App and Connectivity Firms Share Local Access Investments?
Will app providers and connectivity providers ever routinely share the cost of internet access facilities? Granted, it never has happened before. But the uncertain payback from fiber access facilities could lead to new thinking.
For fixed service providers, the growing amount of stranded assets is a key issue. Mobile service providers face different issues.
Unlimited mobile internet poses a threat to investments in capacity, in large part because there is little, if any, incremental revenue to be gained when usage is nearly unlimited and prices essentially are capped.
Eventually, that lack of return could prompt previously-unthinkable partnerships, including app providers funding optical access in the same way they often help fund (and own) subsea transport networks.
Partnerships between carriers and over-the-top players to fund deep fiber therefore emerges as a possibility, argue Deloitte consultants. But it is equally possible that more application providers will simply decide to build their own access networks.
Many will argue app providers cannot afford to do so, and will point to Google Fiber as evidence. Those objections are valid, but also must account for other possibilities in the future, as huge amounts of new millimeter spectrum are made available, including huge amounts of unlicensed spectrum.
Also, more powerful radio platforms and open source network elements will help the business case for such “overbuilds” as well.
So it is that over-the-top players might choose to fund fiber deployment by owning assets or forming partnerships with carriers.
Much as they view any other investment, service providers are likely to prefer ownership of assets that provide differentiation, and be more willing to spin off, partner or lease other parts of the infrastructure that do not provide clear business advantage, much as big carriers have spun off tower networks, data centers, network operations and technology development in general.
So shared infrastructure models could emerge for last mile fiber access. That would make access fiber a form of leased real estate.
But that is not a new, or terribly unusual problem. It has been clear for some time that there are limits to the amount of revenue growth possible from all connectivity services (voice, text messaging, internet access). In the consumer space, telco growth is increasingly reliant on video entertainment services.
In the business space, it likewise will be necessary to “move up the stack,” into the applications and platforms part of the ecosystem.Easier said, than done.
Internet of things also could provider new opportunities to move up the stack. Gartner predicts that affluent households will have up to 500 connected devices by 2022.
“In such cases, carriers could increase revenue by offering integration, network security and traffic management services,” Deloitte consultants argue.
“Another potential opportunity is working with, rather than against, over the top players,” Deloitte argues, as in the case of sharing access infrastructure costs. That has happened routinely in the undersea transport space, but would be a major change for the retail access networks business.