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Fiber infrastructure has been hailed as the “railroad of the future.” It serves as the nervous system of new information era by connecting homes and businesses with an ever-increasing demand for high bandwidth and low latency communication.
Investment in U.S. fiber infrastructure is anticipated to exceed $125 billion over the next five years, as organizations open their wallets to build out the communication infrastructure. According to AlixPartners' analysis, private equity groups are among those identifying the sector’s prospects, making multiple fiber-related acquisitions over the past two years.
However, to adequately monetize this capital-intensive investment, smartly accelerating deployment and consumer adoption is key. This will not only help meet the world’s ever-increasing communication and data transfer demands, it will also justify the enormous upfront investment required by reducing time to value and minimizing operating expenses.
The Rollout Model Is Broken
Fiber deployment is an urgent priority, but the progress is sluggish due to an unstructured approach. This is further complicated by ineffective collaboration among key parties and end users who are often reluctant to transition.
In operations of this magnitude, glitches are inevitable; however, operators who solve them are likely to benefit from first mover advantage. This is imperative because the biggest profit potential belongs to those who get ahead of the oversaturation and commoditization set to influence fiber pricing and adoption.
Another success factor lies in access to capital. Very few companies, especially in North America, have provided visibility on deployment and connection costs. However, modest estimates indicate these costs are likely to exceed $1,300 per home. These costs may be even higher in densely populated or urban areas, where benefits are greater but achieved with higher difficulty. Considering operators are expected to deploy fiber to 38 million homes over the next five years, the demand for capital investment alone would exceed $50 billion.
Finally, having access to fiber does not necessitate adoption. Marketing teams have a significant role to play in identifying areas with the highest value for deployment, maximizing awareness, and converting customers.
Reevaluate the Blueprint
As fiber companies attempt to orchestrate a large-scale fiber deployment, they must reevaluate the blueprint they are using. Today’s strategy is not efficient and does not effectively facilitate a truly end-to-end rollout.
Here are the priorities to address:
Be First: Fiber to the Home (FTTH) would reward the first mover who captures the end-user market with. With a new digital era – defined by fast communication and increased data consumption – slowly diminishing the operability of copper, there will be heightened demand to switch to fiber. The first mover to establish the network is likely to capture the influx of demand.
Be Efficient & Fact-Based: Many rollouts are delayed, costing 20% to 50% more than initial expectations. Revenue growth, meanwhile, is below forecasts. Many operators are overestimating the present household demand for fiber. Until these trends change, a high risk of inadequate returns from these capital-intensive investments remains. Meanwhile, planning and organization are plagued with inaccuracies, leading to incorrect ordering and delays.
Proactively and Accurately Deal with Bureaucracy: Insufficient, delayed, or missing approvals prevents the start or continuation of civil engineering works. Ensuring a timely and accurate permitting process will help remove this bottleneck where the operators have limited control.
Coordinate Go-To-Market Strategy: Once the fiber network is operational, marketing and sales activities tend to not be in sync, delaying time to deliver value via onboarding new customers.
Eliminate the Guesswork
We believe an execution and value tracker “solution” is the best suited to fix this broken process. The solution is a deployment tool powered by technology created by Palantir – a firm AlixPartners works closely with.
The “solution” triggers collaboration by bringing together several different functions into a single tool capable of integrating massive data flows and interpreting information via artificial intelligence: one source of facts based on input from various devices and data sources. This enables fortified governance, fact-based decision-making, and efficient execution.
Stage 1: Deployment and rollout planning
Many of the new rollouts being planned will take place in rural areas presently not connected by fiber. This presents several variables:
What are the commercial elements, including value of the market, risk of substitution, and price sensitivity?
Are there competing fiber networks in the area?
What deployment logistics need to be considered?
What is the cost to roll out in a region, the distance between end-users served and permits required?
Will the fiber be buried or aerial?
The answers to these questions pave the way for efficient and profitable rollouts. Getting those answers quickly and accurately requires an execution and value-tracking “solution.”
Stage 2: Monetization and cost-reduction
The “solution” also acts as an integrated platform to harmonize deployment activities across more than 1,000 parties. It can plan the rollout in a structured sequence from applying for approvals to going through different approval stages and then on to contracting, ordering, physical rollout, and monetization.
These activities are currently handled by different departments, teams, and systems, leading to delays and synchronization issues and crimping value creation.
We believe there is significant value at stake. Capital expenditures can be lowered by 10% to 20%, and a 20% reduction in time-to-value can be achieved. Additionally, 5% to 10% of total capex invested in FTTP deployment can be recovered from scrap copper alone. Incremental value can be achieved by targeting the rollouts to take place in optimal customer regions based on churn-risk profile and deployment costs. An AlixPartners-Palantir solution could alleviate a lot of the guesswork from fiber deployment and expedite the path to monetization.
