Begin forwarded message: From: "Robert J. Berger" <rberger@xxxxxxx> Date: November 5, 2005 1:01:28 AM ESTTo: Dave Farber <dave@xxxxxxxxxx>, Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Subject: Amsterdam's Fiber to the Home Project and implications
EuroTelco Blog
http://eurotelcoblog.blogspot.com/2005/11/and-answer-is.html
<snip>
Frequent readers of this blog will no doubt recall the frequency
with which I have referred to the proposed Citynet
(http://www.citynet.nl/) FTTP project in Amsterdam. Well the
embargo is now lifted, so I can reveal that Phase 1 has been
formally proposed (to be debated and voted on by the City
Council later this month), and the funding structure has been
finalized.
The City of Amsterdam is to be a 1/3 shareholder, with a
consortium of five housing companies (also 1/3) and other
unnamed investors (1/3). I'm curious to know who the other
unnamed investors are. My guess is someone with a long-term view
of investing and a preference for long-term predictability of
returns. We are talking about a 20 - 30 year horizon here, so my
gut feeling is that insurance companies are involved somehow.
Phase 1 consists of 40k premises, roughly 10% of Amsterdam, to
begin in early 2006. Infrastructure build is to be carried out
by Van den Berg and Draka Comteq, and bbned will be the
wholesale network operator.
This is intriguing, in that bbned is Telecom Italia. I expect
there may be some interesting phone calls to KPN investor
relations this afternoon. KPN was on the list of parties in the
tender process (see the page entitled "oproep" in the Citynet
site), but the company never publicly highlighted this fact.
These neutral network projects are not without historical
precedents, but what I find so compelling here is that the
city's priorities are spelled out so clearly:
"This enables our city to compete with other European
cities. The fiber network delivers to Amsterdam an innovative
and freely accessible infrastructure, suitable to support growth
in demand for the next 30 years or more. In this way we ensure a
wide open marketplace for innovative service-providers and
economic growth, as well as a fast track for the smarter and
cheaper delivery of care, education and other public services."
Competing with other cities, yes, not just for the Olympics
(hello London!), but for economic activity, tax revenues, social
and cultural development (which attracts tourism and
businesses). Smarter and cheaper delivery of public services,
yes, as was articulated to me on my recent visit to
Amsterdam. This stuff is too important to be left to gradualist
measures like Ethernet over cable or ADSL2+, or to a duopoly
market where investment and pricing decisions may be driven by
shorter-term considerations such as share price or strategic
redeployment of capital.
Not to put words in anyone's mouth, but I think the message is
something like:
It may be "your network" and "your investment" you are trying to
defend, but your customers are our taxpayers, our society, and
we have a duty to look beyond the next quarter and where our
share options are at present. Access to information is an
essential building block of social development, like access to
water and electricity. Highly-contended DSL products with
bandwidth caps ain't gonna cut it.
This is powerful, challenging stuff, and I'm sure a lot of
people in the market are going to be unhappy and stamp their
feet. My sense from talking to politicians in Amsterdam was that
political consensus is strongly in favor, and the press release
itself expresses a high degree of confidence that Brussels will
not consider this structure to be state aid. Certainly, cases
like Limousin would seem to lend support to this view. I also
sensed from my conversations with people in the local market
that a number of other Dutch cities have been watching closely
and drafting their own plans. Today is a green light to anyone
with the vision to shake things up, and I’m sure that won’t be
limited to the Netherlands.
I think this is an incredibly significant event for European
broadband, and it's going to be fascinating to watch. How will
traditionally access-oriented service providers adapt to
differentiate themselves solely on price, user experience and
customer care? For those who choose to sit out or attempt to
fight back, what are the options open to them? What happens to
pricing? (I have my ideas - remember I'm from the Deep South.)
Longer term, and undoubtedly most importantly, how will
Amsterdam be transformed? Neutral networks are a great leveller,
commercially and socially.
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