There are suddenly a lot of open-access networks springing up around the country. Traditionally, open-access networks have been built by local governments such as the PUDs in Washington, the small cities in Utah that are part of Utopia, or cities in states like Colorado. Today, there are also open-access networks being built by commercial network owners.
I’ve been asked by several ISPs if they should consider operating on an open access network. Like with any decision of this magnitude, there are no easy right or wrong answer, but instead a lot of pluses and minuses to consider. Following are a few of the most important factors to consider about operating on an open-access network.
Capital Expenditures. One of the primary reasons to think about using somebody else’s network is the savings from not having to fund and built a new network. For small ISPs without a lot of borrowing capacity, an open-access network might be one of the easiest ways to get more customers.
But there is a flip-side to not spending money on capital. If the ISP plans on eventually selling the business, there is a lot more long-term value created by owning a network than by riding somebody else’s. There might be far more corporate value created by building a small fiber network with a few thousand customers than by serving 10,000 customers on an open-access network. If you pursue open-access, it has to strictly be about the cash flow generated today rather than about the value created in the future.
Economy-of-scale. Another reason to consider operating on somebody else’s network is that anything that makes your ISP larger adds to economy-of-scale. There is a big benefit to spreading the costs of overheads like OSS/BSS systems and corporate staff costs over as many customers as possible. Any costs you can shuffle off to an open-access expansion should make your other markets more profitable.
But economy-of-scale savings can diluted if you decide to tackle a open-access network that is far away from your existing operations. It’s never as cost-efficient to open and operate in a new distant market compared to one that is next door.
Trust. One of the scary parts of being on an open access network is being captive to the processes and prices charged by the network owner. An ISP is taking a leap of faith that the network owner will always perform as promised.
If the network owner decides to increase wholesale rates, there is no option but to go along. While a rate increase would also apply to the other ISPs on the open-access network, it’s possible for rates to get too high compared to other competitors like the cable company.
It can also be a problem having to rely on somebody else’s processes. For example, in most open-access networks, the network owner builds new fiber drops and installs customer electronics. It can be devastating for a marketing plan if the network owner can’t deliver customer installations on time, or decides it has a limited budget to add more customers. An ISP is also a captive of all other processes of the network owner like trouble reporting and resolution, timely network upgrades, network monitoring, and the ordering process. Even if the processes are good today, the network owner can change the way they do anything. This is possibly the biggest reservation for an ISP that is used to working on its own network.
No Technology Advantage. It’s an odd situation for an ISP to be operating on a fiber network and yet have no technology advantages over many of your competitors. Every ISP on the open-access network has the identical capabilities as you. This means that an ISP on an open-access network must distinguish themselves through either price or customer service. Open-access can turn into a race to the bottom if one of the ISPs on the network decides to deeply slash prices.
This blog wasn’t meant to scare ISPs away from working on an open-access network. There are ISPs that are thriving in this environment. But it’s not for everybody, particularly for ISPs that want to control the customer experience from beginning to end.