The rise of the AltNets

Ofcom in the UK are currently coordinating the upgrade of the nation’s telecommunications access infrastructure from copper to optical full fibre, typically utilising GPON-based FTTH [Fibre To The Home] technology to provide service both to residential and business premises. This is currently targeted for completion in the mid 2020s, extending reach from the current 6 million to around 30 million premises passed, and enabling faster connectivity by supporting Gigabit [1000Mbps] speed – compared to the typical 70Mbps upper limit supported by the previous generation of consumer-focused access technologies.

As well as significant investment from large established Telecommunications infrastructure companies such as BT Openreach, recently we have seen the emergence of a wave of agile, well funded FTTH ‘AltNet’ challenger Telco service providers. Makepositive have identified three different types of AltNet [with distinct offerings]:

• Type 1: typically regional providers offering Broadband and Telephony services to customers over their own fibre infrastructure. These AltNet operators may have a distinct ‘Wholesaler’ business entity responsible for building and managing the underlying FTTH access service infrastructure, and a ‘Retailer’ business entity responsible for building Broadband and Telephony service offerings over the access infrastructure and selling it to the end customer. This explicit separation would be evident where the AltNet has an interest in offering their FTTH access infrastructure for use by other Retailers as well as their own.
• Type 2: ‘Wholesaler’ business entities focused on providing FTTH access service infrastructure and ‘interconnect’ offerings to ‘Retailer’ customers, although they can also provide Broadband and Telephony services for Retailers who lack network assets of their own. Whilst Type 1 AltNets are generally more regional in their nature, Type 2 AltNets often have a wider geographical reach.
• Type 3: ‘Retailer’ business entities focused on utilising FTTH access services provided by Type 2 ‘Wholesaler’ alt-nets to support the provision of FTTH-based Broadband and Telephony offerings to their customers. These AltNets may integrate directly with Type 2 Wholesalers or indirectly through a mediator. Note that this category can extend to consider Retailers providing Broadband and Telephony over both FTTH and previous generation access technologies, and this definition would include major service providers such as Sky and Vodafone.

Levelling-up opportunities for AltNets

AltNets in general experience pressure to progress in both operational and customer attraction and retention metrics, in order to enhance the valuation of their business. Specifically :

• They need to rapidly Plan and Build the FTTH access infrastructure necessary to support service provision. This is about getting the basic infrastructure in place to allow their customers to take FTTH-based services [Type 2 Wholesaler AltNets selling access services to Retailers, Type 1 AltNets building access primarily or exclusively for their own use to support Broadband and Telephony service offerings for their customers]. In some cases, there could be multiple AltNets providing service to the same premise through different delivery routes [e.g. poles based delivery ‘piggybacking’ on the infrastructure of an incumbent provider, delivery through street cabinets and ‘micro-trenching’ to run fibre past a premise], however generally there is effectively a ‘race’ to be the first AltNet to provide infrastructure that can support FTTH-based services to a premise, and onboard customers at that premise once the infrastructure allows it.
• They need to attract and retain customers. Critically dependent on the rapid Plan and Build of FTTH access service infrastructure as we have seen, this further considers the importance of marketing to potential customers even prior to the planned build out of supporting infrastructure, their attraction and retention as customers of the AltNet. There is obviously a different requirement here between a Type 2 Wholesaler seeking to attract Retailers and a Type 1 AltNet seeking to attract residential and business end-user customers.
• They may wish to consider separating their Retail and Wholesale businesses (Type 1 AltNets). The separation of the Retail and Wholesale businesses supports the easier provision of access and interconnect services to other Retailers, and as such provides an additional potential source of revenue. This becomes particularly relevant when we consider the market dynamics of Type 1 AltNets increasingly offering access services to larger Type 3 AltNets such as Talk Talk [potentially via a mediation layer], and also potentially becoming the acquisition target of a larger player. In all instances, a well separated Type 1 AltNet should command a premium over a Type 1 that may be unable to separate out their access infrastructure from Broadband and Telephony over access offerings.

Choosing the right path to growth

To support their chosen path to growth, AltNets require solutions that:

• Are tailored to their specific AltNet type – considering both the existing state of operation and strategic intent [Type 1 separated or unseparated, Type 2 Wholesaler, Type 3 Retailer], reflecting an understanding of the business domain and the strategic dynamics within the industry.
• Reflect architectural best practice and deliver against key operational metrics – primarily Time To Market [TTM] to support new offerings or variants of existing offerings launched through increasingly diverse channels, as well as usual operational metrics such as Right First Time [RFT] rate in Order management and Trouble Ticket resolution, minimal Time To Deliver or Resolve [TTD / TTR], etc. This in our opinion requires
  • well separated solutions across both Retailer and Wholesaler businesses, and across commercial [BSS] and operational / technical [OSS] layers within businesses
  • catalogue driven solutions such as SFI CC to deliver catalogue-configured rather than customised / coded solutions, integrated into the wider infrastructure of the customer’s architectural estate

• Support phased introduction of capability reflecting the typical business case priority for an alt-net starting up. For example, we would typically prioritise support for a ‘New Customer / New Provide’ Quote-to-Order Customer Journey over support for in-life Quote-to-Order Customer Journeys [e.g. Modifying the speed of an existing Broadband Service, Ceasing an existing service], and this would be reflected in our proposed phased transformation plan for an alt-net.

In following blogs we will look into the specific solutions that will enable the different types of AltNets can address challenges and leverage the accelerated market growth. In the meantime, if you have any questions or want to discuss how you can improve customer share, competitiveness and business value, get in touch!