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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:

TomWheeler

 

(Source: http://news.linktv.org/net-neutrality/r-i-p-net-neutrality)

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: https://www2.gotomeeting.com/register/826247690

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!

TPG Telecom’s FTTB play a headache for Turnbull

11 Feb

See on Scoop.itConnected World

Although obviously very unhappy with the broadband monopoly created by the previous government, Communications Minister Malcolm Turnbull – as its shareholder minister – also has to protect the interests of NBN Co.

Benoit Felten‘s insight:

I must confess to a certain amount of pleasure watching Malcolm Turnbull struggle to keep together the NBN he has contributed so hard to undermine. It’s not good news for Australia, but you can’t help but feel he got it coming…

See on www.afr.com

Exciting Stuff at the FTTH Council Europe Conference in Stockholm

4 Feb

740x260_Superman1

Like every year, Diffraction Analysis is an analyst partner of the FTTH Council Europe annual conference which this year takes place in Stockholm on February 19-20th with pre-conference workshops on the 18th.

This year is particularly exciting for us because we will finally be able to show results from a very exciting quantitative study of broadband users in Sweden. We think these figures could significantly change some of the perceptions around the potential of FTTH. These results will be presented during Session 15 of the Conference on the FTTH Business Case:

Session 15: February 20th, 14:15, Room B

You will not want to miss that, sorry for insisting!

Benoît Felten will be there during the whole week of the conference from Feb 17-21st. He will be manning the Diffraction Analysis booth when not otherwise engaged. The booth is in the Analyst Corner section of the exhibition floor. Should you want to meet with Benoît for a briefing, expert opinion or to discuss business opportunities, please get in touch!

In addition, Benoît will be speaking at a number of workshops and events throughout the week:

  • Tuesday 18th AM – Huawei Customer Event
    Speech: 5 ways to supercharge your FTTP Business Case
  • Tueday 18th PM – Investor Day
    Panel Moderation
  • Tuesday 18th PM – World of Applications Workshop
    Speech: FTTP Usage Trends

Diffraction Analysis and Fiberevolution will be tweeting teasers from our study results starting tomorrow and all the way leading up to the conference. Please spread these around if you find them interesting!

2014, the year of Emerging Market Connectivity, Open Access and Smart Cities

17 Jan

New Year's CardIt is traditional for analysts to end a given year with an assessment of the major trends in that year and predict what the next year will be like. This year we thought we’d do a bit of that ourselves and update you on some of the things you can expect from us in the coming months.

Broadband and politics, unhealthy bedfellows

Probably the most significant news of 2013 in the broadband space will remain as the partial collapse of the Australian NBN. A highly political project from the start, its inability to deliver in the promised timeframe gave the Australian political opposition the ammunition to significantly reduce its ambitions when they won the elections. We have written repeatedly about exactly this risk, and while the reduced scope and ambition of the new project is a dissapointment to those who looked at Australia as the beacon in forward-thinking government led broadband, at least the core of the structural separation has so far been preserved.

In New Zealand also, the highly political NBN has hit some roadblocks, though not quite as dramatic as the Australian ones. The government, by not adjusting the regulatory framework to fiber caused the whole UFB plan to be jeopardized by a drastic price reduction in wholesale copper just when Chorus and the other Local Fiber Companies were heavily investing in FTTH. We have written about potential solutions, but they would require a fair amount of political clout and coverage, and it’s uncertain at this stage whether the government in place has that.

The conclusion from these events is that when large scale plans are put in motion to bring the telecom infrastructure into the 21st century, be it kicking and screaming, governments need to make realistic promises, execute efficiently on these and insure that regulation and policy go hand in hand. Good advice for a number of countries that have moved or are moving in that direction like Israël, Uruguay, and others.

Open Access is finally getting mainstream

At Diffraction Analysis we have long been arguing that Open Access not only makes economic sense but that in many countries around the world it’s the only way to get infrastructure deployed. A few years ago, the coalition of the unwilling incumbents was so deeply against this idea that even policy makers, for the most part, balked at exploring it. Things are slowly changing.

We’re seeing various forms of infrastructure sharing emerge around the world, be it around mobile network components (cell-towers, base stations…), access (open access fiber), backbone, etc. And the players involved, increasingly, include the same incumbent operators who had been fighting tooth and nail against any form of mandated open-access. Consequently we will see increasingly that Public-Private Partnerships that impose open access are likely to become more and more prevalent as even established players willingly consider participating.

Structural Separation doesn’t really get any closer…

On the other hand, the ultimate solution to infrastructure sharing and market fairness, structural separation, isn’t really gaining much traction. There was hope that Italy would represent a major landmark earlier in the year, but shareholder Telefonica seems to have killed that one in the nest (and nabbed a few assets in Latin America in the same move). The aforementioned Israeli project is closer to the mark although the continued existence of the copper-based incumbent may become an issue down the line.

The sad thing is that structural separation (and we now have a functional example of it in New Zealand) would solve most of the issues the market is facing both with funding and competition, at a lower cost to market players than the current model. I don’t have high hopes for policy makers to have the gumption to push this any further, although the UK and Poland might be places to keep an eye on. In the former, the incumbent seems to have aggravated the government so much that I hear the subject is at least no longer taboo. In the latter the incumbent seems keen on making it happen. If only it wasn’t owned by another incumbent who won’ hear of it…

The year(s) to come

While the above trends will continue to unfold, and hopefully a more radical approach to policy, at least in Europe, will be understood to be necessary, there’s little that we can do at our level to influence that. In emerging markets things are a little different because pragmatism generally trumps ideologies and even lobbying to some extent when you try to get from nothing to something. The example of the Colombian national backbone project is very enlightening in that respect, and probably the smartest piece of policy we have seen in telecommunications in years.

This helps us focus where are work will be needed, and it’s essentially in three areas:

  • Emerging market connectivity: the field to further connectivity out in emerging countries and in the rural areas of developed countries is wide open, and smart solutions and approaches emerge everyday. Our research has convinced us that the traditional view that only wireless will do and then only in dense urban areas is increasingly erroneous. We are releasing a white paper in the next few days on this topic, so watch this space. We expect to work more and more with emerging markets in the coming years to help policy makers set up the right context for connectivity growth and to help businesses build smart, effective and profitable networks addressing the massive opportunity there. Rural broadband in developed markets will most likely rely on similar approaches although the legacy may prove to be a big hindrance.
  • Open Access: now that the ideas of infrastructure sharing are gaining traction, an increasing number of players, public, private and in-between hop on board. At the same time, they start to realise that there’s no ‘Field of Dreams’ effect in technology adoption, and that you have to work hard to make an open access model work. We have been hard at work in 2013 assisting neutral operators, both municipal and national in fostering the right ecosystem for adoption to happen as swiftly as possible, and we will continue to do so. Figuring out the proper wholesale offerings, establishing the right levels of trust between partners and taking an active role in promotion and commercialisation are all part of the solution.
  • Smart Cities: it’s a sad state of affairs when you realise that many cities that have invested massive amounts in their own municipal fiber networks are not using it for much beyond delivering broadband to their citizens. Furthermore, cities that don’t have their own assets are increasingly puzzled as to how they can become smarter while having to rely on third-party networks not designed to do what they need them to do. This will be a big focus for us in the coming year as we try to establish the infrastructure bedrock for local governments to really launch themselves in the world of Smart Cities.

These areas are of course in addition to our usual coverage and analysis. In the next few weeks we will announce a lot of releases from Diffraction Analysis, including but not limited to the new iteration of our FTTx World Database, a report presenting 5 Ways to Supercharge an FTTx Implementation, in-depth analysis of user-by-user consumption data from a gigabit fiber network, a thorough examination of the reality of Chattanooga’s Gig City and much much more.

We will also attend rather more events than we did last year, including the just-round-the-corner FTTH Council Europe conference in Stockholm from February 18-20th. We will be presenting very exciting results from the first ever Fiber Usage survey. Stay tuned for more in the coming days.

This is going to be an exciting year, both for Diffraction Analysis and for the industry in general. We certainly hope it’s an excellent year for you, and we hope to see you around before December!

Fantastic Video on Net Neutrality

3 Oct

I’ve long held the idea that a short video explaining the concept of net neutrality to joe and jane average should be feasible. This isn’t a short video, but it’s the next big thing. It features a (fake) researcher doing some work for the big ISPs to establish the case for net discrimination. In the process of doing so, he interviews just about everyone who defends net neutrality to understand why. It’s fun, and it’s powerful. Take the 30mn to watch it!

Gigabit at Bayonette's Point!

26 Sep

 

I’ll be honest, I’d never heard of Bayonette until I read this article in ZDNet. I tend to be cautious around such announcements because while it’s relatively easy to get coverage in the tech press, it’s much harder to actually deploy a network at scale and hook customers to it.

So, Bayonette is taking a leaf off of Google’s Fiber book and deploying Gigabit and free broadband. Could work, although when you don’t have the Google brand backing you, I have some doubts about the effectiveness of this. In France where a number of social houses have negociated “free basic broadband” as part of their FTTH deals, the story goes that customers who subscribe to the free service never upgrade. I guess it’s just the wrong kind of demographic to expect upsell from.

There are a few things that raised my eyebrows in this piece though:

  • Bayonette’s basic enterprise service is also a symmetric 1Gbps connection, but priced at 2,490 NOK per month (about €309): Good luck explaining to business customers that the service they pay 5 times as much for isn’t the same service consumers pay less for, honest gov’. That’s a recipe for cannibalization and value destruction if ever there was one.
  • The company employs existing dark fibre, and runs its own-brand DWDM (dense wave division multiplexing) equipment on top of the fibre: OK, so they’re not deploying fibre (fair enough, although I’m curious how much open dark fibre actually exists in Norway for access services), but they developed in-house DWDM. Either these guys have cracked the hardest nut to crack ever (DWDM ONTs cost a bomb which is why no one has seriously deployed them in the access market to date) or there’s something I don’t get here.

My gut feeling is these guys are really small, probably sub- 20k customers today (which is kind of our threshold at Diffraction Analysis for including them in the Fiber Database) but I guess I’m intrigued enough that I want to know more. If anyone from Bayonette is reading this, or if anyone reading this can put me in touch with someone from Bayonette, I’d be keen!

 

A Way Out of the New Zealand Copper Price Quagmire?

18 Sep

I came back from New Zealand last week, just before a political bomb related to regulated copper prices was launched. Here’s the story in a nutshell:

  • back when structural separation was being implemented, a review of regulated prices was put in the agenda by the government. The regulator, ComCom was supposed to perform this review in 2012 and a big focus was regulated copper access prices, which were supposed to shift from retail minus to cost plus.
  • the government, aware that their was a potential risk in copper prices being examined in abstract, ie. without examining the fiber investment in parallel, passed an amendment that specified that network investment should be taken into account by ComCom. However, the wording of that amendment was vague and ComCom decided it could not interpret it, so decided to ignore it. The new cost-plus principle was to be applied from December 2014.
  • ComCom conducted the cost-plus review based on international benchmarking. It benchmarked New Zealand against two other similar countries in the world (Denmark and Sweden) – and not having done any cost assessment as far as I’m aware – announced they would drastically reduce the wholesale access price to copper.
  • Chorus announced that such a change in the regulatory context would put them in jeopardy and certainly make the economics of the fiber network deployment suffer.
  • The Government announced it would bring forward the planned 2016 policy review and in its discussion document proposed overruling the regulator on the issue and started exploring ‘graceful’ solutions to extricate itself from the mess it had created.

This is roughly where things stand today. Last week the opposition and a coalition of private businesses including some of the operators have published an ‘independant’ study that describes the differential revenues between current copper rates and ComCom’s announced rates as a “tax” to fund an already profitable private business. It is of course turning into a political story, which means that sadly reason no longer comes into it.

Here are a number of things that spring to my mind about this sad state of affair, I should stress that I’m about as detached from New Zealand politics as one can be, so the following is really my views as an industry analyst and nothing else.

  • first of all, having looked at the recent impact of regulatory uncertainty in Australia and the jeopardy that Australia’s NBN plan currently is in, I find it deeply ironic that New Zealand would consider radically undoing what it started to do by destroying the delicate pricing balance that structured the UFB deal. Incidentally, this is not just an issue for Chorus: other LFCs will suffer too if the price differential between copper and fiber becomes such that Retail Service Providers simply have no incentive to consider switching customers to fiber.
  • second, it should be stressed, again and again, that the government got an amazingly good deal out of Chorus and other LFCs, probably too good. At NZ$1.5bn, the amounts invested come out at a little more than 500€ per household for a 75% coverage. The following graph is one I use in NBN related conferences to show the amount per household and the scope of intervention in parallel. Obviously, the more of the territory you want to cover, the more expensive it gets as urban density decreases. As it stands, New Zealand is getting 75% of households covered for the same cost per household that gets Malaysia 20%. And building costs in Malaysia are somewhat lower than in New Zealand. And that’s not even mentioning that the NZ government isn’t subsidizing the buildout, it’s investing in it, with an expectation of return.

 

  • third and last, this is not a case – as it might have been when EU regulation was looking into copper price adjustments – of Chorus using the copper revenues to pay dividends instead of investing in FTTH: the government has set hard targets with stiff penalties for the infrastructure to be deployed, and Chorus has met these targets (as far as I know). In fact, their deployment costs have turned out to be higher than what they had originally modelled and still they’re deploying. Put simply, the current level of copper revenues ensures that fiber deployment is possible. Take it away or reduce it dramatically and either the UFB doesn’t happen or Chorus goes belly up or the Government has to commit a lot more taxpayer money at no return.

My interpretation from far away, is that really what this is is a political coup by the opposition. Don’t get me wrong, I find the government’s behaviour here to have been really lame, to understate things a bit. They’ve opened themselves to the attacks now coming. I do find it strange though that the party that initiated the UFB is now willing to throw it under the train to score some political points…

I’m often left wondering how we ever got roads, highways, railroads and bridges built. These are amounts of public investment that dwarf what it costs to deploy a network infrastructure such as the UFB and yet they never seem to have been political liabilities…

Anyway, the real question now is: is there a way out that doesn’t make government look even more authoritarian and messy than it already does without sacrificing the UFB?

I think there is, but it requires adressing the elephant in the room: copper switchoff.

There are two issues to address here really: one is that without a decent level of copper revenues, Chorus can no longer finance the UFB deployment. The other is that with an excessive wholesale price difference between copper and fiber, RSPs will never push customers towards fiber. Then everybody loses: the government makes a bad investment, Chorus goes belly up, and New Zealand doesn’t reap any macro-economic benefits from Ultra-Fast Broadband.

By introducing a copper switchoff mechanism in fibered areas, even if copper prices are lowered, at least one of these issues is addressed: RSPs investing in unbundling will know that that investment has a limited lifetime, and even if the copper prices were lower, they will have to arbitrate between investing in a soon to be switched off cheap platform or migrate their customers to a more expensive future-proof one.

This wouldn’t solve all of Chorus’ issues, but it would create a radical long-term improvement of cost-structure as the company would no longer have to manage two networks in parallel (and the copper network is the costlier one to maintain in the first place). Chorus would still have a big cash-flow issue to get to that point and keep investing in Fiber, but I suspect that would be manageable, either through government or government-backed loans.

I’m not arrogant enough to believe that my voice will have any weight in this matter, and I have no doubt I’m simplifying things to excess, but I do think this could offer an elegant solution that, furthermore, would be effective from a nation-building point of view: it wouldn’t just be a matter of knowing that 75% of the country would be eligible for fiber in 2020 but knowing that 75% of the nation would be on fiber by 2025. That kind of certainty could allow massive local and national government rethink of the services they offer for the general good, not to mention the opportunities it would open up for the private sector.

Disclaimer: I have recently done some paid work for Chorus in New Zealand. However, I have not been asked by anyone to write the above, and the views expressed are clearly my own (I’m not sure Chorus would be too happy with the solution I propose anyway…)