing 100 €, with a leasing of three years at 10% interest rate
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SG&A
19/04/23 Page 23GINA WP2 – Analysis of Applications / Services
About SG&A, the Business Plan uses the following assumptions:
• Commercial costs:
Commissions to sales agent (either belonging to third parties or to an own sales force network) equal to 5% of total revenues (based on telecom benchmark where commissions go from 4 to 8% of revenues)
Fixed share of commercial costs equal to a percentage of the steady state revenues (assumed to be reached in 10 years after GINA launch)
• Marketing costs: 0,5% of the revenues (based on telecom benchmark) for advertising and promo costs for product launch, customer retention initiatives and brand/product awareness building
• Administration, Finance & Control: staff of 600 employees for the pan-European service provider at regime condition (average of 20-30 employees per country) costing 80k€ each
• Other costs: rent and other minor costs assumed to be 10 M€ at regime condition
• In analyzing the deployment of EETS (taking into consideration the need to establish agreement with Toll Chargers in the different EU Member States), the possibility to focus on strategic corridors or areas could optimize the SG&A costs
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Operating costs
19/04/23 Page 24GINA WP2 – Analysis of Applications / Services
• Operating costs based on Giroads costs strucure
• To be finalized based on GINA architecture and partners review
COST ELEMENT MAINTENANCE OPERATIONSOPERATIONSPERSONNELHEADCOUNT
OPERATIONSPERSONNELUNIT COST
OPERATIONSPERSONNEL
COST
DATA SERVER Operating System - Web Platform - Cartography/Maps Data Base - Client+OBU Data Base - Back up system - OtherCENTRAL INFRASTRUCTURE -SYSTEM 2.750.000 2.000.000 1.600 50.000 80.000.000
Communications Management (Front end - Back end) - Database Management - Cartography/Maps Management - Administration, Control, Accounting & Blling Module - Equipment Diagnosis Module - Liability-critical processing - Multiservice Manager - Call centerOtherCENTRAL INFRASTRUCTURE -APPLICATION 3.500.000 1.000.000 1.200 50.000 60.000.000
CENTRAL INFRASTRUCTURE -TOTAL 6.250.000 3.000.000 2.800 140.000.000
SP1- Highway Operation 126.000 28.800 - SP2- Insurance Companies 157.195 56.141 - SP3 - Trafic Information Generation 126.000 28.800 - SP4 - Transport Operator 157.195 56.141 - SP6 - Emergency centers 157.195 56.141 - SP7 -Traffic Info centers 527.727 - - SP8 -Navigation & Routing assistant 360.000 180.000 - OtherSERVICE CENTRES-TOTAL 1.611.313 406.023 400 40.000 16.000.000
TOTAL I T CORE 7.861.313 3.406.023 3.200 156.000.000
TOTAL COSTS 167.267.336
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Depraciation of Capital expenditures
19/04/23 Page 25GINA WP2 – Analysis of Applications / Services
• Capital expenditure cost elements are referred to Hardware, Software, Development costs and depreciation.
• Depreciation assumptions for the different type of expenditures are the following:
• Hardware: 5 years
• Software: 3 years
• Other material: 5 years
• Other not material: 15 years
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Regime Cost Structure
19/04/23 Page 26GINA WP2 – Analysis of Applications / Services
0
5.000
10.000
15.000
€20.000M
Regime Cost Structure (2022)
1.147
1.968
4.419
8.404
16.102165
1%
52%
27%
7%
12%
%
EGNOS/GALILEOService
Telco
OBU
SG&AOPEX
PRELIMINARY
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Content
19/04/23 Page 27GINA WP2 – Analysis of Applications / Services
• Business model definition
• Value chain structure and key players assessment
• Addressable market and market potential
• Revenues generation potential
• Cost structure definition
• Sensitivity scenarios
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Scenarios for sensitivity analysis
19/04/23 Page 28GINA WP2 – Analysis of Applications / Services
In order to carry out a preliminary sensitivity analysis, price and penetration values will be changed in comparison with the base scenario analysing the following different scenarios:
Best case
Worst Case
• Penetration rate: 10% higher than base case (assuming that the enforcement strategy will be successful and stakeholders playing the role of GINA enablers will work properly)
• Price: 5% higher than base case
• Penetration rate: 20% lower than base case
• Price: 15% lower than base case
Base Case
• Reference prices of the business model, decreasing along the overall time horizon
• Penetration rate consolidated in Giroads final report (to be noted that these penetration values look already “aggressive” considering also the Galielo overall project status
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Milano Municipality involvement in GINA
19/04/23 Page 29GINA WP2 – Analysis of Applications / Services
• Mid September 2009: established a first contact with AMAT (Mobility, Transportation & Environment Agency of Milano Municipality)
• October 30th, 2009: meeting with AMAT Representatives (Dott. Valentino Sevino and Dott. Paolo Campus) with the aim of illustrating GINA project and evaluating possibility for a direct involvement of Milano municipality
• Milano municipality main areas of interest are:
Traffic Data collection and management for traffic control and info distribution to drivers;
Fleet management (taxi, public transportation, car sharing fleet);
Tracking of commercial vehicles and management/optimization of logistic flows within urban areas
• Next steps:
Prepare a report for Mobility, Transportation & Environment Councillor, Mr. Croci
Arrange an official meeting with Milano municipality by the end of 2009 with the participation of GSA
Invite officially Milano municipality at the Stockholm workshop of March 2010