Amsterdam: FTTH penetration at 35%

When Amsterdam, KPN and Reggefiber recently announced that they were close to entering Phase 2 of the munifiber build-out, they were somewhat secretive about the number of homes activated. A local journalist pulled it out of one of the managers: 3k, on a total of 43k, which makes a penetration rate of 7%. Since work started 3 years ago, that was a less than impressive number.

However, things need a little clarification, as an insider informs me. First, hooking up was made available just 2 years ago. Second, yes there have been all sorts of everyday problems in rolling out. Third, Amsterdam not only counts homes passed (43k) and homes activated (3k), but homes connected too. The latter number stands at 9k, for a penetration rate of 35%.

What a little PR can do.

Still, the number of homes passed would still be of interest to me. I guess we need some 'performance measurement' standards when it comes to measuring penetration rates.

Lastly, the FTTH Council numbers last week also build upon the number of homes passed. See this IDATE information to find out some detail on the number of subscribers (= homes activated). The Netherlands stand at 350k homes passed and 29% (101.5k) of that as homes activated.

D-Day

Yesterday was D-Day on multiple fronts. Parties to celebrate and also some predictions made over here coming true.

#1
First of all, my daughter turned 5, which is a major achievement in a child's life. It kept me very busy, and I'm sure it was a day to remember for her and everybody else present.

#2
Over in Geneva people had their own party. CERN's Large Hadron Collider went live and anybody with an interest in physics, such as myself, is anxious to see results coming out of those 30 years of preparation and 6 billion euros. Check out this newspaper article (in Dutch), with a film clip (in English).

#3
Talking about speed. The Amsterdam FTTH network, now connecting 40k homes, yesterday demo'ed a 1 Gb/s connection (imagine using that full bandwidth - it will blow you through Comcasts's monthly allowance of 250 GB in half an hour). A trial will go live shortly, but a commercial launch isn't planned yet. I somehow felt this was coming ...

On the side: this is a typical OA PPP project: open access public/private partnership. The passive layer is run by GNA, in which the city, housing corporations, banks and Reggefiber participate. The active layer is run by BBned (part of Telecom Italia) and InterNLnet (same Italian parent) is the service provider for this trial (there are other SPs active on the network).

On the side: I mentioned a study on the benefits of broadband and the impact of availability on usage in my previous post (the Eindhoven University report). Ventura Team of course come to a similar conclusion in March. Now the Milken Institute published a report, showing that Provo, with its troubled FTTH network, is the 'best performing city' (in terms of job creation). Even Lafayette (whose munifiber isn't live yet) is among the top 25 towns. Finally, check out this article on the benefit of broadband for Africa.

#4
Something else I kind of predicted was DTT coming to the Daily Media box (see this post). By the way: I also talked about adding a DVR with the United Content Distributors guys, but at the time they didn't think that was necessary. We'll see.
Let me first bring the box back to your memory: it helps place-shift internet video streams to the TV (as other boxes from Apple, Sony and Sezmi do), but there is much more: VoD, interactivity, ease of use, targeted ads, several trials and a live deployment, and last but not least: a unique business model.
Guess what happened yesterday? They demo'ed a new version of the box, that includes a DTT (DVB-T) tuner. After I first wrote about the box, the people behind it acknowledged that adding such a tuner could be a smart strategy for making a deal with the local incumbent telco over here (KPN), which also happens to own the country's single DTT license and operations (extended with DVB-H technology). Or with any other DTT operator worldwide.
Apparently, there is even more. They also added DVB-C (cable) and DVB-S (satellite) capabilities. O, and FTTH is no problemo either.
In short: the box is a great tool for adding video or enhancing current digital telco TV offerings. We'll keep tracking the box, because yesterday a lot of cable execs were present at the demo.

Not so conventional wisdom in FTTH

The always excellent Benoit 'Fiberevoltion' Felten points us to a piece of market research from Dutch consultancy Stratix. Here are some additional points to make - very much the creeds of this blog.

Most interesting to me is to see how conventional wisdom can be contradicted: structural separation is good for business and investment; more than one FTTH network is feasible.

• FTTH is a community driven business. It takes a 40-50% take-up to get the business case working. (Wilson (NC) apparently only needs 30%, but I suppose that is exceptionally low.)
• Stratix refers to the problem of in-home wiring in Amsterdam's Citynet. However, my inside source tells me that it is a non-typical event related to a single MDU. Apparently, some hotshot architect decided that all meter cupboards should be located on the ground floor. Ducts going up to elevated appartments were not allowed in the stairwell, so installation required all your below neighbors to be home on the day the wiring was to be installed. This problem was intensified by the fact that many inhabitants are using their appartment as a pied-à-terre only.
• As I found out before, there is a lack of construction workers. This is probably the biggest limiting factor for quickly rolling out FTTH. At the same time, it implies that you need to start early if you don't want to fall behind in building a future-proof network.
• Three-layer model. In contrast with an earlier report, Stratix claims that KPN would not be a co-owner of the passive layer in Almere. Now, with the Reggefiber FttH joint-venture that will obviously change. In other words, Mr. Farwerck turns out to be right after all in that KPN will indeed co-own the passive layer. Anyway, checking with the KPN IR group it was confirmed that Reggefiber FttH will be open to other service providers, but the active layer will be a KPN monopoly.
• The entrance of real estate investors. FTTH enhances property values and is interesting to long-term investors. In addition, open access lowers the risk (as per Pensioenfonds Vervoer), since it reduces service provider default risk. Stratix contrasts these investors to private equity funds (high risk, no openness, restricted investments).
• My crucial belief is supported: "Both deals of ING and Rabo Bouwfonds demonstrate market led investment in structural(ly) separated networks. These deals counter the widely held beliefs in telecommunications policy papers that structural separation is bad for innovation."
• "Local loop economics indicates only one network per area to be feasible." This is an all too obvious statement, but let's do some basic math here. If you can make a business case at a c. 40% penetration, than there must be room for at least two networks, assuming that the entire population will sooner or later migrate to FTTH!
• Stratix expects a 'run-for-the-market'.

Update on FTTH: service provider issues

The world of fiber is moving fast, but it is not all good news. Since my previous update, some notable developments occured.

• Citynet (Amsterdam). First of all, I have to make a correction. Amsterdam does in principle offer enough room to allow for direct buried duct (not just direct buried cable). However, one of the project's execs points me to the fact that probably not a single Dutch town allows ducts of 30++ centimeter diameter to be buried. And that is what you would need to connect the central office to the aggregation point. Other than that, Citynet simply decided to go without ducts.
• UTOPIA and iProvo (Utah). Both projects are running into financial problems and are looking for refinancing. This article holds the key to the solution, I believe: better marketing. Wholesale projects such as these (and Citynet) require service providers for marketing. The trouble is, there may simply be too many SPs, which is confusing to the public (sources tell me this is an Amsterdam issue), or they may simply be too small, and cannot absorb the losses associated with the necessary investments (as seems to be the case in Utah). Furthermore, the Utah networks seem to be suffering from a limited product portfolio (no low tier product at a competitive price point). The issue reminds me of projects (Powell, Wyoming) that decide to allow for a service provider monopoly during the first several years of operation. Of course, pricing must be in order too (even if MSOs will launch targeted cheap offerings). EPB in Chattanooga targets to undercut market prices by 5-15%. By the way, Provo seems to have had offers for the iProvo network, but isn't ready to sell out.
• Database. I updated my FTTH 2007 - 2008 database for more details and lots of links.
• Financial models. I wonder if any of the projects has a financial model available. There are lots of consultants out there who are doing that laborious task.

New Zealand: another Amsterdam look-alike

It didn't take the New Zealand Institute long to come up with an answer (April 2) to the question ("What investment vehicle", March 12) who should operate New Zealand's FTTH network. (In response, InterNZ calls for a debate.)


What it comes down to is a PPP (public private partnership) for a 3-layer model, that the Institute compares to the Amsterdam (Citynet) solution (page 9), which also seems to be coming to Singapore. Some questions remain, though (see below).


The highlights:

• FibreCo: a regulated monopoly "created by the government" charged with building an FTTP network covering 75% in 10 years time.
• "... because there is insufficient market value to build redundant fibre infrastructure and no technical reason to do so." (page 7) A peculiar way of defending this option. However (page 11) "... the value of fibre infrastructure will increase over time." This can be related to new services, rising demand and decreasing costs over time (page 15).
• Open access: FibreCo will have to rent dark fiber capacity on an equal basis.
• "Owners of existing (copper and fibre) networks can sell these assets to FibreCo on a commercial basis."
• Services based competition (page 20): "FibreCo works closely with appropriate companies to light the network and provide a range of services. (...) A single provider lights the network. May be provided by a service provider or an independent third party." This hooks in to current separation plans at Telecom NZ.
• Breakeven. Total cost of reaching 75% by 2018 is estimated to be NZD 4.0-5.0bn, of which two thirds for passive components and one third for active components (page 12). Assuming ARPU of NZD 50 per home (compared to current Telecom NZ ARPU of 80-100 NZD/mo/home) and other input, the breakeven cost per home is NZD 3,000 (page 13). The private sector would be expected to pay for such homes and the government would have to put up another NZD 1bn to cover homes that are more expensive to cover.
• Stimulating uptake: entry level service at a comparable cost; extended period of free services (here a reference is made to Nuenen in the Netherlands); require a switch from copper to fiber in order to be able to retire the copper wire (page 16).
• Stakeholders: government bodies (who will also be anchor tenants: today's annual spend on telecoms of NZD 200m will migrate completely) and private investors may contribute cash, existing operators contribute assets (existing fibre, ducting) and cash - all for a stake in FibreCo (page 18-19).
• Timeline. Operational separation is underway at Telecom NZ. Chorus, the network operator, should be priced within 12 months. Within another 6 months it should be sold to FibreCo (i.e. structural separation).

My take on this:

• Very much in line with my own preferred solution (single infrastructure, separation, 3 layers, open access).
• A focused, regulated, natural monopoly at the passive layer should be viable (page 11), even for a life at the stock exchange. Check out tollroad stocks (page 19) in Europe, which have done very well. It remains to be seen who the government will be able to attract as passive, private investors, but I am sure FibreCo will be an interesting vehicle for investors who prefer utility style investments. In case of emergency, would the government be ready to step and nationalize FibreCo?
• Chorus is to be sold to FibreCo, but at what price? This must be the toughest part to negotiate. The Institute says 'the value' will increase over time (see above) - whatever that means - so that assessment won't exactly help.
• Also, incumbent telcos are very much network focused, so they may oppose the idea of a monopoly operator. Doing operational separation is one thing, but structural separation may feel like another matter entirely to such a company.
• Some vertical integration would still be allowed (between the active layer operator and one of the the services providers). So, regulation should pertain to both the passive and the active layer, I suppose.
• Could some form of infrastructure based competition be possible by allowing more than one player at the active layer (transmission providers)?

Lafayette needs the Daily Media box

Two interesting blog posts on FTTH from Geoff Daily at App-Rising.com.

First, a review of Lafayette's network roll out. Geoff pinpoints two interesting new focus areas:

• On-net file-sharing to boost traffic and the sense of community. Obviously, this could involve copyright issues.
• Targeting late adopters of the internet by offering 'a special STB' for web access on TV. Geoff has a couple of concerns over the planned capabilities (no YouTube, no storage, no support for peripherals), which could all be addressed if LUS chose to go by UCD's Daily Media box that I wrote about a few days ago.

Second, his review of Amsterdam's local hero Dirk van der Woude, who gave a keynote speech at the Freedom 2 Connect conference.

Viviane Reding: how do we get to FTTH?

Viviane Reding delivered this interesting speech at a KPN Forum in Brussels, this week. Thanks to one of the leading Communications Breakdown MUVRs for providing the text.

I am very sympathetic to most views and proposals coming out of the EC, even if the new EU regulator (EECMA) could be a stretch (it remains to be seen how bureaucracy and harmonisation will be balanced).

Here are some quotes that I find particularly interesting, but do read the whole thing (it's not very long):

• "(...) by summer in the mid-term review of the i2010 strategy, I will publish a new indicator of broadband take-up in Europe that compares national performance, not only on broadband penetration but also geographic coverage, speed, competition and price." This is important, since penetration only doesn't tell the whole story. Compare the OECD Broadband Portal.
• "Further service development is likely to result in the need for significantly higher broadband speeds of up to 100 megabit per second or more." There is some room for debate - I have shown some scepticism myself, but 100 Mb/s must be the milestone to focus on. Among the many drivers will also be Web 3.0, which may have significant implications for both bandwidth and storage.
• "I found a widely held view that the European regulatory framework and its emphasis on access obligations to open up competition is not at all the impediment to investment and innovation that some market players claim, (...)." Bravo.
• "How we treat next generation access is therefore the single most important policy question in the telecoms sector today."
• "(...) one of the potential attractions of functionally separating access networks is to make this incentive structure clearer and more operational." Mind you: functional, not structural. KPN is a good example of a telco staving off the 'threat' of structural separation by making functional separation really work (transparancy, good portfolio of services, happy wholesale customers).
• "My worry is that such bundling will, de facto, stifle choice and innovation."
• "Let me be very direct: except where the structure of the market has non-discrimination built into it such as in a well designed system of functional or structural separation the incentive of the telecom company is to design new infrastructures in a way that controls or chokes off competition."

Furthermore, she looks at the "three different models of network upgrade":

1. FTTC + VDSL. "In terms of open competition however there are serious concerns that VDSL could be attractive to incumbent telecom operators, because they require competitive market entrants to substantially scale up their investment in switching capacity." But "(...) unbundling requirements at street cabinet would have to continue to allow competitive access operators to stay in business."
2. FTTB + PON. "But the flexibility in the medium term may be more limited, not least because the end user equipment and the equipment in the network have to be compatible. Unbundling these passive fibre networks is therefore more difficult and the incumbent increases control." (...) "It is unclear that passive optical networks can be unbundled in the way that we see today on copper networks. This requires close attention and probably experimentation with novel architectures, using wave division technology to offer virtual unbundling as a more flexible alternative to bitstream access."
3. FTTH. "The difficulty here is cost: existing ducts are often too small to allow multiple fibres to pass through and therefore major construction spending is required. This is by far the most expensive option." (...) "Point-to-point fibre deployment, meanwhile is rarely being deployed by private market investors. Certainly, this is due to its high cost, but it is also probably due to its openness. Where we do see it being used is in open access schemes initiated by municipalities, in cities such as Stockholm and Amsterdam. These schemes are local partnerships that take a pure 'infrastructure utility' approach by building ducts and end to end dark fibre and then leasing access to service providers. Clearly by so doing these cities have created for their business and citizens a future proof network infrastructure and for the investors in the networks a very long term stable return on their investment given that ducts and dark fibre have a potential operating life of several decades. Under these conditions of guaranteed open access circumstances, perhaps, infrastructural competition is less important than an open and high performance platform. However, the municipal solution seems unlikely to be relevant for all of Europe and could lead to a very fragmented landscape." This highlights the fact that the EC is not a friend of munifiber and is very critical about them. "Whichever infrastructure route we take forward, my conclusion is clear: regulation will have a role to play to keep networks open and to guarantee progress, efficiency and choice."

BT's Ebbsfleet project needs some work

A short follow-up to my earlier post on the BT project in Ebbsfleet. A couple of Communications Breakdown MUVRs (mega ueber value readers, pronounce MOVERs - thanks James) reported:

• Keith McMahon mailed me about the project back in July.
• Dirk van der Woude adds some pricing details from one of his own MUVRs (also see the Guardian). Ebbsfleet could be less than spectacular. The top tier product is asymmetrical (e.g. 100/2 Mb/s) at a rather expensive price point (530 GBP/yr = 707 EUR/yr ex VAT at the wholesale level). Compare that to Iliad/Free's famous 30 EUR/mo = 360 EUR/yr (at the retail level). Dirk also adds 'his own' tariffs, at Citynet in Amsterdam: 20/20 Mbps for 300 EUR/yr (retail, incl VAT) in the first two years.

Update on FTTH

070829: Truckee (Cal) plans network (15,500 homes/businesses, > $15.5m), with 180 Network Services
070902: Verizon 'FiOS' trials 100 Mbps
070903: CityNet (GNA (= Amsterdam, 5 housing corps, ING, Reggefiber) phase 1 on track (40k homes, EUR 30m) for completion mid 2008, with Draka Comteq and Van den Berg Infrastructuren
070903: Iliad ('Free') plans launch of service (TV (2 sets, >100 channels), 100/50 Mbps, free calls for 30 EUR/mo) in 2 Paris districts mid Sep 2007
070903: Lafayette RfP for building equipment housing comes in above budget
070904: Orange Slovensko (FT) launches network ($40m to cover 200k households in 2007) in Slovakia: BB (12/1 Mbps for 600 SKK/mo, 30/2 Mbps for 720 SKK/mo, 60/4 Mbps for 1190 SKK/mo), TV (from 360 SKK/mo), calls (480 SKK/mo incl 100 minutes)
070906: 22 CLECs (XO, Cavalier, RCN et al) ask FCC for open access to Verizon's FiOS
070906: Tellabs launches indoor ONT (for active ethernet)
070906: Telefonica plans network for 50 Mbps capability
070907: El Dorado Golf & Beach Club (gated community in San Jose del Cabo, Mexico; = Discovery Land Co) ordered network from ERF Wireless, X Analogue Comms, $2m, to be completed mid Sep 2007
070911: Sipperec (86 Paris municipalities) plans FTTP network 'Sequantic' (EPON 802.3ah, up to 1 Gbps), with Spie Comms, Wave7, to launch Oct 2007 to 6500k businesses in 147 areas
070911: Reggefiber plans network in Valkenswaard, with NEM Brabant
070911: Telstra plans network to greenfield (Rouse Hill, Sydney) from early 2008
070911: Telus plans trial fall 2007 - mid 2008 (1k subs in Calgary, Edmonton, Vancouver, Quebec)
070914: Embarq plans FTTP network in Portofino (267 homes in Clayton, NC)
070916: Monticello (Minn) plans network, referendum Sep 18 2007 (65% needed)
070917: China Telecom plans network in Wuhan, with Fiberhome Telecomm Tech
070918: Telenor orders gear from AlcaLu for greenfields, GPON (also FTTN + VDSL)
070918: UK government considers ultra-fast BB 'intervention', discussion with Ofcom and BT Nov/Dec 2007
070920: Hong Kong Broadband Network (HKBN; = City Telecom; operates FTTB) plans FTTH network 'FiberHome', 48.50 $/mo for 100 Mbps, 88 $/mo for 200 Mbps, 215 $/mo for 1 Gbps
070922: Oxford Networks plans FTTP in downtown Bangor and Brewer (Maine), $4m
070924: Cisco launches active ethernet CPE gear for FTT-MDU
070924: Wien Energie Wienstrom (= Vienna) orders gear from PacketFront (network and home gateway systems); active ethernet; Phase 1: 50k homes, EUR 10m
070925: North Kansas City launches 'liNKCity' ($8m)
070926: Ofcom launches consultation on NGA, until Dec 5 2007
070927: St Paul (Minnesota) City Council approves network plan, $150-200m
071001: Iliad ('Free') plans network in Valenciennes 08Q2
071001: STA (Andorra) plans FTTP network, with Wave7, Telindus (= Belgacom) and Cisco, to launch 08Q1, nationwide 09Q2

Look at the data (and previous posts) for several interesting developments since my last update. See also the recent flurry of press releases in the wake of the ongoing FTTH Conference & Expo in Florida.

What stands out most to me: Orange's expansion into Slovakia, Telefonica's stealthy expansion, Telus and Embarq tipping their toes, and of course Vienna, Hong Kong (and Andorra!) moving forward. Look at Telindus, the Belgacom subsidiary, that is leveraging its skills in the Andorra project (looks pretty much like BT leveraging its 21CN skills).

Is Telecom Italia serious about the Netherlands after all?

FTTH Update

Planet Multimedia reports that bbned, the Dutch wholesale unbundling operator owned by Telecom Italia, has bought InterNLnet, an ISP affiliated to Nijmegen University. InterNLnet's portfolio is geared toward both ADSL and FTTH networks. The latter include networks owned by Portaal (housing corporation) and GNA (Amsterdam Citynet).



I sort of expected a move like this. If TI do not sell the unit (as was rumoured at some point), why not add a service provider business to the network operator and get the broadband strategy aligned across Europe (Italy, France, Germany)? Also, bbned is among the unbundlers who are working out the details of 'regulation 2.0' (SLU) in the Netherlands with KPN, and they are already conducting a VDSL trial - with InterNLnet and SURFnet.



Taking this speculation one step further, one could envison TI beefing up its bbned operation even more. The market is consolidating, but there are numerous opportunities left:

• ISPs, such as SURFnet, mentioned above (if it would be up for sale)
• Reggefiber (once Dick Wessels would be interested in selling out or swapping)
• Orange NL's broadband unit (once France Telecom finalises the deal to sell the company to T-Mobile)

That would add not only ISP capabilities and subscribers, but the inevitable road to FTTH as well.

Finally, an overview of recent FTTH activity (click to enlarge):

Amsterdam hooks up first FTTH sub

Trouw reports Amsterdam has hooked up the first customer to its munifiber network, Citynet, owned by GNA (Glasvezelnet Amsterdam). It's a 100 Mbps symmetrical connection. Current plans are to connect 40k homes (10% of the city) by late 2008.

THIRD PIPE://Amsterdam inspires FriscoNet

San Francisco released a feasibilty study regarding munifiber. A promising element is that the city had Dirk van der Woude come over to give them some advice. Dirk was involved in getting Citynet started in his hometown Amsterdam.

Recently he also pointed me to this Light Reading article, from which he took a number of quotes:

"threaten to overwhelm even their fattest broadband pipes"
"It's definitely a real problem; there's definitely a storm coming."
"Prepare your networks for the primetime on-demand wave."
"There's an absolute risk of people dropping basic video service for
Internet video."
"Thanks to these trends, some tech executives contended that the bandwidth
crisis may never actually end for cable operators."
"They're even weighing such previously unthinkable moves as building
fiber-to-the-home (FTTH) networks".

On the other hand, some respected research firms still dig in, doubting the demand side of the equation:

"We conclude that the new broadband divide would be best bridged using a
combination of VDSL and fixed wireless."
"Our main conclusion is that any decision to promote investment in higher
speed broadband on the grounds that it will accelerate economic growth cannot be
justified by evidence that such investment will have a measurable effect".