Polar Communications: FTTN cannot keep up with future demand

Polar Communications of Park River (North Dakota) is ordering FTTH gear from Occam Networks. What makes it especially remarkable is this quote from the press release:

Polar realised its long term FTTN strategy would be unable to keep up with future demand. The solution was a shift to a FTTP strategy that began two years ago and will continue with the current Occam deployment.

It is a GPON deployment, so we'll see when they will need to replace that with a point-to-point network.

NGA news: Australia, Virgin Media and 3-D

Hot news:

• Australia NBN: Acacia is the front runner, rumour has it. It will bring along Leighton Holdings, the owner of both a backbone and a maintenance unit. Acacia is backed by wealthy individuals, an important asset today, including: Doug Campbell, Solomon Lew, Doug Shears, Paul Bassat, Andrew Bassat, Matthew Rockman, Steven Skala, Leon Kempler, Lawrence Paratz.
• Open acces to cable broadband: Sky is trying to open up rival Virgin Media. That would introduce unbundling in the cable domain (as it will at TDC Cable), i.e.: regulatory symmetry. Virgin Media doesn't have nationwide coverage (as BT does), but I fail to see what that has to do with it. It's about consumer choice and regulatory symmetry.
• 3-D: A nice overview in this Wall Street Journal article. Jeffrey Katzenberg estimates that 3-D will enable movie owners to raise ticket prices by $2-5.
  

Telstra gears up HFC against the NBN

Telstra is launching the roll-out of DOCSIS 3.0 on its five city HFC network. They are targeting 100 Mb/s to 1m homes in Melbourne by Christmas and claim it is upgradeable to 200 Mb/s. Total spend in 2009: AUD 300m.

Some remarks:

• Apparently, this is the way forward for Telstra competing the NBN, which will have a winner by the end of the month. Looks like Telstra is definitely not going to be it. And if it will get involved after all, horizontal separation (spinning off of BigPond) should be next.
• Let's not forget about the inherent limitations of HFC networks: highly asymmetrical (limited upstream spectrum and no gear available); unbundling is ruled out (from a technical perspective); not quite as much bandwidth (compared to FTTH), to be shared by quite a few more homes (compared to FTTH).
  
• The HFC network and the future NBN (FTTN + VDSL) will be on a par, especially since a VDSL-network is tough to unbundle too (but from an economic perspective). However, the next logical step (FTTH) is pushed into the distant future by this development (unless Axia or Acacia wins the NBN tender). That will not be good for Australia on , say, a 5 year timeframe.
  
• Interesting: "... infrastructure that complements our world-leading Next G mobile broadband network." (Not the other way around.)
• No vendors mentioned (Cisco? Motorola?).

FTTH: Axia NetMedia, separation, FTTN and SLU

Three important developments this week in FTTH:

• Axia NetMedia (discussed before) detailed its plans for Australian NBN. If they have it their way, they will build FTTP, not FTTN.
• The same firm bids on the active layer of the Singapore network (NGNBBN), with Cisco. It's somewhat puzzling to see Axia bid alone (on the Australian NBN, but naturally they need partners), with SingTel (on the NGNBBN passive layer), or against SingTel but with Cisco (here). Maybe there's room to band together before contracts are signed.
• Swisscom has the revolutionary idea of laying 4 fibers to each home in its FTTH plans. It will use one itself, leaving room for three competitors to engage in infrastructure-based competition.

Plus: a worthwile interview. with TransACT's former CTO Paul Brooks. Question: "Telstra said it is 'impossible' to build or maintain a network if structural separation is enforced, is this true?" Answer: "No, of course not. They might not enjoy the same levels of cross-subsidisation they currently access regarding basic network infrastructure costs and high value-add retail products, but that's an economic argument, not an argument about whether it is possible or not. (...) If the wholesale arm actually had incentive to make things easy for their customers, then the business case for the separated retail arms becomes even stronger."

Plus: an Australian opposes sub-loop unbundling (SLU), but a New Zealander points to the reality of it, albeit it in FTTN + VDSL deployments.

Brisbane to leapfrog the Australia NBN

This is very ironic; while all of Australia is debating the six proposals to build a National Broadband Network (based on FTTN), the city of Brisbane (1.9m pops, 918 km^2) has ordered a study into the feasibility of constructing its own FTTH network. The city targets 0.1-1.0 Gb/s to every home and business, that is: True Broadband.

This is supposed to generate 15k jobs and add AUD 5bn to the local economy. Doing a little back-of-the-envelop calculus, the latter figure looks like around 6% of Brisbane's GDP. Not bad!

KPN versus Telstra: driving volumes versus prices

KPN's FTTH proposal and Telstra's NBN bid couldn't be further apart. It's open access thinking (driving utility rates and thus volumes) versus denying that telecoms is a volume business (charge as much as possible for the service). Of course, it's also FTTH versus FTTN.


Let's hope the Australian contenders (Optus/Terria, Acacia, Axia NetMedia) will be able to put aside their differences and join together. After all, they are all open access aficionados as well.


Telstra is looking to charge 30 AUD/mo for a 1 Mb/s connection. How does that compare to KPN? We will have to make some assumptions. Take a look at the layered network:

• Passive: to be regulated. Wholesale prices: 12-15 EUR/line/mo (capped at 14.50-17.50 EUR/line/mo, and subject to CPI corrections), excluding VAT. This all derives from the current Reggefiber pricing.
• Active layer: no regulation, but price discrimination is not allowed.
• Services: digging around at OnsNet Nuenen, OnsNet Eindhoven and GNA (Amsterdam) should provide an idea of where retail prices may end up, since they are each munifiber projects with Reggefiber involved. A triple play costs anywhere between 45 and 125 EUR/mo. A wide margin, but the high-end is somewhat of an outlier. KPN so far has more expensive triple play packages available: 65 EUR/mo, which includes a 30/3 Mb/s connection, and all the way up to a very asymmetrical 60/6 Mb/s service for 110 EUR/mo. This grants KPN some room to drop its prices once the service is launched nationwide.

It looks like triple play retail pricing will be in the 45-65 EUR/mo range, with KPN probably using its brand to charge tariffs at the upper end. Still a great deal compared to Telstra's very expensive single play.

If Telstra is structurally separated, there is no more Telstra ...

Conventional wisdom is: an incumbent building a NGN equals re-monopolisation; it therefore must offer open access to rivals. But if it has to offer open access, it has no way of earning a decent return on NGN investments.

So much for conventional wisdom.

Just a few days left for the National Broadband Network (NBN) RfP deadline (November 26) and Telstra is rattling its guns. No structural separation, or else we won't bid. It looks like Telstra wants to have monopoly-style rights, or else it is afraid it will not be able earn a decent return.

Let's poke some holes.

• If Telstra is structurally separated, THERE IS NO MORE TELSTRA (which is something that must be a worrying idea to Mr. Trujillo). I'm quite sure the Netco that will arise from the ashes will be more than happy to take a AUD 4.7bn grant to expand its network.
• Open access is for the good of everybody. The more the merrier. More service providers means: more services, more marketing dollars, more take-up, higher utility rates.
• It would not be good news if Telstra's existing network assets were excluded from the NGN. There would be excessive network duplication.
• They really need to take the plan a little bit further and aim for FTTH instead of FTTN.

The solution is quite simple - on the drawing board, at least. Put all those network assets and available funds together (Telstra, Terria, Acacia, Axia NetMedia); invite third-party investors in (telecoms stocks are hot these days); bring in government funds (Keynes-style).

Put differently: if Telstra refuses to bid if it is structurally separated, then the only way to make sure that Telstra's network assets are included in the NBN is to first structurally separate the company.

Paul Budde for President

The battle over Australia's National Broadband Network, including an AUD 4.7bn subsidy, is drawing to a close - and it's not getting any prettier. Telstra wants to bid, but threatens not to, should the government structurally separate the company. The main opponent is the Terria consortium, which has had a few defections recently and seems to have trouble (I wonder why) getting it's financing in order.
Yesterday, at the Broadband World 2008 conference in Sydney, Telstra played hardliner once again by not taking part in a panel, apparently for the simple reason that Paul Budde was there too - and as chairman, mind you. Budde is a firm believer in structural separation, which sort of (does it?) explain Telstra's actions. I have to give credit to Paul, not just for his views, but for taking an Obama-esque stance at the conference. Writes iTnews:

Budde implored delegates not to ignore or ridicule Telstra in the remaining part of the process. "It's not in our interest to ignore Telstra," he said. "Telstra will still be a critical part of telecommunications in Australia. We all need to sit down and address the seriousness of the issues brought about by the NBN and the ways to go forward." Hear hear Budde!

Kabel-X: Copper-to-fiber with limited digging

Take a look at this: FTTH made cheap & easy. Kabel-X touts 'Copper to Fibre without excavation'. Taking excavation (or really: replacing it with some other labour) out of the equation will "save your business up to 200,000 euros per kilometre compared to conventional digging".
Besides, the copper can be sold at 20-30 $/meter and will no longer attract individuals with unhealthy intentions.
Kabel-X already has a long list of customers: Deutsche Telekom, BT, KPN, Swisscom, Telekom Austria, O2, UPC, Elisa. I am not sure if the cost advantages are already incorporated in the FTTH business plan calculations these operators no doubt all have done. So far, they all maintain that the business case is not viable, but the lack of support from investors seems to be the true reason why FTTH is not yet widespread.

Any way, if the technology really works, it could have far reaching consequenses, but I see a couple of limitations.

First, fiber may not necessarily be put in the ground at the exact same location where the old copper is. This is especially true when it comes to connecting street cabinets to MDF locations. A valued reader recently asked me how KPN works at this, since it is moving from LLU/ADSL to FTTN/SLU/VDSL for its All-IP network. KPN confirmed that in many cases the copper stays in the ground for this reason (at least until it needs to be removed for regulatory reasons).

Second, when it comes to the last mile (FTTH, esp. active ethernet for point-to-point), regulation has to be in place - one way (no sharing, as is the case in the US) or the other (open access seems to be here to stay in Europe). GPON architecture (point-to-multipoint) may run across a completely different route than the existing copper network.

Third, Verizon (FiOS) attracts a some criticism for ripping out copper wiring in the last few feet (but this doesn't seem to be where the technology could be used - unless you have a really big place). A switch back to DSL is not possible, even if this seems more of a regulatory concern than something anybody would really want (customer satisfaction over FiOS is very high).

Australia plans ADSL2+/WiMAX network

Australia has awarded AUD 958m to the OPEL Networks joint venture of Optus and Elders, to build a combined ADSL2+/WiMAX network. It is part of the government's Australia Connected initiative.
The network will consist of 15k km of fiber backhaul, 426 exchanges (to cover 3m households with ADSL2+) and WiMAX (for regional areas).
End-user pricing should come in the range of 35-60 AUD/mo, depending on speed. In 2009 the maximum speed should be 12 Mbps, which is subsequently to be raised. The network should cover 99% of the population. The other 1% is eligible for a 2750 AUD/household subsidy.

I find this a remarkable move. First, the G9 consortium (around Optus - also), as well as Telstra, is vying for building a FTTN/VDSL network. Second, an ADSL2+/WiMAX looks like combining 'old' technology (ADSL2+) with unproven and possibly inferior (to LTE) technology (WiMAX), as Telstra is eager to point out.

For reference, read Alan Kohler's case for FTTH (as opposed to FTTN) and Grahame Lynch's case for a merger of the G9 consortium members, which nicely fits my view on how to beat the incumbent.

Australia and Sweden may lead the way

Alternative operators and ISPs have a hard time fighting the incumbent. Why not get together?

Now, Australia and Sweden could pull the industry into a new phase:

• The Australian G9 consortium has proposed to build a FTTN network with Telstra.
• Telenor is trying to convince Telia, as well as Tele2, to cooperate on a VDSL2 network.

Somehow, market participants and regulators must come to balance the interests of each:

• Incumbents may prefer to go it alone, in order to force altnets to 'follow or die'. Still, there may be budget restraints, especially when FTTN/VDSL networks are regarded intermediate stages toward FTTH.
• Altnets lack scale on an individual basis. Also, in most cases they are backed by competitors. The Swedish example could be a way out: work together on a country-by-country basis.
• As the G9 put it, only a single FTTN network is economically viable. As regulators and operators alike prefer facilities-based competition, the competitive element will have to move up and away from the physical (passive) layer.

Sweden and Australia may lead the way. The next step could be to separate the cooperatively built network. This way, a (natural) monopoly would arise and competition would be focused on delivering superior services.

Does anybody want to compete in the Netherlands?

As I've written before, LLU is coming to and end in the Netherlands. France Telecom yesterday in a way referred to this, meandering on its strategy regarding Orange NL.

The consequences of the next stage in copper-based competion:

• KPN thinks it's so clever, forcing the competition out of the market. Only a player like KPN can afford to build a FTTC + VDSL network ('All-IP'). However, the plans could backfire: OPTA could go the separation route; OPTA could allow UPC to merge with @Home to form an MSO with near-national coverage (and create a duopoly US style); altnets could band together Australian style (the G9 consortium, proposing a FTTN network of its own).
• OPTA, the local NRA, together with all market participants, is studying a Full Alternative for LLU. Could it be SLU (FTTC + unbundling from the street cabinet)?
• Altnets have invested very little over the past two years or so. Coverage of their ADSL-networks has not expanded.
• Municipalities are cleverly moving in, building FTTH. There seems to be kind of an arms race between KPN (also buying up ISPs) trying to get involved and Reggefiber (the Dick Wessels company).
• Orange NL was put up for sale in February (rumours, but I had them sort of confirmed). Then in March, at the final 2006 results, it was denied. Now, at the Q1 results, France Telecom acknowledges all options are open. The same happened to Telecom Italia subsidiary bbned: for sale, and then all of a sudden it wasn't. This can only mean one thing: FT and TI want out, but they can't. And with market regulator NMa still studying the KPN takeover of Tiscali NL (report due May/June), KPN is no longer a buyer.

No potential buyers and LLU coming to an end - do I hear monopoly? Is duopoly the simplest answer to this? Or can altnets overcome their cultural differences and build a joint G9-style network?

More corporate action to trigger the telco sector

Continuing on this post, I dug up some more ongoing business dealings.

Operators for sale:

• Alltel
• Pipex (and C&W?) in the UK; possibly Lycos Germany, Jazztel (Spain), and PT's PT Multimedia unit
• FastWeb (Italy) could attract a counterbid (next to Swisscom's).
• Telefonica not only has Endemol up for sale (late March), but Airwave (UK) as well.
• Deutsche Telekom is shopping Ya.com (Spain) and Club Internet (France) around.
• TDC's owners are looking for buyers for HTCC (Hungary), sunrise (Switzerland) and Talkline (Germany).
• Both Lebanon and Libya are selling two state-owned mobile operators.
• Stakes in state-owned PTT's may change hand: OTE, TI, DT, PT, TeliaSonera, as well as the operators of Bulgaria, Uganda, Botswana and Algeria.

IPOs:

• Infamous Versatel (Germany) and Flag Telecom may re-enter.
• Several wireless operators: MetroPCS, Colombia Movil, GrameenPhone, Safaricom and Spice Telecom.

Licenses:

• Fixed line, SNO: Saudi Arabia and Kenya.
• Wireless (2G and/or 3G): Iceland, Germany (2008), France (2008), Canada (2008), Russia (2007 and 2008), Vietnam, Norway (2007), Sweden (2007)
• WiMAX: Ireland (2007), Italy (2007), Portugal (2007), Sweden (2007), UK (2007).

Product/service launches:

• DT will launch a secondary brand in Germany, aimed at the youth market (summer 2007).
• Handsets: Apple's iPhone (June) and perhaps news around the 'Google Phone'
• FTTN may come to Australia.
• FTTH in Paris will be launched by Neuf and Iliad.
• MVNOs from KPN and BT may come to Spain.
• Wireless VoIP tests at Vodafone (Starfish) and StarHub (pfingo) may have some impact.
• Breaking down the wireless walled garden at Hutchison 3G (X-Series) will be followed by Amp'd Mobile's launch of the MOTO Q (with Sling and Orb).

Regulation:

• EC on international roaming (June)
• EC v. Germany regarding DT's FTTN/VDSL network (any day?)
• OPTA on KPN's All-IP network (June)