My man Om is working on a piece on BT Group (NYSE:BT) for Business 2.0, and was kind enough to call me for my thoughts yesterday. One of the things I highlighted in my comments was that I had concerns about how the current structure of BT (or any other integrated carrier) could deal with the complexity of reconciling the very different commercial agendas of its retail unit with a structurally separate access unit.
I did say that, to its credit, BT is further along this learning curve than anyone else, by virtue of the fact that no other carrier has faced this scenario yet. Little did I know at that time that Viviane Reding was about to drop the structural separation bomb in a speech last night.
Take some time and read it through. I note with interest the idea of an independent European regulator, a single pan-European spectrum management agency (which sounds like an absolute nightmare), and the concept of structural separation as a method for dealing with regulatory obfuscation. In particular she lays down some very downbeat comments towards Germany, citing its low level of capital investment in telecom as well as its relatively poor levels of broadband penetration - both of which it would seem she lays at the door of regulatory inertia. Note in particular her adamant message that VDSL and FTTx do not constitute new markets exempt from regulation (I have argued this for some time), and that a move towards unilateral regulatory policy would set a dire precedent which would damage Europe as a whole. Pretty strong stuff.
I am puzzled, however, by the extent to which she seems to be enamored of the AT&T (NYSE:T) breakup (failing to mention that it has all but recoagulated over the past year) and the dual-infrastructure (DSL/cable) nature of facilities-based competition in the U.S. In my experience, none of the brighter minds in the industry in the U.S. are anywhere near as sanguine about the situation on the ground there, and many would argue that the entire access formula needs to be rethought from scratch. The pressure to do so in Europe will also increase, in my opinion, as the move to FTTC/VDSL, even without regulatory holidays, poses some seriously high barriers to competition.
Consider what I was trying to say here regarding KPN's migration to a network of 28,000 local access nodes - even assuming that the consultation results in the regulator giving a higher comfort level to the existing unbundlers, they will still have to foot the bill for backhaul and other technology migration costs, let alone the cost of colocating their own street cabinets (which may not even be possible under planning restrictions in some areas). The legal wranglings have yet to even get going.
BT 1-yr chart: