Rise of the UTelco?
Utilities and transport infrastructure companies are ideally placed to bridge the digital divide
Around the world we are seeing an ever increasing digital divide, between those that have good broadband connectivity and those that do not. This divide can be seen at all levels; county compared to country, a region in country compared to another region in the same country and between urban and rural locations within the same region of a country.Most governments have now recognised the huge socio-economic impact this digital divide is having on its ability to educate its citizens, its health infrastructure and its ability to generate wealth by creating and maintaining competitiveness against other countries. So governments are starting to provide funding in an attempt to bridge this divide; for example in the US we see the Regional Development Opportunity Fund (RDOF) and the 5G fund for rural development, in Europe we see the Connecting Europe Broadband Fund (CEBF) in support of the European Gigabit society vision, in India we see the National Broadband mission and so on.
Utility and transport infrastructure companies are uniquely placed to bridge this digital divide?
Utilities and transport infrastructure companies need to invest to modernize their communications network. This modernized communications network must provide the dynamic packet transport required to allow them to evolve their operations and IT technology to provide the “smart” infrastructure they need to adhere to new regulations and meet ever increasing customer expectations. It must also provide the deterministic packet transport required for mission critical applications. And with the increasing use of high quality video for security and maintenance there is a need for a new high-bandwidth optical network. The result is these companies have a created telecoms network which not only meets their own needs, but is also ideally suited to provide broadband services to residential and business customers.
In addition, utility and transport infrastructure companies have a number of unique characteristics which make them uniquely placed to use their new network to offer telecommunication services:
- They already have the “right of way” - with real-estate that spans wide geographical regions and reaches into remote rural regions.
- They already have the telecoms infrastructure - The same infrastructure and equipment (fibers, towers, switches/routers, transmission equipment) that support their operations can be leveraged for developing a telecommunication business.
- They already have the telecoms knowledge – They already know how to build, operate, and maintain a telecom network for their own internal services.
- They already have brand recognition - They have established relationships and brand image in the B2B and B2C markets
Potential Business models for monetizing their modernized communications
There are a number of different business models a UTelco can look at:
Facilities Wholesaler Model
The UTelcos lease spare infrastructure capacity (e.g. buildings, towers, dark fibres, racks, etc) to provide co-location services for Competitive Local Exchange Carriers (CLECs), Internet Service Providers (ISPs), and Interexchange Carriers (IXCs). In this model, services and telecom equipment are managed by the respective carriers who also own the telecom equipment.
This provides the UTelco with incremental revenue, at low incremental cost and complexity – but with this model the UTelco/utility is not making the most of what they have
Carrier of Carriers (CoC) Model
The UTelco owns and operates the telecom equipment and sells managed bandwidth with agreed service level performance metrics, examples of potential customers include :
- Mobile operators who are willing to pay for an effective backhaul infrastructure.
- Service Providers or MSOs who want to deploy residential broadband services but don’t have the metro capacity to connect to the network core. The UTelco network provides the network extension they require.
This provides the UTelco with greatly increased revenue, but there is some incremental cost and greater business complexity when compared to the Facilities Wholesaler
Retail Broadband Business Model
The UTelco becomes a competitive telecom operator, providing retail residential and/or business broadband. Since the fibers that the utilities use for their internal needs usually don’t reach end customers, it is important to consider how they will span “the last mile”, this could be via investment in access infrastructure, or by leasing last-mile capability from local carriers.
The retail business model requires the UTelco to adjust its organizational structure accordingly. This includes creating sales channels for promoting and advertising sales and customer-care units for supporting these new customers. But greatly increases revenue and allows them to apply for the various rural grants that are being offered.
The shift from Utility to UTelco is not entirely smooth sailing, there are regulatory, financial and competitive hurdles to jump over.
But whatever business model they select, ultimately to become successful as a UTelco it is about a change in mind-set, they need to move from focusing on providing their own internal services to becoming a service provider and focusing on the needs of the telecoms customers. This means a shift in focus from the strict performance requirements and high availability which are the top concerns for their internal markets, to cost per bit and maximizing revenues which are the top concerns of a service provider.