Archive for January, 2004


Tuesday, January 27th, 2004

It seems that the struggle for FlowCom is finally over.

The company has struggled from the very start. This was partly due to the fact that it entered the market towards the end of the telco boom, at a time when it was becoming clear that infrastructure competition, as well as resale competition in the traditional telco markets, was killing off almost every company operating in that segment – as a vertically-integrated facilities-based telecommunications group, the company is far too small to compete with the likes of Telstra, Optus, AAPT and Primus, and it has been unable to grow the business to a sufficient mass to compete with them.

As a vertically-integrated business FlowCom lacked the agility to operate as a niche market player, a role which would have better suited a company of its size.

In the very beginning, the company bought an interesting asset in ‘Macrocom’. An East Coast infrastructure operator in the microwave space, this network has some interesting links into regional areas. However, despite its competitive nature, this wasn’t enough to achieve success – and, of course, the trend in this market is now clearly towards fibre-based networks.

In late January 2004, the company ended up in the hands of the receivers, just two months after it raised $5 million in a share placement to purchase the collapsed Froggy Internet business, along with its claimed 31,000 subscribers. This clearly demonstrated that the company was prepared to fight to the very end to maintain its operations, and the management was certainly not happy with the final decision to put it into receivership.

While I was in Wagga Wagga I read a long article on the collapse of FlowCom in the local newspaper. This highlights the regional nature of the company’s business – in fact, they were the operators of the Riverina Telco in which Wagga Wagga Council has an interest.

Let’s hope its new owners will take advantage of the good work that FlowCom has done during the past few years. The company certainly has potential, but in its current format it will need a significantly larger base from which to operate. Alternatively, it could be trimmed down to become a specialised (regional) player in the market – but the first option makes the most sense to me.

Paul Budde

FlowCom Ltd
Australia – Telecommunications Infrastructure Inter-City Networks
Australia – Analysis telco market – Forecasting Developments

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Tuesday, January 20th, 2004

Adoption of the Personal Video Recorder is a slow process, although it recently showed signs of acceleration.

Sky Digital was the first to launch a PVR in the UK in 2001, which they named Sky Plus. Together with technology provider, NDS, and a few other manufacturers, they put the boxes on the market. At this stage there are 110,000 Sky Plus boxes, plus another 20,000 TiVo boxes – on a total user base of seven million subscribers.

Awkwardly enough, this modest success was mainly based on the fact that a PVR could be of great assistance in disentangling the numerous channels offered by Sky. For this reason Sky decided to waive the subscription fee, with the aim of boosting the take-up level. Rupert Murdoch is even considering distributing boxes for nothing. Sky gives him this option, and he is able to do the same in the USA where he will soon control satellite television Direct TV.

The French Canal + and colleague satellite provider Canal Satellite, introduced their own service under the name Pilotime in 2003. They claim to have installed 20,000 boxes in the first two months. The digital satellite receiver has a built-in hard disk, a nice piece of equipment, with a double tuner and a PVR with a storage capacity of 80Gb.

The combination of PVR and a subscription TV provider is quite logical, especially with companies like Sky and Canal that offer integrated all-in-one package deals. The user controls the content and technique completely, which makes integration much easier. The drawback lies in the fact that you are dealing with a completely closed system – for example, the French Pilotime only works with its own supply of Canal and not with the other satellite channels.

Slow growth
Why is the adoption of PVR so slow, despite the good press?

Firstly, the functionality of the PVR is quite complex. A demonstration is really necessary to explain its advantages.

Secondly, the PVR is useless without a program guide.

In the USA, the user needs to be subscribed to the TiVo service in order to make use of their PVR. TiVo is able to bring the program guide up to date on a daily basis, via a local television channel. The user has to adjust the guide to their own preferences. Meanwhile digital TV providers such as DirecTV can now also provide TiVo-like services.

It is not a cheap service.

A lot of money is needed to buy Sky Plus or Pilotime. In France, for example, the consumer pays eight Euro for the hire of a ‘basic’ model digital receiver, but 28 Euro for a receiver with PVR. And this is in addition to the subscription fees for the different channels they subscribe to. So this could add up to a considerable amount.

See also:
Global – Broadband – Video on Demand (VoD);
Global – Broadcasting – Analysis – Digital FTA market in 2004;
Global – Broadcasting – Digital Terrestrial TV

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Tuesday, January 13th, 2004

In a recent broadband presentation by Cisco I came across a very interesting idea, in which the current developments of broadband infrastructure were considered in the context of the development of electricity a century ago.

I was unaware of the fact that electricity was originally commercialised for street lighting, competing with gas companies who were embarking on a similar exercise. Electricity, of course, quickly proved to be the superior technology.

So, it started off as an infrastructure development, mainly deployed by local councils. As a matter of fact, most cities in those days had their own electricity company – and, in some cases, this is still the case today.

I have not come across any debate in historic literature about what the ‘killer’ electricity application would be that would bring electricity to peoples’ homes and businesses.

Obviously big businesses were amongst the first to use electricity – in several instances, well before the cities they operated from had street lighting.

But in the consumer market the subject of killer applications never seems to have arisen – yet this is an issue that is repeatedly used by operators in their attempts to defend their position in not rolling out infrastructure.

I think this is often just an excuse – I doubt that these operators really believe there could be a single killer application.

In the case of electricity there are many killer applications, such as: lighting, heating, cleaning, washing, cooking, power tools, audio/visual, communications, computing and so on.

What has made electricity one of the success stories of the 20th century?
It applies to a very broad range of power demands.
It has Standard Interfaces.
It is connected to every city, suburb, home, and room.
It is Always On.

Surely the similarity to broadband is obvious.

See also:
Global – Broadband – Powerline – Trends and Developments in 2004
Global – Broadband – Powerline – Technology
Global – Industry – Electricity Utilities Applications
Australia – Utilities – Major Players

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Tuesday, January 6th, 2004

The case for fibre-to-the-home (FTTH) is building quickly, with significant developments expected in the USA in 2004. These developments will be led by Verizon, but the main drivers will be, not the incumbents, but local government and utilities.

This is very much in line with what I have been predicting over the last few years.

In 2001 I gathered together the Australian electricity utilities and, under the name UtiliTel, they are now in the process of rolling out fibre-based networks throughout Australia.

The following year I organised the Local Council Broadband Summit and, since that time, I have travelled around, visiting local and regional governments and establishing local Broadband Steering Committees.

I see these projects as the main focus for the broadband technology. Some other operators will probably enter the market – in countries with low broadband penetration, in particular, wireless broadband operators may take the opportunity to move into this space – but I remain sceptical about these developments since, in the end, it will always be cheaper in built-up areas to deliver broadband over fixed networks. Incumbents will initially dump prices in the DSL market, undercutting the wireless operators and then eventually roll out fibre networks, which will be no match for the wireless broadband networks in speed and capacity.

In view of this, any alternative operator needs to develop good exit strategies in case others (the incumbents, or perhaps the utilities) start entering their markets with fibre networks.

FTTH will involve a great deal of cost upfront, with no prospect of a quick return. This scenario is well-suited to utility players but not to alternative service providers, who need a much faster return on their investments.

Australia and New Zealand have underdeveloped broadband markets where a lot of activity can be expected, but some of the more advanced markets will also see some significant advances.

In my birth country, the Netherlands, utilities have always played a key role in new infrastructure. When I was a teenager our street was broken up and the local electricity company PNEM rolled out a cable TV network. For over a decade more than 95% of Dutch households have been cabled and, with the advances in technology over the last five years, many households now have two broadband networks coming into their houses – one based on cable TV/modems and one based on telco/DSL.

In May 2003 three of America’s largest telecom providers, BellSouth, SBC and Verizon, adopted a set of common technical requirements based on established industry standards and specifications for fibre to the premises (FTTP). This could be the shot in the arm that the US telecommunications industry needs to get fibre and very-high-speed data systems off the ground.

See also:
Global – Analysis – Developments – FTTH in 2004
Global – Broadband – Gigabit Ethernet
Global – Broadband – FTTH Infrastructure issues

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Thursday, January 1st, 2004

It is unfortunate that, over the last decade, we haven’t seen a more aggressive play from John Fairfax in the media space. They have been dabbling, and still are, in some of the Internet markets, but I would say that Telstra’s activities regarding Sensis have been more successful in the classifieds and retail advertising markets than those undertaken by John Fairfax.

Without the driving force of a ‘real’ owner the company certainly has been punching well below its weight, and it is critical for the diversity of the media that a quality company like John Fairfax should begin to take on more of a leadership role.

It is therefore with great interest that I observe the company’s interest in the Ten Network.

From a business point of view I applaud this move, and it would certainly strengthen the company’s position in the media shake-out. The major problem I foresee is the total mismatch between the newspaper customers and Ten’s customer demographics. The two organisations operate in two distinctively different consumer markets and this will be a major challenge.

In order to make it all work financially (profitably) the company will, in one way or another, have to align these two businesses so as to generate synergy – and this will not be an easy job.

Both companies have not excelled in the ‘new media’ and this poses another problem, as both newspapers and free-to-air broadcasting will have to change dramatically in the future. They will need to be much more focused on the convergence of the various media, as mentioned above.

Paul Budde

See also:
Australia – Convergence – Massive media changes – Analysis
Australia – Analysis – From telecom to media monopoly
Australia – Broadcasting and Digital TV – Analysis and Overview 2004

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