Monday, July 09, 2007

Co-operation will drive separation and FTTH

This news out of Italy unites three of my favorite (and interrelated) trends: co-operation, separation and FTTH.

Apparently, alternative operators (Vodafone Italia, Fastweb, Wind, Tiscali, BT, Tele2, Welcome Italia and Eutelia) are calling for a break-up of Telecom Italia.

1. Co-op
Note that PTTs who resist full separation at home (BT, Swisscom), allow their foreign subsidiaries (BT Italy, Fastweb) a viewpoint different from their own. Deutsche Telekom to the contrary did not allow T-Mobile NL a divergent view when OPTA (the Dutch NRA) called for market response to KPN's All-IP network plans; T-Mobile, mirroring Deutsche Telekom's strategy in its home market, called for an end to regulation altogether in the Netherlands.
The new development in Italy is supportive of my call for a country-by-country approach, which will allow altnets to finally work together, no matter what their parents do or believe or say.

2. Separation
I am not sure what kind of separation the Italian market is headed for (anywhere between accounting and ownership regulation, but probably functional). Anyway, having truly equal access to TI's network must reduce the need for altnets to build their own infrastructure: embracing the wholesale market will drive the need for TI to build a broad portfolio of IP-based services, available to each altnet.
Another interesting development is that an incumbent like Telecom New Zealand openly lost interest in being a network operator and wants to be service provider.

Fiber being a natural monopoly and the TI network to some degree spun-off from the TI services organisations will, I believe, drive the newly created NetCo to aim for nationwide FTTH. Demand keeps rising and there is no such thing as the Broadband Incentive Problem in the wholesale market, where tariffs are usage-based (the BIP in the consumer market is a consequence of flat-fee tariffing and unsufficient pricing power). As a result, building FTTH will drive revenues and lower the cost base (after an intial capex hump, naturally).

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