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The Disruptive Power of Wholesale Approaches

8 Dec


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

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

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.


Benoît Felten

Let’s Discuss Structural Separation

12 Nov


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


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.

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…

How much money is there in Net Discrimination?

1 Jul

One of the striking realizations of my Analyst career was when I found out that very often companies in the broadband ecosystem defend, or even lobby for positions that they assume to be in their interest for ideological reasons, but without having worked out rationally if indeed they are. I have many an anecdote about crestfallen faces when real numbers are worked out and exposed.

And in fact, this has long informed my own approach to research: the idea is, based (ideally) on hard data or failing that on documented modeling, to assess whether a policy position actually makes sense or delivers what it’s supposed to deliver. This was the genesis of our short report Net Discrimination Won’t Buy You Next-Generation Access (still available, dirt cheap) in which we modeled a top-down revenue share between OSPs and ISPs to figure out the financial impact it would have. Long story short: not a lot, and certainly not enough to shift the lines in terms of network investment (as often argued by ISPs).

Fellow analyst and provocative thinker Dean Bubley has just gone one step further in what I consider to be a groundbreaking piece of analysis entitled Non Neutral Mobile Broadband Business Models. In this report, Dean doesn’t look at the classic arguments for or against net discrimination, he examines in-depth which business models net discrimination would enable and how much revenue they might generate.

You can get a feel for the material that’s in that report through the following presentation he’s made available on Slideshare:

The report is thorough, very well documented and enlightening. A highly recommended read.

Photo (cc) by Tax Credits

Rescheduled Webinar on Swedish Broadband Consumers

17 Apr

The webinar that was scheduled this week on the Swedish Broadband Consumer study ran with the FTTH Council Europe had to be postponed due to a platform failure outside of our control. We apologise for those who waited in vain until we figured out we couldn’t go forward.

Everything is fixed now, so we are rescheduling the webinar to April 24th (next Thursday) at 3PM CET. For details on the content see here and also this interview from the FTTH Council Europe conference (starts at 37:30).

Registration is here!

Spread the word!

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: