Archive for January, 2013

OTE launches retail and wholesale VDSL in Greece

Thursday, January 31st, 2013

Economic background

At the end of 2012 the parliament passed an additional package of austerity measures needed to release an additional €31.5 billion in EU and IMF sponsored funds. The deal may see Greece’s debt cut to in coming years as lenders agreed to cut the interest rate on official loans, extend their maturity to 30 years and grant a 10-year interest repayment deferral. They also agreed to return €11 billion of profits accrued through the European Central Bank’s purchase of distressed Greek government bonds and to conduct a debt-buyback scheme. Yet new debt issued by the government in 2014/2015 depends on doubtful economic recovery, and this may oblige the government to require an additional €50 billion bailout after 2014. In addition, high unemployment and low tax receipts continue to exacerbate poor economic output.

Telecom market overview

The broadband market benefits from extensive infrastructure-based competition. The dominant DSL platform has contracted in recent years as consumers have migrated to FttH networks. This trend will become more pronounced in coming years, compounded by greater adoption of mobile broadband offerings as LTE networks depending on fibre backhaul take shape into 2013. Lower revenue from fixed and mobile telephony has been partly offset by increases from the CATV sector.

Mobile market

The mobile sector is now the largest comms market in terms of revenue. High penetration rates have focussed MNOs’ attentions to mobile data services. These are set to develop swiftly in 2013 following the recent auction of spectrum in the 2.6GHz band. LTE services will become a dominant feature of the mobile landscape, supported by operators’ existing experiences in other European markets.

Key telecom parameters – 2010; 2013

Sector

2010

2013

Subscribers by sector (thousand):
Fixed broadband

2.21

3.15

Mobile (SIM cards in service)

18.0

17.8

Mobile broadband

1.7

2.25

Fixed-line telephony

3.51

2.87

Penetration by sector:
Fixed broadband

20%

26%

Fixed-line telephony

46%

41%

Mobile SIM (population) 118% 116%

(Source: BuddeComm)

Market Highlights

  • GSM licences auctioned in 2012 generated much needed revenue for the government, and have enabled the MNOs to pursue mobile broadband options in their bid to increase revenue.
  • OTE’s suspended VDSL deployment was re-launched in late 2012 following the regulator’s decisions on access and wholesale pricing. The move has boosted the availability of higher broadband data speeds for consumers, so helping Greece maintain one of Europe’s fastest growth in broadband subscribers.
  • The government’s national strategy for fibre access networks is aimed at building a nationwide open access FttH network providing 40% geographic coverage by the end of 2015 at an estimated cost of €2.1 billion (mostly derived from the private sector). Delays have pushed back delivery to 2018, while the regulator has since facilitated negotiations between six telcos to develop a cheaper national FttB network.
  • New regulations for in-building wiring and cable infrastructure oblige all new building to be equipped with ducting systems to facilitate the installation of fibre cabling. The provisions encourage at least two fibers to be installed per apartment, thus allowing for two network competing providers, though this is not mandatory.

BuddeComm’s annual publication, Greece – Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in one of Europe’s more economically troubled countries. The report includes the regulator’s market data to the end of 2011, telcos’ financial and operating data to September 2012 and market developments to early 2013.

For detailed information, table of contents and pricing see:

Greece – Telecoms, IP Networks, Digital Media and Forecasts

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Smart Energy moving into 2013

Thursday, January 31st, 2013

With a better understanding of the complexity involved in the transformation of the electricity industry the words ‘smart energy’ are becoming more prominent. BuddeComm believes that the term ‘smart grids’ is too narrow and that eventually ‘smart energy’ will become the accepted terminology, especially once the communications developments in national broadband networks and mobile broadband start to converge with smart grid developments.

Smart energy signifies a system that is more integrated and scalable, and which extends through the distribution system, from businesses and homes and back to the sources of energy. A smarter energy system has sensors and controls embedded into its fabric. Because it is interconnected there is a two-way flow of information and energy across the network, including information on pricing. In addition to this it is intelligent, making use of proactive analytics and automation to transform data into insights and efficiently manage resources.

This links with the telecoms development known as the ‘internet of things’ (IOT). For this to happen various functional areas within the energy ecosystem must be engaged – consumers; business customers; energy providers; regulators; the utility’s own operations; smart meters; grid operations; work and asset management; communications; and the integration of distributed resources.

With energy consumption expected to grow worldwide by more than 40% over the next 25 years demand in some parts of the world could exceed 100% in that time. This will produce an increase in competition for resources, resulting in higher costs. In an environment such as this energy efficiency will become even more important.

Quite apart from any increased demand for energy in specific markets, the move to more sustainable technologies – for example, electric vehicles and distributed and renewable generation – will add even more complexity to operations within the energy sector

Concerns about issues such as energy security, environmental sustainability, and economic competitiveness are triggering a shift in energy policy, technology and consumer focus. This, in turn, is making it necessary to move on from the traditional energy business models.

As a consequence utilities could end up in a similar situation to that of the companies that invested in the building of the internet infrastructure – they may own the means of delivering electricity and associated services, but may not be able to take advantage of the new business opportunities that will arise. This will limit their opportunities for future growth.

Another problem will surface when, due to users reducing consumption and producing energy themselves through energy efficiency strategies, the traditional pricing models become inadequate in terms of maintaining the energy infrastructure.

The potential for transformation of the energy industry to smart energy is still at a very early stage. Valuable advances have already been made in some areas but consensus needs to be reached regarding a collective approach and technical standards.

Significant progress has been made within the industry in relation to the deployment of smart technologies that, over time, will create a smart national grid. The report provides an overview of all the major smart grid projects and their players, including the international acclaimed Smart Grid, Smart City project.

M2M and The Internet of Things

With the NBN now well and truly underway it is important to look at what will be the real value of this new infrastructure.

The infrastructure that is now being built offers a range of features such as ubiquitousness, affordability, low latency, high speed and high capacity. It will link millions of devices, such as sensors, that will enable us to manage our environment, traffic, infrastructures, and our society as a whole much more efficiently and effectively.

This ‘Internet of Things’ – other names used include: M2M, Pervasive Internet and Industrial Internet – is going to be a real game-changer. It will transform every single sector of society and the economy and it will be out of this environment that new businesses – and indeed new industries – will be born. This is one of the reasons so many overseas ICT companies are increasing their presence in Australia. The NBN is an ideal test-bed for such developments. A great deal of attention is being paid to cloud computing and the NBN can be viewed as one gigantic cloud.

The number of connected M2M devices will grow to somewhere between 25 million and 50 million by 2020. From a very low level the market will double again in 2012 and this will most likely also be the case in 2013.

Smart Meters in Victoria – Case Study

What at one point looked like a disaster story is rapidly turning into a success story. While things have certainly gone wrong in the deployment of smart meters in Victoria the lessons that have been learned have led to a turnaround of affairs and the State is currently looked upon as an example of the benefits that can be gained from smart meters.

With the benefit of hindsight it is clear that the vision of smart grids and smart meters we share today did not exist when the legislation for the rollout was passed in 2008. This led to some of the underlying elements of the plan being built upon the wrong foundations.

This Victoria rollout was prompted by serious electricity outages earlier in that decade. With temperatures more frequently soaring into the 40s an increasing number of air-conditioning systems were being installed and the capability of the electricity supply to deliver sufficient energy during these peaks was being seriously tested.

In 2006 the Council of Australian Governments (COAG) launched a cost benefit analysis for the rollout of smart meters. At that time BuddeComm argued that the MCE (Ministerial Council on Energy)  should consider the broader option of smart grids rather than look at smart meters in isolation.

The program ran into serious difficulties after the Auditor-General of Victoria questioned the cost-effectiveness of the project, as costs were blowing out, from $800 million to $2.3 billion.  Furthermore, a consumer revolt was brewing, similar to those taking place elsewhere in the world. Consumers were forced to pay for the rollout which they perceived did not supply them with any benefit – there had been no consumer consultation or involvement at all. At the same time electricity prices were increasing significantly and it was perceived that meters only served to benefit the electricity companies, who were using them to increase costs further.

The debate was heavily influenced by a media frenzy, fuelling the discontent.

To the credit of the Victorian government they made some tough decisions about the rollout and got the project back on track. They learned from the lessons. Not all the mistakes could be undone and to a certain extent they will have to live with that, but the lessons are extremely valuable for the other states where such rollouts are still to take place.

In December 2011 the government decided to continue with the rollout; however it is implementing the recommendations of the Auditor General. By late 2012 they had turned the corner and turned the project into a positive one.

For detailed information, table of contents and pricing see:

Australia – Smart Infrastructure – Smart Grids and M2M

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Mali set for recovery following intervention on islamist insurgency

Thursday, January 31st, 2013

Mali has market penetration rates below African averages in all market sectors except mobile where it is now racing towards the 100% mark. The division of the country during 2012 with islamists linked to Al-Qaeda controlling the north cast some uncertainty over future developments, but the recent intervention by French and African troops has resolved the situation at least in the short term. The economy contracted in 2012, but GDP growth is expected to recover and remain stable at between 5% and 6% from 2014 onwards.

Alpha Telecom Mali, a consortium of Monaco Telecom and Planor Afrique won Mali’s third mobile licence in January 2012 with a bid of EUR84 million, beating India’s Bharti Airtel and Viettel from Vietnam. The government had reportedly hoped for a minimum of EUR50 million. South Africa’s MTN and Portugal Telecom had shown interest in the licence but did not submit final bids

The licence was to be formally awarded in November 2012 following payment of 60% of the licence fee, with the remaining 40% due in January 2013. However, Planor’s local partner reportedly defaulted on its share of the licence fee, and Monaco Telecom’s involvement in the joint venture was also shrouded in doubt. If these issues cannot be resolved, the licence may have to be retendered

Despite the high mobile penetration in the country, enormous potential exists in the development of mobile broadband services.

Another opportunity to enter the market will become available later this year with the planned sale of a 53% stake in Maroc Telecom, which owns 51% in Sotelma, Mali’s incumbent telco which also operates one the country’s two mobile networks.

For more information, see:

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CyTA upgrades international subsea cable capacity

Wednesday, January 30th, 2013

Telecom market overview

Despite market liberalisation Cyprus’s telecoms market continues to be dominated by the incumbent, which is still fully-owned by the government. Improved regulatory conditions, particularly in relation to network interconnection and access, has given competing operators the confidence to invest in network infrastructure, unbundle local loops and launch competing services.

Mobile market

Two MNOs offer services in Cyprus, along with a small number of MVNOs which are gaining market share. Operators have upgraded their networks with new technologies and infrastructure to exploit the revenue potential from mobile data and broadband services.

Key telecom parameters – 2010; 2013

Sector

2010

2013

Subscribers by sector (thousand):
Fixed broadband subscribers

225

245

Fixed-line telephony

405

405

Mobile phone subscribers

1,030

1,180

Penetration by sector:
Fixed broadband 25% 27%
Fixed-line 47% 47%
Mobile phone 131% 141%

(Source: BuddeComm)

Market Highlights

  • Prepaid mobile subscribers marginally dominate the sector despite lower ARPU from operators. Efforts to migrate subscribers to contract plans are beginning to show effects, with a slow rise in the proportion of contract subscribers.
  • PrimeTel Mobile launched services in mid-2011 and though it has less than 1% of the mobile market by subscribers the company’s success in the fixed-line and TV sectors indicates that greater competition and cheaper access prices will develop well during 2012.
  • Cablenet provides the fastest broadband services in Cyprus, though its network is restricted to a few of the major towns. Its DSL network has extended its reach to other areas, though there is little prospect of capital investment to extend its cable network as well.
  • IPTV has become very popular, with PrimeTel and CyTA offering up to 150 channels. Triple play services are available widely, with Cablenet’s market share growing steadily at the expense of both CyTA and PrimeTel.
  • In 2012 Cablenet deployed a back-office system from SeaChange to support its VoD and time-shift TV services.
  • CyTA has deployed an optical transport platform to enable 500Gb/s transmission on the TE-North Cable System connecting the country to Asia and Africa to Europe.

BuddeComm’s annual publication, Cyprus – Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in one of Europe’s smaller countries. The report includes the regulator’s market data to June 2012, operators’ statistical data updates to June 2012, and market developments to early 2013.

For detailed information, table of contents and pricing see:

Cyprus – Telecoms, IP Networks, Digital Media and Forecasts

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Optus spectrum dilemma

Tuesday, January 29th, 2013

The upcoming spectrum auctions have once again opened up the debate about the mobile industry and its future. Anybody who uses a mobile phone is aware of the problems related to the current infrastructure. There is a decrease in the quality of the voice call and an increase in drop-outs or congested areas; and in relation to mobile broadband we see speed and connection problems.

This all indicates an infrastructure that is under stress – and no wonder, when you look at the enormous increase in mobile broadband over the last 3 to 5 years, and for which, at least in their long-term planning, the companies were ill-prepared. The lack of long-term planning, anticipating this growth, is now creating havoc in the mobile industry, not just in Australia but elsewhere as well. The network problems of Vodafone are a clear example of this.

Another dilemma is that an increase in network capacity does not necessarily supply the returns needed to cover the investments. In general terms the average ARPU of mobile users doesn’t increase in line with the increase in investments. This, in turn, leaves the operators with no option other than to undertake serious cost savings in order to compensate for the financial shortfall.

However, if you are a leading mobile network provider then you have no option but to invest in spectrum. If you do not, your rivals will simply increase their market share, as they can offer better services at competitive prices over more efficient technologies; and that is exactly what 4G, for example, offers to those mobile operators – more efficient network operations.

Mobile operators in the Netherlands were very much aware of the need to buy this spectrum and they paid a premium price for it. If one compares this to the Australian situation then the reserve price set by the government comes pretty close to what the Dutch operators were prepared to pay.

So what does all this mean for the future of the industry?

Let us look beyond the upcoming spectrum auction. Technology experts are already indicating that the spectrum that will be for sale will only last 3-5 years. And, even more frightening, there is no clear-cut technology scenario beyond that. There is no one technology that will be able to handle the extra capacity needed. The industry talks about heterogeneous networks – in other words, a conglomeration of technical solutions cobbled together to make it work. We believe this is what will happen, but it will place a lot of pressure on the quality, security and reliability of the network, as there will be so many different components that could potentially go wrong.

But the reality is that there is no other option.

Another inevitable solution is the sharing of infrastructure. Do we need three separate parallel mobile networks in Australia, all gobbling up spectrum? Of course, it makes far more sense in a situation of scarcity to declare the infrastructure a utility, provide it on a wholesale basis, and have the competition move to the services over that network.

This sounds very similar to the solution several countries have chosen in relation to the future of their fixed network – countries where the old infrastructure is nearing the end of its commercial life, where fibre optics (FttH) is the new infrastructure and there is little hope, for example, of three parallel fibre optic networks. Those governments decided to move towards a wholesale-only FttH infrastructure with competition moving to the services provided over this network.

BuddeComm will undoubtedly receive the same volume of commentary, criticism and abuse over such a scenario for the mobile industry as we received when we first proposed such sharing arrangements for the fixed network in the early 00s. However, to date we have not seen one alternative that overcomes the technical problems in the mobile industry as per the abovementioned scenario.

With the Australian auctions one could start looking at possible alternatives. First of all, Telstra will not look at other options. It will go straight for a bid in the auction. Vodafone, severely wounded over recent years, has already indicated it will not bid for the critical 700Hz spectrum. And Optus is desperately looking for alternative options.

So let us concentrate on Optus ……

In general there are no real options if you want to be a leader in mobile. Financially, Optus depends to a very large extent on its mobile business, so if it wants to maintain its current position in this market it will have to participate – no alternative there.

Having said that, what could happen is that, based on the abovementioned principle of sharing, Optus will sublet some of that spectrum to Vodafone, or develop a similar wholesale arrangement. It might also be talking to other MVNOs, who could underwrite some of their spectrum investments.

Of course, not becoming involved in the auction – and even the sharing scenario – will create a regulatory problem. On the one hand, the ACCC will not simply let Telstra buy the entire spectrum and create a new monopoly – and, in fact, even reducing the future mobile infrastructure to two players will create regulatory issues. This is coming closer to a NBN solution for the mobile industry. We don’t think Optus would favour such a solution at this time but, as mentioned above, we believe that this will eventually become a real issue.

There is a great deal of talk about WiFi at the moment – we would say belatedly.  WiFi has been around for two decades and telcos have taken a half-hearted approach to this technology. It is only two years since Telstra abandoned large parts of its WiFi network. The reason is that WiFi is free and there is no clear way to change this. However it will be one of the most important elements of the heterogeneous future of the mobile networks.

Of course there are other ways to make WiFi work financially, but the telcos do not like this. They want a residential play, not a wholesale play. The alternative would need to be a wholesale or corporate play, with revenue coming from shopping centres, sporting venues, train stations, airports, etc, and so far I have not seen any business models moving in this direction. Operators can use their valuable data to create new wholesale services for those organisations.

So, with little activity from the mobile operators here, if we wait a bit longer this market will most certainly be occupied by OTT players such as Google, Facebook and Amazon, as well as local OTT players who have business models more suited to these advertising models.

The real issue for Optus is whether Singtel will invest the amount required based on the current auction model. There have been persistent rumours that it wants to sell Optus. The telco industry – in the way it currently operates: access and usage, rather than services – has become a utility business and that requires different investors and different business models. While there is constant talk of taking on the OTT players the success of the telcos here has, so far, been very limited.

Paul Budde

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