Market trends that are shaping AltNets' go-to-market strategies
In our previous blog The rise of the AltNets we described three main types of AltNets based on the kind of services they provide. To recap, we identified:
- Type 1 : typically regional AltNets offering their customers Broadband and Telephony services over FTTH access all provided by the AltNet, possibly offering FTTH access services to other Retailers
- Type 2 : Wholesalers providing FTTH access and interconnect services to Retailers, and possibly also Broadband and Telephony services over FTTH access to smaller Retailers
- Type 3 : Retailers using the services of Wholesalers, typically to offer Broadband and Telephony services over the Wholesalers’ FTTH access and interconnect services
AltNet go-to-market strategies
Given the massive opportunity created by the pledge (and investment) for fast broadband across the UK, the AltNet space keeps reshaping with new go-to-market strategies. We identify a number of significant market trends which have impact and significance for AltNets:
the ‘race’, but with caveats: build out of Fibre infrastructure by Type 1 and Type 2 AltNets. There is to some extent a ‘race’ to be the first to provide FTTH access coverage to premises between AltNets, however we may expect to see premises served by multiple AltNets where using distinct physical delivery methods, such as
- Micro-trenched Fibre delivery in the street, with ‘Toby’ boxes outside individual premises supporting completion of delivery to a premise as part of a Service Order. This might utilise a hierarchy of street cabinets aligning on the typical hierarchy of optical splitters deployed in the delivery of GPON-based FTTH services
- Poles-based delivery, often ‘piggy-backing’ on the physical infrastructure of incumbent providers. In this instance the completion of provision to a premise would be performed from a pole in the street to the premise
- Utility-aligned delivery, for example following the path of electricity supply to a premise with fibre and potentially mirroring the electricity substation hierarchy with optical splitters. AltNets may also use other pre-existing infrastructure to support delivery, such as sewers.
It is suggested that it would be less likely for a premise to be served by multiple AltNets utilising the same delivery method [e.g. multiple micro-trenched services, each requiring physical work in the street and distinct Toby boxes outside each premise]
Type 1 drive to Wholesale / Retail separation: separation of Wholesale and Retail entities for ‘unseparated’ Type 1 AltNets (typically regional, providing fibre infrastructure and selling Broadband and Telephony services over their own fibre).
- This allows operators to offer at least access fibre and interconnect and possibly also Broadband and Telephony services over that fibre to other Retailers
- The rationale for such a move could be to:
- provide alternative revenue streams for the AltNet
- address any regulatory pressures or conditions of state provided funding
- support easier acquisition and integration by a (typically larger) AltNet, which would in turn positively impact the valuation of the AltNet
- It should also be noted that a Type 1 AltNet offering Wholesale services to other Retailers may be servicing different types of Retailer with different needs:
- a larger Retailer would be likely to take basic fibre access and interconnect services (to connect into their own network) from a Wholesaler, and provide their own Broadband and Telephony services over that access / interconnect. They would also be likely to utilise API driven integrations into the AltNet to validate the feasibility of providing service during the Quote stage, arrange engineering visit appointments and progress an Order from the Retailer. They would similarly look to the AltNet to support API-driven interactions to support in-life Service Configuration and Service Assurance customer journeys.
- a smaller Retailer may have no network assets and little sophistication / maturity in their Operations Management technology stack. Under these circumstances they may look to the AltNet to provide both access services and Broadband and Telephony services over that access, and to offer a Portal-driven Quote to Order [and in-life Service Configuration / Service Assurance] capability.
Emergence of ‘Mediator’ platforms: evolution of ‘Mediators’ between Wholesale and Retail AltNets. Mediators here constitute an intermediate layer between a Retailer and potentially multiple Wholesalers to perform one or both of the following:
- Technical integration abstraction – integrating into a variety of different underlying Wholesalers and presenting a common technical integration to a Retailer. This would be used to ‘hide’ typically minor variations between the API integrations exposed by different Wholesalers across the full set of customer journeys [covering Quote-to-Order, In-life Journeys]
- Wholesaler selection, Product abstraction. Managing and enforcing business logic to
- select between Wholesalers where multiple options present for a premise – for example considering variables such as cost, lead time, metrics considering Retailer / Mediator preference
- abstract variations between product offerings – for example if one Wholesaler offers 100M, 450M, 900M variants of BB over FTTH access and another offers 120M, 400M, 900M variants, we might abstract these variants ‘down’ to 100M, 400M, 900M variants for a vendor-agnostic BB over FTTH product
This approach applies where the Retailer is looking to build Offerings over a vendor-agnostic Product that could be sourced from multiple candidate Wholesalers, which would be a common scenario for a B2C use case. Alternatively all vendor options and product variants would be exposed to the Retailer, which we might expect to see taken as an approach in B2B use cases such as those seen in a Managed Service Provider.
There is evidence in the market of larger Retailers [Type 3 AltNets] building Mediators to support FTTH access service provision to a wider geography / set of premises through separated Type 1 AltNets [acting as Wholesalers] integrating into their Mediator platforms. The Type 1 AltNet is provided with an additional revenue stream and in the process of separation can enhance its’ valuation as discussed previously, and also make itself a stronger candidate for acquisition by the owner of the Mediator platform.
Type 2’s may move to Retail [less Regional Type 1’s]: Wholesalers supporting smaller Retailers, expanding into Retail domain. As mentioned previously, separated Type 1 AltNets targeting offerings at other smaller Retailers would typically need to support the provision of Broadband and Telephony services over their access services, to reflect these Retailers lacking the capability to deliver these services in-house. Type 2 (pure Wholesaler) AltNets may also seek to expand into offering traditionally Retailer Offerings, effectively forming a typically less regionally constrained separated or unseparated Type 1 AltNet.
Type 2 – Type 3 partnerships: It is worth noting that relationships have and will continue to emerge between AltNets. We have already seen how the emergence of ‘Mediator’ platforms suggests the evolution of relationships between AltNets, further it should be noted that relationships will develop between Type 2 (pure Wholesaler) and Type 3 (pure Retailer) AltNets – with Type 3’s establishing and aligning on the use of their preferred Type 2 supplier(s).
Type 1 acquisition: Finally, note the tendency towards smaller Type 1 AltNets being acquired by other AltNets or interested parties. Retail / Wholesaler separation and integration into Mediators can make Type 1’s more attractive acquisition targets, and this will typically be reflected in a company’s valuation.
It makes sense for an AltNet to have an aligned view of the evolution of their business from the ‘as is’ towards their desired ‘to be’ vision, potentially through a number of incremental transformation steps. This view should be informed by an understanding of the market trends identified in this analysis, and should consider the following dimensions:
Market / Strategy view – a view (over incremental transformation phases) of
- How the AltNet aligns on the Type model, view of integration (if any) into Mediators
- The AltNet’s fundamental infrastructure delivery model (for Type 1 and Type 2 AltNets) – e.g. micro-trenched, poles delivered over incumbent, utility aligned
- Product Offerings of the business(es) – e.g. FTTH access, interconnect, Broadband and Telephony over FTTH access service offerings
- Integration into the business(es):
- B2C channels (e.g. web, contact centre exposed customer journeys for Retailer B2C interaction)
- APIs (typically for Wholesaler servicing larger Retailers or Mediators)
- Portal (typically for Wholesaler servicing smaller Retailers)
- Key business drivers for the business(es) and their relative priority, for example
- Time / Cost to launch new Offerings, Products, Technologies (offering and network technology agility), desire to extend beyond core Broadband and Telephony over FTTH access / customer target focus
- Customer attraction and retention (Marketing, Channel appropriate / automated / Right First Time servicing of customer journeys)
- Time for Wholesaler to onboard new Retailer / Mediator customers, Retailer to onboard new Mediator / Wholesaler suppliers (supply chain agility)
Architectural view – view of architecture (over incremental transformation phases, aligned with above Market / Strategy view) across the following domains
- Business (People, Process, Capability) Architecture
- Information Systems (Applications, Data) Architecture realising Business Architecture
- Technology Architecture (Infrastructure supporting Information Systems Architecture)
Makepositive’s AltNet ‘accelerator’ describes best practice end-state architectural designs and reference transformation plans, to support the development and implementation of architectures tailored to AltNet market / strategic need and flexible enough to deliver against future need. We further provide an aligned Information Systems Architectural view based on the use of Salesforce Industries Communications Cloud and MuleSoft technologies integrating into a wider architectural estate, together with pre-built implementation ‘assets’ to speed time to implementation.
We will discuss these in more detail in our next blog, which will focus on AltNet architecture.
Other blogs in the series:
Blog 1: The rise of the AltNets