Matching Operational Speed With Learning Speed: Competing in the Fibre Broadband Race

Written By Guest User

The UK fibre broadband race is heating up. The companies that will be winners in the long run are likely to be those that:

  1. Optimise operational excellence to deliver premises at lower costs

  2. Achieve high penetration rates through effective marketing and broadband packages

This article will focus on assessing how operational excellence can deliver lower costs.

There are an estimated 29 million premises eligible for fibre connection in the UK [1], with capital costs due to rise significantly as urban build is completed. The largest players are operating at scale, as Openreach plans to upgrade its copper lines to fibre to 25m homes by 2025 [2] and Virgin Media (post-O2 merger) wants to expand its own cable and fibre network to 14m homes [3].

For premises targets to be met within budget, organisations need to address key cost drivers throughout the operations and procurement process. Cost advantages will be won by companies with process excellence, and those able to improve service attributes and/or lower costs through organisational process improvements. As the below graphic shows, capital costs rise significantly with the number of premises reached [1]. As fibre to the premises (FTTP) household coverage matures, cost control will become critical in building out remaining coverage.

Estimated Capex by cumulative premises reached

Estimated Capex by cumulative premises reached

 This article will explore how organisational rate of learning and partner integration can help operational leaders to revaluate existing processes and reduce costs in the fibre build race.

Innovation to Reduce Cost

In the fibre broadband race, a new crop of cable operators known as alternative networks, or “alt-nets” are spending huge amounts of money to compete in the increasingly crowded UK market.

Whilst funding is readily available, disciplined cost-control may be crucial in the long run to be well-positioned when the market cools down. While experienced incumbents hold scale and time advantage in learning how to lower the delivery cost of operations, challengers who adopt a culture of continuous improvement can accelerate their rate of learning to improve operational excellence at speed.

The ability for operators to dramatically reduce the cost of delivering FTTP is limited by current processes of civil-engineering work, cabling and connecting properties. However, there are innovative ideas currently being explored such as feeding broadband cables through water pipes that could be transformative in reducing the current industry cost structure, particularly in suburban and rural areas [4]. When deploying FTTP networks, the ability to move fast whilst running experiments in learning mode can generate a healthy volume of new ideas to test, from which promising opportunities can emerge.

Steps to competitive advantage from a superior cost structure

Steps to competitive advantage from a superior cost structure

 Integration to Improve Speed

To ensure that experiments function quickly and cheaply, firms can benefit from the front-line insights provided by build partners. Operators that work closely with third party contractors will benefit from collaborative relationships to optimise processes together. As the UK lags behind other developed markets in FTTP household coverage [5], Chinese logistics companies offer a useful example to infrastructure operators as they face comparative operational challenges in trying to cover underserved locations in an inefficient environment; evidenced by higher logistics spending as a percentage of GDP compared to more developed markets [6]. JD Logistics, a spin-off from leading Chinese e-commerce platform JD.com, is pioneering a novel solution to this problem by achieving scale in a cost-efficient manner through “Cloud Warehouses” that allow third parties to integrate with their own warehouse management system [7].

Closely integrated partner relationships such as this allow a company to shorten communication times and thus reaction times to fix operational challenges. Simply implementing new project processes or new IT solutions will not suffice in attaining dynamic performance at a low cost. Contractors and clients alike must look to adapt new strategies through collaborative relationships at every stage of their operations that benefit both sides and accelerate information flow.

There is no silver bullet to building process power in the infrastructure sector. Adaptive learning approaches must be applied selectively. However, in an industry with unmet consumer demand, a learning culture can support fast construction and help foster a flexible, collaborative organisation.

Guest User
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