Testing

Category: Capex Optimisation

  • Getting Closer to a Reliable FAR

    Getting Closer to a Reliable FAR

    OK finance teams, time to come out of the shadows.  At most operators with whom I have worked, the focus of enterprise data quality efforts has been on optimizing network operations.  Misalignment between the network and data in systems that support planning, provisioning, activation and service assurance adds friction and cost to essential telco processes.  No new insight here.

    Lately I’ve been spending more time with the finance guys.   Despite stereotypes to the contrary, they’re not just number crunchers.  They care about what’s in the network- where it is, how old it is, the condition it’s in, where it’s been, where it’s going and what happens at end of life.  Complicating their lives, the financial database of record for network assets, the Fixed Asset Register (FAR), typically suffers from the same data issues confounding the Ops teams—if not worse.

    Sounds bad, but Finance doesn’t have to worry about delivering or supporting new services.  So what’s the harm?   Based on the earful I’ve received from finance organizations, including a Tier 1 CFO—plenty.  This diagram provides a sampling of corporate functions dependent upon accurate asset records in the FAR:

    Mission Critical Role of the FAR

    Among the potential costs of inaccurate fixed asset records are:

    • Improper calculation of depreciation
    • Failure to identify impaired assets and candidates for accelerated write-downs
    • Overpayment of property taxes
    • Overpayment of insurance premiums
    • Restatement of past financial results
    • Risk of regulatory penalties
    • Exposure to fraud, theft and asset mismanagement cases

    Such issues get corporate board-level attention.  I am aware of several recent cases of poor FAR audit results prompting an operator to launch a FAR cleanup effort or even a full asset management program.

    To their credit, financial reporting analysts I have spoken with are not blind to their data woes—just typically dependent upon compromises and work-arounds.  They often manage as best they can by mining numerous B/OSS’s to cobble together a view of assets across all network layers and asset classes.  Gaps and inaccuracies in this view abound.

    Among the most common methods finance organizations employ to address the situation are manual audits performed on sample sites once or twice a year.   This mostly provides insights on how far off the FAR is from reality.  Generally, such spot audits are too limited and expensive to support systemic and continuous correction of the errant data.

    So how do we achieve a reliable FAR (before the Board takes it up as a crusade)?

    It starts with determining the impact of inaccurate asset records on financial reporting and planning, corporate governance, taxation and regulatory compliance.  Is the exposure minimal and bounded, or are the risks unacceptable?  Assuming the latter, a FAR get-well plan should include:

    • Data acquisition methods for both active and passive network assets that use the network itself as a source versus other systems
    • Comparison of this data to the FAR and reconciliation of errors
    • A permanent mechanism to keep the FAR aligned with the changing network so the data stays clean
    • Commensurate process enhancements and guardrails to reinforce automated approaches—which can never guarantee 100% accuracy on their own

    When tightly aligned with the network, the FAR becomes more than a reporting tool, it can become a strategic enabler for Capex optimization.

  • Capex Optimization: A strategy for growth, or defense?

    Capex Optimization: A strategy for growth, or defense?

    The battle is heating up and speeding up in virtually every market. Customers want the newest, latest, greatest handsets, products, and services.  But how long has this battle been heating up, really?  The answer is simple:  Since the 1980’s.  All that has continued to change are the tools used by the operators in the battle.  Let’s examine the latest tools being used in the Americas and understand how that impacts Capex.  The results may be surprising:

    In what is arguably the start of the latest rounds of “artillery”, T-Mobile launched free roaming to over 100 countries in 2013, and started attracting customers by the millions away from the likes of AT&T and Verizon.  After the immediate dust settled and the program was seen to actually be viable, AT&T responded with paying the early termination fees for converting subscribers from T-Mobile.  In the process, flat rate plans with expanded data benefited all of us, as T-Mobile and AT&T both offered non-contract based data allotment increases, for no cost (and in many cases, lower costs) to existing subscribers, to shore up their retention numbers.

    Verizon has taken a more conservative approach, saying they have the largest 4G network, which has caused AT&T to counter with having the fastest 4G network.  Not to be left behind, T-Mobile responded with offering to roll over unused data, and to unleash attractive unlimited plans via their recently acquired MetroPCS brand.

    All the while, Sprint, the last major national carrier in the mix, has been losing market share while “sprinting” to greatly expand their 4G network.  In the recent weeks they have jumped into the market with a very viable message, aimed directly at AT&T and Verizon, to cut subscriber bills in half…literally.  They even took out an ad in the most expensive slot in the world:  The American Super Bowl.  This ad was designed to “apologize” to AT&T and Verizon.

    And now the latest, and perhaps most interesting move, has been the international expansion of some operators into Latin American markets.  The model is simple:  Buy a Latin operator network.  Re-brand it to your internationally known name.  Offer local services that extend all the way into North America.  No roaming or interconnect, and all local calling.  This is a major threat to long-time incumbents in the Latin market, and it’s already happening. Three years ago I was asked what I thought the impact of 4G/LTE would be to the markets.  I made a quite possibly crazy prediction that 4G was going to upset the way we understand roaming and interconnect, simply due to the fact that data, VoIP, and the new products that were going to ride on femtocells and wifi / wimax were going to totally change the playing field.  Could it be that something similar is gathering momentum today?

    What is the common thread in all of these battles in the Americas market(s)?  Quite simply, the operator revenues are not growing, or are not growing at the pace to keep up with Capex spend.  Networks are being extended and evolved not to add revenue, but instead to sustain revenue.  Here’s an example:  In the last 24 months I have moved my entire family to 4G.  My bill decreased.  More data was added to my plan.  My bill again decreased.  I then expanded my home DSL to a 30x increase in speed.  My bill stayed flat.  All of this involved more network capacity and expansion in products and services.  But I was not further monetized…I was just retained.

    Capex optimization, if pursued for growth, could be considered a great goal and something to strive toward.  However, if Capex optimization is pursued to simply maintain your revenues (and market share), this should no longer be considered a goal, but instead a critical strategy for longer term survival.

    So ultimately, how do operators monetize networks?  Perhaps the question needs to be focused on monetizing customers – by turning attention toward strategies that get more share of wallet.  Operators should invest Capex into supporting behavioural shifts in their customers.   Mobile wallet, xBanking, xCommerce, etc, need to be provided as revenue-generating services by the operators, for those customers.  It’s no longer about getting money for network services…it’s now about getting money from supporting a behaviour facilitated by those network services.