The Evolving Commercial Model for Broadband Service
The commercial model and supplier landscape for broadband service is evolving as the rate of enterprise adoption accelerates.
In this 8-minute podcast, Keith Cook joins Tony Mangino to discuss the challenge of identifying the optimal balance between available broadband technologies, suppliers, and financial outcomes.
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The Evolving Commercial Model for Broadband Service
In today’s rapidly changing digital landscape, broadband services have become a cornerstone for enterprise networks. The increasing reliance on broadband has led to significant shifts in the commercial models and supplier dynamics within the industry. This article delves into the evolving commercial model for broadband services and provides insights into the optimal supplier mix for enterprises.
As broadband usage in enterprise networks continues to rise, the market is moving away from traditional contract structures that include multi-year terms with significant overall revenue commitments. Instead, market-leading deals for broadband now often feature shorter terms, such as a 12-month minimum circuit term. This shift allows enterprises to maintain competitive tension between their portfolio of suppliers, ensuring the best service delivery at the most competitive price for any given site.
Supplier flexibility is crucial in the evolving broadband market. Enterprises should be cautious of suppliers attempting to lock them in with site and/or circuit volume commitments over the term of the deal. Instead, an overarching revenue commitment that maintains flexibility can be considered. By managing short circuit terms, enterprises can achieve a “best in breed” solution, balancing the number of suppliers to manage with the available cost savings.
The optimal mix of suppliers within any particular global region typically ranges between three to five suppliers. This approach allows enterprises to select the best possible service at the lowest price for any given site. While managing multiple suppliers can be challenging, the cost differential between one and three or four suppliers is substantial. Conducting a thorough analysis helps enterprises make informed decisions about their supplier mix.
Service aggregators play a significant role in the broadband market. These aggregators, which include both primary service providers and pure aggregators, provide service on a resale basis. Understanding the underlying service provider is critical, especially if there is a requirement to maintain diversity at a site. Aggregators can offer flexibility and cost savings by selecting the best option for a given site.
Recent market activity, such as Verizon’s acquisition of fiber-optic internet provider Frontier Communications, highlights the ongoing consolidation in the broadband market. This acquisition expands Verizon’s broadband footprint and strengthens its position in the fixed wireless market. As traditional mobility and fiber providers scramble to piece together converged offerings, increased acquisition activity is expected.
The evolving commercial model for broadband services presents both opportunities and challenges for enterprises. By maintaining short circuit terms, leveraging supplier flexibility, and optimizing the supplier mix, enterprises can achieve cost savings and improved service delivery. Service aggregators and ongoing market activity further shape the broadband landscape, offering new possibilities for enterprises to enhance their digital presence.
