Tuesday, November 13, 2007

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.

  • "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.

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