Broadband investment—and the call for it to be treated as essential infrastructure—continues to be the focus of a wide range of discussions and programs. The American Jobs Plan introduced in March 2021 is pushing for $100 billion to help expand broadband access across the country. The use of fiber networks offers a viable way forward to deliver on the long-term results and future-proof solutions of reliable internet that the bill is prioritizing.
Utilities have built robust fiber networks to support operations for decades, putting them in a unique position to support broadband penetration, leverage their existing or planned middle-mile reserve fiber infrastructure in areas currently unserved or underserved by broadband, and lease capacity to service providers.
But the market for broadband services is quickly shifting. Evaluating and deploying utility-owned fiber business model options are a challenge because of rapidly evolving customer needs, potential partners, competition, and substitutes.
For utilities in the strategy and planning stages, there is often a desire to move fast. But pausing to ensure that the wide array of market factors have been properly accounted for when defining a fiber offering can pay significant future dividends.
This requires a market-driven, disciplined methodology to assess the best investment.
Digital redlining, the inequitable digital accessibility for marginalized customer groups, is a reality in broadband. In a deregulated competitive market, internet service providers (ISPs) and carriers will deploy broadband in those areas, promising the greatest potential market share and revenue. As a result, some areas—particularly rural or low-income urban neighborhoods—are prone to be underserved, becoming “broadband deserts” (areas with limited or no access to affordable broadband internet services).
These areas are characterized as unserved (coverage falling below 25/3 Mbps) or underserved (coverage falling below 100/20 Mbps) by broadband providers due to the area’s unfavorable costs to deploy and build infrastructure relative to the predicted number of consumers that would subscribe for service, average revenues per subscriber, and associated returns on investment.
Telecommunications infrastructure owned by regulated utilities may play a key role in addressing this digital divide while driving new economic development opportunities and ancillary utility revenue streams. Utilities have been building fiber communications across their electrical assets for decades to provide near real-time measurement, monitoring, and control of equipment as well as communications backhaul for utility operational purposes. This investment is needed to support a modern 21st century utility grid and provide broadband access to all customers.
Significant progress has been made over the last year in expanding broadband access. A recent survey reported a 54% increase since 2020 in the number of Americans who have access to low-priced wireline broadband service plans, and 77% now have access to plans that cost less than $60 per month with a speed of 25 Mbps download and 3 Mbps upload. It’s a major step forward, but there is still work to be done to deliver the broadband that communities need to not only survive but to thrive.
The FCC includes internet access of any speed of over 200 kbps as part of its broadband maps. Due to the use case accelerations driven by COVID-19, what customers consider to be broadband service does not necessarily align with previous definitions. Now that remote learning and work have become essential for many, homes require speeds of at least 10 Mbps download and 1 Mbps upload per person with latency below 150 ms. Even in states with high reports of broadband availability, the services often fall short in terms of upload speeds and latency. Speeds and latencies once thought to be only for premium services have become essential across the socioeconomic spectrum.
The needs of many are not being met by services carrying the broadband label. Delivering on this core infrastructure will require more fiber being deployed to wider areas.
This means there are still opportunities for utilities to successfully enter markets that appear well-served at first glance.
Utilities can enable the telecommunications infrastructure (or elements of it) to accelerate economic development and stakeholder benefits, but selecting a strategy in a rapidly shifting market remains a challenge.
As residential and business customer needs evolve, so do the offerings of service providers. Cable and other wireline providers will invest in network upgrades in portions of the service territory viewed as profitable. Wireless providers will continue to deploy different types of 5G across the territory over time. Low Earth Orbit satellites providers have received significant attention and federal grant money, but they will not likely be able to successfully target every premise in a given geography.
Understanding the shifting market needs and predicting the competitive dynamics is essential when selecting a strategy and creating fiber deployment plans. This requires a detailed, structured methodology to both assess and forecast market shifts, ideally down to the postal code level.
Utilities are faced with a wealth of potential target customer options, but each target customer will have different business and technical requirements to support their financial objectives and business strategy. The fiber market value stream spans from material providers through infrastructure and service providers to the different segments of end customers. At each phase, a variety of potential customers exist, but their needs must align with the utility’s abilities and service offering.
Determining the right target customers and potential collaborators for a solution requires a firm understanding of this value stream, the players within each portion of the value stream, and their respective business models.
During this assessment, a utility must look at macro and micro factors in their territory, which will influence the type of offering the utility might offer to each type of customer. A structured value stream analysis helps to better align the utility fiber objectives with the right customers, collaborators, and their individual business needs—or to validate if an investment in fiber beyond utility operations is appropriate under the current conditions.
Prior to detailed planning, it’s critical to align corporate strategy with the impacts that expanded fiber deployment might have on a utility’s operations, customer experience, new business, regulatory obligations, and overall financial objectives.
A fiber strategy and plan must account for factors including regulatory and legislative constraints, target customer requirements, customer support needs, contractual requirements (e.g., Right-to-Use and Service Level Agreement terms), other service options both existing and expected, and go-to market tactics, including bundle definition and pricing.
To overcome the newness and complexities of a broadband offering, utilities should take a structured, product-centric framework to build a well-defined market strategy. The key to success for a fiber offering will be to determine how to best leverage the utility’s unique strengths such as its brand, access to consumers, and planned or available infrastructure while also aligning with the objectives of key partners such as ISPs and carriers who can provide last-mile connections, electronics, and customer management. Applying this framework offers a proven, disciplined approach to assessing the market and creating a well-defined market strategy.
Creating a broadband offering presents new challenges and complexities. Each utility brings its own unique capabilities and current operational plans into a unique local market. The product-centric approach provides a methodology to understand where and how to deliver value and then create a plan to ensure swift value delivery. This approach also provides a foundation that can be revisited and iterated on as markets conditions continue to evolve. A product-centric approach enables the utility to pivot and adapt their offerings and plans during the multiple-year fiber broadband program.
The broadband market is dominated by larger carriers offering bundles of wireline and wireless services, as well as ISPs and other service providers. Some utilize fiber as part of their access networks while others leverage different technologies, like LTE and LEOS, to reach the end customer. There are five major offerings that are typically considered by utilities. When selecting an initial offering, the potential reactions of current market participants should be accounted for in detailed planning. Whether a utility chooses to lease dark fiber or bring a full fiber-to-the-premise solution to market, they must focus on where they can best deliver value through the value stream, geography, and customer segment lenses.
Depending on the offering selected, utilities may enter this space as potential partners or competitors to the incumbents. Once a utility makes its plans known, they can expect the existing players to react by modifying their offerings or changing their deployment plans. Creating a plan based on a product-centric strategy is a strong foundation for identifying and planning for these scenarios. It frames the plan on customer outcomes and emphasizes that strategy requires action across the organization.
A product-centric approach makes it easier to evaluate how changes can impact assumptions and metrics because a more detailed understanding of the market factors is incorporated into the initial technology, deployment operations, and delivery plans. The team has already considered the needs and drivers across the value stream, making scenario planning a simpler, faster process.
Fiber broadband programs offer significant benefits to utilities in terms of operations, electric rate reductions, driving economic development in the territory, and closing the digital divide. Several utilities have already begun to plan for and execute upon utility digital divide broadband pilot programs over the past year, in some cases partnering with local ISPs or leveraging their own fiber ISP subsidiary to provide high-speed internet. As the concept begins to prove itself out through successful pilots, other utilities seeking offerings of their own will need to take a concerted, product-centric approach to align their individual objectives with the market conditions specific to their territory.
Regulatory approval is often the initial goal. But the essential first step is working through the strategic alignment and planning process to leverage a disciplined methodology. This will allow utilities to set the right strategy and detailed plan that will position them to drive sustained success and benefit realization over the multi-year program as it progresses and evolves.