Partner & Associate Director
Related Expertise: Telecommunications Industry Consulting and Strategy
The world’s enthusiasm for doing things online seems nearly unlimited, and as it grows, so does the demand for network capacity. The estimates are head turning: worldwide mobile data traffic is expected to increase 13-fold between 2012 and 2017, and fixed networks should see Internet traffic rise approximately 50 percent year over year.1 Notes: 1 Cisco Visual Networking Index Global Mobile Data Traffic Forecast, Februrary 2013, and IDC Worldwide Internet Broadband Bandwidth Demand 2012—2015 Forecast, March 2012. For telcos that provide—and, more to the point, sell—network capacity, this would seem to be very good news. More demand, after all, means more opportunities to launch products, win customers, and increase revenues.
But there is a challenge here, too. Adding the capacity to satisfy the voracious appetite for data will require huge investments in fixed and mobile infrastructure. While telcos are no strangers to large capital expenditures, the anticipated figures are unprecedented, particularly for providers that follow the traditional method of upgrading networks through national, one-size-fits-all rollouts. In those cases, even midsize operators face investments of tens of billions of dollars over the next decade—far more than they can muster.
Enter a new, nontraditional approach to network planning developed by The Boston Consulting Group in the course of its work with telcos. The integrated broadband solution (IBS) gives telcos far more agility in rolling out network upgrades, enabling them to minimize investments while maximizing the value that those outlays create—both for themselves and for their customers.
At the core of IBS is the recognition that different regions within a national rollout area are different, with characteristics and market potential that vary—so a solution that works well in one region may not be needed, or successful, in another. Fiber to the home, for example, fares best in high-density, affluent areas but is hard-pressed to turn a profit in more spread-out regions. IBS forgoes the one-size-fits-all rollout in favor of a more targeted approach, with telcos tailoring their offerings for a mosaic of customer needs and local conditions. And it does so in a way that is practical, manageable, and cost effective.
In our experience, IBS drives rollouts that can be 20 to 30 percent less expensive than plans made the traditional way, while generating the same EBITDA. It stresses—and facilitates—three crucial elements: geographically targeted rollouts, integration between fixed and mobile networks, and investments that are scaled to match local business opportunities. These are strong cards that telcos hold, but the traditional approach to network and business planning—in which the fixed and mobile sides of the business tend to go their own ways, and marketing and engineering departments don’t often interact—means they’re not often played. IBS ensures that they are.
The benefits aren’t just theoretical. When we worked with one telco on a granular review of target districts for a fiber-to-the-home/fiber-to-the-curb rollout, for example, our analysis led the client to reduce the overall fiber-to-the-home rollout significantly, avoiding more than $1 billion in capital expenditures on which it would have earned no return. The analysis also redirected about 30 percent of the remaining investment to areas that were more commercially attractive.
Yet IBS doesn’t necessarily mean making smaller bets. It means making the right bets. It drives rollout strategies that more closely match the needs and potential of a given market and allows rollouts to be implemented in the most cost effective way, often using a mix of network technologies. We believe that when IBS is executed wisely, it will prove far more successful than traditional methods in driving upgrades that make sense in today’s world. It is a new paradigm for new times—one that will help a telco not only tackle the future of broadband but lead it.