In theory, the business case for FTTH (and the like) is improving. Total cost of ownership is being reduced continually, broadband demand and traffic are growing, the cost of waiting is increasing, etc.

Verizon (VZ) has closed a wholesale deal with DSL Extreme to resell FiOS internet (not TV or voice), which will be marketed as Fiber Extreme. Fiber Extreme will undercut Verizon's price points. The 50/20 Mb/s service will be sold for $100/mo, whereas at Verizon it costs $150/mo (or $140 if bundled with voice). It is available in 17 states.

One question that keeps being asked is: why don't ISPs move away from the flat-rate pricing model? Good question of course, and not so easy to answer.

ISPs started this offering when always-on broadband made its appearance, most notably at a time when video wasn't part of the internet yet. It kickstarted the adoption of broadband, especially so because consumers don't have a sense of what a MB or a GB is.

Apparently, the regulator nor many a competitor thinks structurally separating the incumbent is needed. In the Netherlands, the situation could be the same. Still, I believe there could be a point in moving the issue up the political agenda. Yes, it's a huge issue, but precisely that may require huge steps.

• Half of the employees of this regulator are former KPN (KKPNY.PK) employees. Most munifiber networks have recently become KPN partners. Are the representatives still objective?
• Structural separation is seen as a remedy, whereas I would see it as good for business. As long as this doesn't change, structural separation will likely not happen. Unless the incumbent totally screws up (Australia), or regulation suddenly changes (US). KPN is well respected (perhaps even too much so), also among competitors. It has a good wholesale portfolio. Further, competitors are not asking for separation. And any competitors still around seem to have a doubtful commitment to the Dutch market (BBned was put up for sale by Telecom Italia; Tele2 is facing large investments in mobile and broadband but hasn't made any commitments yet; Online doesn't sit very well in T-Mobile's portfolio, but there are simply no buyers).
• Separation is unlikely as long as regulators think that competition is at a decent level. In the broadband market, KPN has a 45% share, cable has 40% and unbundlers have the other 15%. The EC is rightfully worried over ongoing incumbent dominance. It looks like the 15% share of altnets will be going down, especially when the market moves toward FTTN/VDSL.
• The advantages of structural separation are not about pricing only. Incumbents like to drag their feet; let's not forget that Openreach's P&L still is included in BT's. Also, separation opens the way to attract third-party funding, or even nationalisation.
• Why do incumbents object to structural separation? Not just because of the disruption and the one-off costs. Surely, it must be because they fear the loss of any synergy benefits of being vertically integrated. And that is precisely why they must be separated: this inequality of enjoying these benefits will only go away once the incumbent is separated. In other words, if incumbents object, they implicitly say they have advantages over competitors. This is not good for true, long-term competition.
• If you think that proper wholesale prices are the way to avoid structural separation, look again. BBned (active operator in Amsterdam's Phase 1) pays only about half of what is proposed now by her employer (14.50-17.50 EUR/mo/line for ODF access to passive FTTH lines). Going forward, active operators and service providers will have to recoup about 10 EUR/mo more from their customers than currently is the case in Amsterdam. Does FTTH have this kind of pricing power? It certainly paves the way for low margins at service provider businesses. KPN will be the only service provider that can afford this kind of pricing.
• KPN will not ony be a service provider, but it also is co-owner of the passive layer (with a call option to a majority stake), and possibly the monopolist of the active layer (which is not regulated), which could lead to serious re-monopolisation. I would like to call upon the regulator to make sure that the active layer doesn't turn into a monopoly (as it will in Singapore). If it does, the wholesale tariffs mentioned above should fall. Further, an active operator monopoly is not good for competition, because true service differentiation arises on the active level. Otherwise, we are stuck with WBA only.

Telstra (TLSYY.PK) is launching the roll-out of DOCSIS 3.0 on its five city HFC network. They are targeting 100 Mb/s to 1m homes in Melbourne by Christmas and claim it is upgradeable to 200 Mb/s. Total spend in 2009: AUD 300m.

Some remarks:

Google's (GOOG) Eric Schmidt described Twitter as a 'poor man's email system'. It is usually described as microblogging, but pulling it into the realm of communications can be enlightening.

I think of communications in a three dimensional matrix:

• Along one axis is the type of message (text, voice or video).
• Along the other is the level of immediacy, ranging from immediate via somewhat delayed to almost time-insensitive.
• A third axis could have the type of device by screen size: inch (mobile device), foot (computer) or yard (TV).

Since I don't have any 3-D skills, this is what would describe the matrix:

Comparisons of FTTH and DOCSIS (.pdf) usually aren't very thorough. So I got some industry intel to help me better understand the differences. Here's a first shot at providing a better comparison.

The conclusion could be that FTTH is superior, but upgraded HFC networks will go a long way. Telco incumbents have a choice: sweat the copper plant (some running into a huge problem because VDSL doesn't handle analogue TV very well); or leapfrog cable and swallow the capex pill.

An ancient question is gaining relevance: will mobile broadband be able to replace fixed line broadband?

At first glance, the answer could be no. The bandwidth difference between fixed and mobile networks remains large. In fixed networks, 1 Gb/s is a reality now in Hong Kong and Lattelecom is working toward half of that by the end of the year. In mobile, Telstra (TLSYY.PK) is leading the pack with 21 Mb/s and upgrading to 42 Mb/s later this year. That's still a large difference and it doesn't look like it will be getting any smaller soon, in a relative sense (Lattelecom already talks about 10 Gb/s, and LTE is some years off).

However, without a video component, mobile broadband looks more and more like a fixed line replacement. HSDPA USB modems have come to the market and gateways are avaliable for connecting up to 4 PCs to the mobile network. The addressable market could be limited (probably business travelers) as broadband is becomig pretty universal and heavy video consumption or P2P file-sharing is not going away (so, giving up on your fixed BB connection doesn't seem realistic). Also, mobile broadband carries much higher opex than fixed broadband, I would suppose.

Now, in Israel operators are asking the government to prevent mobile operators from providing internet services. According to this article, Partner (PTNR) and Cellcom (CEL) are trying to sell mobile broadband services through a gateway. The operators crying foul are asking for 'structural separation' (I think horizontal separation would be a better term) of mobile operators and ISPs. Interesting development, underpinning the view that mobile broadband is indeed becoming a fixed line replacement.

What was rumoured before is now a fact: Sol Trujillo will step down as Telstra's (TLSYY.PK) CEO by June 30. The board expects to have found a successor by that time.

This is potentially good news for all who believe in open access FTTH. The real reason for Trujillo's departure may remain undisclosed, but under his rule a way back into the NBN process would have been impossible. There's a good chance that the board realised that change has come to the telecoms sector and open access is the name of the new game. Trujillo typically believed in a closed network and vitriol-rich press releases to undermine his rivals.

Skype was probably rumoured to be for sale the day after eBay (EBAY) bought it. Recently, at the Q4 analyst meeting, new speculation found fertile soil. I added a little myself.

There is an interesting case for incumbents to take a look at Skype (which is not a very new idea). Not only would they buy back some lost revenues, but they would also expand internationally (including emerging markets, where they all want to focus their investments at this point - talk about following the crowd). I particularly like the option to buy an international brand name that could be extended to include other services (such as operating the services and the active layer in FTTH networks throughout Europe).

There has been some noise on the Long Tail Effect [LTE], as per Chris Anderson; Will Page has demonstrated that it does not occur: "more than 10 million of the 13 million tracks available on the internet failed to find a single buyer last year."

STL recently put forward a popular view of telecoms as a defensive sector in today's financial and economic turmoil. Still, they feel things could change:

The audience at our November event seemed comforted by the appeal which the capital markets currently find in telecom as a defensive sector. However, we also stressed that this is likely to be a fleeting phase, as underlying concerns about the industry’s ability to generate sustainable value will return.

Three important developments this week in FTTH:

• Axia NetMedia (AXX) (discussed before) detailed its plans for Australian NBN. If the company gets its way, it will build FTTP, not FTTN.
• The same firm bids on the active layer of the Singapore network [NGNBBN], with Cisco (CSCO). It's somewhat puzzling to see Axia bid alone on the Australian NBN, but naturally it needs partners, with SingTel (on the NGNBBN passive layer), or against SingTel but with Cisco. Maybe there's room to band together before contracts are signed.
• Swisscom (SCMWY.PK) has the revolutionary idea of laying 4 fibers to each home in its FTTH plans. It will use one itself, leaving room for three competitors to engage in infrastructure-based competition.

Plus, a worthwile interview with TransACT's former CTO Paul Brooks:

Benoit had an exciting experience of being in a telepresence conference. The equipment was put together by Cisco, probably the market leader. Interestingly, I got in touch with a competitor, back in October: Teliris. The company is privately held (Fidelity Investments holds a stake), but its site is quite informative. Also, the CEO Marc Trachtenberg has a blog ("Before you even think it – NOOOOO Cisco did NOT start the telepresence industry. A company called Teliris did.")

To add to Benoit's story: I posted before on the telepresence market and put together a number of market players, taken from this article. Besides Teliris and Cisco they are mainly Tandberg (TADF.PK), Polycom (PLCM), LifeSize and Telanetix (TNXI).

The people at Teliris threw some interesting info at me:

My son takes swimming lessons, and I discovered there is something distinctly fishy about it. It has all to do with perverse incentives: the teachers have no interest in making him go through the course in the shortest possible time. That would only endanger their jobs.

No, this story will not lead to the GFC (global financial crisis), but to telecoms regulators. They too are perversely incentivised. They have no interest in deregulation, because it will make them lose their jobs.

KPN's (KPN) FTTH proposal and Telstra's (TLSYY.PK) NBN bid couldn't be further apart. It's open access thinking (driving utility rates and thus volumes) versus denying that telecoms are a volumes business (and charging as much as possible for the service). Of course, it's also FTTH versus FTTN.

Let's hope the Australian contenders - Optus/Terria, Acacia (ACTG), Axia NetMedia (AXX) - will be able to put aside their differences and join together. After all, they are all open access aficionados as well.

Conventional wisdom is: an incumbent building a NGN equals re-monopolisation; it therefore must offer open access to rivals. But if it has to offer open access, it has no way of earning a decent return on NGN investments.

So much for conventional wisdom.

Last week, KPN's FTTH plans were leaked - possibly to test investor appetite for large-scale FTTH investments. Officially, they are testing demand and will decide 09 H2 to go either FTTH or FTTC. Whatever is the case, the coming week will be eventful. Not only does it have Australia's NBN deadline, OPTA (the Dutch NRA) will publish a proposal on rulemaking regarding FTTH Monday night (at 7 PM).

It will be very interesting to see how they plan to regulate this huge effort, that could entail re-monopolisation of the market if it is not regulated well enough.

The word is out, but no big surprise for our readers: KPN (KPN) and privately held Reggefiber will build out FTTH nationwide in the Netherlands, spending EUR 6-7bn over five-seven years. Vincent Dekker gets the credits for digging in. KPN and Reggefiber are planning a joint venture Glashart (originally Reggefiber FttH), with KPN taking a 41% stake + option to a majority.

Just a few comments/clarifications:

How long has it been since a great new Web 2.0 service was launched - or bought for a crazy amount of money? Has innovation come to a grinding halt?

Take a look at Twitter or LinkedIn; seem like the latets fads, but they have been around for quite some time (Twitter mid 2006, LinkedIn launched May 2003).