Friday, April 27, 2007

Does anybody want to compete in the Netherlands?

As I've written before, LLU is coming to and end in the Netherlands. France Telecom yesterday in a way referred to this, meandering on its strategy regarding Orange NL.

The consequences of the next stage in copper-based competion:
  • KPN thinks it's so clever, forcing the competition out of the market. Only a player like KPN can afford to build a FTTC + VDSL network ('All-IP'). However, the plans could backfire: OPTA could go the separation route; OPTA could allow UPC to merge with @Home to form an MSO with near-national coverage (and create a duopoly US style); altnets could band together Australian style (the G9 consortium, proposing a FTTN network of its own).
  • OPTA, the local NRA, together with all market participants, is studying a Full Alternative for LLU. Could it be SLU (FTTC + unbundling from the street cabinet)?
  • Altnets have invested very little over the past two years or so. Coverage of their ADSL-networks has not expanded.
  • Municipalities are cleverly moving in, building FTTH. There seems to be kind of an arms race between KPN (also buying up ISPs) trying to get involved and Reggefiber (the Dick Wessels company).
  • Orange NL was put up for sale in February (rumours, but I had them sort of confirmed). Then in March, at the final 2006 results, it was denied. Now, at the Q1 results, France Telecom acknowledges all options are open. The same happened to Telecom Italia subsidiary bbned: for sale, and then all of a sudden it wasn't. This can only mean one thing: FT and TI want out, but they can't. And with market regulator NMa still studying the KPN takeover of Tiscali NL (report due May/June), KPN is no longer a buyer.

No potential buyers and LLU coming to an end - do I hear monopoly? Is duopoly the simplest answer to this? Or can altnets overcome their cultural differences and build a joint G9-style network?

1 comment:

Stefano Quintarelli said...

Apologies for the previous comment to the other post, didn't read this one before.

Here's my take on this:
1) is there a proven correlation between broadband take-up and increase in competitiveness, productivity, pro-capita GDP or whatever ?

Data is not clearly supporting it; always on is important but broadband not necessarily; there is apparent correlation between ICT takeup and GDP and TLC is traditionally a big portion of IT spending, so TLC are important.

2) Is NGN essential for the development of a country ?

Maybe; I'd rather bet that it's better to have a FTTH network than not having it and risk loosing an opportunity. It's (sort of) the kind of bet that supported the development of the first telephone networks for residential users.

3) is it possible to have 2 (or more) FFTH networks in one country ?

I agree with Jeremy Penston: devices may change, but fiber is a natural monopoly. Once you have a fiber, the cost of running a second fiber network into the same home cannot be repayed.

4) Is it feasible to have competition with SLU ?

Maybe, I'd guess it depends heavily on geo-demographics of the country and the possibility of deploy efficiently fiber to cabinets. In Italy, for many reasons, it'll not be the case.

5) Is it possible to remunerate the buildout of a FTTH network with the payback of services that satisfy short-term requirements of customers ?

not likey. In my view there's a conflict between long term strategic interest of a country and short-term financial discipline of a public-company operator. Shall we look just to short-term dynamics, we would end up having customers using wireless broadband on pay-per use packages, eliminating the possibile birth of new services.

6) Is it possible to manage the employment problems determined by the technological evolution ?

I guess in certain countries is more difficult than in others, but it needs to be done, as fiber statistics indicate they have 2 orders of magnitude less failures than copper.

Based on the above, my option is what we call "One Network". An option that is developing in the interest of italian stakeholders.

I'd hope we
+ decide that a NGN is in the long-term interest of the country
+ have a political support that gives some assurances to the remunerability of the investment (through regulation)
+ recognize that the Universal Service of this centuy is Net access
+ have a plan to build FTTH
++ in a medium term so to accomplish an occupation softlanding
++ with the possibility of participation to the Netco by Altnets
++ with a common technical board
++ with a clear governance
++ with a management indipendent from the incumbent
++ which sells only wholesale to increase retail competition
++ with a price cap, administered by the NRA, so to force efficiency
++ with a guaranteed level of investmen payback to bond holders (ca. the present WACC on fixed network ULL prices)

This is one of the ideas on the medium-long term scenario for fixed TLC in Italy which is getting every day more attention and support from small investors, bond holders, competitors and consumers associations as well.

I talked about this in Brussels with Peter Scott and his team in february and his first-hand comment was that present regulation does not veto this kind of solution.