Are we there yet?

The broadband revolution can’t happen soon enough to satisfy consumers and service providers who eagerly anticipate an ever-increasing variety of efficient, personalized, broadband applications

For years now, we’ve heard the seductive promises of the coming broadband revolution:  high-speed, “last mile” network connectivity for all; an ever-ready, always-on network connection to the world, providing lifeline services and the bandwidth-on-demand to accommodate today’s bandwidth hungry multimedia, personalized content and other specialized applications.  Mom can videoconference from her home office. Dad can do Internet research on his stock tips. Jenny can chat with Internet companions across the country and Jimmy can play a video game with a friend located across town.  It can happen all at once, for just pennies a day, thanks to broadband.

The broadband revolution marches on, albeit more slowly than originally anticipated.  While customer demand for bandwidth and broadband services has remained high, limitations on large-scale deployments of broadband technology have stymied early entrants into the broadband access marketplace.  Their experience demonstrates that they face two key challenges that significantly influence the ultimate success or failure of the deployment.  First, they must have the ability to respond to the industry-wide changes in the underlying business model requirements and expectations.  Second, they must accommodate both voice and evolving services.

The failure of the traditional telecomm business model to accommodate widespread deployment of broadband technologies has led to suspicion and impatience among investors, and a reticence within financial markets to continue to support such efforts.

Changing Business Models

Spurred to competition by the opportunities presented by deregulation and the public’s cry for bandwidth, a cadre of newly created telecommunications service providers sought to deliver on the promise of broadband, investing billions of dollars in long haul and regional infrastructure to support the anticipated volumes of customer traffic.  Network expansion at the edge, however, proceeded slowly due to inherent limitations of the existing wireline infrastructure and the extraordinary upfront, per subscriber cost of providing last mile, high-bandwidth connectivity to customers.  Despite the industry’s great promise, the weight of huge upfront capital expenditures and debt loads required at the edge of the network to pursue their “if we build it, they will come” business models has crushed many competitors. 

The failure of the traditional telecomm business model to accommodate widespread deployment of broadband technologies has led to suspicion and impatience among investors, and a reticence within financial markets to continue to support such efforts.  Nevertheless, this experience provides two critical lessons for surviving service providers proceeding with broadband deployment strategies.  

First, the investment community and financial markets will not tolerate the slow and expensive methods of the traditional “infrastructure first” business model.  Broadband infrastructures must deploy quickly and modularly and flexibly accommodate alternative future customer and service growth demands.  Second, companies must tie service revenue generation more closely tied infrastructure costs–-in both timing and magnitude–-from the start.  In short, early profitability is not just desirable–-it’s mandatory.

While it’s impossible to predict the fate of those companies demonized by the traditional business model approach, it is encouraging to note that technology alternatives exist that can deliver on the “new” business case requirements.  Fixed wireless networks, for example, offer service providers a modular, scalable infrastructure for broadband deployment at a fraction of the cost and time required to deploy wireline alternatives.  By using such alternatives, service providers strengthen their business case by reducing their upfront capital expense and shortening the period to cost recovery.

Is Voice the Driver?

The second challenge facing service providers has been the inevitable business model decisions regarding which services to target and deliver.  Until recently, broadband infrastructure platform decisions were predicated upon selecting either a platform best-suited to delivering voice services (by using a circuit-based network), or a platform best-suited to delivering a portfolio of robust data services (by using a packet-based network).  In such a situation, however, service providers find themselves excluded from a significant portion of the market and the revenue opportunities associated therewith.

...a broadband service provider choosing to pursue a service structure focused on providing circuit-based voice services...may be precluded from installing the infrastructure capable of supporting the evolving next-generation of IP-based applications....

For example, a broadband service provider choosing to pursue a service structure focused on providing circuit-based voice services (a rich, short-term revenue source) may be precluded from installing the infrastructure capable of supporting the evolving next-generation of IP-based applications (a rich, long-term revenue source).  This “either/or” scenario has severely compromised the likelihood for success and, in many cases, the aversion to making such a decision has delayed pending broadband deployments altogether.

Here again, technology has responded through the convergence of voice/data services (circuit-based/packet-based) onto a single network platform.  This IP-based network platform can provide the bandwidth required for emerging, high-speed broadband applications like multimedia or videoconferencing while simultaneously providing reliable, “circuit-like” voice connectivity through voice-over-Internet Protocol (VoIP) technology.  

The emergence of the multiple service platform alleviates the service provider’s dilemma of “playing not to lose,” and provides them with a broadband infrastructure that empowers them to “play to win.”  Now, able to capitalize on both the short-term and long-term revenue opportunities, the service providers strengthen their business case through the inclusion of not just earlier, but sustainable, revenue generation.

Validating the Business Case

The viability of the technology and the business case supporting large-scale broadband deployment is evidenced by SONOFON’s recent announcement of plans to undertake what’s heralded as the world’s largest fixed broadband wireless deployment and the largest end-user VoIP deployment to date-–supplying fixed broadband wireless access to 95% of Denmark.

SONOFON, Denmark’s second largest GSM/mobile wireless service provider, intends to leverage its current customer/service base to develop a national, integrated wireless broadband access network.  While SONOFON’s selection of a fixed wireless infrastructure may seem intuitive, given the company’s expertise with mobile wireless, it is important to note the business case advantages to their decision.

First, fixed broadband wireless infrastructure is quickly and easily deployed; in this case, on towers and real estate already available, without the time or expense required for laying fiber or cable.  Second, customer premises equipment (CPE) for end users is likewise easily installed--without multiple truck rolls or intrusive cabling associated with competing “wired” alternatives.  

Most important to note is that the end user CPE can be installed and produce revenue for the service operator in a matter of hours.  Last, fixed wireless infrastructure can be easily upgraded and expanded, incrementally and without construction equipment or truck rolls, as customer and service demands require.  Combined, these factors enable SONOFON to strategically deploy and upgrade its broadband infrastructure in direct response to market requirements-–minimizing stranded capital costs and maximizing service revenues resulting from deployed hardware.

Another distinctive element of SONOFON’s project is the incorporation of VoIP technology and the offering of voice connectivity services over broadband on a wide scale basis.  The inclusion of this service offering not only complements SONOFON’s strong position in the mobile wireless market, but also provides additional revenue flows to support the overall fixed wireless broadband access deployment.

The success of the deployment and proposed services will not be known until later this year, with infrastructure deployment and service offerings slated to begin this fall.  However, industry experts and analysts have recognized the significance of the project-–for both its magnitude and the fundamental soundness of the underlying business case.  Clearly, SONOFON’s bold national wireless broadband access network deployment is expected to demonstrate the viability of large-scale, broadband access deployments featuring not just hot technology, but also solid business plan performance, as part of the package.

Service providers have gained valuable insights from the experience of their predecessors-–reinforcing the conventional business wisdom that return on investment (ROI) and profit still applies and that there is indeed a time value to money.

The Revolution is Imminent

The true rewards of the broadband revolution have yet to be widely realized-–either by service providers or a significant number of end-users.  The movement, however, is gaining momentum.

Service providers have gained valuable insights from the experience of their predecessors-–reinforcing the conventional business wisdom that return on investment (ROI) and profit still applies and that there is indeed a time value to money.  They also have the technological advantages of available multiservice network platforms that facilitate simultaneous circuit-based and packet-based service delivery and revenue generation.  Using these resources, service providers have the tools necessary to satisfy the business case requirements for successful, large-scale broadband deployments.

For Dad, Mom, Jimmy and Jenny, the broadband revolution can’t happen soon enough.  Despite VoIP’s ability to accelerate the widespread deployment of always-on, broadband connectivity, it is the rest of the revolution that’s so anxiously awaited.  As local broadband access becomes prevalent, an ever-increasing variety of efficient, personalized, broadband applications will emerge and evolve-–potentially touching and enhancing virtually every aspect of our personal and professional lives.  This is the real promise of the broadband revolution and its allure is irresistible--to service providers and users alike.
Edward Champy is Executive Vice President, Spike Broadband Systems, Inc. he can be reached at
ed.champy@spikebroadband.net.

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