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European Research Notes |
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European Research Notes |
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Convergent Communications Europe
by Jonathan DoranEvent
Following on from the likes of Thus and Versatel at the beginning of the year, Energis UK has announced its withdrawal from local-loop unbundling (LLU), citing high fixed costs and incumbent BT's continuing effective monopoly on local access as the main reasons for its decision. Unable to see a business case for LLU in Britain, Energis will instead follow the wholesale/resale model for providing DSL, leasing wholesale access from BT (or other operators which may secure unbundled access) to be resold under its own branded portfolio. Energis also criticizes BT's wholesale DSL service as too expensive, demanding that the operator reduce wholesale prices to a level that reflects implementation costs.
Analysis
The Energis case sums up the plight of broadband in Britain, with another major operator pulling out of the race for competitive, infrastructure-based DSL provision. BT's counter-argument to LLU protests holds that alternative operators' lack of capital has stifled demand for unbundled lines. In a way, both sides have a point: funding retrenchment has forced many operators to reconsider plans for an uncertain broadband play. Stronger players—such as Energis—which appear to be weathering the storm, are right to object on principal to the high costs of LLU and wholesale access.
Recommendations
The struggle facing alternate operators entering Europe's LLU markets are examined in a new Yankee Group Convergent Communications Europe Report "Into the Labyrinth: Untangling the Real Cost of Unbundling," which focuses on the costs of collocation within incumbent local exchanges. The start-up costs for LLU are substantial and present a significant risk for would-be competitors in the broadband arena. Before committing to investment in unbundling alternative, operators should:
- Examine the underlying costs of LLU and its associated administrative hurdles, which vary considerably between countries,
- Carefully assess potential demand and the importance of achieving economies of scale, and
- Consider the wholesale/resale option and push regulators and incumbents for wholesale terms that allow worthwhile margins.
Wireless/Mobile Europe
by Philip TaylorTrend
Across Europe, mobile network operators are, through the launch of GPRS, beginning their odyssey toward IP services and 3G. While the launch of GPRS has rightly been looked upon as a milestone in the evolution of wireless networks, this journey has only just begun. Over the coming months and years, fundamental issues pertaining to the development and pricing of services transmitted over packet networks will need to be resolved. These decisions will have lasting impact upon operators' role within the delivery chain for mobile services, their ability to add value to subscribers, and ultimately, upon their financial viability.
Market Impact
By October 2001, 50 out of the 65 mobile network operators in western Europe had launched GPRS services. Although GPRS handsets still represent a very low proportion of those available from high street retailers, the majority of GPRS operators have now launched commercial tariffs aimed at consumers.
However, debt laden and risk averse (for the moment) many operators are, they are obviously reluctant to spend additional funds on upgrading or replacing their billing systems to the degree that will be required if real service and pricing innovation is to take place. We estimate that only around one third of the operators offering GPRS have done so through the acquisition of new billing software, with the majority opting to tweak systems in-situ to cope with packet pricing. While requests for customer care and billing (CCB) proposals are still being made, billing system vendors note that many of these have been put on hold.
Conclusions
- Operators have a choice as to whether they adopt end-to-end solutions such as Convergys' Atlys and ADC's Singl.eView, which entirely replace CCB systems in place, or modular best-of-breed solutions, which interface with existing systems. While operators' decisions will vary according to their services roadmap, their technical philosophy, and an assessment of the balance between investment and performance, what they cannot afford to do is sit on their hands for much longer.
- CCB functionality will increasingly become a vital source of competitive differentiation. Despite an understandable desire to shy away from further investment, operators must bite the bullet sooner rather than later if they are to get to grips with new business models for mobile data.
Internet Market Strategies, Internet Strategies Europe
by Andy GreenmanEvent Summary
BT has admitted it has been restricting its Openworld ADSL subscribers access to some Web sites. The news vindicates claims from users who claimed BT has been using a policy known as "port throttling" to cap the speed to specific servers. In particular, BT has restricted access to peer-to-peer (P2P) sites. BT claims that heavy P2P users were endangering the entire network and action had to be taken. Was port throttling a good strategy to deal with heavy users?
Market Impact
Admitting to port throttling will add further doubt over the incumbents' broadband capabilities. By August 2001, BT had only managed to attract 90,000 subscribers to ADSL and is drawing criticism from multiple angles. BT is now offering free ADSL upgrades to narrowband users, in an attempt to win over the public, but this latest admission sends out a confusing message.
Consumer confidence maybe damaged. ADSL costs US$60 per month in the UK, well beyond the reach of most Internet users. Loss of interest in BT's ADSL offering will also impact on Freeserve and AOL, which are both trying to push their own ADSL services.
This is good news for cable operators NTL and Telewest, which operate cable modem services as an alternative to ADSL. While major differences exist between the two broadband technologies, for consumers, at least cable modems appear cheaper and do not have a tarnished reputation. This week NTL announced a 128 Kbps cable modem offering at US$22.
Recommendations
- Consumers must have their expectations of broadband clearly set. Many ADSL providers in Europe already impose a maximum data download per month. This will mean a new tariff structure for BT, which sets a maximum download allowance per subscriber. Once this maximum is reached the consumer must start paying a metered rate for the volume of data they consume.
- Many will view this as a step backwards from the always-on promise of broadband. If the download limit is set at a reasonable level based on average user requirements, charging a metered rate based on volume helps to protect incumbents backbones; it stops a small minority abusing faster access speeds and challenges the expectation that everything on the Internet should be free.
- The major challenge is price. At US$60 per month—three times the cost of flat-rate narrowband—consumers will feel cheated if limitations are suddenly imposed.
Wireless/Mobile Europe
by Declan LonerganEvent
In the week beginning October 8, German 3G license holder Group 3G (owned by Spain's Telefonica and Sonera of Finland) attempted to bring some clarity to the current state of nervousness surrounding the introduction of 3G services in that country. Through a combination of official statements and comments from the CEO, Group 3G announced that its 3G service would be launched in first quarter of 2003, its service brand name would be "Quam," and it is now targeting a 10% market share within five to 10 years. The company also recently announced a wide-ranging collaboration with KPN-controlled E-Plus for 2G/2.5G service roaming and 3G network sharing.
Market Impact
If ever a market needed some clarity, it's 3G in Germany. Unfortunately, this week's announcements, from one of the two new entrants among a total of six license holders, will not mark the end of the jostling for position that has characterized the German market over the past 12 months. In that time, we have seen speculation ranging from Sonera attempting to sell its stake in Group 3G, to the possible merger of two license holders (E-Plus and Orange-controlled MobilCom), to Orange abandoning MobilCom altogether and buying E-Plus. The reason for the uncertainty is a growing consensus, among industry observers and participants alike, that there is simply not room for six successful 3G players, even in a wireless market as large as Germany. This reality is emphasized by MobilCom's recent assertion that it is targeting a third or fourth market share position, despite the fact that it is starting from scratch as a new entrant to the 3G market.
Conclusion
The inescapable truth, and one that the Yankee Group has expressed ever since the licenses were first awarded, is that at least one of Germany's 3G licensees will not survive to profitability. This was evident even before the onset of the current recession affecting the technology and telecommunications sector. The recent murmuring about possible M&A activity among the German license holders only serves to illustrate these companies' growing acceptance of that harsh reality.
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The Rise of the Inter-Business Network: An Architecture for Competitive Advantage
BCAv6n12, Report, October, by Lisa WilliamsSolving the In-Home Connectivity Dilemma: Discovery Protocols and Home Networking
CMCv18n12, Report, September, by Milosz SkrzypczakCollocation: More than Just a Real Estate Play
CSNEv2n10 and WCSv1n9, Report, October, by Courtney T. Quinn and Mary ReganGlobal Trends in Communications Regulatory Structures, Part 1: Asia-Pacific, Africa, and the Middle East
GRSv1n5, Report, September, by Dianne NorthfieldGlobal Trends in Communications Regulatory Structures, Part 2: Europe, Latin America, North America
GRSv1n6, Report, October, by Dianne NorthfieldNTT DoCoMo Introduces FOMA 3G
JMSv2n10 and WMAPv2n12, Report, by George Hoffman and Naoto NakagawaIPv6: Addressing the Needs of the Future
SSSv1n13, FLASH, November, by Zeus Kerravala and Matthew Kovar, CFAIndia's Cellular Market: Finally Kicking into Gear
WMAPv2n11, Report, October, by Shiv PutchaTIM-TIM-TIM!—Round One of the Brazilian PCS Auction Closes
WMLAv2n13, Report, November, by Luis Minoru Shibata and Marcelo MoutinhoBack to Table of Contents
October 16 2001
Key Regulatory Issues in the Communications Sector
A Global Regulatory Strategies Audio ConferenceOctober 17 2001
Global Infrastructure Capital Expenditure and Vendor Positioning
A Wireless/Mobile Technologies Audio ConferenceOctober 23 2001
India's Cellular Market: Finally Kicking into Gear
A Wireless/Mobile Asia-Pacific Audio Conference
October 26 2001
Web Application Performance Management: Ensuring Site Availability and Performance
An Application Infrastructure & Software Platforms Audio Conference
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