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

Meet Me in Brussels

14 Nov


I will be in Brussels on November 19th-20th, speaking at a number of events:

On November 19th, I’ll be one of the speakers at the Swedish Municipalities event entitled Maximizing Fiber Infrastructure Investment in Europe. He will discuss the importance of broadband for the future of cities, the challenges of the current market situation to enable smart cities and a number of potential solutions to these issues. The event is free to attend provided you register ahead of time.

On November 20th, I’ll speak at the ECTA Regulatory Conference. Benoit will present evidence disproving the premise that there is an economic reason to be reconsidering Net Neutrality.

If you wish to meet with me at either of these events (or around that time elsewhere in Brussels), please get in touch or just walk up to me after my presentations.


Photo: (c) Ben Felten

The Empire Strikes Back: AT&T threatens to pull Paltry US Fibre Investment

14 Nov

In a sure sign that net neutrality won’t be instituted in the US without one hell of a struggle, AT&T CEO, Randall Stephenson, has announced an “investment pau…

Source: www.telecomtv.com

Not much to add to this, except to say that the very fact that they are willing to stop an infrastructure investment plan because there’s a lack of clarity on net neutrality (if you take their argument at face value) shows that there is no investment plan. Anyone who invests in infrastructure seriously knows that whatever happens on top of that infrastructure matters not at all about the profitability of the investment. 


But we knew from the start that these announcements were a smokescreen, Fiber to the Press Release taken to the next level. 

See on Scoop.itConnected World

Why Comrade Cameron went all Russell Brand on the UK’s mobile networks

13 Nov

National Roaming Rǝʌolution, innit!

Source: www.theregister.co.uk

The Telegraph is not exactly a subtle publication, and this article is no exception. For once though, I’m not sure I agree with their read of the situation. Establishing a single shared infrastructure in deep rural not-spots is not a communist solution as the title suggests, it’s actually a sensible approach to providing quality services to expensive coverage areas. How it’s done, and how competent the powers that be in Britain are in implementing something like this is another story (and I’m not too confident about that), but dismissing the principle on political grounds is, frankly, stupid. 

See on Scoop.itConnected World

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.

PSTN Switchoff Will be the Next Big Challenge

14 Oct



There’s a little nugget in the last paragraph of this article on Belgacom’s deployment of ALU vectoring (in French), one that I wish had been more developed. Let me offer my own translation here:

One last point, Standaert also reveals that these networks will continue to be converted to all-IP: “In Knokke le Zoute in particular, everything goes via IP. This year, we already migrated 400.000 lines. By 2018, Belgacom will no longer have any classic telephone line.” This means that the Siemens EWSD switches and the Alcatel-Lucent PSTN switched will finally all disappear. It should also free up a lot of physical space and allow Belgacom to sell even more of its buildings. By 2020, 30 buildings should be sold. Altogether, this should generate savings of 35 million euros.

I was astounded earlier this year to find out that the Australian NBN, despite the massive structural upheaval that it created had not been accompanied by a decision to phase out PSTN. Similarly the New Zealand policy makers, visionary though they might have been in establishing FTTH nationwide (or nearly so) and structurally separating their incumbent did not take this opportunity to dephase the legacy of PSTN.

Of course, this raises regulatory issues. In particular, what happens to voice regulation? An inclusive approach suggests that any VoIP service would become regulated, which may seem daunting and impractical. The alternative though would be that no voice services would be regulated, which seems somewhat dangerous.

I haven’t spent enough time gathering data and thinking about this, but I do think it’s going to be the major topic on the regulatory plate in the next five years. Stay tuned for more when I have more.


Photo Credit: Old Telephone (cc) by Macinate

Google Europe Blog: Dear Rupert

26 Sep

Source: googlepolicyeurope.blogspot.co.uk

I am sometimes frustrated in the current policy debates because Google tends to not respond to accusations, even when said accusations are just plain stupid. So it’s fun and interesting to read Google’s response to Murdoch’s attacks in the last few days. Murdoch painting himself and his companies as Angels of content and information is hilarious enough, but even down to the specifics, this is worth reading. 

See on Scoop.itConnected World

THD Seine = RIP ?

16 Sep


The French Fiber PPPs are called RIP, Réseau d’Initiative Publique (Public Initiative Network). An unfortunate acronym, perhaps, considering the largest one of these seems to be in big big trouble. THD Seine is the largest such network in Europe, with the ambition of covering 800k homes in one of the densest (and better served) regions of France, just outside of Paris.

THD Seine was a landmark project because it successfully overcame every regulatory and legal challenge both in France and in Brussels by focusing on the SIEG notion, which means General Interest Economic Services in English. Basically, the notion was that if the public subsidy in a project helps make said project universal when commercial propositions will never offer full coverage, then public subsidy for the part that wouldn’t get done otherwise is fine.

Unfortunately, the project seems to have hit some major execution hurdles. Targets have not been met and Sequalum, who won the deal (a subsidiary of Numéricable and SFR) seems well on its path to be rejected and imposed massive penalties for not delivering. The political authorities of the 92 have issued the following statement (in French) entitled Towards an Annulment of the Public Service Delegation.

Seems like that particular RIP might well be RIP…

Photo: (cc) Corentin Foucault