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The Future of Telephony (or Lack Thereof)

13 Apr

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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

Analyzing Broadband Usage in France and Portugal

2 Feb

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Last year Diffraction Analysis worked in collaboration with the FTTH Council Europe on a study analyzing the behavior and attitudes of Swedish Broadband Users. In particular, we examined their satisfaction, their intentions to upgrade or migrate and their broadband usage. We recently published a thorough analysis of these results under the title Fiber broadband drives higher satisfaction and advanced usage.

The second wave of that study will be presented in Warsaw at the FTTH Council Europe’s Annual Conference. I will be presenting the findings for our France and Portugal studies on February 12th AM. This is a unique study that yielded fascinating and quite unique results. The full-fledged studies for France and Portugal will be published later this year, but for advanced insight into the behavior of FTTH and FTTB users in particular, I hope to see you in Warsaw!

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

An Example of Spin-Off

2 Dec

In the last few weeks, Thomas Langer and myself have been talking about structural separation via spin-off at length, and interestingly yesterday’s news gave us an illustration of what it might look like. I’ll let Thomas describe this to you in his own words:

Yesterday, one of Europe´s largest utilities, German e.on announced its plans to split into two publicly listed companies via a spin-off. This approach nicely corroborates our views of how fixed access spin offs could add value to the incumbent sector. Admittedly, market dynamics in the energy and communications markets are not comparable. Without going into the details of the motivation for the decision (excess capacity in the power generation market, repercussions of the decision by the German government to wind down nuclear power), a number of details of the proposed transaction highlight some of the aspects we discussed in our „Structural Separation“ study:

1. Even large European companies are considering spin-offs to release value for shareholders. The presentation to analysts mentions strategic, operational as well as financial benefits. These range from the creation of „more focused companies“, less complexity of organisational structures and a „better alignment between rewards and results“. Last , but not least the transaction „provides tow different and compelling investment opportunities.“

2. Interestingly, the spin-off will lead to structural separation between traditional power generation on the one side and green power and services on the other. Clearly this suggests that a shift in technology and a focus on service orientation both played a role.

3. The initial spin-off will take place in 2016, in less than two years. This illustrates that large organisations can execute a reorg. within a short time frame. Skeptics that look at structural separation in communications markets as too complicated should analyse this deal. It´s doable.

4. One slide of the presentation deck is entitled „Safguarding emloyees interests“. This corresponds ideally to our standpoint that a spin off must not be seen as a means for job cuts and larger downsizing. This would risk losing both internal support and consent of labour unions.

Ah yes: The e.on share was up by more than 4% by midday yesterday while the German Dax was slightly down.

So, not a telecoms sector example and not perfectly mappable, but interesting to examine. And remember, the best example out there is New Zealand, and we’ve described it at length in one of our reports entitled Can the New Zealand NGA Model be Replicated?

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

DT didn’t shelf its variable rate plans…

28 Nov

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There was an interesting and animated discussion on twitter yesterday about the fact that journalists systematically present network congestion due to Online Service Providers as a given. The discussion led to talk about Deutsche Telekom’s pay what you eat plans announced last year, and their apparent shelving. But Pál Zarandy pointed me to this article which suggests that the plans haven’t been shelved.

Essentially, and even though the wording is all but clear, what this suggests is that consumers will either be able to buy expensive “flat rate” plans, or cheaper variable-rate plans, the ones that DT believes would help them leverage their market power to coerce Online Service Providers into paying for zero-rating their content (as shown in the video I posted yesterday).

Now as Dean Bubley repeatedly stresses, this has exactly zero chance of happening… as long as there is significant competition in the market. Now the bid for further consolidation in-market appears more clearly as a part of this mad plan. I still believe the chances of it actually being implemented are zero, unless a stupid policy maker (EU Parliament who voted a non-binding motion to structurally separate Google, I’m looking at you) actually buys the argument…

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