It is a truth universally acknowledged that a burgeoning fibre market needs people in possession of a good fortune to survive (apologies to Jane Austen).
More recent marketing jargon might simply say, “In a starving contest the fat man wins.”
However, no matter what the importance of financial and people resources, a focus on target customers’ needs can help to save emptying your purse unnecessarily or avoiding investment to maintain existence.
The fibre gold rush
In the UK – and around the world – there is a plethora of companies looking to provide fibre-based broadband services, backed by billions of pounds in capital investment. It’s like a gold rush only with fibre rather than precious metal. The cliché is that the only definite winners in the gold rush were purveyors of spades. This appears to be the mindset of ambitious fibre network providers: ignore the reason why customers want fibre, just make sure you offer the infrastructure. As is so often the case, technology companies forget that customers buy services to meet their needs, not technology to meet the ambitions of infrastructure companies. Infrastructure and applications are co-dependent
With the ‘land grab’ in full flight, BT’s Openreach was looking to squeeze the market with discounted FTTP pricing for UK internet service providers (ISPs) through its Equinox 2 offer, which has now been paused for further regulatory scrutiny. So, the ‘fat man in a starving contest’ scenario is on hold.
In the meantime, unsubstantiated reports claim that Virgin Media O2 has been looking at acquiring the UK’s most significant independent wholesale fibre provider, CityFibre. Given the problems Vodafone has faced looking to buy mobile operator Three UK, any such deal appears hugely problematic from a regulatory and government Competition & Markets Authority perspective.
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The law of three
Mature markets tend to obey the ‘law of three’ which provides sufficient competition to be effective both in terms of customer choice and the ability of companies to make enough financial return to continue to invest and innovate.
This does not, however, mean that other providers can’t compete – but it does mean they cannot be competitive without a specific point of differentiation. Differentiation can come from a focus on a particular geography, specialism in a vertical sector, or exceptional customer service that adds significant value over and above the competition. One recent approach is represented by Rebel Internet, a company founded by former BT executives, which aims to offer a better deal to customers by not insisting on contracts (presumably this just means long-term contract lengths as it would otherwise be illegal) or installation fees. This is what might be termed a ‘courageous’ strategy.
In the long run, the fibre-based broadband market is likely to have three main nationwide infrastructure players alongside others serving regional niche markets deemed uncommercial by the biggest players. In addition, there will be other niche players that offer something exceptional and differentiated to their target customers.
Like with so much infrastructure in the UK today, there will be potholes and bumps in the road which customers will have to put up with. On the plus side, in the long run they are set to benefit from market opportunities, operational efficiencies, and improvements enabled by fibre broadband and, more importantly, by the applications than run over them.