Monopolistic behavior risks failure
We believe a single national broadband network operator risks returning to the monopolistic behavior of single national operators. Before telecoms markets were opened to competitive players, too many incumbents were slow-moving, unresponsive monoliths that put revenue before customer service.
Service provisioning was measured in months or even years. Retail prices bore little relation to costs or affordability, and service innovation was almost unheard of. Often these telecoms operators were state-owned, their employees were civil servants, incentivized to avoid risk while focusing on growing revenue for their governmental masters.
See Also
The new wholesale-only next-generation network operators must not be allowed to revert to this old monopoly mindset. If they do, investment in new infrastructure will be concentrated where returns are more certain, prices are likely to rise and service innovation will slow. Monopolistic behavior by these national broadband network operators risks running counter to governments’ desire to increase broadband penetration and affordability.
Value-added support for retail service providers
The new wholesale-only next-generation network operators must be encouraged to provide the services needed by RSPs efficiently and cost-effectively. They must be responsive to changing market demands and should proactively invest in service improvement and innovation.
In New Zealand, Chorus took action to stimulate demand for its wholesale services by encouraging demand for the services provided by its RSP customers. In its “Gigatown” competition, Chorus invited communities across the country to develop plans for how they would use gigabit services “to foster new ways of learning, playing, and conducting business.” Although Dunedin won the competition, awareness of the social and economic benefits of broadband access have been felt across the whole country.
In addition to schemes like this to stimulate demand, the wholesale-only next-generation network operators should also create value-added services to help their RSP customers develop their retail offers. For example, wholesale-only operators can assist their customers by advising on marketing, providing training, helping with customer migration, and aiding their service configuration and integration activities. Not only will this foster closer working between RSPs and wholesale-only networks; it should also encourage greater responsiveness to new demands and even help evaluate the benefits of service innovations.
However, regulation will still be necessary to ensure that these wholesale network operators do not abuse their monopoly positions, whether by setting prices significantly above cost or through reluctance to invest where returns are lower or less certain. This regulation should focus on actions that will increase broadband penetration, such as insisting on cost-based pricing, open-access availability of services, and improvements in provisioning and repair times.
David James is principal analyst for wholesale telecoms at Ovum
This article was first published in Telecom Asia Wholesales Insights November edition