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The Disruptive Power of Wholesale Approaches

8 Dec

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Steve Kamman’s blog Strong Views Lightly Held has come back to life. This is excellent news. Steve is both a top telecom market expert and a great disruptive thinker, a winning combination if you want to look at things a little differently. His latest blog post got my mind churning, connecting (as he often does) a number of previously unconnected dots in my mind.

The post is entitled US Wireless About to Get Interesting (and Ugly). I strongly encourage you to read it, but in a nutshell, Steve argues that DISH’s massive spectrum assets will be put to use to disrupt the US market in the very near future. Most interestingly though, Steve outlines one possible use of that spectrum that resonates a lot with me: building a wholesale wireless network centered around IoT rather than human communications.

Steve isn’t arguing that it should be solely able to deal with IoT (I think) but rather that it could be designed with IoT in mind from the get go, both from a technology standpoint and from a business model standpoint. One of the issues I raised in a number of speeches I made recently is that Cities are currently paying through the nose for sensor-based smart city applications because the network layer is sub-contracted to carriers who have no genuine interest in this market and are not adapting their pricing to its needs. While that might push Cities to consider alternatives (like deploying their own backbone fiber + wireless or even their own fiber to the home as a basis for smart city applications), the alternative Steve outlines could be a really interesting way of complementing that “self-reliance” scenario.

In fact, in combination with the recently announced Veniam products, a little Sigfox for low-level continuous data and deep fiber aggregation + wifi for upstream, you could totally see how cities could, with minimal investment, completely circumvent the traditional telecom ecosystem. Not to mention that, in the case of DISH, it could open up opportunities for traditional mobile telephony/data disruptors like Ting to expand their footprint and (possibly) make higher margins than with the current MVNO deals they’re getting. And there’s probably a way that open SIMs fit into this as well. If DISH was the first to fully embrace that in the US (T-Mobile is kinda there but not quite, as I understand it) the Verizons and AT&Ts could be in for a lot of trouble.

So, Steve, how do we make that pitch to Ergen ?

 

Photo: (cc) by Camilo Rueda López

Diffraction Analysis in Crosstalk

1 Dec

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Crosstalk is an Australian podcast on Telecom matters, and as one might expect, the Australian NBN is a frequent topic. Diffraction Analysis’ Benoît Felten is interviewed in the latest podcast, Doesn’t a 3030 Vision Need Fibre? Phil and Benoît discuss Structural Separation in the wake of the publication of our report Can Structural Separation Via Spin-Offs Help Europe Achieve its European Ambitions. Is Australia a good example of Structural Separation? (Spoiler: no) Could a classic Structural Separation model similar to that of New Zealand be implemented in Australia? And how future proof is the current “three networks” NBN plan exactly?

Photo: (CC) David Jenkins

The Incumbents’ Net Discrimination Plan Exposed

27 Nov

I was just pointed to this fantastic German video that ‘unveils’ Deutsche Telekom’s plans with internet discrimination. It’s both funny (because it turns every creepy aspect of it into a ‘feature’, like “you will no longer be bothered by these thousands of services you could never figure out“) and scary, because from all I can gather in discussions with Incumbents across Europe and the US, this is exactly what they hope to achieve. Seriously worth watching.

Oh, and since I always insist on the lobbyists working for Big Telecom being exposed, the guys behind this are Internet activists, and you can find them on http://www.netzneutralitaet.cc/.

Falling in Love with Stockholm All Over Again

25 Nov

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Last week I spent two and a half days in Stockholm, doing interviews and meeting various public officials and private businesses with the aim of updating the White Paper we published in 2013 entitled Stockholm’s Stokab: A Blueprint for Ubiquitous Connectivity. When we published this back then, Smart City issues were just beginning to emerge, and while we did cover a number of broadband enabled initiatives by the City in the report, it simply wasn’t a major focus. One of my goals with these meetings was to assess how that situation had changed in the last few years.

I still need to digest a lot of the information I gathered, and I need to do some follow-up interviews as well, but one thing came across loud and clear in each and every one of these interviews: the Stockholmers get it. The City has recently rewritten its strategic vision document to include ICT in every aspect of its missions, and no matter who you meet in the City government, they understand this at the core of whatever it is they are responsable for.

Actual implementations are still limited when it comes to Smart City applications, but there are a number of pilot programs in place, some of them financed in part by the European Union to design and build (or retrofit) entire districts of the City with “smart” in mind. I was going there believing that despite its infrastructure assets, Stockholm was going to be managed just like every other city out there: with no central governance on ICT related projects.

The more I look into this stuff and the more I’m convinced that the Smart City killer is fragmentation of vision, resources and implementation. Stockholm doesn’t have everything right, they don’t even have everything in place, but they get it, and that vision is shared across the whole city administration and even amongst the population, entrepreneurs and social workers. They are paving the way to do it right. That in itself is impressive. And it’s working already: there are 150k newcomers to Stockholm every year that the city has to accomodate. You don’t get to deal with that kind of expansion without either creating a big urban mess (that’s what I see here in China) or being very very smart.

I have some work to do still to clearly articulate how they’re doing it right, and that will be published in the white paper revision in a couple of months.

But I just wanted to say that I’m falling in love with Stockholm all over again…

Structural Separation Webinar Commentary

20 Nov

Our webinar on Nov. 18th hosted by the FTTH Council Europe was extremely successful, both in terms of attendance and in the level of engagement and quality of questions. The video has been uploaded, and is available here. The report is still available for purchase and goes in a lot more detail on these issues. It also analyses existing successes and failures in Structural Separation which was not touched upon during the webinar.

In the wake of the webinar, we have decided to offer in addition to the report the full Q&A document to anyone purchasing the report. We are also happy to throw in a one-hour person to person presentation / conversation for those who will purchase the report.

Please get in touch if the payment instructions on our webpage are not clear.

 

Mister Oettinger and the Natural Monopoly

17 Nov

Dear Mr Oettinger,

I hope you don’t mind my writing to you in such a direct way, but we like to be informal in the technology world. I’m addressing you to commend you for the conceptual leap you nearly made in your first blog post as Digital Czar (or whatever the official title is.) It’s entitled Connected Europe? Broadband for All is the Answer, and while I’ve heard snappier titles, it’s actually the contents that are worth discussing.

In this blog post you argue that the digital divide is intolerable, and that we need to be thinking outside the box to connect rural areas with high-speed internet. I couldn’t agree with you more, and it’s nice to see you come out of the gate with such a strong will to break the mold. You may not be aware how much the mold has been cast by telecom lobbyists, but I’m sure you’ll find out soon enough.

You then argue that because the cost of deploying infrastructure in rural areas is so high and the expectation of revenue so low, we should consider granting monopolies to operators who agree to go there. In economic terms, they call this kind of situation a natural monopoly, and it’s good to hear you state clearly that yes, infrastructure is a natural monopoly. As you dig in deeper on these issues, you will actually discover that this doesn’t just apply to rural areas, but to 99% of most European countries.

But I digress.

The only issue with your proposal is that you don’t actually have to sacrifice the rights of citizens to choose their providers to achieve what you want. The reason is very simple: the natural monopoly is actually the infrastructure, not the service. And we in Europe (unlike our American friends) have been running multiple services on shared copper infrastructure for years. It’s very simple to do.

So since we’re thinking really outside the box, why not consider infrastructure and services as separate issues? There are several ways this can be (and has been) done:

  • we could establish an infrastructure company for rural areas that would have all kinds of public and private shareholders (including operators, local governments, investment banks, long-term financial funds, etc.) This company would wholesale access to their network to all market players, thus allowing rural areas to have connectivity and choice.
  • if we’re a little bolder, we could look at what New Zealand did and actually separate the incumbent’s infrastructure and service arms. Make them into two companies with no financial ties between them. One company would be focused on long-term investment and operations, the other would be focused on short-term service retailing.

This last concept is called structural separation. It was never discussed by the previous commission because, well, it’s a “taboo”. One of those taboos that millions of Euros of lobbying money has kept silent at the bottom of a deep, dark, hole.

Yet I and a number of colleagues believe that it could actually help solve the issue of underinvestment in broadband infrastructure at very little (if any) cost to the European taxpayer. And it wouldn’t just solve it for rural areas, it would solve it for Europe.

Tomorrow, my colleague Thomas Langer and I are running a webinar to present our findings in this area. We have modeled a structurally separated market in one country in Europe you know well and found that the resulting capacity for investment was vastly higher than current investment while at the same time representing significant financial upswing for the shareholders of the incumbent. It’s free to attend and we hope you or members of your staff will join this webinar. It should not be “taboo” to ask such questions and start a public discussion on them.

Yours,

Benoît Felten

Let’s Discuss Structural Separation

12 Nov

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At Diffraction Analysis, we (ie. Thomas Langer and Benoît Felten) have been busy these last few months working on a series of reports on structural separation. Our starting point is not that it should happen because of market fairness issues, but simply that it should happen because it makes financial sense. Furthermore by clarifying the investment horizon of both the network and the service entities, it could revive much needed long-term investment in fixed networks, the kind that vertically integrated entities currently deem “unworkable”.

We released a first report a couple of months ago entitled Can Structural Separation via Spinoffs help Europe Achieve its Broadband Ambitions. We will be presenting the results of this initial report during a live webinar hosted by the FTTH Council Europe on Tuesday November 19th. The webinar is entitled Structural Separation: A Solution to Boost FTTH Investment? It is free to join, and you can do so by registering here.

We are hard at work on a follow-up report that actually breaks down the numbers for the main European countries and looks at both the benefits of separation to shareholders and the investment potential unlocked on the network side.

 

Photo: Separation ou Retrouvailles (cc) Geoff Llerena

Has Eircom unearthed a Pot of Gold?

7 Nov

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Last week both the Fiberevolution blog and the Diffraction Analysis website crashed spectacularly, for which I apologise. It also means that I wasn’t able to comment this piece of news at the time of its release, but I think it’s worth discussing nonetheless, so I’ll comment it now. The Irish Times relayed Eircom’s announcement about FTTH deployment in an article entitled Eircom to offer extra-fast fiber broadband.

I’m normally quick to applaud such announcements, but in this particular case, I have a number of alarm bells ringing that I thought I would share.

The first, and most significant one, is that Eircom is broke. Or is that was broke? Maybe they have hired a good number of Leprechauns who all have invested their respective pots of gold in the company? More seriously, I’d have to see a pretty convincing business and financing plan before I’ll believe this announcement.

The other thing is that the announcement is a thinly veiled response to the recently vetted ESB / Vodafone collaboration to deploy FTTB in urban Ireland. Now that project is going ahead, but it’s a relatively small scale project as far as these things go: a €450m investment will get you (roughly) into 450k homes at best, which is about a quarter of Irish households. Not bad if they get that far, but not a massive deployment either. Also, direct competition with UPC in all of those areas most likely. So why would Eircom in response go into 66 towns and cities including (if the Irish Times piece is to be trusted) rural ones?

And incidentally, what happened to FTTC? That’s a very recent investment for Eircom. Should we assume it’s not working? Not that I’d be surprised, but still, it’d be nice to know…

I’m sorry but I just don’t buy it. Maybe I should be quite so affirmative, but this smells of Fiber to the Press Release to me.

If you have data that points to the contrary, please let me know, but until then, I’ll treat this one with extreme caution.

 

Photo: Clover (cc) Steve Corey

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

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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.