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Meet us as Broadband World Forum

19 Oct

This week, starting Tuesday 22nd of October is BBWF in Amsterdam, one of the most important events about broadband in Europe. Diffraction Analysis will of course be there in the person of CRO Benoît Felten. He will be attending from 21st to 23rd, and will be speaking/moderating on the 23rd PM at a session entitled Moving faster towards Gigabit access at home.

Should you want to meet Benoît for a chat, a briefing or just to share a drink and discuss the market, feel free to email us.

Is management T-Mobile USA’s layer of fat ?

15 Sep


There’s an article in French magazine Challenges this week about Iliad and T-Mobile. It’s entitled “How Iliad-Free bluffed the Americans” (in French). As usual with the business press, it doesn’t actually answer the question, and by and large there’s little new in there. Still, there’s a quote that I found interesting in the context in which I view the potential acquisition, as described in my earlier post from last week. Here it is (translated by myself, apologies for imprecisions):

The synergies they are talking about mostly happen at management level, explains a business banker. Stating that they are capable of lifting the margin from 20 to 30% is an insult to the CEO.

Or is it?

The alternative is that the management is the layer of fat that you can most easily get rid of without harming the company. And that’s insulting to the CEO only because it means he hasn’t been doing his job.

Let me tell you a couple of anecdotes. Back in 2006-2007 when I was still a telecoms consultant in the French market, I wanted badly to have some kind of “Iliad” reference on my CV and on the roster of my company. I managed to set up a meeting with an ex-colleague and friend who’d joined Free in the early days. I asked him if he would introduce me to the marketing director. “There isn’t one” he responded. I was gobsmacked, but the fact is that they didn’t need one. They had less product managers than most companies have VPs, and it worked just fine.

Here’s another story, told to me by the CTO of a European operator. He went on a two-day fact-finding trip at Iliad’s in France. When he came back, during a board meeting, the CEO asks him to recount the trip. “Errr, there’s not much that’s applicable to us”, he responds, trying to dodge the topic. “Come on”, says the CEO, “they’re the most successful operator in Europe, surely there are things you learned that would help us”. Cornered, the CTO starts: “There’s no marketing director”. The marketing director blanches. “There’s no communications director”, the communication director blanches. You see where this is going.

Therein though, lies the challenge that Niel and his teams will face: as I mentioned last week, it’s one thing to create a super-lean corporate structure, one where anything that’s not vital is not necessary. It’s much harder, and much more painful, to trim down an existing “fat” structure into a lean one without losing the employees’ spirits along the way.

The Maddening Schizophrenia of US Incumbents

11 Sep

(cc) Evan

(cc) Evan

I must confess to a particular fondness for those moments of synchronicity when different news items happen to collide in the same cycle, violently contradicting each other. This week is a great example.

On Tuesday, Techzone 360 published a really interesting editorial entitled Shifting Towards Symmetry: The New Broadband Landscape. I strongly encourage you to read it, but here’s the elevator pitch: AT&T and Verizon have finally realized that symmetry not only sells but differentiates them from cable. Suddenly, after years of arguing users didn’t need it, they flip around and extoll its virtues. Of course, to you and me, that’s not an incredibly forward-thinking stance, but think about where they are coming from!

The fact is that the market has moved beyond copper, whether they like it or not. That’s why Verizon can aggressively push symmetry (they’ve shed a lot of their copper, and have fiber everywhere else). AT&T, as is clearly highlighted in the editorial isn’t quite so at ease, having a large FTTC footprint that most definitely doesn’t support symmetry.

Still, no matter what the reasons, we should applaud them for being so modern, right?

Not so fast! That same day Ars Technica’s Jon Brodkin writes an article (AT&T and Verizon say 10Mbps is too fast for “broadband,” 4Mbps is enough) detailing how the same AT&T and Verizon are fighting the FCC tooth and nail to stop the regulator from increasing the requirements for a data service to be considered broadband. Today, 4Mbps down and 1 Mbps up is considered broadband, the FCC would like the download to go at least to 10Mbps and argues (quite convincingly) that you need that much for a perfectly normal evening at home. AT&T and Verizon are having none of it though, and their main argument is the same as ever (I quote AT&T): ” a 10Mbps service exceeds what many Americans need today”.

The real reason, again, is elsewhere: with a 10Mbps definition of broadband, suddenly the market doesn’t look so competitive anymore: 10% of users have no access to service and 30% only have one option for service. In other words, 40% of the market is either unserved or a monopoly. That doesn’t look so good…

So there you have it. PR schizophrenia at its most beautiful. I say the FCC should up the broadband requirements to a symmetrical 10Mbps. That should help AT&T and Verizon reconcile their paradoxical positions!


Photo: Insomnia, (cc) Evan

3G/4G as a landline data substitute

10 Sep

(cc) Philippe Henry

(cc) Philippe Henry

A guest post by Herman Wagter.

In the never-ending discussions about platform competition, the notion that mobile data is a substitute for landline data keeps coming back. I thought it might be interesting to recount a real life experience of trying to do just that.

One of my friends owns a couple of farms in rural France. They date back to the year 1100 and are located on the hills of the Rhone valley near Valence. He has restored them to apartments which he now rents to tourists.

Offering Internet access as part of the accommodation is a big problem. 10 miles of old copper lines doesn’t work for DSL, and there’s no line of sight to someone who might have better DSL to share.

The only option is to use 3G and (hopefully) later 4G as a substitute for landline data. Since the farms have a wonderful view over the Rhone Valley – which is populated with masts – this seems like a feasible idea. The signal strength though is quite low outside the buildings, and inside there is nothing as the walls are made of stone, and are of medieval thickness (80 cm).

In order to solve this, we installed:
- a 17 dBi planar directional antenna, with cable through the wall to
- a Teltonika RUT550 3G/4G router-to-wifi

and purchased some prepaid SIM cards (SFR as provider). I’ll spare you the administrative telecom-hell associated with these prepaid sims.

The planar antenna got -75 dB signal strength, which is fine. In all likelihood, the signal comes from a mast which is 7 km away, near line of sight. The Wifi signal inside the homes is fine as well.

The throughput fluctuates from 2 Mbps down to almost nothing, 100kbps up to nothing.

Looking at the throughput we see:
- sawtooth patterns, with a periodicity 5-10 seconds
- sometimes it takes tens of seconds to start the connection to a website

Still, it’s more or less usable to check mail, IM, and websites. For Youtube you need a fair bit of patience.

So we installed one per rented accommodation.

The big surprise turned out to be the data consumption: the prepaid SIMs had to be topped up constantly. 1Gbyte of data was usually gone within a day. We first suspected excessive Youtube viewing or the like, but every tenant swore they did not have any data-intensive kind of usage.

After analysis, testing and elimination of likely causes we found out that:
- the average number of connected devices per family member was more than one. Multiply that by the number of family members…
- phones and tablets are very frugal with data when they use a 3G or 4G connection. As soon as they see wifi (which they equate to a landline) the floodgates open.

So we now tell guests to:
- switch off icloud
- not update their OS
- switch off Dropbox, Gdrive and other cloud storage syncs
- check that muTorrent or other bittorrent clients do not start automatically in the background (which is the default on laptops)

That cuts back the consumption to bearable levels.

What this real life example of a mobile substitute to landline tells us is that you can do it if you’re willing to seriously cut back on most of what is considered “normal internet activities”, and if you’re willing to risk paying through the nose for overage charges.

In other words, it’s possible, but it’s not much of a substitute. We’ll see if 4G offers anything different, but one thing is for sure: the data consumption drivers aren’t going away…

Photo: (cc) Philippe Henry

TWDM and the regulatory framework for Fiber broadband

9 Sep


From the start, in markets where competition was valued over oligopoly or monopoly, regulation for next-generation broadband has been an issue. Trying to replicate the model for copper unbundling over a new fiber network was complicated for a number of reasons:

  • point to multipoint fiber, the cheaper way to deploy FTTH, does not allow for such passive unbundling
  • incumbent operators, the market players most likely to deploy some FTTH were happy with a technology that pushed hitherto passive wholesale customers into higher margin active products.

This led to point to multipoint technologies being deployed en masse by large scale players in most countries (exceptions: Sweden, Netherlands, Switzerland) which in turn led to essentially two regulatory models:

  1. either the regulator favored infrastructure competition, which in most markets is a very short term road to a duopoly in dense areas (cable / FTTP) and a monopoly everywhere else,
  2. or the regulator favored infrastructure sharing, with active wholesale products the norm and the incumbent operator retaining an upper hand on the market.

(France, typically, could not choose between these models so we have infrastructure competition with network sharing, and it’s a mess. But that’s a story for another day.)

The shortcomings of the latter model were partly addressed in some countries by forcing the incumbent to separate the network and services activities, either functionally as in the UK, or structurally, as in New Zealand.

Still, the wholesale price gap between passive unbundling over copper and active bitstream over fiber is a major issue as competing ISPs face either a significant margin drop as their wholesale costs double (roughly) or customers face a significant price hike, which may endanger the success of fiber products in general. In practice the market tends to price somewhere in between, but it slows down fiber adoption.

In the short term, it’s not a massive issue, simply because as with copper, no one would think of buying passive products (which require heavy investment to activate and operate) before they’ve acquired a significant market share in a given area. When that happens though, the classic “ladder of investment” concept that powered DSL competition in the last decade simply won’t work with PON networks as passive products cannot be delivered.

Or at least could not until now.

TWDM is a standardized technology that (on paper) delivers more capacity to PON architectures. In a (very) simplified way, what TWDM allows is to stack up to 4 virtual PON networks, operating on different wavelengths onto an existing PON architecture. These ‘virtual PON trees’ would each deliver 10G down and 2.5G up (although a symmetrical product has been specified, there’s no operator demand for it yet), which is about 4 times the capacity of current PON.

The beauty of it is that although you might use these stacked PONs to deliver way more capacity to end-users than what you currently can deliver with PON, you could also use them to lease these separate wavelengths to different ISPs, thus replicating a quasi-passive unbundling model over PON fiber.

This is probably not why some incumbents were so eager to choose PON for deployment, but it could eliminate a regulatory headache in the years to come as a more even form of competition is allowed to happen over existing architectures with limited reinvestment (and, most importantly, no outside plant work needed).

The technology is standardized and the first commercial products are expected from the big players (Alcatel Lucent, Huawei…) within a year. TWDM really is going to be the tech to watch for in the fiber space.

Can Iliad Succeed in the US Market?

5 Sep



A topic that I’ve been following closely over the summer despite a relatively lackluster press coverage in non-French speaking media is the attempted bid by Iliad on T-Mobile US. This is interesting to me for a number of reasons, one being that I have long spoken of the potential for an Iliad-style disruption in a number of markets (including the US), and another one being that I know Iliad well, and I know the US market reasonably well. This is really me musing on whether Iliad could make it work more than anything.

I won’t go into valuations and other financial aspects that might allow Iliad’s bid to succeed or not. My gut feeling at this stage is that with the removal of the competing Sprint bid, they are well positioned, particularly if they get a consortium of investors around them, but I’m too far removed from pure financials to have a viable view on that.

The more interesting question (to me) is, assuming the bid is successful, can the industrial project be successful? The financial markets clearly seem to think not, or at least seem to think that it’s very uncertain. Iliad’s valuation has taken a serious hit as a consequence of the bid being announced.

One thing is for sure: the initial instinct that got Niel (Iliad’s founder and CEO) interested in T-Mobile US is correct: the US market is ripe for price disruption, with ARPUS two to three times higher than European averages and there is no reasonable explanation as to why costs would be two to three times European costs in the US. Iliad successfully entered the French market as a low-price competitor by building a lean operation in an environment where margins were already much lower than in the US. The opportunity is clear.

The thing that many people don’t understand about Niel is that he’s one of those entrepreneurs who is still willing to take risks. I would actually argue that he thrives on risk. Financial and industry analysts are trying to read Iliad’s bid within the framework of industry accepted practices, but I believe that’s the wrong way to look at it, especially in the US where price competition has been very limited due to the oligopolistic nature of the market. The right way to look at it would be to try and anticipate all that an Iliad owned T-Mobile could offer end-users that nobody expects. What could they give away for free that everyone in the industry agrees has to be paid for? What could they radically simplify in terms of portfolio, distribution, etc. Which partnerships could they strike that would open up possibilities for visibility and commercial success.

This isn’t so much about replicating the French success as it is about bringing in (and hopefully transitioning the existing teams to) a radically different culture, one of lean disruptiveness. That’s what Iliad would be bringing to the table. And unlikely though it sounds, it could very well work. It’s worked in the past, multiple times. I’m not underestimating the cultural challenges here, but I do think with Niel you need to keep your mind open to the fact that his success might surprise you.

Still, the biggest challenge here is that Iliad isn’t starting from scratch. Every success of Iliad’s in the past was built from the ground up. The only failure they had to deal with was their acquisition of Telecom Italia’s French subsidiary Alice. In the case of T-Mobile, Iliad announced that $2bn of savings per year could be generated, and they may very well be right. But there’s a long way between identifying where money can be saved and actually restructuring to save it. And it’s a very different thing building a super-lean operation from a clean slate and turning an organisation with the kind of technical, organisational and cultural legacy that T-Mobile US has into a similarly lean outfit. To me that is the greatest challenge: not only in transforming the company’s culture (hard enough as it may be) but in trimming down the company to the lean operation they think they can turn it into.

Still, I hope it happens, because it’s going to be super-interesting to watch, and because I’d love to see the US incumbents quake with fear once they realize that someone is operating the same type of business they have at a fraction of the cost, and it’s working…

US Cable Reviled by its customers

9 Jun



It’s hard to believe that profitable businesses would be so detested by their customers, and yet survey after survey shows how US broadband users revile their cable operator. The latest is the subject of an article in the Washington post entitled A Soup of Misery, which shows (amongst other findings) that over half of US Cable customers would switch to another provider if they actually had an alternative.

The amusing thing (or ironic, or sad depending on how you want to look at it) about this is that cable still insists there is competition. If this market was a free market, with satisfaction ratings like that cable would be bankrupt instead of being amongst the most profitable industries in the US.

There’s an added bit of irony for me. A few weeks ago I got into a bit of tiff on twitter debating with Luigi Gambardella, the head of the European Telecom Network Operators’s Association (ETNO). ETNO has been lobbying fiercely for a regulatory model that’s more akin to that of the US, despite overwhelming evidence that that market is dysfunctional and anti-competitive. I naturally took exception to this view (as well as to the preposterous assertion that wherever fiber was being deployed, it was not regulated), and the back and forth went south very quickly (you can read the whole exchange here, assuming it doesn’t get deleted). The point here is that Gambardella’s final stroke was the following:

Needless to say that baffled me…

Anyway, all this to say that looking at the US for a functional model for Europe is not just ridiculous, it’s dangerous…

Net Neutrality Threatened…

24 Apr

Last night the US regulator FCC announced that they were carving out exceptions to Net Neutrality rulings for “fast lanes” that ISPs could charge to OSPs. Only in La La Land can this still be called Neutrality. I’ll write about this more at length when time allows, but in the meantime let me share this wonderful drawing on the topic by Susie Cagle:




Free Webinar on Swedish Broadband Consumer Study

10 Apr

The FTTH Council Europe and Diffraction Analysis are running a free webinar on April 15th at 11 AM Central European Time. Benoît Felten and Joeri van Bogart will present and discuss the results of the quantitative study entitled Why Consumers Love FTTH – The FTTH Consumer Experience Study. Here are some of the one-line results from this study:

• In Sweden a huge majority FTTH users (75%) think their broadband is better than before they had fibre.
• 67% of Swedish broadband users think broadband over fibre is ‘Very Good’, but only 13% think the same of DSL.
• Swedish FTTH subscribers use video-communication over the Internet five times as much (25%) as DSL users.
• In Sweden 59% of FTTH users see FTTH as modern. Only 17% of DSL users see DSL as modern.
• In Sweden, 34% of FTTH users are 4Play or 3Play customers vs. only 23% for DSL users.
• In Sweden 59% of FTTH users think fibre broadband is sustainable. Only 44% of DSL users think the same of DSL.
• In Sweden, 59% of DSL users find their broadband price excessive vs. only 32% for FTTH users.
• For FTTH users in Sweden, quality of broadband is the 1st criterion after home price when choosing a new home.
• Close to half of Swedish FTTH users (45%) are Very Satisfied with their broadband vs. only 28% of DSL users.

During this session, we will discuss all of these results and much much more. Please join us by registering on the following address:

FTTH Council Europe 2014: less gloom, more pragmatism

24 Feb

Stockholm in Winter

Last week I was in Stockholm all week for the 2014 edition of the FTTH Council Europe’s annual conference. It was a very good week for me (though sleep deprivation nearly got me in the end) with lots of great meetings with customers, potential customers, fellow analysts / consultants and friends. I’m not going to write a long analysis of the event (got to catch up on the million things I couldn’t get done while there) but here’s a set bullet points that summarize my feelings about it:

  • the atmosphere at the event was miles better than last year. Much more positive, better interaction, better content (at least for the little I got to attend),
  • the Council, while not endorsing VDSL in any form seems a little more relaxed around the idea that there are alternatives that make more sense for some players in some situations. It’s a good thing: more pragmatism cannot hurt the industry,
  • key finding: the second wave of FTTH deployment in Sweden is happening under a totally different model; Skanova’s CEO stated that customers were willing to pay 2000€ to get their connection installed, which would pay for most of the up-front cost,
  • the above statement didn’t surprise me as much as it could have: in between the results of our qualitative study on real-estate last year (and some follow-up work I’ll talk to you about soon) and the quantitative study on attitudes, usage and satisfaction this year, it’s quite obvious to me that most Swedes know that fibering up your home is a sound investment that also delivers great quality services (or the other way around),
  • said quantitative study was very well received, and exposes what I believe to be the first ever usage & attitudes analysis of FTTH users in a mature market (Sweden in this case). Hopefully there will be other iterations in other countries,
  • key finding: there is a third (besides Andorra Telecom and Jersey Telecom) that is doing fiber/copper substitution, on a much larger scale. It’s Telekom Indonesia, and their plans are quite advanced, targeting millions of users. Will need to investigate that one more fully,
  • key finding: Mobiliy (Saudi Arabia) is really one of the most interesting FTTH operators, very smart in its approach. I knew this from their technical operations, but their marketing operations are just as smart,
  • there’s a quasi-religious zeal in the promotion of the Swedish Open Access Model in some parts of the market there. I’ve long been aware that the model is not as widespread as it’s advertised to be, and has some deleterious side-effects on the industry, so tread with caution and don’t buy (all) the hype. It’s worked for Sweden (at some cost) but isn’t necessarily the best way to implement Open Access in my opinion,
  • key finding: TWDM is a damn interesting technology, especially in its regulatory implications. Another thing I need to dig into deeper,
  • finally, there was one thing that puzzled me deeply, and that is the Operator Award received by Vodafone. Sure, they have some FTTH in Portugal, and might have a bit in Spain soon, but for a player their size, they’re not exactly commited to the technology. Maybe it’s like Obama’s Nobel Peace Price. Let’s hope it works better…

Thanks to all of you who came by the Diffraction Analysis booth to chat or discuss collaboration. Kudos to the FTTH Council who pulled (in my opinion) the best annual conference of those I’ve attended to far. See you next year in Warsaw!