Yesterday, European Court of Justice (EJC) added the latest chapter in the surreal dispute [1] between DT and german regulator on the one side and the European Commission on the other about the effective grant of regulation holidays to the german incumbent.

It all started back in the 2006 when the german watchdog took the bold, off-the-charts decision (if you consider the EU related legislation and strategic guidelines) to relaxe regulation to encourage incumbent’s investments in next genreation networks. EC responded to that by requiring from the german state to not endorse in preferential treatment rulings and that any decision made be supported by detailed and thorough market analysis.

The decision of the European Court of Justice stands in favor to EC claims and asks the german government to comply. You can read more at EurActiv.com.

I am really keen to know if as of now the german regulator’s decision has effectively encouraged large scale investments by DT and at what extent it may have increased coverage and take-up of high-speed broadband in the country. If anyone cares to share the know and how is more than welcome to do so!

[1] Surrealist works feature the element of surprise, unexpected juxtapositions and non sequitur.

I was on my way to an appointment figuring out new view-points and reasons why we must consider seriously the option to allow sharing of the NGN physical infrastructures (e.g. open access, unbundling and the like) and not simply let/allow/encourage/facilitate anyone to digg at will, when there before my eyes saw the hardest evidence I could ever record on camera! This picture depicts Mavromichali Str. (few blocks south of Alexandras ave.), a street in Athens, relatively close to the center. The street is approximately 4-5 meters wide and as it seems very popular to telecom operators! 4 fiber networks and 3 public utility networks run underneath it. That’s 7 networks in total,. We have no FTTH in the city (these are metro networks or FTTBusiness connections) and the underground is already overcrowded.

Imagine what this means in terms of costs and time to maintain/upgrade the water or sewage pipes for example, or imagine the chances to not hit anything if someone decides to dig vertically across the street!

I have reservations [Infrastructure-based Competition in NGA: The Best Way Forward? - Facilities-based Competition vs. Open Access Networks] regarding the applicability of infrastructure based competition in all cases (as recommended in EC policy documents). No doubt, geographical economies will benefit from competing alternatives. Even better, the biggest the independence between these alternatives the higher are the incentives for differentiation, thus innovation.

However, I tend to conclude that the marshallian social welfare is not positively correlated with the existence of redundant physical infrastructure in our cities. If we let the market alone to decide the when the how and the where of physical broadband infrastructures we risk the depletion of the street’s underground capacity. The regulators and the Governments need to realize that the street’s underground capacity is not abundant and it must be exploited with care[1].

My point boils down to this: Excluding US with the widest ever streets, Paris with the widest sewers  system  ever constructed, and possibly a few more cases, for the remaining of us letting anyone with a trencher and a license to dig without a long-term plan may not be such a good idea after all!

[1] Don’t think this as an exaggeration. Imagine the fate of other commons (such as air, forests, sea water, potable water, fisheries etc) and reflect upon the consequences (quality, availability) of the unconditional exploration of a public resource by the free market.

OTE’s CEO Panagis Vourloumis announced this Friday (10/7/2009) that the organization decided to set in motion its VDSL roll-out plans “as soon as possible”. According to organization’s top executive, national FTTH plans face bureaucratic delays and OTE “can’t wait any longer” [Check Reuters and Adslgr.com].

OTE has been testing VDSL for a long time. And while the organization is investing hard money in its IPTV platform (content: NBC UNIVERSAL GLOBAL NETWORKS, security: SecureMedia, etc), its ADSL2+ network delivers average video quality, (slightly) inferior to standard analogue TV (Read: Video on Demand by OTE. But When?). No one objects that OTE’s VDSL roll-out to monetize its IPTV investment is a fair marketing practice and in fact it was long anticipated.

The interesting part is the timing of the announcement. It was made a one (1) day after the parliament’s majority,  stressed by the country’s not-so-good financial situation, voted in favor for an additional 5% shares sell to DT (Report in Greek). Shares will be sold at €27,50 when their listed price is €10,66. That’s an additional (as in “extra”) 413 millions for the seller (not a bad deal at all). So, DT (at a substantial expense) will soon own 30% leaving 20% to the Government making it much harder for the public sector to oppose the plan (assuming that they would want to).

But, there’s more: The announcement complicates Greece’s application for EU funding and (most importantly) project approval by the Competition Commission. Herman Wagter made an excellent remark a few weeks ago commenting on European Commission’s draft “Guidelines for the application of State Aid rules in relation to the rapid deployment of broadband networks“:

The EC takes the opposite approach, creating an impossible burden of proof on governments where companies do not have to proof an intention to roll out to create a blockade. If an operator claims a roll-out in the next 5 years (on paper) it blocks any initiative from a (local) government. If after 2-3 years “unforeseen” circumstances appear which “force the operator to delay investments” the cycle starts again: the government has to prove that the operator will not roll out in 5 years FROM THAT MOMENT ON, which the operator can easily claim on paper that he will do.

This is effectively a free (no obligation, no costs, no commitment) blocking trigger which can be used by any operator almost indefinitely to block any initiative from a municipality or government. Very lopsided. A enforceable burden/commitment of the operator to roll out if they want to excercise the blockade would have been more balanced.

That’s a puzzle for strong players and a tough enigma for national and European regulators. How will public policy makers respond? And how will Greece’s national broadband strategy be defended?  Let’s see if the underdogs can play again serious ball!

(*) photo by xamad

When faced with NGA policies, one of the biggest sources of “misunderstanding” and inefficient policy making relates to the inappropriate definition of broadband. What is, and what is not considered as broadband is a challenging issue for policy makers drafting NGA national strategies. This is because the level of speed, acknowledged by authorities as broadband, differentiates the government planning and the regulatory expectations from the telecommunications operators.

Broadband, broadband access to be exact, is a very subjective term, primarily due to that it is mainly a marketing term. It refers to the use of a wider range of frequencies that allow higher speeds toward the end-user. The range of frequencies and the effectiveness of use is directly linked to the achievable speeds. It is worth noting that broadband comes as the “evolution” of other terms used before (narrowband, baseband, wideband).

Simply put, the perception of broadband is directly linked to the level of functionality provided by an access connection to the end user. In any given time period, as application and service markets develop more bandwidth is required to do a standard set of functions. That means that the level of speed that characterizes a connection as broadband a) varies by cultures, markets and countries and b) increases over time. This makes the definition of broadband (speed-wise) a moving target, both in the local and in the global context.

Accordingly, any attempt to incorporate a level of speed (e.g. 1Mbps, 10Mbps, 100Mbps) to the definition of broadband is doomed to fail. For successful implementation of broadband policies we need a more relaxed definition that will qualitatively describe what we consider a broadband connection should do for the end-users. The definition has to refer to the functionality that is expected from a “so-called” broadband connection. A speed may be attached to the definition to facilitate short-term action plans, however, this figure will have to be subject to a review/renewal process in predetermined intervals.

I often argue that fiber connections, or simply the availability of the adequate infrastructure to enable fiber connection increases the value of a property, home or complex. It’s widely acknowledged that, say, kitchen renovation or the addition of wooden floor in a house brings much more value than it costs. By the same token, fiber access increase the value of the property as an additional enabler for its residents. In this blog I have refered in the past to Swedish and American studies for that matter.

Yesterday I came across another report, coming from Australia this time, which estimates the added value of a fiber access to $5000. Read about it at itwire.com.

Until recently the telecommunications market in the US was divided between two camps: the telcos (traditional telephony operators) and the cable companies. A recent trend however seems to change things drastically. Another type of segmentation is emerging in the country, this time between rural and urban carriers. Telecompetitor reports that incumbents are giving out their rural markets and increase their focus on dense urban areas. As a result, the rural carriers are expected to become stronger and larger (and most likely fewer).

This may bring some benefits for the underserved markets. Operational efficiencies from the wider coverage may illustrate an opportunity for rural carriers to extend fiber closer to the end-users. The investment incentives are amplified given the reported trend (the dilemma between investing in rural and urban areas is invalidated due to that rural carriers do not cover the prime residential and commercial centers), thus farther investments in rural areas will make more sense.

Whatever the case, it remains to be seen how this trend will eventually materialize and how this may affect the development of the rural markets in US. For Europe, it has already been acknowledged by the EC that there may be several cases in national territories that electronic markets should be geographically segmented, based on the local market characteristics. Might we see this making sense for US too?

Essen is the next German city to plan the installation of an FTTH network. According to tcmnet the municipal holding Essen EW and Conlinet are preparing to deploy an FTTH network in the city. Annual capital expenditures are estimated to reach 10M euros until all (!) 45.000 houses in the city are connected. The go/no-go will be given to Essen EW in 24th of June when the city’s council will meet for the matter.

The most interesting part in this announcement comes with the network’s plans for synergies/coordination with public utility Stadtwerke Essen to deploy fiber when gas and water connections are renewed. So far, only when a public utility (usually a power company) participated in the FTTH project have I seen this type of synergies. It sounds promising. I’ll keep you posted.

The case of Lyse Tele, reported in this article published in Telephony On-line provides yet another practice by operators (both public or privately owned) to stimulate FTTH take-up. I’ll jump on the opportunity and make a short introduction for some nice and creative ways used worldwide to increase FTTH penetration rates. These methods are also used to reduce deployment costs and investment risks for the operator:

Neunen, Netherlands: Onsnet is a public-private-partnership operating in the city. Fees for the first year were spared for all interested households. Due to that, 97% of the population subscribed in the first year and 80% remained connected on the network for the second year. Nicely done.

Ottawa, Canada: Customers are owning the fiber tail from the CO to their homes. Essentially, the residents property extends in the fiber cable laying from from their premises to the CO. That way the residents are assuming ownership of part of the network. This is a small pilot project running in a small part of the town.

Norderstedt, Germany: Wilhelm.net is operated by the local power utility company. Interested customers sign up in advance. If at least 40% of the population in a certain area or nearby village subscribes then the FTTH network is being built and passes through the customer’s premises

Lyse, Norway: Lyse Tele passes the FTTH network in front of the customer’s premises leaving a hatch available for the residents to connect to the network should they desire. Installation from the hatch to the building’s basement is done by the customers themselves with guidelines provided by the operator.

Anyone have a case/business model he/she like to share? I’m taking this discussion to the Public-Broadband Debating Group . Come on board!

This is not the first time it’s happening to me. The office at the university is closed today, this time due to the eastern holidays. Since I drove all the way up here, I decided to get a coffee at this cozy spot, that shares my name near the campus with free wireless, excellent view to the crowded main street (by the way, the female population seems to have dressed up to the occasion, i.e. in spring mood) and the led on my laptop indicating 45 more minutes of life in the battery. This is going to be a blitz post.

This is how the story goes: when I try to use the more or less traditional way of network market segmentation all more often I realize that it does not completely capture the dynamics stemming from the current structure of the telecommunications industry. On a quick note, the telecommunications market has been historical segmented into four distinct layers:

Physical Layer: Here lie all the passive elements that the Internet infrastructure and the access networks are made of (i.e. ducts, poles, tubes, cables, POPs etc).

Access Layer: In this layer we generally consider active equipment, services and business models that enable access provision to the end users. In this layer are included standard services such as email, web, DNS etc.

Content/Services Layer: This layer refers to the fast developing services and content offerings we are used to call advanced services such as IP Telephony, Video-on-Demand, IPTV.

Terminals: This layer has been liberalized since the mid 80s and vendor’s business models thrived by offering advanced customer premises equipment that enable the service provisioning and enhanced quality of service.

In trying to apply contemporary business models, regulation rules and competition strategies given this particular market segmentation I run into troubles when attempting positioning in each layer distinctively. In today’s market that specialized, horizontal business models have started to make more sense there is a great need to accurately distinguish between physical, access and service layers. What follows is “my” perception of the Broadband Market that helps me distinguish the added-value that each layer brings to the broadband product:

Physical Infrastructure: This includes the passive elements of the network infrastructure (i.e. poles, trenches, ducts, tubes/mini-tubes, optical and copper cables, distribution frames, etc.) and other auxiliary active equipment or passive element (i.e. rack space, cooling devices, electric power supply, UPS, power generators, etc) required for operating in the upper layers. I would consider even air being part of the physical infrastructure. Contrary, at large to fixed-line infrastructures, the weather conditions (e.g. fog, humidity etc) can directly influence the quality of services in the upper layers in wireless networks. Unbundling regulation (LLU being the most notorious regime of this kind, physical collocation being another) focuses precisely on this layer

Spectrum/Bandwidth Services: Right atop the physical infrastructure are the spectrum or bandwidth services that enable broadband/Internet services provision. Service providers use active equipment to leverage on the properties of the physical infrastructure and offer data services. Regulation in this layer deals with the competitive use of capacity featured in physical infrastructures. Bit-stream is the most noted regulatory regime in this layer. PON networks also operate distinctively on this layer. DWDM technology provides a clear operation on this layer too. The discussions on white spaces (in US) and digital dividend (in EU) are relevant to that particular layer.

Internet Access: This is the traditional ISP’s offerings. Here, I consider IP connectivity (e.g. IP addressing), IP interconnection (which allows Internet connectivity) and protocol transparency (i.e. enabling the use of services offered in competitive networks and international content/service providers). Protocol transparency has also to do with how the Internet access providers treat the traffic that passes through their networks. The debates on net neutrality, traffic throttling, deep packet inspection are centered on this layer. This is the layer that ISPs have full control at, and thus are experimenting in ways to discriminate or favor specific value-adding services against others.

Standard Services: Internet access is often bundled with a set of standard services that can make an Internet connection more meaningful, such as web hosting, DNS, email etc. At the “dawn of time” these services used to be provided only by the Internet access provider, but as things developed we have seen more competition in these services. That is why I take out these services from simple Internet access. Providers of standard service cannot be granted as direct competitors with Internet access providers. Their main focus is to attract users from this low to none marginal service layer and monetize on other advanced service offerings.

Advanced (Broadband) Services: This is the layer that, by many, adds the true value to the broadband market. These are the services that take full advantage of the broadband properties (e.g. always-on, high-speed, low latency, reliability etc.) to offer advanced services to the end-users, such as telephony, video-based services, health and education services, e-government, public services etc.

That’s the broadband market from my standpoint. Whenever I tried to analyze a telecoms (public or private) business expansion strategy this model simply fitted perfectly.

p.s. 2 minutes left in the battery. I made it ok! Now, allow me to just finish off my coffee!

According to a press release by Etisalat , the telco is expanding its current FTTH network, called eLite, to the entire city of Abu Dhabi. Etisalat has already connected more than 300,000 homes through eLite since 2008 and aims to connect the entire UAE by end of 2011, connecting more than 1.4 million homes and offices. The network is based on Huawei’s GPON equipment and, obviously, there is no evidence that this will change in the company’s future plans.