Fool's Gold: Why Full Fibre Broadband for Cheap Won't Pay Off
Stu Holliday
Forward thinking leader, sales specialist, understands if you look after people, people will look after you.
The UK broadband market is highly competitive, with several players competing for market share. One strategy that has gained popularity is selling full fibre broadband for cheap. Full fibre broadband is the latest broadband technology that offers faster and more reliable internet speeds. However, selling full fibre broadband for cheap may not be a good business strategy for the UK market, particularly when considering the viewpoints of investors and the need for monetising the networks.
Reducing the Price Leads to Lower Profits
The first reason why selling full fibre broadband for cheap is a poor business strategy is that it leads to lower profits. While a lower price may attract more customers, it also means that each customer is paying less for the service. To make the same amount of revenue, providers will need to attract a significantly higher number of customers. This can be difficult in a competitive market and may not be sustainable in the long term.
High Costs of Implementing Full Fibre Broadband
The second reason why selling full fibre broadband for cheap is a poor business strategy is that the costs of implementing full fibre broadband are high. Full fibre broadband requires laying fibre optic cables directly to each customer's home, which can be expensive and time-consuming. Providers may not be able to recoup their investment if they sell the service for a lower price.
Viewpoint of Investors
Investors always look for profitable investments. When a company lowers its prices, it is effectively reducing its potential profit margins, which can negatively impact its attractiveness to investors. This can make it harder for the company to raise additional funds or investment to expand its services or infrastructure. Additionally, investors may view the decision to lower prices as a lack of confidence in the company's value proposition, which can further erode investor confidence in the company.
Monetising the Networks
Monetising the networks is an important consideration for broadband providers. To recoup their investment and make a profit, providers need to monetise their networks effectively. This means offering additional services, such as TV or phone services, to attract more customers and generate more revenue. Additionally, providers may also monetise their networks by selling wholesale access to other providers, which can generate additional revenue.
Lowering prices can be counterproductive to monetising the networks effectively. Providers may find it harder to sell additional services or wholesale access if they are offering their main service at a lower price point. This can negatively impact their ability to monetise their networks and generate a sustainable revenue stream.
In conclusion, while selling full fibre broadband for cheap may seem like an attractive strategy for attracting customers in the short term, it may not be a sustainable strategy in the long term, particularly when considering the viewpoints of investors and the need for monetising networks effectively. Providers should consider offering other services or bundle options to maintain their profit margins and monetise their networks effectively. This will make them more attractive to investors and ensure that they can provide reliable and high-quality broadband services to their customers.