Yankee Group recently released a study prepared by my good friend Benoit Felten called “Open Access Makes Economic Sense“. The study puts the international debate surrounding the “Open Access” NGN business models on new grounds. Benoit challenges the traditional notion, embraced by most telcos, that foreclosing competitive access to their networks is a good business practice.
In my view two things clearly stand out in the study:
- On the demand-side, payback is much more sensitive to take-up rates than it is to ARPU and
- On the supply-side, payback is highly sensitive to the cost per homes connected
These two observations clearly imply that:
- Telcos rolling out FTTH must secure high take-up rates in the short-term, and opening the networks to competing service providers can ensure higher use of the infrastructure; thus shorter payback (ARPU is not as important as take-up rates are) and
- Telcos rolling out FTTH need to explore all available options to reduce the cost of deployment. Although state subsidies may be one way for doing so, partnering with the public sector (utilities or municipalities) and synchronizing construction with public civil works (I wonder how possible this might be) is the safest, and socially optimal, way to ensure the lowest possible cost per home passed/connected.
Overall, the study is clearly a mind-opener and provides insight to the economics of Open Access models. As always, Benoit gives the right push for innovative thinking to all NGA stakeholders (especially those with the capacity to rollout FTTH networks, i.e. the incumbents and big telcos). I highly recommend reading it forward and backwards!
