A fixed mobile convergence business case

Imagine you are a mobile operator. You run your 3G network on 2.1 GHz and your 2G network on 900 MHz. You lease all capacity on your transport network from your big incumbent competitor. You bought a LLU player in 2006, trying to get yourself a share of the fixed broadband market. Two years later, your market share has grown over 200% but unfortunately you’ve got still less than 2% market share. Two of your competitors are about to combine forces under a new company that will rank second in the overall market (waiting regulator approval). What to do?

I was playing with this business case this morning and pushed by the green light given by regulator to the acquisition mentioned above, I thought of sharing it here while I organize my thoughts.

Well, what if you start charging less? Let’s say…

• charge half of what your competitors charge for fixed broadband access;
• or…offer a bundle of voice and broadband for the price your competitors charge for broadband only.

Would it be then reasonable to consider this could bring your market share up to some 35% around Q3 2011? In case it is, break-even for what I am about to explain comes in 2 years.

So, how do you actually get about doing it?

Put a Mobile Broadband Router (MBR) on a pole and share access between three households. Break-even in 2 years could be brought forward if you review the pricing strategy I mentioned above (I think you can charge more than just half of what your competitors charge) and I am considering extremely conservative estimates for operational expenditures in the business case (to be fine tuned).

What does it bring to your cash flow?

• You may renegotiate your contract with the big incumbent competitor mentioned above. You won’t need to use all that copper going into the houses any longer, will you?
• You may lower your OPEX on your fixed operations some 4-5 times. No copper; pre-set CPEs (no parameters to be set as in DSL modems); no DSLAMs, lower customer services enabled by remote support; and the customer pays for power at the access point.

Isn’t that wonderful?