Monday, December 11, 2006

FTTH://Munifiber still underestimated

The FTTH conundrum keeps dividing companies, investors and analysts. On the one hand are most telcos (including AT&T and BT), who fail to see the business case. They believe current local loops are sufficient, even if projects like KPN's All-IP network effectively shorten the local loop. Cablecos point to DOCSIS the way telcos point to xDSL - and John Cioffi, even if he could be gravely misunderstood, as Dirk van der Woude informs me:

Many references can be found floating around to the well respected expert Dr
Cioffi. He (rightly) projected a long time ago the potential of ADSL. He is now
quoted as having said that copper telephone wires have a Gbps potential. The
source is one article:
And specifically one headline: More bandwidth than fiber?
One of Dr.
Cioffi's presentations of DSM contains a slide that argues that copper actually
has more available bandwidth than fiber; it just needs to be better used. He
points out that a bundle of 50 Cat 3 twisted-pair wires (the kind that might be
used in the last segment of the phone network) has 10Gbps of available bandwidth
to distribute to the fifty homes at the end of those wires. By contrast, fiber
to the home has only 2.5Gbps to distribute to its homes.
But wait a minute:
what does Mr Cioffi say here? He compares a PON architecture of fiber (shared
medium for lets say 50 homes) with the aggregate potential bandwidth of 50
twisted wires point-2-point to the same homes. In the most ideal circumstances
VDSL2+ can achieve 100 Mbps up and 100 Mbps down to a home. 50 x 2 x 100 = 10 Gbps…to be compared with PON aggregated for these 50 homes. It is easy to spot what the spin has been. What is amazing how easily it has been adopted and

On the other side are specifically Verizon (FiOS) and Iliad (Paris). The case for FTTH is defended very well in this article. It's in Dutch, but the argument is straightforward: copper and coax and their upgrades simply will not do in a few years time. Of note is a quote from Eelco Blok of KPN:

All-IP is a necessary step toward a full fiber network.

In the Netherlands Dick Wessels is a force to be reckoned with. Through his ventures (Volker Wessels, Reggeborgh and Reggefiber) he controls a large part of the (muni)fiber efforts in the country. For Dutch readers, this series of articles is worth a read.

The KPN quote above is remarkable when contrasted to KPN's ususal drone, exemplified at the latest quarterly results by referring to the 'net line loss' metric (PSTN/ISDN line loss - VoIP adds - 'ADSL only' adds; the latter not being published independently; KPN are right now trying to sort of win-back such subs by promoting ADSL to mobile-only subs). Net line loss improved to 140k (from 165k in Q2). KPN was quick to point out that line loss therefore had bottomed. However, with all the munifiber coming to market in 2007 this seems unlikely. Also, last week OPTA (regulator) published 9 responses to its Position Paper, itself a response to KPN All-IP network proposal. KPN can be quoted from their responses:

UMTS, HSDPA and WiMAX are import developments related to increasing local loop competition. Private and public initiatives around munifiber, as in Amsterdam, Lisse and Nuenen, also contribute to increasing local loop competition.

In short, when talking to investors KPN downplays the advent of FTTH (munifiber), but when talking to OPTA they are more open and do appear to fear the munifiber threat. Also, simply taking over Reggefiber at some point will be made impossible; having acquired many small ISPs, KPN's market share is simply to high.

I will try to cover the responses on the OPTA site this week, as they are in Dutch only.

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