Toward sharing a single infrastructure

Our fifth poll has ended: how many infrastructures do we need for proper intermodal competition? The question was meant to be taken really in a very general sense, but focusing on access networks.
Possible answers went simply from 1 to 5 (or more). Here are the results, which are as interesting as you want them to be:

1. 48%
2. 8%
3. 24%
4. 4%
5. or more: 16%

If we go by the winner (48% voting for a single infrastructure), the conclusion could be: we only need one FTTH network; and let's start unbundling those mobile networks too! Obviously, we need some rules to make a monopoly work, however.

Poll #5: clarification (?)

Perhaps my latetst poll needs some more explanation (apart from what we did in this post).
First of all, the question (how many infrastructures do we need?) relates to access networks, be it fixed or mobile.
Next, it requires a sort of high-level view of competition. OPTA says "two is not enough", referring to a telco/cableco duopoly. So then, how many networks will suffice? Or will just one do (and share it, to avoid capital destruction).
To round off: to support the case for four: Swisscom decided to roll out FTTH with four strands of fiber to each home (see slide 3 in this presentation), for easier competitor access (now of course things get complicated: is this one network, or four?).

Pick your gut feeling!

BBC 2008 and a new poll

Broadband Cities 2008 was a great opportunity to catch up with my fellow Fibre Ring bloggers: Costas (our host), Benoit (who did a great job on FTTH open access and services) and Stefano (via Skype). Costas provided this link to access the presentations.
Several towns, districts and countries presented either their broadband (Malta, Trikala) or their FTTH plans (Almere, UTOPIA, Seltjarnarnes).
We had some pretty good discussions with people such as Paul Larsen (UTOPIA), Thomas Martin (Cisco), Bart Nieuwenhuis (Exser, to be launched December 18) and Vassiliki Apostolopoulou (Telecompare). They covered quite a wide spectrum of FTTH related topics:

1. Network

• Technology, topology, protocols, standards
  
• Benefits
• Comparison to DOCSIS
• Cost (opex, capex)
• Digital divide
• In-building wiring, network sharing
  

2. Wholesale services

• Layers
• Open access
• Regulation, separation
• Dark fiber, bitstream access, unbundling, wholesale broadband access, IP access
  

3. Retail services

• Usage v. availability, Nielsen's Law
• Net neutrality
• VAS: internet access, IPTV, VoIP, e-learning, e-health, gaming, video conferencing, surveillance (Ericsson's Crister Mattsson quoted the case of Sweden, where he identified 242 services types (slide 22), and Stockholm, where 155 service providers are active (slide 17 of this presentation, earlier this year in Greece as well)).
  

Benoit's presentation centered on this prerequisite: the customer should be serviceable by many different service providers (BSPs) at the same time. His solution: opening up the IP layer for wholesale services.
But then you can ask the question: don't all these BSPs want a choice of wholesale operator? And so the question goes down all the way to the physical layer.
Which brings me to my new Poll: How many infrastructures do we need?
It's the perennial question, and nobody really seems to have the answer. Now, the answer probably doesn't exist, but I would very much like to see how people feel about this question in a very general sense. Let me provide some food for thought:

The case for 1:

• It's a dumb pipe anyway.
• It's expensive as it is (FTTH), so let's just build one and share it. Once operator X puts a network in place in any town, the chance for operator Y to replicate it is near zero.
  
• Even in mobile are operators starting to share more and more of their infrastructure.
  

The case for 2:

• For those of you who think that the US is a healthily competitive market: this is a telco/cableco duopoly. Put differently: intermodal competition (truly infrastructure-based) is what regulators should aim for. There is no long-term point in intramodal competition (such as LLU).

The case for 3:

• OPTA's slogan (the Dutch NRA) is: 'Two is not enough.' In other words, the telco/cableco duopoly doesn't work. Adding compulsory open access to the telco network (LLU etc.) leaves the market asymmetric, so now OPTA is aiming for cable open access as well. But is intramodal competition truly a form of infrastructure-based competion, or is it in fact more of an enhanced form of services-based competition?
  
• In Germany, investors have been speculating about the options for the #3 (E-Plus) and #4 (O2) operators to merge, in order to create a viable competitor against T-Mo and Voda. Many other mobile markets, including the Netherlands, have three players.
• SingTel is opposed to structural separation on the grounds that there would be enough intermodel competition: telco, cableco, 4G.

The case for 4:

• The British mobile market had four players for a long time, until 3 UK launched. However, many remain skeptical about Hutchison's chances in the long run.
• The US mobile market has four more or less nationwide operators: AT&T Mobility, Verizon Wireless, Sprint Nextel and T-Mobile USA. In addition, there is a choice of one or more regional operators, but it looks like these will be absorbed by the national players in the long run.
• ARCEP, the French NRA, is very keen on issuing a #4 mobile license in order to increase competition levels. The same goes for Portugal, Albania, Hungary, Bulgaria, Slovakia and South Africa.
  

The case for 5 or more:

• In rare cases are regulators trying to get as many as 5, 6 or even 7 mobile operators to build out networks (Burundi, Ghana, Sierra Leone).
  

New Poll: Structural separation?

My third poll (How to solve the broadband incentive problem) has ended, and here are the results:

1. Usage-based metering: 9%
2. Service-based tiers: 18%
3. More bandwidth (FTTH): 31%
4. Allow throttling: 15%
5. Accept that access is a dumb pipe business: 53%
6. Bundle access with other services: 25%

I suppose answers 1-4 are remedies of sorts, with FTTH fortunately by far the most popular. Answer 6 has surpisingly few proponents, or put differently: surprisingly many people still feel that access is good business (answer 5), despite the fact that it is quite 'dumb' (in other words: a utility service).

Of course, one could easily vote for all 6 answers since none of them excludes another, as a valued reader remarked.

Now, do take the new poll (see right).

Video: place your bets

It's Polling Season. Please do take my Poll in the right hand column (multiple answers, you may want to read this post first), and while you're at it anyway: please do fill out the new survey on Internet Video Distribution from my friends over at STL Partners. For that, you may want to read this post first.

On the side: I am quite sure we haven't seen the end of video coming to the web and it poses real threats to ISP business models. But let's not forget that primo it is a wonderful development.

Which brings me to United Content Distributors, my love-baby and maker of the Daily Media box. I know, there are lots of boxes like the Apple TV around. Some, like Sezmi, even come close to Daily Media. But the latter still has the advantage of its unique business model. And: it's not just a press release or a prototype. The Daily Media box is up and running in several (trial) locations in the Netherlands, one of which is a full-blown deployment at a hotel (fiber, IP - the works). Read about it here or here (in Dutch, but translated here and here).

On the side: you may counter that an application like Daily Media initially will not add to the pressures on ISPs and last miles. However, one thing it is supposed to do is eat the video store's lunch by offering VoD.

Which brings me to the new application I found on UCD's web site: Daily Care. Very much in line with KPN Health's strategy, and yesterday even Telstra (!) stepped on the bandwagon.
I look at the KPN strategy as very much of a blueprint for the entire telco business:

1. Traditional ICT services.
2. Connecting professionals and adding (third-party) VAS.
3. Consumer services.
   

Take the new Poll

In the right hand column is my new Poll. For more info (such as a link to the original MIT paper) see my previous post.

P2P: down with Dvorak, up with Dvořák!

My second poll has ended. Time for some commentary and a new poll.

Basically, it is Andrew Odlyzko v. John Dvorak (not to be confused with Anton). (Anybody care to make a Wikipedia entry about me?)


1. Outcome of Poll #2

What to do about illegal P2P file sharing? (multiple answers were possible)

• It's like shoplifting: learn to live with it. 8%
• It's illegal and killing ISPs: keep fighting it. 0%
• People want downloads and streams, at lower price points, instead of disks, which are perceived as expensive: new distribution models and record companies are needed. 70%
• P2P file sharing can be legal, as well as a very efficient distribution model: new business models and DRM are needed. 41%

The third and fourth answer were similar, but especially the third obviously rings true with many file sharers. In the Internet era, where pop stars are born on YouTube, record companies are perceived as expensive dinosaurs. And who needs discs, if you can store them on ever smaller devices?
The fourth answers was quite popular too. It centers not on records and record companies, but on the technology itself.
The second option still has some support, but the good thing is that they focus on providing legal alternatives.


2. Commentary

Several topics are related to the P2P problem:

• Usage growth. In June, Cisco predicted a 46% CAGR for global IP traffic during the 2007-2012 period. Then in August, Andrew Odlyzko picked up a very conspicuous decline, the first ever on a quarterly basis, in the data traffic on Cogent Communications' backbone (-1% qoq, with school holidays to blame at least partly). On Telephony Online it was suggested that CDNs could have something to do with it (pushing content closer to end users, so we should look at last mile traffic separately) and that internet-based video is far from mature. Odlyzko himself is still seeing 50-60% growth rates. Dave Burstein of DSL Prime has some AT&T statistics, such as: growth per customer is 25-30% per year. I would add that the availability of high-speed networks causes usage to go up, as Ventura Team has pointed out.
  
• Net neutrality. Should network owners be free to 'shape' (or whatever term they use) traffic, or would that be a threat to innovation? Too much is being said about this problem, but I will add one thing. Operators are trying to squeeze more money from the likes of Google, who already pay to put their content in the cloud (!), just because they have no pricing power at the other end, as the retail market is very competitive. In other words, it is one possible answer to the:
  
• Broadband Incentive Problem (MIT, September 2005). Flat-fee pricing is at the heart of our broadband economy, but at the same time it perversely stimulates ISPs to discourage usage. "... operators have not yet found access pricing mechanisms that both make sense to users and effectively align user behaviors with the costs they impose".
  
• Usage-based metering. Is this then the answer? The first argument against it is to say that the 5% of users that use up most of the available bandwidth changes every day. However, I don't see how that would make usage-based metering an unfair pricing mechanism. I could even go a long way with John Dvorak, defending a metered internet. He is absolutely right - except that he is totally wrong. We must remember that dial-up was really bad and that the internet is meant to bring lots of benefits (economically, socially, environmentally). We should not return to the 90s. Instead, usage must be stimulated (as Odlyzko says, or read this piece by Colin Dixon), not discouraged. We must remember that bits aren't like water or electricity. When it comes to bits: the more the better. Water and electricity however are scarce and producing them requires energy and puts a strain on the environment. But some folks just won't stop.
  
• FTTH. I suppose throwing bandwidth at the problem is at least a partial solution. However, I have heard people say that they refuse to believe in FTTH, because there is no legal use for such networks. "Why should we pump money into it, if all people do with it is illegal file-sharing?"
• The value of music. Last but not least my personal view on modern music cultures. These days music is all around us. Long ago, it was limited to concert halls and in the 19th century people like Franz Liszt produced piano reductions for people to enjoy the great works of art in their homes. The rise of popular music has accelerated this technological development, and now we have iPods and iTunes. Thirty years ago, people complained about elevator music, aptly called muzak. But I don't hear the term muzak anymore. Today, we have gone so low that DJs make CDs. This dear reader, is behind the third option in the above poll. People want to listen to DJs, but at least they are right about one thing: it shouldn't cost them anything. May I suggest you go to your web store (I would suggest jpc.de) and get yourself a decent set of Olivier Messiaen (born 100 years ago) and Elliott Carter (100 years old this year, and composing like mad) CDs. Just so you know good music is still around and very much alive. And not very expensive.
  

3. New Poll

My third Poll is in the right hand column. Cast your votes!

Poll revised

A valued reader explained to me how he thought that something was missing in the three possible answers in my second poll (see right hand column). I adjusted it according to his views, so cast your vote again (more than one answer is possible).

Basically, I added an option (the third answer), which I originally thought was included in the last option.

New poll: P2P file sharing

A new poll can be found in the right hand column: "What to do about illegal P2P file sharing?".

I wonder if there will be any sort of consensus. I believe that there is some very negative sentiment around the issue, when it is related to FTTH: "Do we really need that super-highway, if all people do with it is illegal file-sharing?".

KPN's stealth advance in the FTTH market

A new site (Fiber Update, in Dutch) recently launched in the Netherlands, tracking mainly grassroots FTTH projects. What comes forward is a picture of KPN gradually fibering up the country. After their stealth move to hoover up ISPs, they have now embarked on a quiet mission to make FTTH widely available (as predicted).

Another issue for this post is Poll #1, which I ran in the right hand column for about a month: "Do we need infrastructure-based competition?" (see also Costas' post). The results are below.

First, KPN's fiber initiatives so far:

• Greenfields in new housing areas, run by KPN Glasnet, in Enschede, Amsterdam, Etten-Leur and Vleuten/Vleuterweide.
  
• Business parks.
  
• Reggefiber FttH, a 41/59 joint-venture with Reggefiber. Setting up this JV is still pending and may get some scrutiny from NMa (competition commission), but it looks like it will be approved, since it is a passive layer operator only. It is not entirely clear what will and what will not be included, but I suppose Reggefiber will contribute most of its munifiber-assets. So far, we have: Almere, Deventer, Nuenen, Hillegom, Veghel, Uden, ...
  

What strikes me in most of the grassroots developments (see my updated FTTH 2008 database), is that these communities mostly team with Reggefiber (for the passive layer) and XMS (as a service provider). I am not sure who takes care of the active layer, but I suppose it is BBned (Telecom Italia).

Now let's see how these parties are tied together:

• As stated, KPN will own 41% of Reggefiber FttH (+ an option to increase this to a majority stake). Other Reggefiber assets (business services) are left out of the JV.
  
• Reggefiber (named after a river called De Regge) is owned by billionaire Dick Wessels, who gathered his fortunes in the construction sector (VolkerWessels), but mainly by selling, at precisely the right moment, his World Online stake in its IPO. World Online subsequently headed for a melt-down and was ultimately bought by Tiscali. A few years ago, Tiscali NL was acquired by ... KPN.
• XMS is a service provider, owned by InterNLnet, which was bought by ... BBned, a unit of Telecom Italia.

What are the implications and most likely outcomes of these developments?

• KPN, Reggefiber and municipalities are apparently making sure just a single super-highway is being constructed. That is, if cable (Liberty Global's UPC and Warburg/Cinven's Ziggo) remain on the sidelines.
• This way, a new monopoly is born: the passive network owner. However, nobody seems to care, since all these networks follow the open access three-layer (passive, active, services) model, and there are plenty of service providers. Perhaps both Reggefiber and KPN will spin-off all their passive network assets into the joint-venture?
  
• OPTA, the Dutch NRA, however will not accept a monopoly in the active layer. It looks like KPN and BBned could be the main contenders, togeter with the other current LLU operators (Tele2 and Orange (T-Mobile)).
  

So let me now turn to the poll in the right hand column. Since I will be taking a two week holiday, I will cut it short to this day. There were 35 responses:

1. 1 vote for pure infrastructure-based competition (i.e. no open access whatsoever, I suppose).
   
2. 7 votes for services-based competition only.
   
3. 13 votes for competition in the active layer (i.e. the model I described above).
4. 14 votes for competition at all levels.

It was just a quick & very dirty poll, so no heavy handed conclusions here, but I do find it striking that people seem to disagree on such a fundamental issue. Let me round off with a few short remarks:

1. OPTA says: "two is not enough". I agree (see the US duopoly). But three (or more) seems totally unrealistic.
   
2. Services-based competition will be a reality, according to the recent OPTA rules, in FTTC markets. I suppose this, in itself, could be no problem in consumer markets, but I think it wouldn't be sufficient in business markets (providers want to distinguish themselves by offering a rich portfolio of services).
   
3. The big question remains: Who will really be committed to the Dutch market? Telecom Italia and Tele2 could exit the Netherlands altogether, and T-Mobile has put up Orange BB for sale.
   
4. Cable will probably, at one point or another, construct its own FTTH network. The next question would be: must it offer open access? Do we need symmetry between infrastructures (both OA or both closed), as well as within? (Which brings to mind two conditions for FTTH investments: a decent return and regulatory clarity.)
   

Last remark: full symmetry arises only when networks are structurally separated. Only then are all providers equal.