Show and Utelco
Is it time for ambitious utilities to play their hand?
In our last blog, we looked at the power and potential of 5G to ‘smarten up’ our cities, and the exciting opportunities this was creating for utilities companies willing to invest in their own ICT infrastructure. For this blog, the last in our four-part mini-series on the impact 5G will have on utilities, let’s delve into the world of business models. In particular, the opportunities available to, and challenges facing, utility companies thinking about becoming Utelcos (utility companies that offer telecoms services as wholesalers, carriers or retailers).
First a bit of background. Over the last ten years or so, more and more utilities have increasingly invested in their ICT networks as a result of a number of congruent trends which we’ve discussed in length here. Once upgraded, these OT networks now offer more capacity than utilities need and as the demand for profitability becomes of major concern, many utility companies are now offering high-speed data, voice and video services on top of their core electricity, gas or water services. And as 5G’s momentum builds, the business case to do so has never been stronger.
But to make the most of the opportunity, utilities first need to think hard about whether the time is right and, in fact, if it’s an evolution they actually want. Becoming a Utelco is the natural next step if you’ve already invested in laying fiber and in a high capacity ICT network. You can sell your extra capacity or capabilities to municipalities (smart cities), MNOs, service providers, and to anyone who might want it.
Decisions, decisions, decisions…
5G will need all the fiber and capacity available. That means if you’re a critical infrastructure operator who has a 5G-ready network you’ll also have a highly attractive revenue opportunity. And if you’re a utility, you’re also strategically positioned and equipped to evolve into a Utelco. Why? Because you have all the components in place to become a player in the telecoms market, such as:
- Right of Way – you have the authority to lay fiber across the geographical reach of your operations.
- Infrastructure – you can use the infrastructure and equipment supporting your own operations to provide telecoms services. This makes complete sense if you’re a utility with an existing customer base you already provide billing and customer services to.
- Know-how – you already know how to build, operate and maintain a telecoms network, which you learned while planning and managing your own internal services network.
- Regulatory understanding – in some countries, utilities are free to offer telecom services, especially if they’re providing such services to rural and remote places.
- Finance – in many countries, governments offer special financial packages to utilties adopting a Utelco business model.
Once you decide to go down the path to becoming a Utelco, there are a number of viable business models to choose from that provide a range of revenue-generating telecom services:
- Facilities wholesaler – co-locating services or selling ‘dark’ fiber to other carriers, including unmanaged hosting services and provisioning of location for equipment owned by other carriers.
- CoC (Carrier of Carriers) – leasing bandwidth and/or network slices (eMBB, URLLC or mMTC) to MNOs (mobile network operators).
- Retail – providing managed services to business and residential customers, such as triple or quad-play services (cable, internet, voice etc.). Since you own the infrastructure and equipment, you have full control of assets and network operations.
Each of these business models requires different levels of investment and involves different levels of complexity.
|Customers||SPs, ISPs||SPs, ISPs, large enterprises||Enterprises, residential|
|Services||Dark fiber, collaboration||Leased lines||Triple play|
|Organization||Internal department||Daughter company||Independent company|
|Network||Leverage existing||Expand beyond internal requirements||Extend coverage to customer premise|
Becoming a CoC Utelco is probably the easiest way to enter the market because you’re dealing with a limited (yet select) number of customers. Having said that, the growth in broadband around the world has created numerous opportunities for utility companies to generate revenues at relatively low risk in the wholesale market. And while the retail model provides the most revenue, it also requires the utility to become a service provider, as well as grid operator. The key, is to choose the right business model and then develop a better understanding of your local market and identify the right services and price points at which to compete.
In the last two years alone, I can think of at least five of our utility customers – responsible for distributing electricity, gas or water, and with their own networks – who have applied for a licence to provide telecom services. And more importantly, been granted one. This is because regulators and governments the world over are keen to create more competition in the market, level-up access for everyone (especially in more remote areas) and enable more customers to access high-quality services. Allocating licences to utility companies to become service providers is a quick and efficient way to achieve these aims.
For utilities, deploying 5G services is a major step in the medium term, because in one fell swoop, they can now cover most all the eventual use cases and business cases. In essence, they can not only bring in more revenue but also improve customer engagement, customer service, and the quality of service, as long as they choose the right business model for their business.
What’s vital, is the need for a clear vision at the outset. What does the utility hope to achieve by diversifying into telecoms and what sustainable and competitive advantages will it offer in the market? Answer those two burning questions with clarity, and you could be a Utelco-in-waiting.
Read our whitepaper
5G is set to change the utility landscape forever. Our whitepaper ‘Reacting to change: How 5G is set to revolutionise utilities, and what utility companies can do about it’ explores some of the incredible opportunities 5G can bring to utilities. Click here to download it.