Behind the end of OEN and Sprint/Clearwire

Here is an interesting story on why OEN (Optical Entertainment Network, a FTTH company in Houston) folded. Apparently there were management issues, but it seems to have boiled down to a tech matter: PON (gear from Alloptic) v. active ethernet (gear from PacketFront). The company couldn't decide. "It was a group of engineers getting together and having a serious case of vendor love."

(PON is cheaper to deploy and has a shorter reach. Active ethernet requires more active electronics, a fatter backbone and therefore looks more future-proof, but it comes at a 15-20% premium.)

By the way, look out for France where FT is a supporter of PON, v. Iliad and Neuf favoring active ethernet.

Which brings me to another (so-called) demise: the end of the intended Sprint/Clearwire partnership in rolling out WiMAX. A new ABI Research report (I haven't seen it, just the abstract) justly points to the fact that it wasn't a contract but an LoI only. I agree with Phil Solis of ABI that the parties may still come together, but I believe they need a different approach, preferably full network sharing.

And: communicating a little better with the investment community.

Verizon Wireless' limited open access

Verizon Wireless opens up. Under the new 'any apps, any device' strategy anybody can submit products to a VZW lab for certification. The company will publish details 08Q1, and hold a developer conference. New products are to hit the market 08H2.

So what does this mean? I think the company is opening up in a limited way, with only one goal in mind: retain (or even win) market share.

Here are my takes:

1. It's a defensive move.

• VZW responds to having lost its battle with the FCC over the upcoming 700 MHz auction. Of course, any relation to the auction is denied. An operator in the C-block will be held to allow 'any device, any application' onto its network. Don't be surprised to see Verizon effectively keeping new entrants out of the market by bidding up the value of this piece of spectrum.
• VZW does not want to lose out against Apple's iPhone, Google's Open Handset Alliance, Nokia's Ovi, or any other open platform (WiFi, WiMAX).

2. A positive move, but crucial info is lacking.

• Obviously, the user will benefit. More devices and more apps will come to the market. Those in favor of more openness are in favor. Also, when markets (such as mobile data) need to be broken open to the masses, any initiative is helpfull.
• On the conference call, the company ackowledged the possibility of vendors entering the market directly; existing Sprint devices should be allowed to work on the verizon network (once certified). The final question on the call painted a picture of Verizon 'stealing some of the subsidy' that a subscriber got from his original provider.
• Pricing details are unavailable. On the conference call, the company said it should be a 'competitive' offering. However, it doesn't look like new devices will be subsidized. Service plans will be 'basically usage based', so no unlimited use here (whatever that means, in the wireless space). On a positive note, the operator could experiment with true usage based models and see how it works. Walled gardens could gradually be opened up without introducing a 'broadband incentive problem'. Can they do the rebalancing act?

3. Not really open because of technical preconditions.

• There are several technical preconditions. Devices must work on CDMA technology, so Apple's iPhone or any GSM device cannot be ported. It remains to be seen which 4G technology will be chosen.
• Any OS will do. Both BREW and Java will be allowed as distribution systems.
• In the end, the VZW lab will decide. It remains to be seen how transparant the certification process will be. By the way, Verizon claims certification will be a swift for a 'surprisingly reasonable' fee.

M1 launches SMS 2.0

Singapore mobile operator M1 launched SMS2.0: another innovative SMS-based service (cf. my previous post).

It requires a (free) download, which may also be pre-installed (Nokia/Symbian handsets only). Content is pushed and free, some of it actually consists of ads. Data charges apply when a subscribers wants to dig deeper.

Sending will cost the same as a "SMS 1.0" message, but now the user can add color and emoticons.

I like the concept:

• innovation to a very profitable service that will likely find appeal, especially among the younger demographic.
• it's an opt-in service.
• could generate new revenues, both from using data and advertising.

Cool news: FTTH, M&A, SMS, products and services

Here is some recent and noteworthy stuff, with just a few words of my own:

FTTH:

• Gaining a lot of momentum. I just updated my private litle database, a Google spreadsheet that you can also access on the right (under 'Fiber Ring').
• Of note: OEN (Houston) closes its network, SureWest may buy the assets.

Takeover speculation:

• DT is checking out EDS. Will DT be the big new consolidator? DT is also interested in 3's European assets.
• Google is weighing Skype.
• TI is looking to exit France, Iliad is interested.
• Several operators are mysteriously selling international mobile assets, or are putting them at an arm's length: PT and its Africa Holdings, Telmex and its Telmex Internacional, Telekom Malaysia and its TM International. Vodafone is interested in the latter, as well as in Vodacom. And Tele2 is still busy buying and selling things.

Cool new products:

• Everex is launching a Google-friendly PC, the Green gPC, with Google apps pre-loaded or given easy access to. I suppose that is an 'asset-light' entry into the PC-market.
• Amazon Kindle, Kindle Store and Whispernet. Many comments widely available. Connectivity is included - very much a Telco 2.0 strategy. A European launch will be hampered by lengthy negotiations with operators.

Cool new services:

• Celtel in Africa is launching 'One Network', essentially a roaming deal turning 12 networks into one. Calling at local rates, automatic activation, no sign-up or fee.
• Cox is stretching its network towards 1 Gbps bandwidth.
• BT is negotiating e-health business opportunities in Qatar and neighbouring states. I think e-health is a multi-billion opportunity, where many participants meet. That will allow operators like BT to become the center of an ecosystem.
• Jajah is launching an opt-in service where advertisements replace ring-back tones. They say it takes an average 12 seconds before people answer a call. I suppose they will not allow competitors into the advertising network.

Ever new SMS-based apps:

• Zain launched automatic translations (Arabic/English).
• SpinVox enables voice-to-text conversion and has a deal with Skype: a voice message will be converted into an SMS. Also several operator deals (Alltel, Vodacom, Telstra a.o.).
• Kajeet, an MVNO on Sprint, launched 'Feeds': entertainment and information pushed to the user as an SMS, at 10 c/SMS.
• Mobile payments using SMS, e.g. Safaricom in Kenya and Base in Belgium. Proximus (Belgium) launched public transportation ticketing by SMS.
• KPN's 'flirting service' olllo uses SMS (priced at 55 cents!).

Wither Orange NL's broadband unit (2)

The balance seems to be tipping in favor of holding on to the former Wanadoo unit.

What is happening? Deutsche Telekom bought Orange NL to merge it with T-Mobile NL. However, Orange NL also operates an LLU unit (the former Wanadoo operations). So far, Deutsche Telekom appears to have either a PTT (eatern Europe) or a mobile-only strategy 'abroad' (even as Vodafone is entering the fixed-line business). I therefore assumed that the BB unit would be put up for sale.

Now Deutsche Telekom has spoken, in Barcelona. It aims to reduce its dependence on the domestic business by expanding abroad - in both mobile and ISP assets. The latter is really new to the strategy. (remember that Club Internet (France) and Ya.com (Spain) were sold). See also the recent Q3 report (page 17, under Group Strategy): "Grow abroad with mobile communications" (which, by the way, is repeated in the Barcelona presentation).

This addition to the strategy could have quite far reaching consequences, as T-Mobile operates (mobile-only) units in the UK, the USA, Poland, Austria, the Czech Republic and the Netherlands. Deutsche Telekom could be a major consolidating force, but it remains to be seen if the company truly pursues this strategy.

Broadband Cities - Day 2

Yesterday the conference included great presentations from Nico Baken (KPN's #1 strategist, Delft professor disseminated his view of massive, ubiquitous broadband once more), Anders Johansson (SABO, Swedish Housing Sector), Martin Geddes (STL) and Jaap Doeleman (Houthoff Buruma, lawyers defending Amsterdam Citynet in the courts).
At the break-out session, Robert Bell of ICF and Dirk van der Woude had very insightful messages.
Again, see below for some useful links.

Two aspects were stressed on more than one occasion: 'open access' and 'user centric'.

• Open access: SABO appears to have found a great model for open access, separating the roles of the network operator and the service providers. Here is an older presentation. Martin delivered a container shipping parallel ("telecom = freight business for bits") and stressed the importance of co-operation and wholesale ("allow service providers to package connectivity with services"). PacketFront, a provider of open access networks, was present as a sponsor and spoke on the first day. The company is a supplier of SABO and Reggefiber, to name a few.
• Customer centric: a central question remains: what do we need 100 Mbps for? There was a call for more research on the actual economic (etc.) benefits of FTTH. Dirk van der Woude gave a very specific example: teleworking. If managers are reluctant to allow people to work from home, FTTH will be a great enabler. Not just for connectivity, but also for video communication. That will allow paranoid managers to keep an eye on their workers. User centricity also was at the heart of Martin's presentation (telcos should sell the connected user, not access to all sorts of different devices and networks, at a wide range of prices). Anders proposed to talk about FFTH instead of FTTH: fiber from the home.

Broadband Cities - Day 1

Today the Broadband Cities 2007 conference started. Thanks Dirk for inviting me!
A great place to meet people, but above all to attend several great presentations. I will not attempt to present a summary, and instead encourage you to check out some material that is freely available on the internet (see links below). Euroforum will post the presentations on its site from November 16.

Here are some quick takeaways.

• Let's not forget that FTTH is more than 'just' superior download speeds. References were made to the symmetrical nature and the economic, social, environmental and cultural benefits.
• PacketFront displayed its 'living networks' vision, where off-net (ISP, telephony, TV) and on-net (local services, including gaming, education, storage and ehealth) are distinguished.
• Prof. Carlota Perez had a hugely interesting presentation on the nature of tech revolutions. This presentation is pretty close to today's and here is a paper. She also has a book out. I particularly liked the bit where she saw an end to (so called) dichotomies: high tech and custom made now merge into mass customisation; competition and co-operation merge into co-opetition; etc. The question now is: how will 'state' and 'market' learn to work together? Very relevant in a FTTH context.
• KPN's Eelco Blok was scoring points (again) on the telco 2.0 score card, talking about wholesale and Chinese Walls. Mr. Blok, as well as his companion Joost Farwerck (who I spoke with yesterday), have conspicuously changed their tone when speaking about the telco v. cable dichotomy. Unbundlers and wholesale are now fully embraced, and in the 'us v. them' battle, it is now KPN + unbundlers v. UPC + Zesko.
• Mr. Burgelman (an EC advisor) gave a fine Web 2.0 overview. His presentation leaned pretty heavily on this one.
• My cyberbuddy Benoit Felten (now at the Yankee Group) gave a detailed analysis of that exciting FTTH market, France.
• Taylor Reynolds of the OECD presented the latest broadband statistics (as of October), which led to several pretty stunning observations. Check out the October stats on the OECD Broadband Portal. The last one is especially funny.
• William H. Melody presented his analysis of the private equity takeover of eircom and TDC. The (shocking) TDC report was published before.

KPN: away from network ownership and toward FTTH

Today I had the honor to meet with Joost Farwerck, director of Wholesale and Operations at KPN. Most striking were unequivocal belief in FTTH ('the endgame', as I have referred to it before) and an apparent decline in interest in being a network operator.
Joost very tellingly was able to see me in between a trip to Australia and New Zealand and a meeting with bbned (Telecom Italia).

Here are my edited notes.

1. All-IP

• KPN is planning the migration to an NGN, as I have written about before. Many MDF locations, LLU and ADSL2+ will be phased out and replaced by SDF locations, SLU and VDSL2. Fiber will be pushed deeper into the network, to reach all the way to 28k street cabinets (FTTC) and bypassing 1300 MDF locations. No FTTH as yet, only in greenfields and selected towns (Enschede and Almere).
• Currently, details of an MoU are worked out. The MoU was signed over the summer by both KPN and the main unbundlers (bbned, Tele2 and Orange). The new agreement is to be published around December 15. The details are about phasing out the MDF locations, the migration and KPN will present an alternative to line sharing (this product is on the way out anyway, as it is replaced by full LLU). Apparently, street cabinets offer enough space for SLU. Bbned is going the way of SLU.

2. Network operator v. service operator

• KPN believes WBA (wholesale broadband access) is a good product that will ensure competition, based on equivalent access.
• Joost seems to think that OPTA nor the new EU regulations, will lead to functional separation. I think KPN is a case in point where proper accounting separation and a good wholesale strategy + portfolio can fend off functional separation.
• By the way, accordin g to Joost, a wholesale customer can be more valuable than a low-end retail client.
• Outsourcing is becoming a major part of KPN's strategy. At Joost's division up to 50% of current employment levels will disappear.
• Joost seems to be much more of a services man than a network operator. I have noticed this before at both Tiscali and Telecom New Zealand. Network control is less important in a regulated all-IP world.

3. Co-op

• I am a big fan of cooperation. So is Joost, but challengers seem to think differently. KPN tried to team with Tele2/Versatel several years ago, but was turned down. Also, unbundlers are sub-scale in many cases, but (foreign) owners appear to be 'believers', as Joost put is. They all seem to think that they can make it work on their own. Too bad that there are few G9 (Australia) type of intitiatives.
• Joost seems to be similarly at a loss when it comes to long-term commitment of the large Dutch unbundlers. Tele2 is selling off many assets; T-Mobile may sell on the Orange BB unit; Telecom Italia may get rid of bbned.

4. FTTH

• "FTTH is the endgame". I couldn't agree more.
• However, VDSL gets deployed 5-7 times faster (and is written-off in 3-4 years), so it cannot be skipped. Here Joost is very much on the same track as Belgacom.
• KPN recently teamed with 'public enemy #1', Reggefiber, for the city of Almere. Joost told me they will own the passive infrastructure together (I was under the impression it would be 100% Reggefiber); KPN will serve as network operator; KPN (and others, if they wish) will be service provider.
• KPN beefed up its Belgian mobile operator by acquiring Tele2 Belgium. That obviously begs the question: will E-Plus make a similar move in Germany? Joost seems to see better business opportunities for some German expansion (out of the Netherlands), e.g. to the Ruhr area, than for doing FTTH in some rural Dutch areas.

Update on WiMAX

Some more factoids (see also the previous update).

• Standard: the ITU approval, I would add, is a set-back of sorts. Not 4G but 3G, as Mr. Daniels eloquently put it. I suppose if you want 'xG' real-life performance, you better aim for '(x+1)G' lab-performance. (Also, compare this WiFi distance record: 382 km!)
• Sprint/Clearwire: much has been said about the consequences for Sprint, Clearwire, Intel, Motorola and the rest of the WiMAX industry. I think Sprint doesn't communicate very well about its intentions, deploying so many standards (iDEN, CDMA, WiMAX). Also, the original MoU was somewhat puzzling to me. Building out together is only logical, but why not put the network assets into a joint venture? The way it was set-up made it look like a complicated roaming deal.
• WiMAX v. cellular: KPN decided to go with HSPA, not WiMAX, for rural deployments (fixed-line replacement, with WiFi for in-home and Digitenne for TV). No surprise: cellular technology is heavily entrenched.
• Deployments: recently mostly in emerging markets.
• Auctions: coming up in Japan, Italy, Mexico and New Zealand.

DIY fibre to the farm

A local Dutch newspaper carries a story (in Dutch) on bridging the digital divide in rural areas. The eastern towns of Bronckhorst and Berkelland have launched a 'Fibre to the Farm' project. A trial is currently conducted among 150 households. Next year it will be evaluated.
It involves a co-op ordering a backhaul network from a company like Reggefiber or Schuuring. The members of the co-op (farmers) do the digging of the last mile themselves.

Here are some quotes (somewhat freely translated), that fit my stance on FTTH, munifiber and e-health exactly:

In rural areas ADSL-connections lack the quality necessary for proper business networks. In this day and age, that leads to trailing economic growth, which is precisely what rural areas are afraid of.

Large operators have no interest in hooking up rural areas, since it costs too much and pay-back periods are too long. That is why municipalities have to take up the gauntlet, supported by regional governments.

The trick is the cost savings at digging, explains Hupkens. The digging activities represent 70% of the cost of constructing the network. (...) Farmers can easily do this relatively simple job, digging to their yards. Thus you can construct a valuable network at low cost. A network, of which the users are co-owners. And therefore have a say over the services delivered over it. Hupkens points to a similar project in the Brabant town of Nuenen, where the members themselves have allowed local radio and TV stations onto their fibre network.

A study revealed that 60-80% of consumers and businesses are likely to want to be connected. Willingness among farmers to do the digging is extremely high.

Reasons for wishing to be hooked up vary. Companies want access to the digital highway. Senior citizens are interested in e-care.