Open Access / Wholesale FTTH
We believe in fiber infrastructure as a long-term investment in society. Regardless of who and where you are, the fast digital evolution we are in is relying on this infrastructure. Everyone and everything will eventually be connected, with a mix of access technologies each suitable for specific applications. What is indisputable is that fiber is the inevitable final solution when it comes to the best and most efficient infrastructure to support all of these technologies (capacity, reliability and cost). Other technologies such as “fixed wireless”, 4G and 5G and other future wireless networks require a fiber connection to meet current and rapidly growing speed and capacity requirements.
As the initial investment in building fiber is substantial, the challenge is to make fiber reach everywhere, also outside of urban centers, in a financially viable way. We believe that without sharing the investment costs using a wholesale approach where the infrastructure is made available for all kinds of service providers this is not possible. Sharing of fiber infrastructure is often referred to as “Open Access”, but what is that really?
Most fiber networks are already Open – Only Last Mile Open Access is “new”
Taking a step back, you quickly realize that the vast majority of all networks are already today, and since the beginning have been, operated with a wholesale business model. Selling capacity on your network to other providers is the only way to support the business case of building fiber networks over long distances i.e., between urban centers and even continents. Wholesale Fiber-to-the-home, also called Last Mile Open Access, where services from multiple providers can be delivered to single residents or business on a shared fiber, is actually not new at all either. In some countries it’s even regulated. The logic behind sharing these last mile connections is the same as with the long-distance backbone networks. Using a fiber to a home for only one provider’s services just doesn’t make sense financially. So why is Open Access not yet the norm in every market and why do we believe it will be eventually?
More services and providers mean a better business case
Historically the physical networks were built by those that provided the service, the telcos. Early on it was telephone networks and then Cable TV networks. There were no other services to sell on these networks than telephone and TV and there were limited other technologies available to receive the services for end customers (antennas and satellite dishes too of course!). When the internet came around, this started to change, suddenly all types of networks could be used to deliver data and multiple access technologies started to compete, Internet over dsl, mobile, cable TV, satellite, etc. Today the internet has transformed from an add-on service to the key service on networks, but the thinking of defending your own service on your network from competition still often prevails. But this thinking is flawed when there are multiple services to be delivered to the customer. To win against the other technologies (maximize your take-rate), and minimize the payback time of the network investment, you need to have as many options as possible for subscribers to make your network more attractive and a maximum of revenue streams. Both can be achieved by inviting multiple providers of all types of services on the network, paying a wholesale fee per service sold on the network. In essence, more customers and more revenue streams per customer. Remember that every house you pass, but not connect and sell services to, is a sunk cost. If customers have any other options to get internet often the single provider networks hit the roof at 30-40% take-rates. On Open Access networks 80-90% take-rates are not uncommon and in many rural locations where there are long distances between customers, these take-rates are required to make the business case work.
Different Open Access Models – which is the right one for you?
There are endless interpretations of what an Open Access Network is, but here we are only going to explain FTTH Open Access – Last Mile Open Access. Because even with that distinction there are several models.
First of all, there are three logical layers and entities being active in the Open Access Network and entities:
- Infrastructure Layer: This is the physical fiber network and is owned by the Network Owner, who could be anyone from a private telco or investor to a community.
- Access Layer: This is all the electronics and management of that equipment performed by the Network Operator. In a traditional monopoly network this is the same entity as the Network Owner, but in Open Access the Owner often contracts with an external Operator to run their network. In this layer the provisioning of services on behalf of the different providers happens, supported by a BSS/OSS platform such as COS Business Engine.
- Service Layer: These are the services sold on the network. Traditionally this was a single service provided by the same entity that owned the network and operated it, but with Open Access there are no limitations. Today we are seeing more and more services delivered from a number of specialized providers. Not only traditional IP services such as Internet, IP-V and VOIP (telephone over internet), but also home security, telehealth, etc.
In a mature Open Access Market, such as Sweden, this has evolved to where every layer has its specialized entities. Often the Network Owner is a municipal Utility, who builds and maintains the fiber. The Network Operator is a private company specializing in Open Access Operations (the major Telcos have transferred into this role over the years!). The Service providers can be anything from a small local startup providing services on the local city network, to the large nationwide telcos who provide services on almost every network. Why this has become the most common model in Sweden is likely because each of the entities can specialize on only their limited scope of the model and do it very efficiently. But, to complicate this further, it is also common that entities are active in many of the layers and with slightly different approaches. Below are a few examples:
- “Swedish Open Access”. The model described above where all three layers are separated. In this model the Operator is typically selling the connection to the network.
- Network Owner and Operator. This is a model common among larger community Networks, where it makes sense to also build up an operations capacity, for example to manage community network infrastructure. There are also several private examples, among operators who have realized that a specialization by staying out of the services layer often provides increased profits, if the operations can be streamlined, for example with a system like COS Business Engine that can automate almost everything.
- Network Owner and/or Operator and Service Provider. To maximize the revenue potential on the network (but not necessarily the profitability), it is quite common for the Operator to also provide services on the network, for example the internet services. By inviting other providers of competing or additional services, the attractiveness of the network will increase and thereby boost take-rates. Also, the additional wholesale revenue streams will grow the total revenue. The only drawback is the increased complexity of also being active in the service layer.
- Open Access Ready Provider. This is the traditional telco or ISP model, with the difference that they Operate their network with a BSS/OSS system that is built for Open Access, such as COS Business Engine. This means that they can at any time open their infrastructure for multiple providers, when they wish to boost take-rates or add wholesale revenue to fully monetize the network.
Another major distinction between two high-level types of Open Access is also the possibility for the subscriber to choose services from multiple providers “at the same time”. In some networks the customer is limited to choose a provider and then buy all services from that provider. A much more attractive model for both the customer and the operator is when software, like the COS Business Engine, is used to virtually slice the single fiber to the customer’s home into any number of parallel “streams” on which services can be delivered independently of each other. With this model the choice is greater for the end consumer and the operator will be able to monetize the network to a greater extent since every service will have a separate wholesale fee, thus adding up as the subscriber picks more services or upgrades to higher speed services. This model is often referred to as True Open Access, since it is truly open to the end customer.
A common Marketplace or not?
With the different models above there are two choices when it comes to how the customers buy and manage their services on the network. For true competition between the providers, to maximize take-rates and offer the best customer experience, we recommend using a common Network Marketplace, which comes with the COS Business Engine. This marketplace is managed by the Operator, but allows the providers to log in to edit and publish their services under any number of service categories. The subscribers can browse the assortment, compare different options and sign up themselves online. The COS Business Engine can then automatically activate the services within a minute. The subscribers can also cancel and switch services from their mypages or create a support ticket with the specific provider. The customer can of course contact their provider of choice directly too and the provider can input their order manually or through their own systems over the COS Service Provider API.
If the Network Owner/Operator wants to stay entirely out of the picture, the Marketplace can be deactivated. In this scenario the subscribers will interact directly with the providers via phone or their websites. Building integrations towards the COS Service Provider API, the ISP’s can connect their own website and CRM/Billing/BSS/OSS systems to the COS Business Engine to work on the Open Access Network almost as if it was their own network.
Open Access Billing
How billing is performed and who sends the bills and the number of bills are different and there are many opinions on which is the best way. In our billing section we describe how we can support all with COS Business Engine, so here we will just briefly explain the two major alternatives from the customer perspective.
- One bill from each of your providers. This model is the one used on the mature Swedish Open Access Market. Every month the customer will receive a bill from and pay their providers the full amount per each service. The wholesale fee that the Provider is paying the Operator is hidden from the subscriber. The benefit for the operator of the network is that all the complexity involved with customer billing is the responsibility of the Service Provider, which saves the operator a lot of work and money. From a customer support perspective it is very clear to the end customer who they should contact if they have an issue (the one who sent the bill). COS Business Engine will support this by producing one bill per service provider and month, aggregating all the wholesale fees for all the services sold on the network by that provider during the month.
- One bill from the network operator for the total cost of all services bought on the network. From a customer perspective this is convenient. All you have to do is to register your credit card at the Marketplace, much like how Amazon works. The drawback is that the Operator now has to handle all billing related work and issues and that it’s not as clear to the customer who to contact when they have an issue (people tend to contact the company that billed them). COS Business Engine supports this model as it allows the subscriber to register their card in the marketplace and view all their billing data on their mypages, and by providing a report per provider and month detailing the margin on their services (retail price – wholesale fee), which will be used for the operator to pass on the revenue to the providers.
There are other models, where the subscriber will receive multiple bills, for example a network fee from the owner or operator of the network in addition to the bill/s from their provider. There might be reasons for this, but overall this model has the drawbacks that the customer will receive multiple bills, that the operator has to get involved in billing as well as the provider and that it will be less clear to the subscriber who they should contact if they have an issue. This is a costly model.
Specialization and automation are key to affordability and profitability
A logical development today, when everything gets digitized and services become increasingly advanced, is to specialize. You are more likely to succeed in being an expert with a limited scope than trying to do everything, and this is even more true if you add on the funding dimension. A company producing digital services for the mass consumer market has a completely different investment profile than an investment in fiber infrastructure with a 30-50 year perspective on returns. This is one of the reasons we believe the Open Access model will continue to grow in popularity and gradually become the norm in all fiber networks. More and more services will be delivered on these fiber networks, some of which will be crucial for the future society and smart cities, with performance and security requirements that require them to be provisioned on the network. It’s not possible that a traditional telco or internet service provider can produce all these advanced services and therefore the networks will have to be open for multiple providers, even though there might only be one choice of provider for the internet service on some networks.
The main challenge with the Open Access model is the complexity the model brings. It’s impossible to keep track of who is buying services from which providers, what should be provisioned and who should be billed, without system support and automation. It’s with an automated end-to-end solution tailor built for Open Access operations, like COS Business Engine, the model will deliver at it’s potential.
Why is the Open Access model particularly suitable for community networks
If you have read this far it might be obvious why the Open Access model is particularly well suited for community networks, but we will still list the major arguments below:
- The community will minimize the competition with the private sector, but rather take the investment cost of the infrastructure and thereby open up markets for the private service providers they might not otherwise reach.
- The community mainly builds fiber not to profit from it, but to create a more attractive community for residents and businesses. Therefore they can build where the business case might not work for a private company.
- The community generally has experience in building and maintaining infrastructure, but definitely not in providing retail IP based services.
- The community can access other types of funding than private companies.
- The community typically have a very different time horizon on infrastructure investments than the private sector
- And most importantly, by owning the infrastructure the community will control their own digital future, and can make sure everyone is connected and that there is nothing preventing them from rolling out community services.
Critique of the model
Of course, every model will receive skepticism and critique and this is in particular true when it comes to Open Access.
By the private sector it is believed that they can’t build these types of networks as it would reduce their revenue if they invited competitive providers on the network. Experience shows that while the revenue might be lower, profitability is instead often higher, as the operator can be more specialized on operations and let the providers take care of the subscribers. Also, more choice will make the network more attractive and increase the take-rate meaning more paying customers. If the private provider is afraid of competition, it can also be set up to only invite providers of non-competing services, meaning every service sold by another provider is added wholesale revenu.
The other common criticism is that “it doesn’t work”, or “it doesn’t work here”. Even though this has often been proven wrong over time, there are a number of failed Open Access networks in most parts of the world. Surely there are a much larger number of failed traditional monopoly networks. The reason is of course the complexity of creating and operating these networks, where Open Access is even more complex. Trying to build a new open access network without the proper systems support is extremely challenging, which is why you should work with a proven end-to-end solution like COS Business Engine, that has been used to operate hundreds of networks reaching over a million homes for a decade.
Another type of criticism is geared towards the concept of communities building fiber networks and thereby competes with the private sector. Obviously there is this type of competition on the infrastructure level and one can debate whether this is right. We believe that for rural areas in particular, it will be very hard to make fiber financially viable without community involvement and Open Access is particularly suitable for these applications as the high take-rates typically seen on Open Access networks are required as distances between houses increase. From a competition perspective, it’s without doubt the model which poses the least competition between the private and the public sector.
Another common reason why networks fail is simply that there are too few customers willing to buy the services. This is why it’s extremely important to generate and aggregate demand before you build the network, which is done by COS Service Zones.
We provide FTTH operators and network owners with software for automating and digitizing every aspect of their FTTH venture. From survey and demand aggregation, to sign up, deployment and billing – to help bridge the digital divide.