The second interview I managed to do in Lisbon was of Sue White, who is in charge of Alcatel Lucent’s recently unveiled HLN strategy. I asked Sue to explain what HLN was and how it affected Next Generation Access deployment strategies.
I apologise for the intense shakiness on this video. Definitely need to get a zi8!
Ever since the Google FTTH announcement a couple of weeks ago, the internet (and indeed the real world, for a change) has been abuzz with rumours, analysis, speculation and downright madness in some instances. In the meantime, I have written and published my own analysis of the announcement, accessible to Yankee Group customers under the title Google’s FTTH Experiment Could Profoundly Reshape US Wireline Landscape.
This has led me to also take a deeper look at how bloggers, newspapers and tweeters have dealt with this piece of news and I was surprised and – to a certain extent – dismayed as well to see how polarizing Google’s image is. I guess it’s not surprising that a company so successful should generate such strong passions for or against it but I guess I never realised quite how profound the adulation or the hatred could be.
Here are a few of the arguments, rants, points, or just wild guesses that I’ve come accross in the last few weeks on this topic:
Now some of these might be reasonable assumptions, others verge on crackpot theories. What I find interesting is that I saw very little commentary focus on what was actually in the announcement which, until proven otherwise, is still the most likely course of action for Google.
But perhaps more importantly, this exercice of scanning what is being said on this made me realise that Google has a PR problem on their hands. While there is still a lot of goodwill towards the brand out there, it seems to me that there’s also the seeds of a Microsoft syndrom. An increasing number of people think (and say) that Google is after nothing else than world domination and the Orwellian state. Once that starts, it only takes so long for people to start repeating it.
One thing I heard in nearly every discussion, for example, is that Google as your ISP is a really bad idea, they would know everything about your online self. That’s actually sensible, which is probably why Google clearly stated they had no intention of being the ISP. Strangely enough, many people seemed to disregard that particular aspect of the announcement…
What this really highlights to me is that Google has some serious PR work to do. There’s been a history of disregard for people’s concern around personal information, and while Google has (I think) been relatively careful in the way it’s been using that data so far (whereas the late Phorm hadn’t) the fact that Google has or could have access to usage data is enough to make a lot of people freak out.
I wouldn’t want to be in that place, and it certainly suggests to me that if their FTTH Experiment is to be successful, radical transparency might be necessary. But is that something Google can operate with ?
I did a few interviews at the FTTH Council Europe Annual Conference in Lisbon before my zi6 camera failed me. I also think I need to upgrade to the zi8 for stability and sounds reasons, but that’s another topic.
Anyway, here is the first of the two interviews I could salvage, and it’s with Wolfgang Fischer, the FTTH guru of Cisco in Europe:
I’m finally back home after over a week of traveling in Europe. Bloggers Pauline Rigby and Carlos Bock, amongst others, have already expressed their views of the FTTH Council Europe Annual Conference in Lisbon, so I’ll try not to overlap too much of what they covered, but will nonetheless share my own thoughts.
I don’t fully agree with Carlos that it’s been a year lost, but I think he has a point when he says that facially there was very little different to be heard in Lisbon this year compared to Copenhagen last year. I’ve always said and written that FTTH deployment would be a slow affair and we are certainly seeing that now. The fact that the numbers have hardly budged in Europe is certainly depressing, but it doesn’t mean that nothing if shifting in the background.
Where I do agree with him is that I sometimes feel frustrated with a certain lack of vision from many vendors who form the bulk of this show. When I say lack of vision, it’s really about vendors looking beyond their concrete interests in selling gear and understanding how this market might happen. I addressed some of these issues in my keynote speech on the Benefit Compendium – a study that I have undertaken for the Council alongside Roland of Idate – but essentially, with the exception of Alcatel Lucent and Cisco, I’m not seeing anyone tackling the issue yet. I’ll have video-interviews of executives from both companies up later this week discussing these issues.
I had a lot of interesting discussions behind the scenes though which suggest that there is some awareness that the way the market is being developed needs to evolve. The reluctance of most incumbents to move is becoming clearer every day, and the lack of attractive services is also increasingly glaring. That suggests two topics that will be key in the next 24 months: policy and services.
As I’m fond of saying and did indeed say at a DSM Desotech dinner that I was invited to give a speech at
“Deploying the infrastructure is actually the easy part: it can be solved just by throwing money at it. Getting customers to embrace the new infrastructure is the real challenge.”
On the policy side, it’s becoming increasingly evident to me that the incentives put in place by regulators, governments and the European Commission to kickstart FTTH deployment in Europe have largely failed. FTTH is only emerging in countries where the market dynamics make it imperative for the incumbent to respond to competitive NGA initiatives, and even then only as fast as the threat really is. In every country in Europe where this is not true, deployment is at a standstill. It seems to me that the powers that be need to acknowledge this and look at easing local government involvement one more step to create that impetus.
On the services side, there was a sign of hope in Lisbon, and that was due to Google’s FTTH announcement the previous week. Irrespective of the aims of Google on shaping the North American policy agenda, the fact that they want to experiment with fiber grade services is a positive sign. It suggests that they consider the aggregate number of fiber users worldwide will reach critical mass in two years and be worth addressing as a specific market. That should in turn spur the telcos on to accelerate service deployment for their own FTTH networks when they have them…
I’ve always been one of those who stated that Google had no interest in being an infrastructure player. I guess I was wrong and this is proof once again that disruptive thinking is hard to anticipate (I guess it’s the whole point…)
Google has just announced a few hours ago that they were deploying a 1Gb/s FTTH “experimental” network in the US that would reach 50.000 to 500.000 homes. The announcement is light on details, like for example a timeframe, but reading between the lines there’s a few things that can be derived from it:
One thing’s for sure, this is a big kick in the anthill. I will no doubt be writing a full report on this this month exploring the implications in more depth, so stay tuned!
(Cross-Posted to www.yankeegroup.com)
On Friday I did a video interview with Martyn Warwick of Telecom TV in their ITU studio in Geneva. Last thing I did before I left and I was expecting them to take a week to edit it since they’ve been shooting interviews like crazy over the last five days. And yet it’s already out!
Martyn and I talk about some of the aspects I highlighted earlier this week in my ‘editorial’ on telco transformation (see Of Dinosaurs, Evolution and Suicides). This has been a big topic at the ITU conference this week and I’m cautiously more optimistic than I was when I wrote the piece. Some people clearly get it inside telcos. The real question now is are these people influential enough to make a change.
Anyway, there you have it, and yes I blink as much as I always do in front of a camera (I have no idea why, but I’ve noticed it…) and no, they didn’t get my name right. Oh well, can’t have it all!
If there is one telecom story that made the worldwide press front pages over the last few weeks, it’s that of suicides amongst France Telecom personnel. In case you’re an ostritch and have been living with your head deeply buried in the sand, 24 France Telecom employees have commited suicide over the last 18 months, several of them at their place of work and while France Telecom management points out that not all of these were necessarily work related, that’s the way the press and the unions are presenting the story.
To some of my non-French counterparts, this seems like a whole lot of hot air; this is also the point of view of Telecom TV’s Martyn Warwick in the above article. An esteemed reader and friend pointed out to me that even were all these suicides work related that was still significantly below French average suicide rates. He’s absolutely right, and yet it’s a story. It’s a big story, that has reached well outside of the French borders. It is also a story that has taken a political turn.
A few weeks back, France Telecom’s CEO was summoned to the office of the Minister of Labour and given a talking to. The government promptly pointed out that France Telecom was still a private company and that the minister was not acting as a representative of the majority shareholder of FT but rather as a minister preoccupied with a deep problem amongst the workforce of one of France’s leading companies.
Yesterday, France Telecom’s #2 man Louis-Pierre Wenes offered his resignation; it was accepted. He was the architect of France Telecom’s restructuring plan, largely considered to be the spark for intense employee malaise that led some to extreme measures. Some will call him a victim, others are aready calling him an executioner.
It’s hard to write about this stuff without getting political. Hell, it’s hard to write about it without being overwhelmed by the idea of people who find themselves cornered into taking their own lives and making a statement about their employer along the way. I will try though, because I think that understanding what is happening at France Telecom is vitally important to grasp the challenges facing the telecom sector (and other large businesses) and more widely our economies and societies.
The issue is well known. I’ve talked about it a few weeks ago. Traditional telcos are no longer suited to facing the challenges of tomorrow’s market. Their legacy network is a single-application infrastructure upon which layers and layers of fixes and add-ons have been cobbled together to try and make it more flexible. This technology smorgesbord must be run by people, the equipment installed needs service revenues to justify its cost; this in turn means marketing people to design said services, etc. Traditional telcos allowed themselves to be caught in a death spiral of technology and personnel.
They have become Dinosaurs.
While the issue is universal, the way it has played out in each market has varied. In many countries, the degree of competition is mild enough that none of the existing players want to get into a price war. As a consequence, incumbents and competitors generate considerable revenues and can afford their own “lifestyle”. Some of these competitors have even grown over the years from lean mean machines to more ponderous beasts. Baby Dinosaurs.
We are told that Dinosaurs were at an evolutionary dead-end and that it was a comet that finally made them extinct. Are the modern high-tech dinosaurs capable of evolving? Or will the internet comet destroy them like their long-lost biological cousins?
Internet, indeed, is the comet. Internet has flattened the network. It has allowed for a rich variety of services to run over this magical thing called IP, making the cluttered legacy network of traditional telcos largely obsolete in one fell swoop. David Isenberg theorised this impact over a decade ago in his essay on the Rise of the Stupid Network but few listened.
Unfortunately for France Telecom, it faces a competitor in France who may not have heard of David Isenberg but certainly came up with its own version of the Stupid Network. Going full IP has allowed Free to take a considerable chunk of the broadband market by positioning itself as a clever broadband utility. With roughly 3,000 employees in France and 2000 in their North African call center, Free serves 25% of the French broadband market. It has the highest margins and the lowest churn rates.
Free has set up the market price for broadband and is now setting the market price for FTTH. Unfortunately, this market price makes the lumbering dinosaurs facing it unsustainable in the long run. Now Free is poised to get a mobile licence and France Telecom, SFR and Bouygues Telecom, the mobile triumvirat of the French market are really worried. They know what Free plans to do: just what they did on the broadband market.
In other words, run a fully converged all-IP network from day one, as flat as a pancake, slash prices and make what CEO Niel would call a “reasonable” gross margin of around 30% when established players are living on 70%+. And thus conquer a huge chunk of the market.
France Telecom is well aware of the danger. They have had time to reflect on how to evolve from a government PTT into an agile telecom revolutionary. Unfortunately, they haven’t gone far enough down that path. In part, I suspect because the “Free” model is anathema to their management culture and they would certainly not recognise it at a model to pursue, but also in part because the French employee protection is such that you simply cannot shed half or more of your workforce by snapping your fingers.
Getting rid of even small portions of your workforce is complicated in France, especially when you’re partly publicly owned. This is how most people in France interpret the events within France Telecom: since they can’t easily get rid of people, they devised plans for people to leave of their own free will. They shifted them to jobs hundreds of miles from where they have lived their whole life. They shifted tech people into marketing or sales jobs that they knew full well they won’t perform well in. They made them so stressed out and disgusted that they would leave.
Or commit suicide.
Things have now become so tense around this issue here in France that, as I mentioned before, it’s become a political hot potato. There’s a lot of social discontent right now and the government can’t afford to have an emblematic company like FT become the epitome of its social policies. The “transformation” plan of FT is now on hold until the end of the year.
Meanwhile, president Sarkozy has publicly stated that he wasn’t convinced that a 4th mobile licence was necessary. That’s the result of months of “employment” blackmailing from Orange and Bouygues Telecom mostly. In a (perverse) way, the suicide wave reinforces that side of the debate. The government no longer supports the only candidate capable of sparking a more competitive mobile market.
Hard to predict where all this will go in France, but here’s one thing I can predict: in many countries this fight will soon come to a head and will subtly shift from being “old dinosaurs vs young tech” to being “employment vs social unrest”. And that’s a battle that the newcomers will have a much harder time winning…
And yet the Dinosaurs have the most to lose. If they don’t undergo the transformation they will ultimately become extinct. If the next wave of innovation doesn’t kill them it’ll be the one after.
I don’t know where I stand in this equation, to be honest. I value the level of employee protection and the social net we have in France, but I also recognise it makes people (myself included) more risk averse and less adaptable. And therefore all the more vulnerable when pushed around professionally. On the other hand, I can’t seem to subscribe to a form of institutionalised waste where employment is its own justification. And yet I fear the social consequences of this transformation and suspect few governments will silently accept them.
So there you have it. I want to hope that the old telcos can gradually evolve and grab the opportunities that exist for them in a new and flatter world. It will have a short to mid-term social cost, just like the shift from our industrial economies to service oriented ones didd 20 years ago. Yet I see that the cultural and political resistance will be fierce, and I suspect that a good few Dinosaurs won’t make it. I worry that the disruptive models that technology allows will also be hindered at every turn.
This is not just a story about France. It’s a story about Dinosaurs, which ones evolve and which ones commit suicide (with their governments’ help.)
Edit: Cross-posted to http://www.fiberevolution.com
Edit2: It was pointed out to me that my numbers for Free’s workforce were
out of date. It’s been fixed.
Earlier this week, French regulator ARCEP released the most recent NGA numbers it has collected from the various players in the market. France currently has 50.000 homes subscribing to FTTH services and 180.000 homes subscribing to a HFC cable offer. The progression from six months ago is not insignificant, but the success rate compared to the announced 650.000 homes passed for FTTH alone is not good, to say the least.
There is, however an ambiguity in this homes passed figure. The French terminology in the ARCEP report (foyers raccordables) suggests that these homes can subscribe to the service when in fact, for the most part, they can’t. This is due to the way the service providers report these figures, describing not the homes they have physically connected but the buildings they pass. This, at least, is what the service providers themselves tell me.
The issue that remains crucial in the French market is therefore that of fibering up the buildings, and while the regulatory framework for that has been laid out for comment by ARCEP and recently endorsed by the competition authorities, France Telecom had, until recently, protested that this framework killed their business model and seemed to be lobbying strongly against it, having even threatened to pull out of fiber deployment altogether. But it looks now like their official position at least is changing. It looks like the way is paved for a law to now be passed making that framework official (meanwhile, France Telecom is protesting about the deployment model for Tier 2 cities, but that’s a story for another day).
Right now though, what we are looking at is a very low take-up rate for deployed infrastructure as a consequence of this issue with in-building deployment. The disagreements on the legal framework may in part explain this slowness, but I’m convinced that it’s not by far the only reason.
The main issue in my opinion is that FTTH operators have seen landlords and building managers (syndics) as a hurdle, not as part of the ecosystem.
When I was in Sweden last week, the vital role of landlord associations in shaping the FTTH market struck me once again. More than perhaps any other player in the market, regulator and service providers included, they were instrumental in establishing the service delivery model. They did this by understanding the benefits they would derive from fiber deployment (avoiding customer lock-in, higher rents, building management opportunities…) and by acting collectively. They decided to take some of the costs of vertical deployment upon themselves in exchange for an increased control on shaping the service delivery model (and avoiding a legacy model that had caused them only pain…)
The landlords and building managers in France are a lot less united, that’s for sure. But they also haven’t been addressed by service providers as entities who could benefit from the fiber deployment, just as someone who needed to give their go-ahead (and perhaps would ask for a well-padded envelope in exchange.)
As a consequence, I’m not convinced that the new legal framework will really accelerate things unless Orange is serious about its change of minds on the framework. Orange, like all incumbents, has a clear advantage in dealing with in-building issues: they have been delivering copper services to these buildings forever. They know who the decision makers are, they probably have huge databases of buildings in France and who you need to speak to to get things done.
If they act upon it, then all three operators could be present in Paris quite fast. If they don’t, Free and SFR are going to struggle in clearing this jungle for a good while before anything happens. Unless they can come up with something that the landlords and building managers want.
More generally, I see very few service providers taking an ecosystem view to their deployments and trying to understand what the benefits are to all of the players involved and not just to themselves and the end-customer. I think if FTTH is going to accelerate its deployment, this 360 view needs to happen, and it needs to happen fast.
This post has been cross-posted to www.fiberevolution.com.
What are the technologies that will power the Anywhere Network®? As our old-generation network expires and broadband becomes more utility than luxury, many have begun to question whether a sustainable and profitable business model for fiber exists. With a virtually unlimited capacity, scalability and potential for ubiquitous-ness, the technology itself appears a sure winner in the race for the next-generation network. But what will make fiber a successful investment?
Vendors and service providers have struggled with finding a business model that works for fiber to the home (FTTH). The current single source, one service provider for one customer model is too constrained. Rather, companies must look beyond the historical strategy of investment versus competition, embrace interoperability and work together to employ an open-access model for FTTH.
Yesterday, Wally Swain and I hosted a webinar that explored how an open-access FTTH business model works, how to optimize it and what makes it the best solution for vendors and service providers.
The webinar runs about an hour: audio (mp3) and slides (pdf).
I met with quite a few wireline service providers over the last couple of days, and one topic kept popping up again and again: SoHos. SoHos (Small Office Home Office businesses, or “pros” as we call them in France) are commonly considered to be businesses of less than 5 employees although the definition sometimes stretches to less than 20 and not too service providers define them the same way. In fact, if you want to have a bit of fun at a Service Provider’s expense, just ask them if SoHos are handled by their residential or their business division…
The SoHo market, to me, is probably the most underserved market in the telecom space, partly because it pauses certain challenges and partly because no one has really been clever in covering it (at least that I know of and have witnessed). Some of the issues are as follow:
As a consequence, SoHo offerings are often little more than repackaged glorified (and a little more expensive) triple play offers. And the consequence of that consequence is that in most Western European markets SoHos massively stay with the incumbent which may not have a sexy offer but usually carries along a perception of trust which is crucial to professionals.
To illustrate the lack of creativity that goes into SoHo offers, the one “differentating” service that you see on every SoHo wireline offer is “Fixed IP”. I’d be interested (and amused) to see the proportion of SoHos that know what a Fixed IP is, let alone need one…
But it seems that service providers are waking up to the fact that this is a largely untapped market. About time too! The potential is huge. This is, after all, a mass market, and promises the rewards of any mass market when it’s addressed correctly: oodles of revenue. The nagging doubt that I have still is that this is not the first time I’ve seen this “sudden realisation”, and it never really came to much in the end…
Let’s hope they get it right this time. I think the emergence of NGAs changes the game to some extent: it means there’s sales teams in the field, it allows for interesting new (and business specific) services to be added to the portfolio and it’s an opportunity to rejuvenate dusty telco or cable images.
I’ve been looking into this space now for a while, and it looks like I’ll be continuing in the coming months. If you have experiences to share in that space (great service ideas, clever niche players, horror stories, you name it!) please feel free to comment or email. And meanwhile, if you’re one of these service providers looking into this to refresh your approach, do get in touch, we might be able to help!