FTTH-related news round-up

• In the Netherlands, CIF is reaching the limits of growth, owning a range of small cable companies. Now they are looking to do rural FTTH, with partners, in a ‘line-rental’ model.
• FTTH is expanding in South Africa, of all places.
• Reggeborgh is selling a majority stake of Deutsche Glasfaser to KKR. Is that an early exit or a way to raise massive funds?
• Impressive cost savings from NG-PON2. It is being trialed by Vodafone.
• Structural separation in the UK? Vodafone appears to be the company with the strongest belief in both FTTH and Open Access. People cannot even agree on the UK’s performance in an international perspective. Of course, BT claims a top position, but others, speaking from experience, disagree strongly.
• A Hyperoptic survey points to real estate value increase from FTTP.
• Italy seems to be committed to nationwide FTTH, but remains a bit unclear on where they are.
• Google Fiber: a new unit in Alphabet and much more than a ‘hobby’. Challenged by Google, several operators are doing cross-state FTTH now: AT&T, TDS, CenturyLink and others. Comcast’s 2 Gb/s service: over FTTH and later over Docsis 3.1? It remains somewhat unclear. And the price is pretty outrageous.
• Speculation in Australia over NBN Co returning to FTTP, with Malcolm Turnbull as Prime Minister.
• Sandvine’s September 2015 edition of Global Internet Phenomena Report.
• The ITU State of Broadband 2015 report: 148 nations have an NBN plans.
• Akamai’s latest State of the Internet report.

Structural separation: great in theory (but so is communism)

Structural separation, separation of network and services, open access: it remains beautiful in theory but hard in practice.

Network and services are financially and operationally entirely different animals, but operators are simply reluctant to let go of the vertically integrated model.

• EE (UK mobile JV of DT and Orange): set off as wholesale-only, but decided to enter the retail services market.
• LightSquared (4G in the US): never got off the ground as wholesale-only provider, albeit for entirely different reasons (interference).
• Reggefiber (FTTH in NL) set out as a wholesale-only network builder with an operator and a services branch to get things off the ground. Indeed, it succeeded in selling the ISPs to KPN, but itself will be rolled into KPN as well. Effectively, it will end up being the NetCo of a vertically integrated player.
• CIF (FTTH in NL) wanted to sell its services branch Caiway to KPN, but this was prevented by the competition council. No other buyer seems on the horizon, leaving CIF a vertically integrated player as well.
• Several open access FTTH operators in the US: the incumbent shuns using their networks and small ISPs appear to have just too little weight to pull of the job. And so, Provo ends up in the hands of Google.
• Google Fiber itself promised an open access model, but this isn't happening either. Google is providing services itself.

Singapore seems to be pulling of the separation model, even though SingTel is trying to grab hold of the passive layer (which it will be required to spin off). The Australia NBN appears to be a disaster. (Who ever advised the NBN Co? Who so shamefully failed in carrying out the business plan according to plan?)

Fiber wars in the Netherlands

The town of Heeze-Leende is now planning a cooperative-owned FTTH network, for fear that Reggefiber/KPN would skip farms and other rural locations. In other towns, things have gone rather more hostile:

• Eersel: similar situation as in Heeze-Leende, except that Reggefiber has already begun assessing demand. Opponent is the Buurtcomite Glasvezel Eersel.
• Vught: again, a similar situation. Reggefiber is in the process of assessing demand, while Glasvezelvught.nu (owned by entrepreneur Jan Schuurmans) is starting to roll-out on its own.
• Harderwijk: the local cable company, CAI Harderwijk, has stated that it will replace its network with FTTH, but not all too soon. It will be a very gradual process. In the meantime, CIF (Communication Infrastructure Fund, run by Bouwfonds with around EUR 1 billion from several pension funds) has apparently knocked on its door, but the city doesn't want to sell. Now CIF is threatening to start rolling out FTTH on its own.

In this order, these are increasingly aggressive tactics to bring fiber to a town. Harderwijk especially could turn into a bloody mess, because who could wish to duplicate a network?

Will Reggefiber give in and blanket entire municipalities, including rural areas? Will CAI Harderwijk give in and sell to CIF? Will CIF revert to buying other cable assets (such as Delta Kabel, Cogas Kabel, Rekam, etc.)? Will it be forced to shop abroad? Is the time getting ripe for coops to enter the market?

Acquisition targets in the Netherlands

It's deal time. And what could that mean for the Netherlands? A short summary:

• International operators could do a little portfolio management and decide they don't need an NL asset: Deutsche Telekom (perhaps increasingly likely now), Liberty Global, Vodafone and most of all Tele2, which requires from its operations an ability to be a Top 2 (hence the name) player. Of course business providers such as BT, Verizon, AT&T, Orange are in a different game, as are Colt, Easynet (private equity owned).
• Private equity investments: Ziggo (possibly heading for an IPO) and CanalDigitaal (could be attractive to any challenger on the TV market: KPN, Tele2, possibly T-Mobile or Vodafone).
• Cable providers: CIF focuses on passive network assets, but has a majority stake in CAIW. How about an IPO for this multi-MSO service provider? And then there are 20+ MSOs, in which CIF is presumably interested, but Ziggo and UPC as well. And perhaps even Reggefiber.
• Fiber assets: OBR (Rotterdam) and LomboXnet (Utrecht) could be targets for Reggefiber or CIF. Reggefiber itself has only one way to go: to KPN.
• Other: Scarlet (owned by Belgacom), Solcon (privately owned) and a long list of newcomers on the FTTH market.

KPN, the hoovering company, is a little unclear in its strategy right now. Under CEO Ad Scheepbouwer it has acquired someting like 40 companies (most importantly: Telfort, Getronics, Tiscali NL, iBasis). Recently, focus was moved from ISPs to MVNOs, but also Atlantic Telecom (business services) and NL-ix (Internet exchange). In the meantime, several assets were sold: fiber and business in Belgium, fiber in Germany, towers in the Netherlands. All quite helpful in reaching the free cash flow target.

So what could be next for KPN:

• Sell E-Plus and Base, by the same logic that DT sells T-Mobile USA: there is a step change coming for the roll-out of LTE.
• Sell more passive network assets. CIF is dying to buy them.
• Sell Getronics. Sort of a u-turn, but perhaps focus is moving to network assets (but not passive assets).
• Buy WiFi assets.
• Buy more MVNOs, esp. those focused on the business market.
• Buy CanalDigitaal (see above).
• Buy out Reggeborgh from Reggefiber.

To round off: one type of asset is out of reach of KPN: cooperatives. This could be the way forward on the FTTH market, but in light of the above (NL-ix), it implies that Ams-IX may be a desirable target, but cannot be folded into KPN.