Is Structural Separation in the UK really that risky?

21 Jul

8213432552_fd1a8cc461_z

I rarely disagree with the excellent Martyn Warwick, but sometimes there are exceptions. In an article in Telecom TV entitled BT Threatens Decades of Litigation Over Forced Sale of Openreach, Martin concludes that:

An ill-considered and badly executed sale of Openreach with no guarantees as to its future performance by a new owner would be a recipe for disaster with the buyer breaking promises and failing to make the investments necessary to make Broadband Britain a reality outside the major cities. Meanwhile, Virgin Media goes from strength-to-strength.

This misses, in my opinion, two major points that I wanted to reiterate here:

  • first, a sale is definitely not the way to go for structural separation. A spin-off, as implemented by Telecom NZ is the right approach for a number of reasons: first, it means that the shareholder structure only changes if the shareholders themselves want to sell their shares in the new vessel, so it’s not really a story of a single (and potentially evil according to Martin) buyer acquiring the crown jewels.
  • second, a structurally separated entity lives only on wholesale revenues. As a consequence it has every incentive to deploy better infrastructure, especially in a competitive environment where someone like Virgin is doing the same.

As Thomas Langer and myself discovered when we released our report late last year entitled Can Structural Separation via Spin-Offs Help Europe Achieve its Broadband Ambitions, there’s a lot of half-truths and outright lies that have been patiently spun by incumbent lobbyists about Structural Separation. In fact, Martin quotes BT’s CEO Gavin Patterson in his article in a way that is very telling:

“This is a commercial enterprise and if there’s uncertainty we will defend the rights of our shareholders, undoubtedly. It puts that investment very much at risk. At the end of it, and if we’re meant to be looking at the next ten years, what do you want to look back on? Do you want to look back at 10 years of litigation and arguments?”

The threat here is clear: a US style ‘litigate ’til they give up’ approach. But what about the shareholders?

As we demonstrate clearly in our report, there is every chance that a well executed structural separation via spin-off will result in two major achievements: increase value for shareholders and allow Openreach to extract enough cash-flow to envisage long-term infrastructure investment instead of the (at best) mid-term solutions currently put in place with VDSL and its upcoming life support.

The fact that this would be done by an entity with no financial ties to any market player and therefore would put every market player on a level playing field is, in many ways, the cherry on the cake. Indeed, it’s been seen to work very well for New Zealand, and the Czech Republic’s O2 is currently undergoing the same process. This is neither new nor rocket science.

The fact is that, if Gavin Patterson truly works for the shareholders, he should be considering Structural Separation very seriously instead of threatening the UK government.

Image Credit: 3D Judges Gavel (cc) Chris Potter

Not exactly Uber-innovative

22 Jun

20150326-DSCF5865

Uber is, or at least was, until recently, presented as a paragon of innovation. The company is, we have read many times, revolutionizing the transportation for hire industry through radical innovation.

I’ve had an instinctive distate for Uber from the start, failing to see how the various players in the ecosystem they built could make decent money. There is no doubt that Uber’s model ensured Uber was making money, but I had the feeling that the drivers certainly couldn’t, long term.

When their bully PR tactics emerged last year, my distate turned into frank dislike, but then what does that matter to anyone? The fact that I don’t use them doesn’t make an iota of difference. I did however get increasingly annoyed at them being used as an example of radical innovation. Let’s look into that for an instant:

Is the innovation in their app allowing you to hire a driver using the app on your phone? Sure that’s neat, but every large taxi company in the world matched that within months of Uber launching in their market. Could they have done it earlier? Sure. But the fact that it was so easily matched shows that that’s clearly not where the innovation lies.

Is it in the dynamic pricing? Beyond the fact that dynamic pricing is hardly a new thing in general (even if it hadn’t been applied to that industry until Uber did it), it doesn’t seem to be such a big selling point for users. Furthermore, at least according to one economist quoted in this fascinating article on Daily Finance, it’s ripe for abuse and will likely backfire as a consequence.

Uber is often presented as a great example of the “sharing economy”, is that where the innovation lies? Actually, Uber drivers are usually taxi drivers who moved to Uber, so there’s no “sharing” there, not more than there used to be. UberPop is a proper sharing platform, but it’s undermining the main Uber driver’s income, possibly undermining the whole business model. So how is that smart innovation? I’d say it rather gives sharing a bad name.

No, the innovation is in one simple, and as yet unadressed (at least until last week) regulatory issue: Uber has designed a model that allows it to completely avoid the labor and fiscal burden of employed drivers. Uber’s innovation, in a nutshell, is in fiscal evasion.

And the most amazing thing this about it is that everybody knows it: when the California Labor Commission last week decided to treat Uber drivers as employees every analyst and tech journalist on the planet said Uber was screwed.

Labor laws exist for a reason. They may seem frustrating to entrepreneurs (I should know) but they are, for the most part, individual rights earned after long labor battles. They protect workers, and they help finance the help needed by those who lose their jobs. Circumventing labor laws isn’t innovation, it’s just morally despicable.

So let’s forget about Uber as an innovator and focus on companies that truly are innovating, for the benefit of all rather than simply for the benefit of their own wallets.

Portuguese FTTH Webinar Replay

22 Jun

Video Webinar 26 May 2015 Why Consumers Love FTTH in Portugal – The FTTH Consumer Experience Study from paftthcouncileu on Vimeo.

Exetel’s Magical Cost Accounting

16 Jun

Coins

Towards the tail-end of last week, tech journalist Juha Saarinen reported how Australian ISP Exetel was going to terminate the contracts of 400 heavy using customers. This surprised me, because I don’t think that’s legal in most western markets, but apparently it is in Australia. I engaged in conversation with Juha on twitter, and others joined. As part of that conversation, Information Age editor Ry Crozier pointed me to another article in PC World that has a bit more about the reasons for the decision. One passage in that article quoting Exetel struck me:

This has allegedly resulted in the ISP losing money on a number of accounts, including “one single user costing Exetel a loss of over $600.00 in a single month and more that 300 users costing us between $30 and well over $200.00 each in the Month of April and then repeating that sort of usage in May”.

I immediately asked myself how it was even possible for a single customer to cost AUD600 a month. I did one of the back of the napkin calculations I’m now infamous for, and this is what I came up with. Let’s assume for a minute that we’re only talking about traffic costs, not the whole wholesale access + infrastructure + overhead shebang (which should be no more than AUD30 anyway).

Transit in Sydney is very expensive (for reasons I won’t get into here, but might be worth examining in the future). Ballpark, in the upper end, it’s around USD15, AUD19. This is likely right for Exetel who is a small ISP.

If you attribute transit costs to a single customer, you have to assume that that customer is solely responsible for an increase in your peak transit (when you’re not peaking, the marginal cost is zero since your bill is based on peak capacity). That is already stretching believability, but let’s assume for a second that that’s even possible.

If that customer was responsible for an increase in peak traffic all by himself, he would be using 600/19, ie. 32Mbps of traffic all by himself. Throughout all peak hours of a whole month.

Since most of Exetel’s customers are ADSL customers, it’s safe to assume that this one is too. So at best, said customer has 15Mbps download capacity and 1Mbps upload capacity (if he lives next door to the central office). So 16Mbps is the maximum capacity this customer can possibly use on the network.

And yet cost accounting (if done with an understanding of the cost structure of transit) attributes him twice that in capacity used full time throughout the peak hours of the month.

This leads me to the unavoidable conclusion that Exetel’s accounting is terribly wrong. What they have most likely done is look at the overall cost of their transit and divided that by the amount of MB downloaded by each customer.

This is not about picking on Exetel specifically. There are still dozens, probably hundreds of ISPs worldwide who do just that. When we published our report on datacaps three years ago (Do Data Caps Punish the Wrong Users?) we hoped it would help the non-network people within ISPs to understand where the costs of transit really were. It seems that hasn’t worked as well as we hoped despite coverage in Techcrunch, Ars Technica, This Week in Tech, Wired and many others.

So we have decided to heavily discount the report, down to a measly €250. The data may be outdated, but the logic behind the cost accounting isn’t and, clearly, needs to be spread wider!

Free Webinar on French Broadband Usage and Satisfaction

10 Jun

On Tuesday June 16th 11 AM CET, Diffraction Analysis will present the high-level results of a study undertaken with the FTTH Council Europe on the French Market. This is a Free Webinar which you can join by registering here.

The results of the study will be presented by Benoît Felten, CEO of Diffraction Analysis and the session moderated by Joeri Van Bogart of the FTTH Council Europe. In it, we will answer questions such as:

  • Are FTTH users in France more satisfied with their broadband than DSL users ?
  • How do broadband users in general perceive the different broadband platforms ?
  • Do FTTH users do more things or different things online compared to DSL users ?

Join the discussion!

What’s faster than superfast ?

2 Jun

This morning I watched the above speech by Göran Marby of Swedish Regulator PTS. It meanders a bit, and (anecdotally) I was shocked by the apparent confusion between IP and Internet, but it makes some good points, and in particular it raises an important question about the future of networks. The assumption seems to be that the millions of devices that we predict to be connected will do so on the basis of a mobile (cellular) network framework. But most of these devices won’t move. In Fiber rich Sweden, the alternative (that they be connected on the basis of a fixed network paradigm) is appealing indeed.

This is something that interests me a lot, but I don’t think my thought process is quite mature enough to really address yet.

Instead I want to (slightly humorously) latch onto a joke Marby made in his speech about the UK’s “superfast” broadband. If 30Mbps is “superfast” he says, the standard 100 Mbps in Sweden should be called “superduperfast”.

We’re currently delving back into a project that’s been on the backburner for too long, with the aim of analyzing advertising messaging and strategies for FTTP.

If I was Virgin or Hyperoptic (or Sky / TalkTalk, assuming their fiber plans in York are actually moving forward), I would latch onto this concept and launch a campaign arguing that if BT is delivering superfast, then either of these other players are delivering superduperfast. Done well it would be funny, and would degrade the “superfast” tag, which frankly means nothing. If copper champions can devalue the advertising power of “fiber”, surely devaluing “superfast” is fair game?

(Note: I notice that Cityfibre used “ultra-fast” in their announcement, but I still think superduperfast would work better)

Free Webinar on Portuguese Broadband Usage and Satisfaction

25 May

On Tuesday May 26th 11 AM CET, Diffraction Analysis will present the high-level results of a study undertaken with the FTTH Council Europe on the Portuguese Market. This is a Free Webinar which you can join by registering here.

The results of the study will be presented by Benoît Felten, CEO of Diffraction Analysis and the session moderated by Jan Schindler of the FTTH Council Europe. In it, we will answer questions such as:

  • Are FTTH users in Portugal more satisfied with their broadband than DSL users ?
  • How do broadband users in general perceive the different broadband platforms ?
  • Do FTTH users do more things or different things online compared to DSL users ?

Join the discussion!

The Future of Telephony (or Lack Thereof)

13 Apr

8645969039_38ca291333_z

I have long been wondering about the part of Telephony services in the classic triple-play mixes. The cost of offering phone service is still significant, but the interest from end-users is dwindling. Dean Bubley has a very interesting post on this topic with data entitled Past the point of Peak Telephony.

What does this mean from the classic Triple or Quadruple play offerings? It means that the perceived value from end-users is increasingly on the broadband and TV, and even the latter may be dwindling soon as more and more online alternatives emerge.

Isn’t it time a little bit more of the marketing effort went on the access part of the mix ?

Photo Credit: Tim G. Photography

F.C.C. Net Neutrality Rules Clear Hurdle as Republicans Concede to Obama

25 Feb

The Republican resistance in Congress surrendered to President Obama’s call to protect an open Internet, with rules likely to be approved by regulators on Thursday.

Source: www.nytimes.com

I won’t celebrate until this is certain, but things are starting to look right for once. It’s interesting that Wheeler who was largely believed to be a Cable wolf in sheep’s clothes is in the process of pulling off what Genachowski, who was originally highly thought of never dreamed of doing. 

See on Scoop.itConnected World

Does the Great Firewall Protect me from the NSA?

24 Feb

Great Wall of China (CC-BY-NC Robert Menzel)

Great Wall of China (CC-BY-NC Robert Menzel)

 

Yesterday I tweeted in jest (and in French) that it felt weird to think that the Great Firewall of China might be protecting me from the NSA. Since then that thought has been percolating in my brain, and I’m not sure it’s a joke anymore.

I live in China, and the Great Firewall is a daily hassle. All of Google if off limits (think about that: all of Google means not just the search engine but gmail, shared documents, youtube, g+, blogger and a ton of things you never knew were Google), but also all of WordPress, most of Tumblr, Facebook, Twitter, Instagram, most of the world’s online newspapers, and so much more I can’t even begin to list it. In fact, the most disturbing thing about it is that you never know if something will be accessible or not.

It’s a daily hassle that’s only circumvented using VPN services, when the Chinese authorities aren’t actively trying to down their servers (Astrill has been patchy for the last few months, and I recently subscribed to Vyper as a backup, but it’s not much better.)

It used to be easy to see the Great Firewall as a great evil that was thankfully contrasted by the open nature of the Internet in the rest of the free world. Not so much anymore. I’ll say this for the way the Chinese approach it at least: it’s not sneaky. You know the rules: if it’s allowed, you’re being spied upon.

The latest NSA/GCHQ surveillance scandal is yet another element of proof that my worldview was just plain wrong. There’s a saying in French that means roughly the same thing as the English expression Catch 22: choosing between Plague and Cholera. As the extent of the Western secret services’ spying on their own citizens is revealed, I realize that as unpalatable as the above choice may seem, even that choice is denied to me.

In China, I am blocked from 4/5ths of the useful Internet and spied upon. Outside of China (or when I’m using a VPN service) I can access the whole Internet (more or less) and be spied upon. Either way, my communications are neither secure nor confidential.

There was an argument in the days following the first Snowden revelations that the US government would have to recant otherwise the whole US cloud and its giant Internet companies would suffer. Clearly, that has not been the case, and even if it was the US and UK government have made it clear through their actions that they care not one whit about privacy. It’s not that the moral argument has been lost, it’s simply that morals don’t even come into it.

Worse, the lack of reaction of other Western governments who (we can only assume) are not directly involved in these spying activities shows where they stand on this issue: they’d rather have the ability (albeit one step removed) to spy on their own citizens thanks for the NSA’s largesse than protect said citizens’ privacy.

The only sensible way of looking at this from a random Internet user’s perspective is to assume that everything you do online can be spied upon. It’s probably safer to assume that most commercial VPNs are compromised as well. That’s a scary prospect, one that would have seemed somewhat unbelievable in dystopic SciFi novels two decades ago.

And just to conclude, I’m not naïve, I know full well that the Great Firewall does not protect me from the NSA. What I have in effect is Plague AND Cholera. What a cheerful world we live in.

Photo Credits: CC-BY-NC Robert Menzel