Mobile Giants Size Up DSL
APRIL 10, 2006
Good news for DSLAM vendors: Pure-play mobile operators such as O2 plc and
Vodafone Group plc (NYSE: VOD - message board) are set to enter the
fixed-broadband fray in Europe, and are sizing up local loop unbundling
(LLU) options that would see them procure and deploy their own DSL equipment.
Vodafone last week announced a management and structural shuffle, including
the creation of a new division called "New Businesses and Innovation," to
be led by the operator's CTO, Thomas Geitner. According to Vodafone, "This
unit will focus on converged and IP services in order to deliver new
revenue streams as Vodafone seeks to provide innovative services to its
customers." (See Vodafone Shuffles the Deck.)
For some analysts and industry watchers, this means Vodafone will likely
wholesale broadband services from incumbent carriers and sell them in a
fixed/mobile package. For others, it suggests Vodafone might look to
acquire fixed-broadband specialists to get an immediate position in the DSL
market.
But, according to industry sources, Vodafone is set to follow the example
of fixed-line competitive operators by procuring and deploying its own
DSLAMs, potentially in multiple territories. The mobile operator has had
presentations from at least one major vendor, the world's leading DSL
equipment maker -- Alcatel (NYSE: ALA - message board; Paris: CGEP:PA) --
and has likely been briefed by others. (See Unbundling Heats Up in UK.)
Adopting an LLU strategy would enable the operator to utilize an IP
Multimedia Subsystem (IMS) and centralized service delivery platform (SDP)
architecture to develop and deliver its own converged services to its fixed
and mobile customers, something it couldn't take advantage of when it is
was simply wholesaling and reselling an incumbent operator's DSL service.
Graham Finnie, senior analyst at Heavy Reading, believes a local loop
unbundling approach would make sense for Vodafone and other mobile
operators that don't currently own fixed-access network assets, because it
would "give them much greater flexibility -- they could make their own
decisions about the range of services and access speeds they could offer."
It would also enable the wireless carriers to develop their own
fixed/mobile convergence services similar to the Fusion offer launched in
the U.K. by BT Group plc (NYSE: BT - message board; London: BTA), says
Finnie. (See BT Goes Blue and BT Offers Fusion to Businesses.)
In addition, he notes, "There's a need for big brand-names to reach the
maximum possible range of customers, including fixed-line users, with a
service combination of broadband and mobile. They also need to find
alternative ways to generate revenues other than from conventional wireless
services."
For Vodafone and other mobile players leaping into the LLU market, there
are two alternatives. They could build out their own broadband capabilities
from the ground up and rely on their marketing machines to exploit their
existing mobile subscriber bases. Or they could acquire one or more
existing LLU-based broadband service providers and invest further in those
businesses, a strategy deployed by both Cable & Wireless plc (NYSE: CWP -
message board) and BSkyB Group plc in the U.K. (See C&W Has $150M Broadband
Plan and Murdoch's Sky Takes on BT.)
Daiwa Securities SMBC Europe Ltd. telecom analyst James Enck believes this
is one way Vodafone could go, especially if it strengthens its financial
position from the sale of its minority stake in Verizon Wireless to partner
Verizon Communications Inc. (NYSE: VZ - message board). Vodafone has
already sold its Japanese business. (See Vodafone Cashes In on Japan and
Verizon: All Together Now?)
Enck believes broadband specialists such as U.K. service providers Pipex
Communications plc and Tiscali UK , Italy's FastWeb SpA and Tiscali SpA
(Milan: TIS - message board), and Spain's Jazztel plc could interest Vodafone.
Vodafone says it is currently reviewing its strategy in terms of services
and technology, and will outline its new strategy in detail "some time
before the end of May," says a spokesman. Any presentations made to
Vodafone on fixed-broadband issues "would be part of that strategy review
process," he adds.
Alcatel declined to comment.
O2, meanwhile, has also been looking into fixed broadband. Its U.K.
operation has been exploring the LLU option, with Fujitsu Ltd. (Tokyo: 6702
- message board; London: FUJ)'s European DSL infrastructure business
confirming it has pitched its wares and business case to the operator.
O2 differs from Vodafone, though, in that it is now part of Telefónica SA
(NYSE: TEF - message board), which already has fixed and mobile assets in
multiple territories. (See Telefónica Swoops In on O2 and Telefonica Buys
Cesky Telecom.)
The carrier says it is integrating its fixed and mobile assets in the Czech
Republic -- Cesky Telecom a.s. and Eurotel Praha spol. s.r.o. -- and is
doing the same in Germany, where it is combining O2 Germany GmbH & Co. OHG
with fixed-line player Telefónica Deutschland GmbH . It also offers fixed
and mobile services on the Isle of Man via its Manx Telecom Ltd. business.
In an email response to questions about any LLU plans in the U.K., O2 said:
"Clearly as a group we are already focusing on fixed (including broadband)
and mobile solutions. For the U.K. specifically you would therefore expect
us to be looking at the possible opportunities presented by broadband,
although we have no firm plans at this stage."
A precedent for European mobile operators branching into DSL by unbundling
the local loop has already been set by Belgian carrier Mobistar SA , which
has sourced DSLAMs from Alcatel and B-RAS equipment from Redback Networks
Inc. (Nasdaq: RBAK - message board). (See Eurobites: Access All Areas,
Mobistar Picks Alcatel for DSL, and Mobistar Deploys Redback.)
In its 2005 report, the operator noted: "Mobistar has taken the firm view
that convergence is an essential factor in the development of
telecommunications and, by developing three ADSL offers from October
onwards, has entered a decisive stage in its progress towards the status of
an integrated operator active in the mobile and fixed-line
telecommunications business."
By the end of 2005 it had signed up nearly 3,000 customers for its DSL service.
Ray Le Maistre, International News Editor, Light Reading
http://www.lightreading.com/document.asp?doc_id=92298&print=true
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