SMS: more innovations

We have reported before on innovative SMS services. Here are some recent additions:

• SMS with Attachments: a text message is sent, after which the phone rings and a multimedia message is played. Launched by China Unicom and China Mobile (technology from NMS Communications, built by ChannelSoft).
• Voice over SMS: short audio messages. To be launched by both Comium (in Liberia and Sierra Leone; technology from Apliman Technologies) and Comcel (in Haiti, technology from Kirusa).
• Ads over SMS: pushing location-based ads. Launched by StarHub in Singapore.
  
• Payments over SMS: Launched by Rabo Mobiel (a Dutch MVNO on the KPN network).
  

The end of BPL?

In case you were wondering what ever happened to BPL, check out this piece on Ars Technica.

One of the early real-life deployments was in Manassas (Virginia), but now the city has taken over the network, with a good chance of reducing it to a Advanced Metering Infrastructure (AMI) system. Earlier this year, a Dallas network run by Current Communications (which attracted funding from Google) and DirecTV, was sold to the city's utility.

It looks like BPL has no chance between the entrenched DSL/cable networks, and the inevitable rise of FTTH. (But then of course there is UETS ...)

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!

Do incumbents need protection?

"Europe's leading telecoms operators have called for a softening of regulation across the sector, to encourage investment in next generation infrastructure in the face of the credit crunch", reports Telecoms.com. "Aggravated by the ongoing financial crisis, slowing investment trends could lead to a further delay in the deployment of high speed broadband access networks, further affecting Europe's competitiveness. (..) If regulatory policy continues to constantly focus on pushing prices down, ever more capital will be withdrawn from the industry. The most recent example is the move to cut mobile termination rates in the EU at an even lower level than costs. If this trend continues, it risks pushing the ICT sector into an economic downturn further deepening the recession of our global economy."

Poor incumbents (united in ETNO)! So now they want protection, not only from us, but from their competitors as well. After all, wasn't regulation invented to lower prices, enhance service levels and increase choice? So now they relaunch their extortionist speak: we will lower investment levels.

Last time I checked, however

• the European telecoms markets were still heavily skewed toward the incumbents. BIPT, the Belgian NRA is ordered by the EC to see to it that Belgacom lowers its fixed line voice rates; and VATM showed (slide 15) that Deutsche Telekom still controls 78% of the German fixed-line market.
  
• the EC was pushing for mobile termination rates to come down from irrationally exuberant levels, but still above cost (1-2 c/min), if things go as Arcep proposes (to about double that amount in 2010).
• NGN investments are supposed to help stimulate GDP growth.
  

But there was some sense in the story as well: ETNO calls for symmetric obligations for duct access. In other words, not just the incumbent, but altnets too should allow access to ducts. Nothing wrong with that, of course. Perhaps ETNO is even hinting at taking this 'symmetry' one step further: access to cable ducts.
Who knows.

UETS: beyond BPL and service bundling

The power guys just won't give up. It has been terribly quiet on the PLC/BPL front: Dallas is scaling back, and progress is only being made in developing nations (Ecuador, India, Brasil), or so it seems.
But now (well, the patent was filed in 2005) we have UETS (Universal Ethernet Telecommunications Service), as per Jose Morales Barroso's paper in the IEC Ocober newsletter. A interesting read!

To be sure, this is neither BPL nor 'just' a new business model (marketing a bundle of broadband and power, as Bill St. Arnaud proposes). This is much more profound integration. Let's wait and see how it develops.


1. UETS in general terms: the Intelligent Grid

• "The total integration in only one shared physical infrastructure (e.g., towers, poles, conduits, wires), with copper cables for electric power and fiber optics for telecom, would be an exceptional improvement. The information and communications systems need the electricity, and the electric power grid of the future needs the information andcommunications technologies (ICT). Hence, the advantages of integrating them in a single infrastructure are very, very clear."
• "A baseline technology, the Universal Ethernet Telecommunications Service (UETS), is proposed for converged services delivery over a single 'intelligent grid', a central role in meeting the world’s growing electric power demands and broadband adoption."

2. Whence UETS: to save energy

• "The telecom technologies that form the Internet waste a huge amount of electric power, and that amount grows exponentially with the number of users and their transmission speed. At the same time, clients and servers increase in size and performance, consequently increasing the consumption. In the United States only, all electronics expend no less than 250 TWh per year, equaling more than 180 million tons of CO2, roughly equivalent to 35 million cars. (...) The practice of leaving PCs and workstations 'always on' consumes yearly 19.8 billion kilowatt-hours in the United States, enough energy to power 1.9 million homes. Individuals, institutions, and companies can help minimize wasted electricity, save money, and reduce CO2 emissions by as much as taking 18 million cars off the road!"
• "... the net efficiency for the entire electricity path: from the grid to the final information process is smaller than 0.6 percent, and from power sources is less than 0.2 percent. This means that each watt employed for the information process needs more than 500 watts from primary energy!"
  
• "We live in a kind of illusion, thinking about diverse 'achievements' (e.g., social, technological, political) when the crude reality is very different: we are consuming, in an outrageous and unjustifiable way, the planet’s resources and, at the same time, destroying
  our environment. We cannot have endless growth in consumption, wealth, goods of all types, or anything in a limited system as planet Earth: it is unsustainable."
  
• "Connecting renewable and cleaner small-scale local power generators distributed throughout the grid will become more economical, taking stress off the grid, improving energy efficiency, reducing the need for transmission capacity, and providing secure regional power supplies."
• "(...) an advanced telecom service would move information instead of people or things, drastically reducing the need for transportation."
• "To manage power demand, the new intelligent meters report moment-to-moment power usage digitally to the utility, through the UETS network, and cycle up and down appliances in response to grid needs and signals. This enables variable pricing, providing economic incentives to shift power use between high- and low-demand periods. Home appliances containing onboard intelligence reduce demand when receiving signals that the grid is under stress or activate appliances when power rates are lower. That can take pressure off overloaded grid infrastructure and power costs."
• "A very interesting application is the connection of hybrid electric cars to the electric network - a product known as plug-in hybrid electric vehicles (PHEVs) - and making them an integral part of the grid, a concept known as vehicle-to-grid (V2G). (...) Smart management systems could provide additional reliability using the storage capacity of the PHEV by reversing the power flow from the battery to the grid during peak periods, using the battery’s stored energy to provide power back to the grid in order to meet peak demand, rather than adding new generating capacity. It is even possible to start the combustion engine 'in a stopped car' in critical moments of consumption to supply energy during blackouts or complement the conventional generation."
• "Telework (...) means the death of distance. Work is not a place; teleworkers drive information, not cars, to work, saving lives in traffic accidents; reducing transportation, fuel consumption, and pollution; increasing work/home life balance; and reducing stress."
  

3. Comparison: simpler, better

• Instead of a more traditional form of layering (physical, data, transmission, presentation, applications, etc.) UETS collapses the internet into 3 layers: 802.3, the IEEE standard for ethernet is the primary medium (PHY/PMD); 802.3 and 802.2 for the next one (MAC and LLC); and finally internet applications. The technology involves Banyan networking for interconnection. Further explanation of the protocols is here.
• The technology is ethernet-based. Switches replace routers. "... evolution from 'computer networks' to the 'computer on net.' When the network is as fast as the computer’s internal links, the machine becomes a special purpose appliance across the Net."
• "... opens up possibilities for micro-grids that supply DC power instead of AC, a tremendous energy and cost saver since digital equipment, which typically runs on DC, contains expensive, energy-wasting power conversion equipment. DC–powered systems waste less electric power, generate less heat, enable more electronic equipment density, and can cut power losses by 50 percent."
  
• "This system is the proposal for the convergence of computers, Internet, broadband, mobility, and telephone networks into something extremely simple, much faster, and less costly, with more capabilities and integrated services over a shared, unique network infrastructure."
• "The bandwidth offered is symmetrical, up to 10 Gb/s today and 100 Gb/s in the near future."
  

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).
  

Incufiber: presentation in Greece

Tomorrow I will be joining the Broadband Cities 2008 conference in Greece. Here you have the presentation, but it will only make sense if you come to Greece (Trikala, Thursday at 11:30 local time). Or invite me to come for a 20 minute talk.

Kabel-X: pull out your coax

The Austrian company Kabel-X has landed in the US. It now targets MSO that wish to replace coax with fiber in FTTP deployments. Before, they targeted telcos with its proprietary technology: replacing the inside of conduits without digging.

Health needs ICT

McKinsey talks about the growth of the healthcare market (article here, free registration). It has exceeded GDP growth by 2 pp for 50 years. This underscores the importance of bringing ICT to that market. See my earlier article on KPN Healthcare.

Will Telstra bid if it is structurally separated? Betcha!

Our fourth poll has ended, but to no obvious conclusion. A ridiculously small sample was heavily skewed toward structural separation (65%), but functional separation wasn't completely off the table (35%). Operational separation (5%) and accounting seperation (which you couldn't even vote for!) are excluded going forward.

The topic gets a lot of press these days, mostly in New Zealand, Australia and Italy. Check out this Arcep document for an introduction to separation.

Here is why we believe in structural separation.

• In a world of intramodal competition on the telco network (and intermodal competition between copper and coax) there will never be full equivalence between all players (incumbent, unbundlers, resellers, etc.). As much as PTT's want symmetry between telco and cableco competition (i.e. open access to cable networks), they should also allow for symmetry on the copper network. There will never be true symmetry if one service provider also owns the network, and the others don't. No matter what they say, the incumbent will always be at an advantage.
• Look at it from a synergy point of view. The incumbent reaps all the synergy benefits stemming from owning both the network and a service provider. These advantages should be equal and shared. And hence, all incumbents cry foul when confronted with the threat of being structurally separated. But that's the whole point, brothers and sisters: the regulator should focus on simply making PTT's smaller and creating long-term competition from viable altnets.
  
• KPN has successfully staved off structural separation. On the one hand, this is due to its full portfolio of wholesale services and a certain co-opetitive stance toward resellers. On the other hand, the world is facing next-generation access investments (i.e. FTTH), which are not only expensive (to be carried by a company the size of the incumbent only) but also create huge regulatory uncertainty. In the Netherlands, hardly anybody is left to consider serious and long-term competition (apart from cable). Orange Broadband is now owned by T-Mobile and put up for sale; bbned and its sisters can hardly be taken seriously because parent company Telecom Italia has a lot on its mind; and Tele2 seems to be withdrawing from western Europe altogether.
• Only when structurally separated can the telco appeal to the right investment communities: the dividend aficionados can buy the network, retail minded investors can focus on service providers (higher risk/return profile), etc. Also, only in this way can the network attract subsidies or create public/private partnerships. In a way Telstra acknowledges this: if it is structurally separated, it will not bid for the National Broadband Network contract and subsidy (AUD 4.7bn). But once separated, the network company will surely bid for the contract; I will eat my hat if it doens't!
  

We have looked very hard and closely at all the arguments against structural separation, but none really seems to make sense. Yes, it will be quite disruptive. And it will costs a few pennies. But to say that it would take away any incentive to invest just isn't very 21st century thinking. Finally, to say that you want to own the network (to generate the cash and allow you to pay fat dividends) is not very clever in light of the above (we want equivalence and symmetry, right?).

To round off, we want to share some fun related to the topic - unless it brings you to tears, of course.
Telecom Italia is one of those companies that may face structural separation and it will come as no surprise that Tiscali is all in favor. FastWeb takes a different position: they think it's a bad idea! Functional separation would suffice. But wait a second: isn't FastWeb 82% owned by Swisscom, another PTT?
With hindsight, that calls for a round of applause for Optus (the Australian subsidiary of SingTel). It openly called for structural separation of Telstra, even if it's parent company was fighting the same fate in Singapore. Or is it the other way around: was SingTel being a hypocrit?