U.S. investment in fiber infrastructure is projected to surpass $125 billion from 2022 through 2026. But we believe a shakedown is coming for the industry, due to a declining macro economy, deployment issues, revenue growth challenges, and poor use of capital.
To do so, fiber companies of all sizes can follow a similar framework to better monetize assets and minimize risk. By revamping their “partnerships, pricing, and promotion” strategies, industry players can accelerate time-to-value by 20%.
While the recent announcement of Gigapower (a joint venture between AT&T and BlackRock) serves as an exception, there are few mutually beneficial service partnerships between capital providers and operators. But reliable high-speed connections are valuable for the growth of multiple business sectors, so collaborating with large content or OTT providers can advance monetization and reduce capital requirements.
Fiber operators can also advance efforts through leasing agreements for wholesale fiber services with regional carriers, mobile network operators, and other internet service providers. This allows operators to better monetize fixed assets like network monitoring centers and purchasing alliances by letting smaller companies pay to tap into their infrastructure. From a wholesale perspective, having an efficient platform connected to the different last-mile providers or in charge of data offloading from fixed wireless access (FWA) networks provides operators with greater ROI.
The partnership model can further extend to:
- Mixing technologies to cover distant areas via a combination of fiber for offloading, laser for traversing rugged terrain (e.g., a lake), and FWA as an alternative to aereal fiber in less densely populated areas.
- Leveraging third parties for copper decommissioning, which offloads labor costs from the balance sheet.
We conducted an analysis of 18 U.S. fiber service providers, which showed companies are often going to market with five or more plans. Operators need to simplify their pricing strategy to drive customer adoption, as too many options complicates and delays the decision process. Offering a plethora of plans also requires operators to spend more on sales trainings, call centers, and marketing costs.
They must prioritize a straightforward product structure and framework (small, medium, large plans) so the selection process for customers is as simple as possible. This also provides easier integration of customer bases should operators consolidate via M&A.
Conducting a geographic micro-segmentation and supply and demand analysis of connectivity services (including fiber, cable, and FWA) can help operators determine strategic pricing opportunities based on competitor landscape and customer concentration in a region.
Operators must pay attention to local needs and buying behaviors when building sales channels and marketing offerings. More spend does not always equate to more effective marketing—ensure efforts are targeted to specific consumer segments to get the most bang for the buck.
Community marketing efforts are crucial to help customers appreciate the benefits of fiber infrastructure for homes and businesses. Field service agents can communicate this value proposition effectively—hire those with strong people skills first and foremost. Tech installation is easy and getting easier, but people management is worth a premium.
The longer tail of fiber companies need to grow their awareness against top operators. To do so, they must promote their unique strengths, as consumers view large, national operators differently than smaller, regional choices:
- The big power players can get ahead by promoting their cutting-edge technology and capabilities.
- Regional operators can get ahead by relaying their local understanding to better connect with consumers.
Over the next few years, fiber companies will become the hunters or the hunted, either buying or selling less efficient competitors.
We believe the hunters will be defined by access to capital and the capability to monetize their networks. Commissioning a transformation program now to redesign their “partnerships, pricing, and promotion” monetization strategies will place them one step ahead.
Stay tuned for future publications in our “Lean, Mean, Green Telco Machine” series.