HomeTelecomsThe race for place is over and telecoms is turned upside down


The race for place is over and telecoms is turned upside down — 6 Comments

  1. Fully agree with you. Working at the broadband coordination of Lower Austria (public unit) and this approach is one of the pillars of our new broadband strategy. Passive infrastructure (ducts, cables, cabinets, antenna masts, etc.) will be handled in the same way as roads, sewage, water pipes and other public utility (build and owned by public sector, ROI>25 years). The active network will be run by a neutral network operator in an wholesale only mode (ROI=7 years, without subsidy) and thereby open at transparent and fair conditions for all existing and new service providers. In this way the passive fiber infrastructure can be build to almost every building over the next 10-15 years and the competition is maximized (=fair prices, very good service and maximized innovation). The public sector is not “going into the telecom business” but is taking care of what they are doing the last 100 years – taking care about infrastructure – and the primary benefit for the public sector are the spill-over effects in economy, transportation, education, health sector, social life etc.

  2. Igor – thank you for your comment and insight from Austria. Really appreciated.

    I must say that I am unsure of the merits of having only one network operator running active assets on the passive infrastructure however. The reason for this is that such a player will have little incentive to innovate, invest in new technologies, lower its delivery cost or improve quality, etc..

    I know such an approach has been used in some places – such as Amsterdam – but I think competition in the active networking layer is a good thing and should lead to innovation and lower prices. Why create a monopoly in that layer?

    • Hi Richard! Sorry for my delay in answering on your comments 🙂

      The active operator has a contract for 7 years. This is the usual technology life cycle and if the operator is not upgrading after 7 years, he can be exchanged by a new operator with state of art active equipment. I would also strongly differentiate between cities as urban areas and rural areas that we have to cover. In rural areas the amount of potential customers is very low. There is no place for two or more active operators to make there ROI, especially not if they are obliged to be neutral (wholesale services only, no retail!). If we would be open on the physical layer (as Stokab in Stockholm) the rent would be attractive only for traditional vertically integrated operators resulting in low competition and very limited innovation. On the other hand we want to have more than one neutral active operator in Lower Austria, but not in the same geographic area. At the moment we have two under contract – OpenNet GmbH and Optisis GmbH.

      If there is only one operator (as in Amsterdam) its an PPP project with a different constellation and other pros and cons compared to a lease model we are running right now. In Stokholm there are many different active operators using the same Stokab passive infrastructure and they can also provide retail services. Now there are more than 100 active operators, some of them neutral (wholesale only) and some of them traditional vertically integrated, but this can happen only in urban areas, not rural as I explained before.

      Last but not least – the rent for the active operator consists of two parts, a fixed per homes passed and a variable (revenue share) for homes connected. If the active operator is biding a high fixed lease that is covering a big part of your repayments of the invest in the passive infrastructure, your are lucky. Usually you will get a smaller fixed part and a higher variable part (revenue share) for the active lines and by this you (as the owner of the passive infrastructure) and the active operators are in the same boat. The active operator has very low incentive to be “passive” – he has to do a lot for being attractive for service operators 🙂

  3. I’d offer quite the opposite is true Richard. Place is the primary comparative advantage of all three towns. Particular services like Voice, Video, Information, Shopping, etc.. are not unique to a town, rather they are readily interchanged by Mr & Mrs homeowner and tots. They really, really like that stuff being cycled, carted and airdropped in, always ordering more. Problem is that our traders get seduced into becoming manufactures of content and forget that at its core, each trader is an enabler linking the homeowner to content and services. Place is a battle to be the First-est with the Most-est. Someday, one of those traders shall stumble out of the jungle upon DataLogisticsMetroplex and learn the secrets of the Forest Topography Transformation Hauler (FTTH) from whence exclusivity of Place is reborn.

    • Robert, thanks for your comment. I agree with most if not all of what you say, though I’m not sure that means that “quite the opposite” is true! Perhaps my title “the race for place… is over” is a bit premature… but the point is that convergence is resulting in redundant parallel infrastructures being built.

      Both TeleTown and CableCity will aspire to the Forest Topography Transformation Hauler (FTTH) status. Either both will deploy, and then engage in a price war to sell services on the asset they just built (since the consumer will probably just buy services from one infrastructure), or one will deploy FTTH and the other will drop prices to try to get the most out of their sunk investment and be able to compete with the superior FTTH infrastructure (worsening the business case of FTTH).

      Either way, we are moving (have moved) from a world where different telecom infrastructures do different things to one where they do pretty much the same things (especially for the needs of the majority of the market). At that point, does it make sense for each trader to focus on maintaining their own unique pathway (parallel passive assets), or should they focus on doing the enabling (active assets)? I am arguing for the latter.

      (I do agree place has value – see my previous article. But the value of place depends on penetration rates … so rather than upgrading multiple parallel infrastructures and wasting oodles of capital, let’s do the hard job of digging just once…)

  4. Solid reply Richard, and yes we’re in sync. Had a long winded reply lost; Karmatic wit. Bottom line, Internet Access has evolved into a strong enough product by itself to enable the FTTH or FTTN provider to retain a retail relationship with the homeowner while employing an open access business model in lieu of needing to be the triple play. This turns the worm of Place back in favor of eyeballs over content boding more network investment.

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