At last week’s Mountain Connect show in Denver, a panel discussed some of the pros and cons of open access networks. These networks are deployed by one company and then leased to multiple internet service providers, which can then offer broadband service to end customers.
Jack Waters, CEO of Intrepid Fiber Networks, is a seasoned broadband executive, having worked as CTO at both Level 3 and Zayo Group in the past. Intrepid is currently deploying two open access networks in Colorado: in the cities of Northglenn and Pueblo. T-Mobile will be the first anchor tenant on those fiber networks.
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Waters said open access networks give consumers a choice of providers. “The idea of choice is incredibly powerful,” he said. “It’s not something you ever got in telecom.”
He also said that building open access networks can make things less disruptive for communities. They don’t have to endure multiple companies digging up streets to deploy fiber. They’ll just have to suffer the disruption once, and then multiple providers can use the same infrastructure.
Waters also indicated that the return on capital investment can be rough if there are too many competitors building new infrastructure in a market.
“In Mesa, Arizona, there are at least four actual builders in the city today,” said Waters. “I’m almost absolutely certain the investors of at least three of them are not going to be very happy. It’s tough to get a return with so many overbuilders.”
The fiber builders in Mesa include Google Fiber, Lumen Technologies, SiFi Networks, Wyyerd, Generate Ubiquity and AT&T’s joint venture Gigapower. Some of them are building open access networks, and some of them are not.
Open access requires capex
Waters said Intrepid’s infrastructure investment is “very different than even private equity investments,” which have a 5-7 year profile. He said building an open access network “is a very high leveraged model,” requiring a lot of capex spend. He called the investment “patient capital” with a return horizon of 10-13 years. But he said, “The margins are high.”
He had some advice for others who might be thinking of deploying open access networks. He said it’s important to lay the groundwork for new infrastructure by communicating with cities very early in the planning process. “Cities can be helpful or not,” he said.
And finally, he said his experience working at Level 3, a company that laid long-haul fiber at global locations, taught him one clear lesson: “Don’t start projects that you don’t have complete funding for. You could come to a sad day.”
Being an ISP on open access
From the perspective of the service providers that lease an open access network, their margins are not as high. But neither are their risks.
Warren Woodward, director of Broadband at XMission Internet, an ISP based in Salt Lake City, Utah, said his company uses fiber infrastructure built by Utopia Fiber. But he cautioned that as more service providers lease the network, XMission’s revenues go down. He said having 2-5 providers for a small city “is probably all you need.” Too many service providers can also make it too easy for customers to constantly switch providers.
He added, “For us it’s just a numbers game.”
Ben Kley is general manager of StratusIQ, a company that rides on an open access network provided by Underline. Kley said the open access model provides a much smaller revenue stream, “but we’re not having to pay ourselves back for the capital investment.”
He also said StratusIQ has to give up control, which goes against the grain for engineers. And there have been integration challenges with things such as automated provisioning and billing. “Who does own the customer?” he asked. And when a customer files for the Affordable Connectivity Program, it can be unclear as to who gets those government reimbursements.
It's also important not to cause confusion for the end customer.
Waters said, “If open access is done right, I don’t think the consumer needs to know. All they need to know is that T-Mobile is selling service to them.”