Monday, June 18, 2007

Silicon Valley business model in the Netherlands: be bought by KPN

The KPN takeover was looming large over the Tiscali Wholesale Annual Partner (ISP customer) Day I was invited to speak at, last Thursday. OPTA (the Dutch NRA) has spoken supportively of NMa’s (the Dutch competition watchdog) approval of KPN buying Tiscali NL. Closing is expected this month.

I suppose KPN’s plans could be anywhere between fully dismantling Tiscali NL and maintaining it as a standalone operation. One thing seems inevitable: a namechange, as Tiscali SpA’s Italian and UK operations are now completely unrelated. Possibly KPN will have the retail branch focus on a certain demographic, under a new label. The wholesale operations could actually be kept at an arm’s length to service ISP’s who suffer a certain degree of ‘green-phobia’ (green being the KPN corporate color – formerly that is). The latter part of Tiscali NL will be cherished, I suppose, because it only recently scored its largest customer win: Vodafone NL, which is working toward it's fixed/mobile strategy. I hear that Vodafone issued its RfP around the time that KPN and Tiscali came to an agreement (September 2006), so when Tiscali NL was chosen, Vodafone was very well aware of the KPN takeover.

Vodafone NL was also invited to speak. Daniel Nordström presented the new fixed/mobile strategy. I wonder if Vodafone’s mobile portfolio could be offered to Tiscali Wholesale’s other ISP customers. Of course, that would be a tough sell at the new parent company (KPN), but it could be a smart way of luring green-phobic customers and at the same time get some inside information on a competitor. However, I doubt KPN would allow Tiscali this level of independence.

What stood out during the day was Tiscali Wholesale’s focus on the end user, which coincided nicely with my own presentation, which related Timothy O’Reilly’s Web 2.0 to STL’s Telco 2.0. People at Tiscali are definitely aware of those developments in the marketplace.

Also, I touched on LLU in the Netherlands, which is coming to an end because of KPN’s ‘All-IP’ plans. What will OPTA come up with to replace it (a ruling is due this month)? If SLU is not feasible (as Analysys calculated), something rather big seems to be heading our way. I believe LLU and SLU are intermediary strategies, fiber is a natural monopoly (both in the backbone and on the in-home level) and thus open access FTTH is inevitable. How about some separation (to add some recent news: Sweden is looking at the Openreach model)?

I aired my growing surprise at the lack of willingness to cooperate among network operators. Recent developments are few and include Australia (G9), possibly Sweden (Telenor/Tele2/Telia) and Nigeria (25 ISPs teaming to build a WiFi network). Sure, these operators are backed by competitors, but if you want to compete with the powerful incumbent, you better get together.

Which brings me to my final observation. We all know the ‘business model’ of many a start-up in Silicon Valley: be bought by Google. Now, somebody confided to me that a similar model was explicitly chosen by many ISP’s in the Netherlands: be bought by KPN. And we all know how that ended!

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