The WSJ proves its value
The Wall Street Journal once more proves its value, this time at a very convenient moment. The Bancrofts may be pushing Murdoch for raising his Dow Jones offer, or they might want to entice somebody else to mount a counter offer.
Just two days ago a WSJ story carried this headline: Will Vodafone Be Put in PlayBy ABN-Energized Activists?. And today, John Mayo steps forward with his ECS Assets vehicle to push for the freeing up of up to GBP 38bn.
Bravo WSJ.
Will wireless be a duopoly market as well?
Further, one may question the long-term chances of a standalone wireless operator such as Vodafone, along the lines of consolidation in the European broadband markets: AOL has vanished (as an ISP), Tiscali has retreated to the UK and Italy, Pipex is up for sale, and today France Telecom and Deutsche Telekom are swapping assets (see below).
Vodafone's break-up value could be considerably more than its current market value. For now, mobile is a far more attractive game than broadband, in terms of margins, justifying 3, 4 and 5 player markets (not to mention markets like Bangladesh, served by 6 operators). But in a few years, mobile could be another utility. Look out for cablecos to snap up mobile operators once they have their networks and balance sheets under control.
Also, imagine the kind of cost savings when access networks are shared. In the end, base station networks are extremely overlapping access networks, which may very well be shared.
Telco/cableco duopoly nearing in the Netherlands
As to the FT/DT swap: today Ya.com is snapped up by France Telecom and Orange NL goes to T-Mobile.
Spain is consolidating:
- three major players (Telefonica, France Telecom, Vodafone)
- two standalone operators (Yoigo in mobile, Jazztel in fixed)
- cable company Ono.
- it will be a 3-player mobile market (KPN, Vodafone and T-Mobile).
- there is no obvious buyer for the Wanadoo-part (ISP) of Orange NL.
What could happen to the former Wanadoo-part of Orange NL?
- I am sure T-Mobile is not interested - unlike FT, DT has a mobile-only strategy 'abroad'.
- KPN is restricted, as the regulator barely allowed its recent Tiscali NL takeover.
- Tele2/Versatel could be a serious candidate; if not, do not be surprised to see Tele2 abandoning the country altogether.
- Scarlet could step in and move to a facilities-based business plan (following the Tele2 example).
- Vodafone doesn't seem interested, as it uses Tiscali NL as its broadband partner for its 'Total Communications' strategy.
- Finally, bbned (Telecom Italia) is a candidate, but its commitment to the Netherlands is doubtful.
In other words, the Netherlands seems to be advancing toward this telco/cableco duopoly.
I believe PTT's are increasingly proving to be winners, but so far this seems to be visible in the Netherlands only. Pushing fiber deeper into their networks (FTTC: fiber to the street cabinet - not to mention FTTH) makes LLU a thing of the past and effectively forces altnets to follow or die (see below).
Unless PTT's allow munifiber to get a too strong foothold, will many markets move toward a US-style duopoly of telco v. cable.If SLU is impossible, network sharing should be considered
As I have written several times before, KPN is trying to kill LLU by moving to an All-IP network, which includes FTTC. The most obvious replacement would be SLU (sub-loop unbundling: from the street cabinet, instead of the central office), but Analysys has shown that this is not economically viable.
OPTA, the local NRA, is grapling with this dilemma. A 'full alternative' to LLU was promised for Q2, but so far hasn't emerged from OPTA's offices.
In my view, the obvious way out would be the Australian way, where 9 altnets have come together to propose an alternative to Telstra's fiber plans. Sure, altnets are backed by competing companies, but shouldn't they set aside their differences to work locally on a country-by-country basis? It simply makes no sense for 9 altnets to want to each compete with a strong incumbent.
Still, one may question the long-term viability of intramodal competition (operating active elements like DSLAMs on the incumbent telco network). Fiber will be extended - sooner or later all the way to the user: FTTH. Any xLU model (LLU, SLU, ?LU) would imply altnets replicating more and more of the incumbent's network, in the end actually replicating the whole thing, as the copper last mile gets shorter and shorter. The only way out seems to be to sooner or later admit that a single fiber network is the only economically viable situation. Now that LLU is coming under strain seems to be the time to acknowledge this. In other words, altnets should aim for network sharing with incumbents. However, the PTT could be tempted into wanting to go it alone. Hence, an NRA like Arcep (France) is trying to facilitate network sharing.
The viability of intramodal competition in general was questioned earlier this week by the Australian Kevin Morgan. He referred to this an arbitrage game. Frankly, I hadn't looked at it that way before, but I suppose he has a point as altnets are merely kept alive by regulatory intervention. It reminds me of what the Bells over in the US kept repeating a few years ago, when the 1996 Telecom Act was replaced and intramodal competition was effectively killed: after 8 years of competition and cherry-picking, altnets should have built their own networks. However, Kevin does not acknowledge one important thing: how LLU operators have increased competition, driving prices down and broadband penetration up.
Anyway, the end of intramodal competition seems to be nearing. FTTH, fiber in the last mile, seems to be a natural monopoly. If PTTs do not see this, newcomers (like Reggefiber, Iliad, neuf Cegetel) will.
Which leaves cablecos: will they follow?
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