ideotel

French government’s €750M initiative for FTTH: is France going to be the next Australia?

It always upsets me a little to hear that Australia is leading the world in FTTH. After all what have they done other than a big announcement and hiring top class consultants?

That seems little compared to the richness of initiatives in France, from big announcements of major operators to local initiatives from municipalities – not mentioning a clarified regulatory framework for sharing infrastructure.

And last month I received a letter signed by three Ministers – I am truly honoured – asking if Covage would participate alongside major operators in a public consortium to fund FTTH deployment and what would be our thoughts on how to structure it. 

This initiative has already been announced as a €750M commitment over three years. That’s a far cry from the $43Bn announced by the Australian government. But the French amount is only the seed money whereas the Australian one is the fully leveraged amount. If one adds the funds already committed by operators in dense areas, the past and future contributions from municipalities, the funds coming from the economic stimulus package, and a reasonable financial leverage, the total can qualify as a major national effort. 

So the point is not how much but how. 

The second part of the ministers’ question is the most interesting. What is the appropriate structure to be successful? In our answer there will be four key criteria that I will gladly share because I have already communicated them to the ministerial counsellors:

•  It should be an open access consortium. That is the only way to combine efforts from leading operators without being seen as an anti-competitive vehicle by the European Union lawyers.
• An independent entity should manage it. Once the funds have been committed and the strategic objectives defined by the shareholders, the Board should be able to independently decide where and when to start. This guaranties that no shareholder will try to block the consortium to protect its market share in a specific area. 
• Consortium members who are also retail operators should commit to buy FTTH lines from the consortium. Quotas could be defined according to market shares. This would ensure that the FTTH deployments are effectively used to provide services to the end users and generate cash flows that, in turn, enable leverage with bank loans. 
• A significant share of the Consortium’s resources should be reserved for partnership with local authorities, between 30% and 50%. This would leverage the funds that the local governments are ready to dedicate to FTTH while guarantying them a framework for their investments. 

And we are not shy to say…that if those good principles are adopted…France could be the next Australia!  

It's good to be a commodity

I just received in my mailbox the executive summary of yet another report offering advice to next generation network operators on how to capitalize on the growth of content value and avoid being relegated to a commodity access service. 

I just want to say how happy I am to be commoditized! 

As the former manager of a retail operator with a strong consumer focus I know how hard it is to monetize the content that is carried to the end user. Some very smart broadband operators are able to capitalize on voice, television or video on demand. But in general, content and services are very expensive to produce, extremely competitive and almost always - except in the case of premium content - face a free alternative. 

Web content providers are like gold prospectors competing for a vein that they know will only make a few of them rich. But the smart entrepreneur who sells spades to the gold diggers is more likely to have a profitable business - even if a spade is by any means a commodity. And the good news is that the rush in the digital world is predictably going to last for a very long time. A look at the poor quality of a streaming video over a cable, DSL, or 3G connection will show the incredible demand in capacity that lies ahead of us. 

Of course being a capacity - or commodity - provider doesn't mean that you should not try to provide value added services.  The right services are the ones which help retail providers to carry out their mission, not the ones that compete with them. Anything that lowers the cost and improves the quality of the services that they provide to end users will be a relevant service. Most frequently these services rely on mutualisation of infrastructure: network planning, co-location, multi-casting, legacy protocols encapsulation, etc. Next generation network operators who satisfy the growing demands of content providers should eventually generate the right revenues to pay for network upgrades and shareholders' return. 

And please continue to disparage commodity providers. It's always good to be in the business with less competition!