This article originally appeared in the Jan. 2011 issue of NGN Magazine.
As I explained in the last issue, the ITU’s vision for next generation networks is unnecessarily complex. Their designs have been driven by operators’ need for revenue and profits that support obsolete business models. It’s just these traditional telco business models that require the complex NGNs.
What if an operator took an IT-centric approach to services? Is there a business model that could cut costs dramatically while increasing profits and customer satisfaction. Yes! The proof is the Iliad network, marketed in France under the brand Free. Starting from scratch in 1999, Iliad has built a broadband triple-play business with over 40 percent market share in greater Paris and 25 percent across all of France.
As recently as 2005, Free had less than 1,000 employees (and 1.6 million broadband subscribers). In 2009, its payroll costs were still only 4 percent of its €1.6 B in revenue (U.S. $2.1 billion) from 4.5 million subscribers (excluding its then-recent acquisition of Alice Telecom from Telecom Italia).
Free has one simple offer – its triple play, currently 28mbps DSL or 100mbps FTTH plus IPTV (News - Alert) and telephone with unlimited calling, caller ID, voicemail, conferencing and fax service at one price, €29 per month. Over the years, the price has remained the same while Free keeps adding features. The result: incredibly low subscriber churn. The single flat-rate service avoids zillions of staff hours tracking hundreds of service options. The company bills by credit card, thus avoiding bad debts and collection costs. Its advertising expense is incredibly low as the one product is simple, and it’s a genuinely good deal!
So it’s possible to provide triple-play service to a country the size of France with just a few thousand employees (versus France Telecom’s (News - Alert) roughly 60,000 employees in France). From an IT point of view, this is no surprise. Every major corporation runs a sophisticated network providing last mile speeds 10 times or 100 times those of a telco and does it with a relatively small staff – recruited, as often as not, from local community colleges. Running an IP network is not rocket science and building one is not expensive.
Most of us have tens, hundreds or thousands of megabits zipping around our homes and workplaces, but once that data leave our premises it hits a network designed from the ground up for complexity. Consider that none of the equipment in Verizon’s FiOS (News - Alert) network is conventional IT gear. Instead it’s “carrier grade” and telco-specific. Like most telcos (but unlike Iliad’s Free), FiOS uses a passive optical network architecture, which makes it difficult to unbundle any of its bandwidth and reduces future flexibility.
Iliad proves there is another path. How could we foster this kind of broadband competition in the U.S.?
Edited by Stefania Viscusi