Tuesday, August 18, 2015

80/20 Rule for Fixed Networks?

CenturyLink, Frontier Communications, Windstream and Lumos Networks are examples of former rural telcos that have transformed themselves into companies that make most of their money from business customers.

In the case of Lumos Networks, the strategy was to spin out the former competitive local exchange carrier assets from Ntelos, the independent telco. After that transaction, Ntelos  itself was acquired by Shentel, another Virginia-based independent telco.

Headquartered in Waynesboro, Va., Lumos provides products and services over a 5,800 route-mile network in six states, including Virginia, West Virginia, Pennsylvania, Maryland, Kentucky and Ohio.

In large part, incumbent telcos have repositioned by creating their own out of region competitive local exchange carrier operations, or acquiring other CLECs.

Over the long term, the unsettled issue is the sustainability of traditional telco operations serving both consumers and business customers, in region.

In many ways, the dilemma is the Pareto principle, commonly known as the “80/20 rule,” where 80 percent of results come from 20 percent of actions or operations. In the case of incumbent telcos, the issue is that the access network serving consumers often is necessary to create the economies of scale to support services aimed at business customers.

In much the same way that undersea carriers serve both retail and wholesale segments of the business, fixed network operators might find that serving consumers is required to attain the scale to support the more-profitable operations supporting business customers.

That might be as true for Verizon and AT&T as well as smaller telcos. The ability to support  small cell backhaul networks covering wide areas,  for example, often depends on dense fixed networks that piggyback on residential service assets.  

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