The expansion of fiber networks is accelerated across the globe. In many parts of Europe, for instance, numerous new initiatives to close the digital gap are underway, designed to increase fiber to the home (FTTH) penetration rates. In Germany alone, eight fiber network companies are working to build their own networks that will become inter-regional fiber networks. To get the best return on investment (ROI), operators need to optimally sequence their rollouts, and this requires capabilities in key areas.
"We need holistic simulation capabilities to unlock the full value of the multi-billion fiber investments."
— THOMAS KNUCHEL , Senior Manager – Strategy and Consulting Communications & Media Industry Consulting Lead Switzerland
To enable a value-based network rollout, a network company needs to master 5 key dimensions:
1. Mastering cost analytics
The competence to understand and optimize built costs in a new area.
Mastering cost analytics is about understanding the fiber rollout cost, not just the average per kilometre or household cost. When running fiber build analysis, it’s common to pick up voluminous data points with significant variances between similar situations. To help us focus on the correct data set, we use a network infrastructure pathfinding simulation (NIPS) that provides a highly accurate and automated low-level design from which rollout costs can be assessed. By taking existing infrastructure and architectural guidelines into account, we can run an optimization for speed, coverage, or budgets. Which makes the prioritization of build areas within certain restrictions possible. Understanding the fiber rollout cost in detail is the first step toward a value-based approach. Not knowing the cost implications of a planned build will lead to suboptimal resource allocation and cost overruns.
2. Revenue analytics for actionable insights
Understanding the potential take rate and average return per user (ARPU) per area.
Analytical insights enable us to identify profitable areas with an above-average take rate, lower churn, and higher average revenue per user (ARPU). However due to the lack of public information on both taking and churn rates we must work with approximations and develop our own model taking into consideration both internal factors (age, education, or income) and external data (take rate, product mix or churn rate) to arrive at a specific hypothesis. Once the observations and hypothesis have been concluded we can then build a statistical model which can be stress-tested to confirm the findings. Not knowing the revenue side of the equation will result in stranded assets. Building fiber in areas with low take rates or areas with high operational costs will prolong ROI.
3. Assessing rollout feasibility
Understanding restrictive factors like the availability of installation partners or political drivers.
Apart from the cost estimates and revenue potential, it’s important to also take rollout feasibility into consideration. By considering both the capacity (technical and financial) and strategic factors (partnerships, political drivers). Capacity constraints might be technical, caused by complex wayleaves and special engineering difficulties. Or they can be financial caused by investment appraisals which are tied to multi-year planning and yearly run rates. Restrictive factors might be strategic where rollout plans are impacted by government regulations aimed at overruling planned network builds which cause delays. In a lighthouse project with media visibility delays to the roll-out plan can take place to ensure that the launch coincides with a marketing campaign. For a network rollout to be successful it’s important to keep both the capacity and strategic constraints in mind.
4. Visualization for decision making
The competence to bring the mentioned three aspects into a unified view, enables a holistic decision and allow for scenario simulation.
Now that the cost, revenue, and feasibility have been assessed the results need to be presented to strategic planners in a non-static view. At this stage, we need to not only assess the one-dimensional approach of comparing the cost of a rollout in conjunction with the attractiveness and building restrictions. We also need to consider competitor moves, changes in regulation, and improvements in technology. From these scenarios different factors can be calculated, compared, and selected. Simulations act as great support material when securing funding for rollout projects and answering executive questions.
5. Operations & improvements
Sustain and improve the competencies over time.
Building up various models, understanding the correlation between factors and gaining insights into strategic options is not a one-off. There is a continuous effort needed to add factors where needed, deal with changes observed in the field and change requirements from decision-makers. In short, we must manage continuous improvements to increase our scope in terms of modelling and hypotheses to be validated, features and visualization to make the data consumable, and capabilities and technologies that allow for more insights.
Continuous improvement process:
New data and insights (from inside and outside of the organization) will spark new ideas.
Example: We found evidence that the FTTH take rate is significantly higher in City A vs. City B.
Use the ideas and data discovered to formulate a new hypothesis.
Example: We believe that superb mobile coverage could lead to a lower take rate of FTTH in City B.
Define how the hypothesis can be confirmed or validated.
Example: We should find other cities that have either a high or low FTTH take rate that is negatively correlated with superb mobile coverage.
Enhance your model by integrating the new insight into the model.
Example: Include mobile coverage as a value parameter to estimate FTTH take rates.
Update input parameters regularly and wherever possible in an automated fashion.
Example: Make quarterly updates of mobile coverage in the model. Conduct regular reviews on the company’s assumptions and operations.
The key to a successful value-based network rollout rests on providing significant ROI on these multi-billion-dollar investments. To achieve this objective, CSPs need to consider all the factors that might lead to suboptimal outcomes and be inclusive by bringing in other parts of the organization and prevent the siloed mentality. This holistic simulation and data-driven approach will ensure that the full value of the multi-billion fiber investments is unlocked.