FTTH and LTE help increase focus on wholesale

Three weeks of holidays create a truck load of catching up to do. Results, LTE, MVNO, FTTH, VoIP, WiMAX - every possible new item crossed our mail boxes. They can best be categorised at the next higher level: Corporate, NGN, Wholesale and OTT.

Corporate:

• Results: incumbents (KPN, DT, BT, Telefonica, Belgacom, FT, Bell Aliant), mobile (Sprint), cablecos (Liberty Global, Telenet, Ziggo, Virgin Media, ONO, Comcast).
• Financing: Reggefiber got its desired EUR 130m loan from the EIB.
• IPO: Skype's $100m plan.
• M&A: possible buyers (Telefonica, PT, Vodafone, FT, TI) and sellers (PT, TI, Vodafone).

NGN:

• FTTH: lots of deployments announced (inclusing China and India).
• NBNs and NBPs: Australia expands coverage plans to 93%, New Zealand receives 15 bids, the US awards another round of funds.
• LTE: several deployments announced.
• 4G: Clearwire moving closer to switching from WiMAX to LTE and the WiMAX2 standard gets ready for a 2012 launch.
• 1 Gbps: several MSO and telcos are now going beyond 100 Mbps, while ever more are eying 1 Gbps as the new frontier for bandwidth.

Wholesale:

• Structural separation: proposal from Telecom NZ in order to be able to bid for the Crown Fibre plan.
• MVNO: KPN reports success with foreign MVNO operations (2G, 3G); Econet plans launch on the Everything Everywhere network (3G); Best Buy will do the same on the Clearwire network (WiMAX); Airspan is LightSquared's first wholesale customer (LTE); Tele2 NL started offering CATV on the networks of Ziggo and UPC (analogue TV); Chile considers a wholesale-only network (mobile and digital TV).
• BT was not allowed to raise wholesale prices to help stem the pension fund deficit.

OTT:

• Apps: Google ended the development of Google Wave and acquired Slide; Samsung announced a developer contest.
• Net neutrality: Google and Verizon struck an agreement.
• Hybrid TV: Apple was rumoured to rework Apple TV into iTV, Cox partnered with TiVo and the Virgin UK/TiVo partnership added Cisco.

Conclusions:

• The focus in the sector is shifting to Wholesale and OTT; FTTH and LTE are ongoing; wholesale is established as an important new business.
• M&A is focused on emerging markets, esp. Latam.
• Many incumbent telcos are still assembling global empires in order to be able to show growth. KPN is continuing on the wholesale path for growth.
• A telecoms network can be looked at as a vital piece of national infrastructure. If structurally separated, its cash flows can be seen as a vital element of the governments budget (incl. retirement funding).
• Cablecos are outperforming telcos. If you split the business three ways, it becomes clear why. 1. Connectivity (access): Docsis 3 outperforms xDSL and provides cable with a growth engine. Utility rates are close to 80% in the Netherlands, still much higher than FTTH's. 2. Communication: a nice add-on for growth and loyalty, hitting incumbent telcos in their hearts. 3. VAS (incl. content): here cable is the incumbent and benefits from a considerable head-start on multiple fronts (network, digital services, content deals). The foremost risks include FTTH and non-linear TV/hybrid TV/OTT.
• NGNs (FTTH, LTE) are exploring their advantages: 1. Maximum symmetrical bandwidth. 2. Lowest opex, highest score on the green scale. 3. Options for open access and wholesale.
• OTT is a complex and uncertain field, but hybrid TV seems to be a promising direction.

Final conclusion: while areas such as Latam may provide telcos with some more growth, wholesaling (open access) appears to be the way to maximise the value of a network. FTTH and LTE carry the lowest possible technology risk. OTT is a promising but complex development.