There has been a wide range of news around FTTH over the past few days. It is striking to see on how many fronts FTTH is gaining momentum.

• DIY trench digging: already 80% of Lyse's customer base. But that's Norway.
• Emerging markets: fiber coming to Lebanon, India, India again, the Philippines, Iran and Estonia.
• Infrastructure-based competition: Swiss utilities are banding together and Swisscom is abandoning VDSL in larger cities in favour of FTTH.
• Munifiber: UTOPIA is picking up steam. Focus is on businesses now and Integra Telecom is added as a business-oriented service provider. Meanwhile, FuzeCore launched a 100/100 Mb/s service at 147 $/mo in the residential market.
• Business VAS: Eurofiber (a Reggefiber sister company in the Reggeborgh holding) launched a surveillance service with a third-party SP, DIT is beveiligen.
• Separation: Telstra may be allowed to buy into the NBN (capped at 49%), by first contributing fiber assets in exchange for 20%. One condition would be for the company to be functionally (?) separated.
• DOCSIS 3.0: Virgin is testing a 200 Mb/s service, but here is why it stands no chance against FTTH.
• 3-D: Digital Hollywood wants it to come to our homes and indeed one consultancy expects up to 10% of homes to be upgraded by 2012. Meanwhile, the new Pixar film UP opened the Cannes festival.

Structural separation revisited

Apparently, the regulator nor many a competitor thinks structurally separating the incumbent is needed. In the Netherlands, the situation could be the same. Still, I believe there could be a point in moving the issue up the political agenda. Yes, it's a huge issue, but precisely that may require huge steps.

• Half of the employees of this regulator are former KPN employees. Most munifiber networks have recently become KPN partners. Are the representatives still objective?
• Structural separation is seen as a remedy, whereas I would see it as good for business. As long as this doesn't change, structural separation will likely not happen. Unless the incumbent totally screws up (Australia), or regulation suddenly changes (US). KPN is well respected (perhaps even too much so), also among competitors. It has a good wholesale portfolio. Further, competitors are not asking for separation. And any competitors still around seem to have doubtful commitment to the Dutch market (BBned was put up for sale by Telecom Italia; Tele2 is facing large investments in mobile and broadband but hasn't made any commitments yet; Online doesn't sit very well in T-Mobile's portfolio, but there are simply no buyers).
• Separation is unlikely as long as regulators think that competition is at a decent level. In the broadband market, KPN has a 45% share, cable has 40% and unbundlers have the other 15%. The EC is rightfully worried over ongoing incumbent dominance. It looks like the 15% share of altnets will be going down, especially when the market moves toward FTTN/VDSL.
• The advantages of structural separation are not about pricing only. Incumbents like to drag their feet; let's not forget that Openreach's P&L still is included in BT's. Also, separation opens the way to attract third-party funding, or even nationalisation.
  
• Why do incumbents object to structural separation? Not just because of the disruption and the one-off costs. Surely, it must be because they fear the loss of any synergy benefits of being vertically integrated. And that is precisely why they must be separated: this inequality of enjoying these benefits will only go away once the incumbent is separated. In other words, if incumbents object, they implicitly say they have advantages over competitors. This is not good for true, long-term competition.
  
• If you think that proper wholesale prices are the way to avoid structural separation, look again. BBned (active operator in Amsterdam's Phase 1) pays only about half of what is proposed now by her employer (14.50-17.50 EUR/mo/line for ODF access to passive FTTH lines). Going forward, active operators and service providers will have to recoup about 10 EUR/mo more from their customers than currently is the case in Amsterdam. Does FTTH have this kind of pricing power? It certainly paves the way for low margins at service provider businesses. KPN will be the only service provider that can afford this kind of pricing.
• KPN will not ony be a service proviser, but it also is co-owner of the passive layer (with a call option to a majority stake), and possibly the monopolist of the active layer (which is not regulated), which could lead to serious re-monopolisation. I would like to call upon the regulator to make sure that the active layer doesn't turn into a monopoly (as it will in Singapore). If it does, the wholesale tariffs mentioned above should fall. Further, an active operator monopoly is not good for competition, because true service differentiation arises on the active level. Otherwise, we are stuck with WBA only.
  

FTTH in the UK: small leap of faith needed

Yesterday Analysys Mason published its fiber-in-the-UK report for the Broadband Stakeholders Group. Recently, there has been a wide range of FTTH related developments. Let's first make a little list of them:

• Incufiber: KPN is steadily, if not stealthily, rolling out through its Glashart ('heart of glass') joint venture with privately owned Reggefiber. New towns are coming on board on a near daily basis. Telefonica is launching its network October 1. Swisscom is getting serious too. Makedonski Telekom (owned by Deutsche Telekom) is rolling out in Skopje. SureWest (USA) is progressing too.
  
• Munifiber, utility fiber, etc.: Greece and Mauritius launched a big plan, whereas Australia (primarily targeting FTTC) and New Zealand are still stuck in the debating phase. Saudi Arabia is building a new city for 2m people, with FTTH from Ericsson. In the US, progress was made in several towns. Localised initiatives are found in Ireland and Australia too.
  
• Altnetfiber: Smart Comp is building in Brno. Over in Korea, Hanaro Telecom is getting its act together.
• Cable. There are several initiatives worldwide, most recently in Hawaii (Time Warner Cable), Japan (Suo Cable) and the US (Corn Belt Communications).
  
• Open access. Europe is fighting for the extension of open access obligations from copper to fiber. Companies as diverse as KPN and Telstra are saying they are in the OA mood. But not Telefonica. Interestingly, in Utah the iProvo network was acquired by Broadweave, which subsequently tried to end competition by buying up two independent service providers. But those deals fell through.
• Upgrades. 100 Mb/s isn't the end of it, 1 Gb/s is now in sight. FastWeb (controlled by Swisscom) still has to upgrade to 100 Mb/s first. Somehow, I have a feeling we will see more of that tomorrow ...
  

Here are my very easy comments:

• Of course the Brits need to do FTTH. Is anybody listening? Access networks are bottlenecks - FTTH is the end game - it takes 20 years to build - video is coming - and there are indeed socio-economic benefits, as this very convenient study from Eindhoven University shows (in relation to the well-known networks of Nuenen and Eindhoven in the Netherlands).
• Check out the new (second) Akamai report on the State of the Internet, as observed through their network. There is a lot about security, but Akamai also ranks countries by the percentage of connections above 5 Mb/s. Comparing the Q2 report with the Q1 report, some minor things catch the eye. The top 10 is pretty much the same, with South Korea #1 with an unchanged 64% of connections faster than 5 Mb/s. Belgium and the US make a big leap forward, both to 26% (from 21 and 20% resp.).
• Things are complicated. Analysys Mason produced an impressive report, but it's just a cost model, in other words: one half of the equation. There are so many variables, a decisive report, including a revenue model, is totally unrealistic. Why not then make a little leap of faith and play the end-game?
  

FTTH: coming to major cities

Munifiber may be a tier 2 or tier 3 city toy in many countries - not so in the Netherlands.
Amsterdam, the #1 city, has its CityNet (run by GNA), which is looking at citywide deployment by 2013. And now Rotterdam, the #2 town, is planning to expand it's network (run by OBR, working with BBned) to do exactly the same: citywide by 2013.

Update on FTTH deployments

Just updated my private little database on FTTH. Drawing some obvious conclusions:

• Yes, it's gaining momentum! However incomplete and unscientific the database is, 07Q1 had 33 entries, whereas 08Q1 has 85 (admittedly, I added sources in the meantime).
• FTTH seems to spread beyond the obvious deployments in wealthy and densely populated Western markets (including greenfields). How about Bangladesh, the UAE, Algeria, North Dakota (which specifically targets rural areas), Virginia and Bronckhorst (NL).
• The familiar names are roaring ahead (Verizon, Reggefiber). Increasingly, they include new housing developments.
• Among the largest new developments to keep an eye on are Singapore (3-layer model: NetCo to be announced 08Q3, Opco 09Q1), Athens, Australia (will the FTTN pland be expanded to include FTTH?), Sonaecom in Portugal (serious plans), Versatel Deutschland (are they serious?), H2O Networks in the UK, Austria, Seattle and the ValleyFiber Project (to name a few in the US, which has both telco (Verizon, Citizen Telephone, etc) and muniprojects in the works).
• State funding is still a conundrum. Of course there are muniprojects, but financing is a tricky matter. Malaysia will simply pay part of Telekom Malaysia's plan; Singapore will plow mony into the passive layer; the New Zealand Institute is in search of an investment vehicle.

The ValleyFiber Opportunity

New England is an interesting new case in FTTH context. Verizon (which was not interested in upgrading) sold 1.7m lines to FairPoint (which lacks financial power to invest), which at first sight appears negative for consumers. However, ValleyFiber is ready to move in.

We will track how this develops over the next few months.

Vermont: FTTH at 'Free' price level

Another munifiber project launched, ValleyFiber. This time it's in Vermont - apparently triggered by Verizon's sale of the incumbent network. A 'non-recourse 15 year capital lease' with an 'outside private financier', along with pre-registrations, is targeted in order to avoid a municipal bond.

The project plans a Fall 2009 launch, an 8 Mb/s symmetrical BB connection (not terribly ambitious, but hey: this is the land where 200 kb/s is defined as 'broadband'), and a triple play service from a minimum of 50 $/mo (cutting in half comparable offers).

Interestingly, at current dollar prices (1.54 against the euro), this comes close to the famous 30 EUR/mo level that made Iliad's Free such a success (at first over their proprietary 28 Mb/s DSL equipment, and increasingly over fiber).

Timothy Nulty heads the effort. I suppose this bodes well: he made Burlington Telecom (see link in the right hand column) a success.