BuddeBlog

Last year I reported on the launch by Iliad in France of its FttH plans, in collaboration with local communities and during my European trip I did get an update of the current situation. Since September last year Iliad has rolled out fibre in Paris, in association with the city council. Interestingly, this has resulted in the two other major players also becoming involved in FttH rollouts, with both France Telecom and neuf Cegetel launching their own FttH initiatives.

Paris fibre competition – 2007 (Source: BuddeComm)

• Iliad – Started in September 2006, €1 billion rollout
• Neuf Cegetel – Plans 250,000 connections by 2009
• France Telecom – Plans 200,000 connections by 2008
• Noos (cable company) – Also plans to become involved
• Departement Haute-de-Seine (upmarket) – Own municipality plan city subsidy: €70 million

On a national level the French Government has targeted four million FttH connections by 2012.

In addition to these important initiatives in France, in Germany fibre competition has taken off in Cologne. Looking at the many FttH projects that are currently underway, further competition is expected in this market. Telcos and cable operators are experiencing increasing competition from municipal fibre initiatives.

The network in Amsterdam is a classic example. Twice, the US based cable TV company UPC has unsuccessfully tried to stop CityNet by challenging the City of Amsterdam incourt, one case from UPC is still running at the European Court. Both suits were disallowed and there is still a case running against the City by one of the cable companies. However, on the day we had our Australia-Netherlands Roundtable in Amsterdam the first fibre connection went live, amid a great deal of national and international publicity.

Municipal fibre is clearly here to stay and reluctant incumbents face being left behind in their most critical markets. Interestingly, in Almere (a satellite city of Amsterdam that we also visited during the Mission) it has been rumoured that KPN will come to the party and will work with the local city authorities to build an open fibre network.

Vienna and Zurich are some of the other European cities involved in FttH rollouts.

I have also made regular reports about the open fibre network that exists in Stockholm. This was the first municipality to start rolling out its own dark fibre network as a utility for other telcos, and later on for ISPs, to use. There are now some 35 operators on this network. However, all of them have simply continued to provide access and very little, if any, value-added services. Their profitability is very low and a serious rethink is underway.

In the meantime, Fastweb has demonstrated that value-added services can be a successful strategy, and other broadband/fibre telcos are now looking seriously at the Fastweb model as a possible better way forward (see below for more on Fastweb).

The Danish government has launched an ‘undergrounding’ plan which would see underground fibre networks connecting up to 35% of the country (representing some 50% of the population) by 2008/2009.

In the meantime major fibre action has moved south, with Greece, Spain and Italy presently adding most of the new projects to the European scene.

As is happening elsewhere, these projects are also driven by municipalities, based on economic development and social welfare. In all, over 70% of all the European fibre projects are driven by local communities for economic and social welfare purposes. The situation in southern Europe often makes it a bit easier for local councils to take part – the EC guidelines allow for local governments to participate if there is evidence of market failure.

Another interesting development is that the threat of municipal fibre, competing against established networks, is often sufficient for the traditional players to start jumping on the bandwagon and investing in their own fibre networks.

For more information, see separate reports:
France – Broadband Market – Overview, Statistics & Forecasts;
France – Convergence – Triple Play & Digital TV;
Germany – Broadband Market – Overview, Statistics & Forecasts;
Germany – Convergence – Triple Play & Digital TV;
Sweden – Broadband Market – Overview, Statistics & Forecasts;
Sweden – Convergence – Triple Play & Digital TV;
Greece – Telecoms Market Overview, Statistics & Forecasts;
Switzerland – Broadband Market – Overview & Statistics;
Austria – Broadband Market – Overview, Analysis & Forecasts;
Austria – Convergence – Triple Play & Digital TV.

According to Infonetics Research’s report "Service Provider Next Gen Voice and IMS Equipment," worldwide service provider next gen voice and IMS equipment sales are up 4% sequentially and 26% year over year. The market is expected to more than double between 2005 and 2009, from $2.5 billion to $5.8 billion.

Some notable movers and shakers this quarter include Nortel, which recaptured its leadership position in the $2.8 billion media gateway and softswitch market; Cisco, which is making serious inroads into the media gateway market and is now second in the media gateway/ softswitch market; and Sonus, which has a strong book of tier 1 customers and is considered by many the go-to manufacturer for pure- play.

Carrier VoIP/IMS Market Highlights
The media gateway segment is up 11% quarter-over-quarter and 45% year-over-year
The session border controller segment grew 8% QoQ and up 102% YoY
As more traffic becomes IP, softswitches will increase their share at the expense of media gateways
The number of worldwide residential and SOHO VoIP subscribers nearly doubles between 2005 to 2006 to over 47 million

Revenue leaderboard:
Cisco had another big quarter for trunk media gateway sales, up 22% to maintain the lead they grabbed from Sonus the previous quarter
Nortel leads in worldwide softswitches
Acme Packet leads in the fast-growing session border controller (SBC) segment
RadiSys is the worldwide leader for media servers
Broadsoft leads in voice application servers

The report shows worldwide PBX/KTS sales grew 5% sequentially to $2.3 billion, with annual sales expected to pass the $10 billion mark in 2008.

The IP PBX segment, which includes hybrid and pure IP PBX, continues to post strong growth, with worldwide sales up 8% to $1.9 billion in the third quarter, led by the pure IP segment. IP PBX sales are forecast to continue growing in the double digits through at least 2009, when worldwide sales will reach $11.1 billion.

The third quarter turned out to be a good one for most vendors, and a great quarter for Avaya, Siemens, and NEC. The third calendar quarter is the end of the fiscal year for Avaya and Siemens, which helped both turn in a strong performance. NEC has a high exposure to the Asia Pacific region, and benefited from a seasonally strong quarter there. But even vendors without those factors on their side turned in a decent performance, including Cisco, who had a blockbuster quarter last quarter and maintained its lead in the North American IP PBX market.

For more info: www.info.infonetics.com.

See also:- Digital Content Markets

In April 2007 Vodafone Australia revamped its digital music offering, launching Vodafone Music Store – a new, dual delivery (mobile and PC) track download service accessible from both 3G phones and fixed or mobile Internet connections. Vodafone Music Store tracks were priced at $1.99.

Vodafone prices albums at $15.99. Vodafone has migrated its entire music catalogue, with as many as 500,000 tracks, to the new online store. It offers breaking music news and information, exclusive artist interviews, gig listings and celebrity playlists.

In late 2008, Vodafone launched its unlimited mobile music download service ‘MusicStation’ at a flat weekly fee of $2.75. The MusicStation, available exclusively to Vodafone customers, provides access to a catalogue of over one million tracks with no download fees within the subscription period, including music from Universal, Sony BMG, EMI and Warner, along with a range of local and independent artists including Shock, Liberation Music, All Killer, Blue Pie, Destra and MGM, contributing to the MusicStation catalogue. The application can be downloaded free from Vodafone Live! and is available on handsets from LG, Nokia and Sony Ericsson.

To better manage electricity networks
All round the world energy companies are increasingly beginning to deploy Broadband Powerline infrastructure (BPL). A major factor in this trend, of course, is the current global warming debate.

The focus of BPL has changed within the last year from broadband connectivity to smart meters on broadband infrastructure, which allow householders to reduce energy costs and energy companies to better manage their network.

Network management is a critical issue. An electricity utility can lose 30 days of profit in a 30-minute electricity spike.

If that’s not an incentive to do something, then I don’t know what would be.

As I have reported in previous analyses of smart meter deployments; if information about the individual electricity usage of a household is made available to the owner, energy savings of up to 15% begin to occur – simply by letting people know what they use, and how they rate in comparison with neighbours, the street, the suburb, etc.

Information about linking individual energy savings to saving trees and reduction in carbon emissions also creates awareness and provides an incentive to change old habits. With the right political will a national BPL network established for this purpose alone could earn itself back in five to ten years. And, of course, much more can be done with such a network.

Looming shortage in local access capacity
Electricity companies already have very extensive telecoms networks in place and for a long time they have sold off their extra capacity to telecoms companies.

A similar development is envisaged with BPL. To provide an optimal BPL service electricity companies will drive fibre as deep as possible into their network, limiting BPL to inhouse deployment, and perhaps a few hundred metres between the house and the distribution network. This can be designed on a ‘needs’ basis – some areas with more or less fibre, some with faster or slower fibre upgrades.

By the end of this year it will become evident, globally, that the telcos simply don’t have enough capacity in their local access networks to cater for all the new services that people are using, especially video-based applications.

The electricity companies have a role to play here as well. They can make available some of their BPL capacity to alleviate the looming local access capacity problems. Every little bit of local access relief will be welcome.

Tackling global warming
However, as mentioned above, the big driver at the moment is global warming. Several states in the USA now have energy-saving commitments in place – for example, no new power plants. Such initiatives will create problems if we don’t start using the energy produced by existing power plants more cleverly (for the purpose of this article alternative energy sources are not taken into account). States such as California, Michigan and Wisconsin are leading some of these developments.

In Europe, Germany and Spain are still ahead of the rest, but interesting developments are also taking place in the Balkans.

BPL in developing countries
The developing world is also moving forward. Mexico has nine very ambitious regional plans and Venezuela and Costa Rica are also starting trials.

An interesting problem has arisen in Brazil. In that country 40% of electricity is illegally tapped off. Smart meters could assist in preventing this, but nothing is being done as it would be too disruptive for Brazil’s fragile social fabric.

BPL – better than wireless
BPL is also winning over wireless. During the last decade thousands of WiFi systems have been installed on campuses around the world. However, because of natural features (hills, trees) or building materials (concrete, steel), the original wireless deployment eventually often ended up twice the size of the initial plan, making it far more expensive than originally envisaged. Furthermore, the backhaul from these campuses through the fixed network is also an expensive exercise. Some of these systems in the USA are now being replaced by BPL. Nevertheless there will of course be plenty of room for both technologies to co-exist.

Smart Meter Summit – Sydney, 4 April 2007
On 4 April we will explore what smart meters can do for Australia. The Smart Meter Summit has attracted the attention of the Labor Opposition and they have indicated their willingness to show leadership on the issue. After their keynote address the Roundtable participants will discuss possible future directions for this technology.

Vodafone follows Telstra with an HSDPA launch – Vodafone launched its HSDPA mobile networks on Friday, following Telstra as the second mobile operator to enter what they call the 4G arena (we classify 4G as an IP based –cheap- wireless broadband technology which HSDPA is not). Vodafone has targeted its initial HSDPA offerings directly to the business segment, with products that include an HP laptop with integrated modem and Vodafone access software, and Vodafone Mobile Connect laptop PCMCIA cards.

Telstra is entering the market with a similar initial HSDPA strategy with its ‘Next G’ products, described as ‘premium mobility services’, appearing to more aimed at the business market. Optus and Hutchison have yet to confirm their HSDPA launch plans.

Vodafone offering fails in three out of four key criteria
If mobile offerings such as HSDPA are to compete in the wireless broadband arena as a real mass market alternative to fixed line broadband offerings, they must be competitive in four key areas:
1. Price;
2. Speed;
3. Network reach and capacity;
4. Target customer market.

However Vodafone’s initial HSDPA offering in fact fails in three out of four of these key criteria.

Price
Current HSDPA prices are ridiculously high if the service is used for broadband access. Vodafone is charging $100 for 1GB plan whilst Telstra’s most expensive is $199 per month with 3GB of downloads. Considering you can get a fixed line cable broadband monthly plan with a 5GB for around $40, there is no possible way that HSDPA will crack the mainstream user broadband market at present.

Vodafone claims that its new service is aimed at the business sector, but it does raise the question of whether it has a lot to do with the fact that the service is so expensive, that it is unlikely to appeal to any other market segment. Vodafone’s entry level plan at $29.95 is reasonable but with only a 100MB monthly download limit it will be unsuitable for most users, especially business users who are in fact their actual target market!

Network coverage
Vodafone has switched on its upgraded systems in the inner suburbs of Melbourne and Sydney, putting forward the reason that Australian business is most highly concentrated in Sydney and Melbourne. It will rollout in other area depending on demand. However such a limited rollout sounds more like a trial than a launch. Inner suburb coverage areas are fine for business during the day but what about if the user wants take their work home??

Target customer market
The target market of mobile warriors in the business sector is such a tiny slice of the overall data and broadband market, that even strong uptake will have minimal impact on the overall revenue streams of the likes of Telstra and Vodafone.

Speed
Speed is the only one of the four criteria that Vodafone’s new service currently passes (but only just). Vodafone promises to deliver customers download data rates of between 600Kb/s to 1.4MB/s and peak uploads of 384Kb/s. On the other hand Telstra promises speeds of 14.4Mb/s by early 2007, 40Mb/s two years later, and by 100Mb/s.

In conclusion
We remain however very unconvinced of HSDPA as viable mass market wireless broadband alternative. Mobile networks have been developed to be optimized for voice services, and there remains a very big question mark as to whether they will be able to deliver mass market wireless data/broadband services cost effectively. The total wireless broadband itself is by our estimation unlikely to exceed about 15% to 20% of the overall broadband market. Within that niche market, 4G mobile will have to compete against other wireless broadband offerings such those from providers such as Unwired as well those linked to the evolving WiMAX standard. At present we don’t see 4G being taking more than a small slice of this 15% to 20% market share over the next five years.

Phil Harpur

See also:
Vodafone Australia
Australia – Mobile Communications Market