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Benoit Felton is a Senior Analyst with Yankee Group Europe. He spoke on Session 6: Networks Here and There at the Freedom to Connect 2009 conference. …

Benoit Felton is a Senior Analyst with Yankee Group Europe. He spoke on Session 6: Networks Here and There at the Freedom to Connect 2009 conference.

If you'd like more info about the conference, see
http://freedom-to-connect.net/

Published in Technology , Business , Real Estate
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  • 1. A World of Fiber Benoît Felten Principal Analyst [email_address]
  • 2. France and the United States: A Love Story
  • 3. Agenda
    • FTTx in Europe
    • Some conclusions on FTTx deployment dynamics
    • How is this applicable to the US?
  • 4. Fibered Europe Sources: Fiber to the Home Council – End 2008 Sweden 910k homes passed 400k subscribers 200+ municipal networks 450 Service Providers over Open Access Model Norway 275k homes passed 180k subscribers Vertically integrated utility networks Incumbent (Telenor) stepping up deployment Finland 420k homes passed 50k subscribers Incumbent (Elisa) deploying selectively Some municipal networks Denmark 620k homes passed 90k subscribers Energy companies deploying aggresively Netherlands 575k homes passed 170k subscribers Municipal networks in large cities Incumbent (KPN) planning open access deployment France 4500k homes passed 180k subscribers Incumbent, two competitors and cableco deploying Spain 300k homes passed 30k subscribers A few regional projects. Incumbent (Telefonica) cautiously rolling out Portugal 200k homes passed ~15k subscribers Competitive operator rolling out Germany 280k homes passed 60k subscribers Municipal projects in Cologne, Munich and more Incumbent deploys VDSL2 Slovakia 430k homes passed 20k subscribers Incumbent (Orange) rolling out Slovenia 280k homes passed 50k subscribers Incumbent (Telekom Slovenje) and competitive operator rolling out
  • 5. Regulatory Models Infrastructure Competition with sharing of in-building deployment Unbundling of the fiber-loop with no bitstream obligation Infrastructure Competition with n regulatory oversight of >30Mb/s market for the next two years Bitstream only delivery model over FTTN and FTTH infrastructure Pole and duct sharing, no open access obligation over fiber Regulatory approach Significant debate over the nature of in-building deployment: single fiber (Orange) or multi-fiber (Free) slows down deployment. In addition, KPN subsidiary Reggefiber is offering bitstream access wherever the network is deployed already. Despite favorable conditions, Telefonica deployment is still uncertain. Bitstream FTTN model is still not clearly defined. OFCOM working on Active Line Access product which would be a form of Ethernet Bitstream. Duopoly has maintained high price levels and limited service penetration (Verizon has ~20% take-up) Comments
  • 6. Framing the Regulatory Agenda
    • Announced Open Access on passive and active layers
    • Went significantly beyond OPTA’s expectations in terms of allowing competitors on own network
    • Initiative is to preserve network business in the face of cable and muni-fiber competition
    • Announced a strategy of roll-out with 4 parallel fiber strands to every home (aggregation level unclear)
    • Lobbies regulator for a symmetrical measure to be impose to competitive roll-out
    • Initiative is to ensure universal access with owned or operated fiber and avoid costly and complex unbundling obligations.
  • 7. FTTH Business Model Fundamentals
    • Take-up has a stronger impact on payback than ARPU.
    • Payback under 10 years is virtually impossible without at least 30% take-up (more reasonably 40%).
    • The current generation of services (triple-play) is probably not sufficient to attract customers en masse , especially if FTTH is priced higher.
    • Service differenciation (Sweden) or price equivalency (France) are crucial components to driving high take-up and making the business model work.
    Source: Yankee Group, 2008
  • 8. Incumbents embracing Open Access? << In hindsight, KPN made a mistake back in 1996. We were not too enthusiastic to be forced to allow competitors on our old wireline network. That turned out not to be very wise. If you allow all your competitors on your network, all services will run on your network, and that results in the lowest cost possible per service. Which in turn attracts more customers for those services, so your network grows much faster. An open network is not charity from us, in the long run it simply works best for everybody. >> Ad Scheepbouwer (CEO, KPN)
  • 9. Regulatory responses for open access Opening Dark Fiber Opening Ducts Services Opening Lit Fiber Opening Services
    • oligopoly in major cities / dense areas
    • monopoly in tier 2 cities
    • patchwork network
    • the « new » unbundling
    • oligopoly everywhere the network goes
    • one network or patchwork network?
    • richer choice for customers (on paper)
    • numerous SP ecosystem (10s)
    • economy of bitstream?
    • richer service environment
    • plethoric SP ecosystem (100s)
    likely outcome regulatory approach ex.
    • Sweden
    • UK
    • Netherlands
    • Netherlands
    • Spain
    • France
  • 10. Exploring a new Open Access Model? Vertical Integration Unbundling Bitstream Active Wholesale Services Passive Access Infrastructure Services ? Network Services Passive Access Infrastructure Services Active Wholesale Services Active Wholesale ? Wholesale Services Passive Access Infrastructure Services Services Services Services
  • 11. Net Neutrality, NGA Style
    • An attempt at defining net neutrality: « a guaranteed amount of customer-to-IX capacity dedicated to internet usage » .
    • Hard to deliver in the copper world
      • all services use a single logical circuit
    • « Easy » to deliver in the fiber world
      • services can be delivered over separate lambdas.
    • Verizon FiOS already uses this technology to deliver TV and broadband on separate logical streams.
    • HKBN offers guaranteed capacity to the IX or your money back!
  • 12. How is this applicable to the US?
    • Is this applicable to the US ?
    • Objection #1: The US is not like the rest of the world
      • Incumbents in the US do not have majority share
      • Ubiquitous Cable Penetration is unique to the US
      • US Wireless Competition is fiercer than elsewhere
    • Objection #2: Which network needs to be the monopoly network?
      • Why should telcos be the ones who are “forced” to open up?
      • Smaller networks cannot be open access because of economies of scale issues
  • 13. Duopoly dynamics?
    • The US lags behind in terms of broadband penetration.
    • Could this be because of a less than efficient duopoly rather than in spite of “vibrant duopoly competition”?
  • 14. Price and penetration are correlated
    • North American Prices per Mb/s download of NGA wireline broadband are the highest in the world.
    • Price doesn’t explain everything, but the correlation between price and adoption doesn’t have to be demonstrated.
    • In a duopoly, neither of the players are interested in lowering the prices.
    Prices per Mbps download (Normalised USD) Source: FTTH Council & Yankee Group By Geography By Technology
  • 15. In Conclusion 1 2 3 Open Access makes economic sense for private players everywhere in the world Vertically integrated NGA deployment will not happen with private money in a 3-5 year investment timeframe Designing a profitable wholesale model for broadband is crucial to NGA deployment 4 Net Neutrality, NGA style is a first step to ensuring service competition .
  • 16. Please visit our website: www.yankeegroup.com Thank you for your interest! Benoît FELTEN [email_address] M: +3 618 243 189