For utelcos, what are the business models that can be employed to help them make the most of the opportunity? And moreover, once they are in place, what impact will these models have on the utilities’ businesses?
Generally, there are three ways utelcos can operate:
1. The one customer option – This is the most basic approach, which focuses on providing voice and data services to the utility business itself. Obviously, there is not much “upside” to this model, although it’s quite valuable to the company, from an operations perspective.
2. Carrier-of-carriers – The utility has network capacity available, and therefore is able to rent it on a wholesale basis to other telecom/Internet service providers. The revenue stream here is clear, and there is the added benefit of the utility not being required to have a telecom service provider license. Think of this model as an “express lane” to telecom revenues for a utility. At the same time, the services the utility can offer are limited to dark fiber/bandwidth leasing and managed IP services. This is a relatively low-risk approach to taking advantage of the telecom opportunity, as it doesn’t disrupt the utility’s core business.
3. The premium plan – This is where a utility becomes a true, licensed telecom service provider, able to offer all communications services. Obviously (or maybe not obviously), this kind of company is spun out from the parent utility for both regulatory and operating purposes.
In recent years, the lion’s share of utilities that have attempted to realize the telecom revenue potential they possess have focused on the “carrier-of-carriers” model, since there is a relatively low barrier to entry and the demand for bandwidth is out there.
But more and more, utilities are making the bold move of becoming full-fledged telecom service providers. And now that infrastructure providers are seeing this as a fast-growing market, we are offering solutions geared toward utilities with the expectation that utilities will see the relatively low barrier to entry even for the “premium plan.”
So how does it generally work?
Well, the operative word to answer that question is “evolution.” What normally happens is that the utility begins by offering voice and data services internally, then works its way up to offering wholesale (carrier-of-carrier) services and then, finally realizing the potential, makes the corporate decision to evolve into a fully functional telecom service provider. As I mentioned, this is a major step. It involves significant investment, commitment and risk, but the payoff is potentially significant as well.
So now that it’s clear where the utelco industry stands today, what does the future hold? Stay tuned, because that’s what we’ll be discussing next …