B4RN is a go - Gigabit fiber coming to Lancashire

Lindsey Annison kindly allowed us the scoop on B4RN reaching its first target. Wonderful news, and Lancashire will likely be connected to gigabit fiber over the next few years.

Here is the entire press release:

B4RN (Broadband 4 the Rural North) has passed its target, in a mere three months, to gain enough interest to proceed with the project to connect 8 parishes in rural Lancashire to a community designed, built, owned and operated gigabit FTTH network. Full details of the project are available on the website http://www.b4rn.org.uk

There are Press Passes available for the launch event on Dec 15th at 2pm at The Storey, Lancaster.

Thank you for all your support. 

FOR IMMEDIATE RELEASE - 1st December 2011


Residents in North Lancashire launch Fibre Optic Broadband Company

An exciting community initiative, initially across eight parishes of rural Lancashire, to deliver a world class hyperfast fibre optic broadband network is being launched at The Storey in Lancaster on 15th December at 2pm.

Broadband has become essential for every sector of the community and increasingly important for our daily lives. Government and the large telecom companies plan to upgrade broadband to ‘superfast’ but not in many rural areas, where limited internet and mobile coverage affects  businesses, homes and farms. The difficulty is reaching economic viability when private companies’ costs are so high and subscriber numbers are low.

Broadband for the Rural North (B4RN) plans to lower the costs, both in the building of the broadband network and to the end user, by using local contractors and the community. “Farmers and local people have the skillset we need for this project. They know the land and people, and have been offering to work for shares, which means the digging for the core network can start early in 2012. We expect this to be completed in approximately 3 months, weather permitting, and then we will begin to connect the first users,” stated Professor Forde. Shares will be available from 15th December - further information and application forms will be available on the B4RN.org.uk website on that date.

B4RN’s plans are for a hyperfast broadband network fit for purpose far into this century. A 1 gigabit (1000Mbps) connection will ensure that any interaction with the Internet will be quick and easy. Television, films, cheap phone and video calls over the Internet, the ability to extend local mobile phone networks to cover black-spots, local security, telehealth and medicine applications - all will become possible. B4RN will be initially be providing the broadband connection and VoIP telephony, with further services to follow as the network rolls out over the coming years.

Barry Forde, B4RN Chief Executive, will explain the project and launch the share offer in the company to raise the necessary capital required over the next few months. Representatives from the first phase communities of Melling, Arkholme, Quernmore, Abbeystead, Wray, Tatham,
Roeburndale, Wennington and Caton with Littledale will be at the event as well as local dignitaries and celebrities.

B4RN is a community benefit company, owned by its shareholders. Income made will be re-invested in the service and spent within the communities the company serves. The shares are being made available under the EIS (Enterprise Investment Scheme) that offers 30% tax relief, with a minimum investment of £100 and maximum of £20,000.

B4RN hopes to attract the support of local, national and international investors, whilst remaining a truly community-run business, bringing fast, future-proof, sustainable Internet access to the rural uplands, for this generation and those to come, leaving a lasting legacy for the area.


NOTES TO EDITORS

1. B4RN has been more than three years in the planning and development stage. The B4RN project will bring a state of the art, fibre optic broadband connection to the rural communities long before most of the urban areas. Rural Lancashire plans to be a world leader in “hyperfast”.

2. Professor Barry Forde (B4RN Chief Executive) is a networking expert with many years experience of designing, building and operating high performance networks. He was responsible for the CLEO network which provides connectivity to over 1000 schools and public sector sites across Lancashire and Cumbria. Bios are available for Professor Forde and the Management team http://tinyurl.com/6tpdkmt

3. The full business plan is available on the website, along with details of the pricing and payment structure for local residents and businesses. http://tinyurl.com/895uvdx This includes bonuses of free install and connection for 12 months with a £1500 investment, three further free months for early bird investors, and payment in shares for involvement in the deployment of the project.

4. A target of 662 registrations of interest were required for a green light and this was passed in just three months. The project moves one step closer to implementation with the launch of the Share Issue. “The phased network will be built by the community over three years for the seven phases. Now we have passed our target of over 700 registrations of interest in investment and taking a service at £30/month for 1Gbps, we can proceed to raise the capital required for Phase 1,” said Barry Forde.

5. B4RN will initially provide internet and telephony with further services in the future. Each home will have a battery backup so telephony over the fibre means landline connections are no longer required.

6. Christine Conder, a farmer’s wife and rural broadband pioneer, who successfully dug and installed the first rural fibre cable to her farm in Wray in 2009, knows it can be done and sums up the enthusiasm and ethos of B4RN, “If we don’t do it ourselves then it will never get done, so B4RN is the answer, let’s all JFDI.”

6. Photos (to be accredited to B4RN) are available at http://www.flickr.com/photos/b4ruralnorth

Contact details:

Professor Barry Forde, Barry@B4RN.org.uk
Christine Conder, Chris@B4RN.org.uk
Lindsey Annison, Lindsey@B4RN.org.uk

Telephone: 01524 221588 or mobile: 07952 503253 / 07967 670759
Twitter: @dig2agig
Website: http://www.B4RN.org.uk
JFDI (Just Farmers Doing IT)

How to reduce incumbents' power: ban all domestic takeovers

KPN made several dozen acquisitions over the past few years. I count 51 (and probably missed a few) since early 2005 in just about every category, mainly in the Netherlands, but abroad as well. Small companies and bigger ones, such as Telfort, Tiscali NL, Getronics, Reggefiber and iBasis. Fixed and mobile, consumer, business and wholesale. Some assets were sold on, but generally the acquisitions fortified KPN's market shares, or even propelled it into a new business. And takeovers compensate for negative growth in KPN's traditional business.

KPN is the incumbent, has SMM in several markets and is therefore regulated. But one measure has not been part of the regulator's toolkit: a ban on domestic takeovers. Just imagine what that would have meant, especially for the home market:

• Opportunities for challengers to buy assets at lower prices (KPN probably drove up valuations).
• No easy 'exit' for start-up entrepreneurs banking on a sale to the incumbent.
• Significantly lower market shares for KPN in most markets.
• Much stronger challengers and market shares much less skewed toward the incumbent.
• An earlier end to deregulation in several markets.

The message to the incumbent would be: all takeovers are prohibited; if you want to add technology, expertise or a share in a new market, you simply should go build it yourself.

Tablets eliminate one premise of connected TV

Connected TV suffered several blows recently:

• Broadcom and Intel abandoned the TV market.
• Logitech abandons the Google TV ecosystem.

So far, connected TV was all about:

• More content: internet-to-TV, multiple VOD, apps (widgets)
• Better content discovery: UI/menus, EPG/IPG, remote control, keyboard, recommendations, search, browser, social, personalisation, voice control, gesture-based control
• Around the home: second screen, multi-screen, multi-room
• Companion screen: complementary content, interactivity.

But an important new aspect was added: the tablet, both for second screen and companion screen

Implications:

1. One of the premises of connected TV was knocked out from under it. Connected TV wasn't justified by the notion bringing additional content to the TV and putting the viewer in the driver's seat (the rise of on demand), but also: any video content is best consumed on the biggest screen in the home, i.e. the living room TV. The tablet has proven that this is not the case. People are happy watching TV/video on a tablet screen.
2. Real interactivity (beyond ordering movies or pausing live TV) is stil in its infancy. Yahoo! IntoNow is interesting, and AT&T made somes moves. But it remains an underexplored area.

KPN's broadband market share is down, not up

After assessing the KPN Q3 results,

• Below expectations, guidance maintained.
• Hit by regulation and restructuring.
• Performace analysis by division.
• Guidance and other targets.

the question remains: were they good or bad? The organic performance was solid in Mobile International, and weak in the Netherlands. Cable is forcing KPN's broadband market share down. VDSL is no cure, not even interim. FTTH needs an accelerated roll-out, and indeed is now playing the 'captive market' card: Reggefiber has up to now entered no fewer than 155 municipalities, out of the nation's total of 418. KPN's customer base will keep shrinking, but what is left over will take more RGUs per customer. It opens an opportunity to once more grow by acquistition, especially when the broadband market share  goes further down below 40%.
In mobile, Consumer NL is weak, but other areas are strong.

Group revenues
Results were hit by regulation (MTA, roaming) and restructuring (mostly KPN Corporate Market), and benefitted from minor takeovers and release of provisions:

Reported:

• Group growth: revenue -3.4%, EBITDA -11.6%
• Netherlands (includes iBasis and Getronics) growth: revenue -5.2%, EBITDA -13.6%
• Mobile International growth: revenue flat, EBITDA -4.9%

Underlying (organic):

• Group growth: revenues +0.8%, EBITDA -0.1%
• Netherlands growth: revenue -2.9%, EBITDA -1.5%
• Mobile International growth: revenue +8.3%, EBITDA +5.9%

The Netherlands then perform dismally, obviously a result of cable competition. Mobile International benefits from Rest of World reaching break-even at the EBITDA level, but most of all from playing challenger. It remains to be seen how sustainable that is.

Coming in below market consensus caused a small share price decline. Investors must be wondering: how can free cash flow for 2011 be > EUR 2.4bn when YTD FCF is only EUR 1.5bn? KPN maintains guidance and points to less MTA impact, no payment of any dividend and no share buy-backs in Q4. Of course it has capex and asset (real estate) sales to play with, so when they say they will meet guidance, that probably will happen.

One question remains: why is organic EBITDA growth weaker than organic revenue growth? It must be the price of expanding networks (mobile) and services (IPTV), which take a toll on work contracted out.

Dutch broadband market

KPN lost 11k subs, despite gaining 16k FTTH subs. In other words, 27k DSL subs were lost. Indeed, VDSL is not much of a weapon against cable. FTTH additions are not impressive, but will probably accelerate going forward (unless heavy frost hits the country once again). The total number of BB subs is back to the level of mid 2008. Market share is going down to 40% now, but in fiber areas KPN claims 44%. Overall, the target still is to raise the market share to 45% by 2015. A stretch.

Dutch TV market

The TV market share is up to 17% (in fiber areas 27%), but associated revenues are just EUR 43m this quarter as a result of the low ARPU. Cable ARPU for TV alone is not published, but is probably at least twice this number. Cable is migrating analog subs to digital, at a conversion rate of roughly 80% (i.e. 20% of customers lost are moving to IPTV, FTTH or DTT). KPN is doing a similar thing: migrating DTT subs to IPTV. Dynamics are a bit different, and overall KPN is growing the number of video subs, so the coversion ratio would be something like 500%.

Dutch customers base

KPN doesn't publish customer numbers, like cable does, only RGUs. But it now reports the RGU per customer metric, which must increase to 2.4 by 2015. It now stands at 1.9, which implies roughly 3.5m customers. Compare Ziggo's 3.02m (its network has a population coverage of 57%) and UPC's 1.86m (population coverage 38%).

Mobile

• Consumer NL: subs are going down steadily. Contrary to what KPN states, MoU is holding up, but SMS is going down rapidly. ARPU is down slightly. Revenues are down.
• Business NL: both MoU and SMS/sub are going down, but subs are up strongly. Revenues roughly flat.
• E-Plus: subs and revenues are up, but MoU is flat/down.
• Base: subs up strongly, but MoU slightly down and revenues are up only slightly.
• RoW: no sub numbers, but EBITDA is positive for the first time.

KPN: what to look for in the Q3 results?

KPN will report on 11Q3 tomorrow. First, see what the Q2 report looked like:

• Job cuts at Getronics.
• Revenues down in NL, up at Mobile International, EBITDA down.
• Weak in NL, solid abroad.
• But maybe not so bad as to warrant a profit warning.

Next: guidance:

• 2011: EBITDA > EUR 5.3bn, Capex < EUR 2bn, FCF: up (2010: EUR 2428m), DPS: > EUR 0.85
• 2012: FCF EUR 2.4bn, DPS EUR 0.90
• 2013: DPS EUR 0.95

Market consensus:

• Revenue: EUR 3303m (last year: 3378)
• EBITDA: EUR 1320m (last year: 1408)
• EBIT: EUR 760m (last year: 847)
• Net result: EUR 431m (last year: 406)
• EPS: EUR 0.28 (last year: 0.27)

General:

• Will guidance be maintained? How is the new strategy (Strengthen, Simplify, Grow) progressing?
• Economic crisis (mostly felt at Getronics and KPN Business)? Getronics benefitted from the certificate problems at DigiNotar.
• Job cuts planned: 4-5k of which 2.0-2.5k at Getronics (now: KPN Corporate Market).
• How will the mobile international activities (Simyo) in France and Spain be ended? Will Ortel (now in 6 countries) be involved?
• Pension fund coverage was OK in Q2 (108%), but if below 105% needs extra cash.
• Will a share buy-back be planned (probably at the Q4 results)?
• Where is the planned takeover of Caiway (still at NMa)?
• Any sign yet of the new company structure as of Jan 1 2012 (i.e. new heads for Consumer Wireless NL and Consumer Wireline NL)?
• Expectations for the spectrum auction of 12Q2 and a possible Reggefiber buy-out?
• More deals such as the Spotify deal coming?

Mobile NL:

• What is the impact on voice & SMS of apps such as WhatsApp?
• What is the impact of new pricing at KPN and Hi (Telfort to follow 12Q1)?
• How many iPads were sold?

BB NL:

• How do the net adds hold up against Ziggo (+38k) and Tele2 (-16k)?
• How does the RGUs/customer ratio develop (1.9 in Q2)?
• How is FTTH doing (HP, net adds, XS4ALL, Telfort)? When/where will the 500 Mb/s service be offered?
• Where is VDSL (roll-out of outer rings), both VDSL@CO and FTTC?

Google Fiber coming to Europe

Google is considering building fiber in a European country, expanding its infrastructure assets base. This would be a follow-up to the Google Fiber project in the Kansas Cities in Kansas and Missouri and at Stanford University.

It's a bit too early to start guessing where Google Fiber might land.





The first questions would be:

• Are we talking FTTH here, or perhaps a middle mile strategy?
• Will it be nationwide, regional, on a city-by-city basis (like Kansas) or focusing on university campuses (like Stanford, or the Gig.U project)?
• Will it focus on rural areas, like Fujitsu in the UK?
• Could it be done through a takeover of an existing challenger, or even a cable company (and then overbuild with fiber, like CIF does in the Netherlands - that takes out the strongest competitor with one stroke).
• Will Google do just the financing, or act as an ISP as well? Will it be an open network?
• Point-to-point (Active Ethernet) of point-to-multipoint (PON)?
• Will it be a gigabit network?

Factors to consider when choosing a country include:

• Regulation.
• Size of the country.
• Current plans of the local telco incumbent. Many of them have such plans, but mostly very limited.
• Current plans of any challengers. Most, if any, are still small.
• Coverage of cable (HFC) networks.
• Current broadband and Internet penetration rates.
• GDP growth rates, living standards.
• Geographical factors: is aerial build allowed, what is the state of the sewer system, can the pavements easily be opened up, etc?
• Are long-haul networks in place to connect to?
• Will the government welcome Google and reduce frictions involved in getting permits etc.? Or does the government have strong ties with the incumbent?
• Are cooperative local partners available, such as a whole host of them in Kansas (University of Kansas Medical Center, Kansas City Power & Light, Kansas City Area Development Council, KCnext, Kauffman Foundation, Economic Development Corporation of Kansas City (Mo), Kansas City Missouri School District, Brush Creek Partners, The Greater Kansas City Chamber of Commerce, The Black Economic Union, Mid-America Regional Council).

Implications of a Google/Yahoo! deal

Yahoo!'s days as an independent company appear to be numbered. Following Carol Bartz' removal as CEO, more than one investor has shown interest in acquiring it:

• Jerry Yang, Peter Chernin
• Andreessen Horowitz, Silver Lake, Canada Pension Plan Investment board, Hellman & Friedman, DST, Bain Capital, Providence, Blackstone
• News Corp, Walt Disney
• Glam Media, Alibaba, AOL
• Microsoft, and now Google

Google's involvement has some interesting implications (apart from the obvious sale of assets and restructuring):

• Combining Google Search with Yahoo! Search, i.e. the former Inktomi and Overture Services.
• Will antitrust regulators approve such a deal?
• Google would most likely end the Yahoo!/Microsoft partnership, which would be bad news for Bing.
• Combination of Google TV and Yahoo! Connected TV.
• Flickr would become part of Google.
• Gmail and Yahoo! Mail must be hard to combine.

VDSL doesn't stop Tele2 NL bleeding broadband subs

VDSL (FTTC) may be an interesting technology option for underserved areas (no cable, but telco street cabinets availaible), as inexio is proving in Germany. But in the Dutch market, it is less convincing. In theory, it could be an answer to cable's Docsis 3 by more or less matching its capabilities. However, Ziggo's growth reached a record level recently, while Tele2's results show another loss of market share. Tele2 NL has finished rolling out VDSL@CO, but this isn't enough to stop the loss of broadband subscribers (since 10Q4). In fact, losses have accelerated to 16k during 11Q3. Of course you can always say that Tele2's losses would have been even steeper without VDSL, but VDSL starts to look like a 'regret investment'. The millions of euros involved would have better been spent on readying systems for Tele2's launch on FTTH.

Further, Ziggo showed how rapid growth negatively impacts margins because it requires investments in all directions. Nothing unusual about that. Tele2, bleeding subscribers, now boasts rising margins at Tele2 NL. (How about TheStreet including European statements for their weekly '5 Dumbest Things on Wall Street'?).

Other noteworthy aspects of Tele2's 11Q3 report for Tele2 NL:

• Guidance, both long-term and short-term, was unchanged. No surprise here, since the capital markets day was just a month ago. One of the LT targets: 'The capability to reach a top 2 position in terms of customer market share, in an individual country or region'. This remains a vexing point.
• The core markets (Sweden, Norway, Russia, Kazakhstan, Croatia) each have their own individual public targets, but not Tele2 NL.
• The contribution of Tele2 NL to group sales dropped to 14.0% (from 14.8% a quarter ago).
• Sales growth sans currencies was a reported +7.2% due to the BBned takeover. We calculate +8.6%, down from +12.1%, +10.8% and +11.4% during the previous three quarters. (The lower growth rate could be the result of the unreported divestment of some voice related business.) From 11Q4, the BBned effect will vanish from the growth figures. Revenue growth will most likely be flattish.
• Mobile: subs -5k qoq (mostly prepaid). This is unremarkable in light of the recent performance. MTA redux leads to lower costs. EBITDA margin up 1.5 points qoq to 18.4%.
• Broadband: subs -16k qoq, much worse than during the previous quarters. ARPU was up. Triple play net additions were again higher than double play net additions. EBITDA margin up 2.9 points qoq at 34.6%.
• Fixed telephony: subs -15k qoq. Unremarkable. EBITDA margin up almost 2 points qoq at 27.9%.
• Total RGUs were down to 1.005 million (early 2007 there were 1.5m). Next quarter, it will go under the 1m milestone.

VDSL as an interim solution isn't going to save KPN

The Netherlands isn't the first place to see wide VDSL deployment, but it will be an interesting test case to see how VDSL holds up against cable and FTTH.




The current situation in a nutshell:

• ADSL: available nationwide, but with very low bandwidths in rural areas (which could number as many as 500k on a household total of 7.3m).
• ADSL2+: available to around 60%.
• VDSL2: roll-out by Tele2 is probably finished, but applied at MDF locations (VDSL@CO). KPN does the same. Coverage of this technology is probably 2m homes, delivering speeds of up to 50 Mb/s. In reality, that probably means 20-25 Mb/s. KPN is also deploying VDSL from street cabinets, giving it a coverage of roughly 6%. KPN is also constructing fiber rings ('outer rings'), enabling more SDF locations for VDSL. It is not exactly clear where this will take VDSL coverage. Further, techniques including pair bonding, vectoring and phantom mode will raise VDSL's powers to 100 Mb/s and more (maximum speeds).
• Cable/Docsis 3: near nationwide (our guess would be 90-95%).
• FTTH: available to probably almost 900k homes by now (the 1m milestone could be passed at YE 2011).

Today, Ziggo's results over 11Q3 proved to be extremely strong, with 38k broadband net additions. That raises the question: how much of an interim strategy is VDSL against cable? It is a bit early to tell, because the VDSL roll-out isn't completed yet. However, given VDSL's limited reach, the fact that Tele2 is done building and Ziggo's results, it doesn't look good. VDSL is a defensive strategy against cable, but probably is insufficient. It can only work where it has the first mover advantage and nationwide street cabinet coverage (see Belgacom's 19k cabinets), or where cable is absent altogether (see inexio in Germany).

It will be interesting to see where KPN is going with VDSL (results are due October 25). It is rather ambiguous about the chances of xDSL against cable. To investors, KPN claims that it can match cable speeds with its xDSL network, but to the regulator KPN appears to be much less self-assured. Tele2 (results: October 19) so far hasn't been able to impress (negative net additions since 10Q4), although one can always say that without VDSL Tele2's net additions would have been a lot worse.

HKBN: "we like being a very fat and dumb pipe"

City Telecom (HKBN) was present at the recent Broadband World Forum in Paris. The CEO and CTO talks were put online and gave some background on the company's strategy, the bottom line of which is to provide 1 Gb/s at EUR 18 (USD 26) per month.

They have stated before that they are "out to commoditise bandwidth". The new catch phrase could be: "we like being a very fat and dumb pipe".

Some of the highlights:

• Its BHAG was to become #1 after 10 years i.e. in 2016 in the four-player Hong Kong market. By 2011, it is #2. And HKBN is larger than #3 and #4 combined.
• There are 3 drivers: the receding recession, dense population and the geography.
• Lacking any legacy networks also determines the strategy.
• Capex is just USD 200 per home.
• In highrises, routers are installed every 10-12 floors, with Cat 5E cabling reaching to every home. It guarantees 100/100 Mb/s to 80%.
• For running the company, there are the three E's: entrepreneurship, execution and engagement.
• It has to be kept in mind that the 1 Gb/s at EUR 18 is just a starting point for the company's marketing machine. Within three weeks, the sales organisation starts calling new subscribers to upsell services such as VoIP and IPTV.