92 enablence article drivingarpu

8/4/2019 92 Enablence Article Drivingarpu

1/5

www.enablence.com

SO YOUVE RUN

FIBER TO THE HOME:

NOW WHAT?

BUNDLED AND VALUE-ADDED SERVICES KEY TO

DRIVING REVENUE PER CUSTOMER

July, 2010

AN ENABLENCE ARTICLE WRITTEN BYPETER KALLAI, VP STRATEGIC ANALYSIS & MARKETINGPUBLISHED IN FTTH COUNCIL NEWSLETTER


2/5

2 | P a g e w w w . e n a b l e n c e . c o m

A sound business model for provisioning advanced broadband services over fiber reliesas much, if not more so, on the number of services each subscriber takes up than it doeson the number of subscribers connected to the network.

While the penetration rate the number of subscribers on the network is obviouslyimportant, relying on this as the key performance metric can be misleading in yourattempt to run a profitable business. The capital intensive cost of acquiring and hookingup new customers must be offset by how much revenue is being generated per user.

This leads us to average revenue per user (ARPU) another key measure for aprofitable fiber network that is determined by many different services a householdsubscribes to and bundles together. The standard bundled package, of course, combinestelephone, television and high-speed Internet. But as these triple-play packages havebecome standard offerings over broadband networks, service providers are challengedto differentiate themselves from rivals, build customer loyalty and reduce churn. Thebandwidth capabilities of an FTTH network offer myriad opportunities for serviceproviders to offer additional value-added services that will generate new revenues.

A 2009 study from Parks Associates found that service bundles boost customersatisfaction and the more services, the greater the satisfaction. This study alsodetermined that a highly satisfied broadband subscriber is 46 per cent less likely tochurn. A 2009 report from Yankee Group, Next Generation Access Services: Analysis ofPortfolios, also asserted that subscribers with multiple service bundles are stickier.

This Yankee Group report also found that advanced broadband services delivered overfiber enjoy ARPU rates that are on average 30 per cent higher, or more, than DSL. HDTV and variety of premium programming content are key attractions to secure new FTTHsubscribers and drive ARPU. Beyond this, the evolution of premium video offers thegreatest opportunity to drive ARPU for new services such as TV videophony, e-healthand interactive TV. The challenge of course, is to have a network architecture that canprovision the necessary bandwidth and scale as needed without costly forklift upgrades.

DRIVING PENETRATION

But lets first take a look at penetration and how to increase it. The typical network has anaverage penetration of 30 per cent. However, Enablence has worked with a number ofservice providers who have achieved 60 per cent and higher. How have they achieved

this? Here are some common best practices.Pre-deployment customer service training : When fiber is being deployed for thefirst time, residents are going to have a lot of questions so too will the serviceproviders customer service staff. It is therefore important to have a thorough training andorientation program for those staffing the contact center before the phone starts to ring.


3/5


Customer service : This should be a no brainer, but all too often is neglected. It is anissue that can be particularly acute for a service provider that has previously enjoyed amonopolistic position in its market, such as a power utility. But regardless of whether theservice provider is a telco, a utility or a cable operator, deploying new services will strainexisting contact center operations and may demand increased staffing to ensure servicelevels meet customer expectations.

Community visibility : This can manifest in a number of ways to drive consumerawareness and evangelize the benefits that FTTH can provide. Having uniformedrepresentatives visiting neighbourhoods, holding town hall meetings, even providing theconstruction staff with the means to sign up subscribers on the spot, can go a long waytoward increasing subscription rates.

Service providers that already have established relationships with their markets, such aslocal telcos and public utilities, have billing, service and contact center systems that can beexpanded to support additional services. Existing customers can be incented to subscribeto new FTTH services on the appeal of centralized customer support and service, unifiedbilling and discounts on bundled services from a known and trusted service provider.

Exclusive partnerships and marketing agreements : En-Touch Systems, a facilities-based local exchange carrier that provides Fiber-to-the-Home (FTTH) services to 25Master Planned Residential Communities in the Houston area, is a great example of this. Itenters into exclusive agreements with developers to be the service provider of choice inGreenfield residential developments.

Greenfield developments offer a unique opportunity to deploy fiber with a clean slate andencourage take up with special promotions that can be subsidized by the builders. Thebenefit to the builders, of course, is that the FTTH network is a value add that helps withtheir own sales and marketing efforts.

DRIVING ARPU

Now that you have achieved a high penetration rate, it is time to consider how the highbandwidth of your fiber network can be leveraged to deliver additional value-added serviceto increase revenue per user. As the Yankee Group report found, the key is to find thehappy medium between a broadband utility strategy, in which the goal is to provide highquality, reliable Internet access to as many customers as possible, and the keep itpremium strategy, in which the goal is to provide sexy next-generation access services ata premium price ... without cannibalizing existing revenues.


4/5


Progressive service levels : Not everyone wants, or can afford, 50 Mbps symmetricalInternet connectivity. And there are other subscribers who cant bear to settle for a mere 6Mbps. It is therefore essential to offer progressive service levels Bronze, Silver Gold, for

example that provide different bandwidth options at different price points. In addition,premium-priced service packages that feature even higher connectivity speeds and, moreimportantly, guarantees the QoS no matter what traffic conditions are on the network canbe offered to business.

By the same token, some subscribers only want to pay for a basic television channelpackage, while others are more than willing to pay extra for additional HD and specialtychannels. The same progressive pricing can be applied to television, with service packagesfurther differentiated by IPTV, number and variety of HD and specialty channels, and VoD.

The Smart Home : En-Touch Systems has expanded beyond the standard triple-playpackage to further differentiate itself and drive ARPU. It also offers advanced in-home

services such as automation, security monitoring and surveillance. Two years ago, En-Touch expanded into retail electricity and smart grid services, with a focus on renewableenergy projects.

Virtual LAN services : Gaming is a growing multibillion-dollar industry. People often gettogether for LAN parties, usually in the same room, with each competitor using his owncomputer. The problem with doing LAN parties between locations is the latency, or lag, inthe data transiting from one player to all the others. This can make the game run slowly,and unfairly disadvantage a player whose connection is slower than the others. On a FTTHnetwork, however, the service provider can budget low-latency bandwidth for thisapplication and offer it as a value-added service. More on this below with DynamicBandwidth Allocation.

Secure On-Line Backup : Anyone who has ever had a hard drive crash knows the valueof backing up data. But backing up data requires good security and, ideally, a backup of thebackup. The safest option is backing up to an off-site server to protect against fire, flood ortheft. While several parties offer such a service over the Internet, massive storagerequirements, combined with slow upstream speeds from DSL and cable modems, canmake this a tedious task. However, with the incredible upstream speed of FTTH, a serviceprovider can offer back-up services that are superior to anything the competition canmuster.

Online interactive music : A jam session between musicians, or lessons betweenteacher and student, in different locations, can be accomplished with low-latency audio and

video between the locations. But as with game playing, low latency over the Internet,combined with the relatively slow upstream speeds of DSL and cable modems, isproblematic. Again, an FTTH network has the bandwidth and quality-of-servicemechanisms that allow for musicians in several locations to jam and even make recordingstogether.


5/5


For more informationvisit www.enablence.com

2010 Enablence Technologies Inc. The information presented is subject to change without notice. Enablence Technologies Inc. assumes no responsibility for changes or inaccuraciescontained herein. Copyright 2010 Enablence Technologies Inc. All rights reserved .

The value of Dynamic Bandwidth Allocation : To provision all of these bandwidthintensive services, do not overlook the value of Dynamic Bandwidth Allocation (DBA). Awell-defined DBA algorithm can significantly improve network performance, provide ameans of flexibly tailoring network responsiveness and enable a service provider togenerate more revenue without having to boost raw bandwidth.

DBA can be strategically used to incent subscribers to pay for more premium services.One possible application is through a self-serve model, in which a subscriber can elect topay for greater bandwidth for specific periods of time. Say for example, the subscribersstandard Internet service is 6 Mbps. For an evening of multi-participant gaming, thesubscriber can pay to increase their connectivity to 50 Mbps for a few hours to ensure asmooth, high-resolution gaming experience without having to worry about latency issues.

And dont forget business : According to that Yankee Group report, the SoHo market small office/home office in particular is, for most service providers, a disregarded low-hanging fruit. Those that do provide services tailored specifically to this market offer,either on their own or in partnership with another service provider, business-grade SLAs,Centrex telephone services and VPN services, to which one can of course add secureonline backup.

CONCLUSION

Remember, as the operator of an FTTH network, you have at your disposal a massivefuture-proof pipe over which all manner of applications can be deployed. When it comes tomaximizing revenues and increasing ARPU, the triple-play is just the beginning.

However, the key is to look beyond the technical specifications of a particular vendorsOLT and instead take a holistic view of the entire network not just what technicalcapabilities it needs in the box, but how it must be structured, provisioned and managed tohandle all the inherent speed and capacity issues. The right solution not only ensuresconsistent and reliable service levels, it allows for easy customization and configuration tofit the needs of different subscribers, can support both Active and Passive network optionsin the same chassis, and offers an easy upgrade path without the need for a forkliftoverhaul of the network architecture as bandwidth demand increases.

92 enablence article drivingarpu

Documents