Fibre comes cheap in Hong Kong

One data point really stuck out at this week’s FTTH Council Europe Conference. In a presentation by Alice Wong, the financial controller for Hong Kong’s City Telecom, the figure of €88 was cited as the cost per home of building a fibre network in Hong Kong. That’s a tenth the cost facing most European and US operators.

As Wong explained to perplexed members of her audience, the cost is so low because most of Hong Kong’s residents live in tower blocks, or what the telecoms industry calls ‘multi-dwelling units’. These can be connected with a single fibre and some nifty in-building wiring, which makes installation relatively cheap. Operators in some European countries, on the other hand, are looking at streets full of detached, one-family homes, and a hefty capex bill to boot.

City Telecom claims to have covered 1.4m homes with its network and to have around 650,000 customers using services that cost from €26 per month. A back-of-an-envelope calculation shows that even if all those customers are on the base offer, payback on capex is just over seven months. By contrast, it will take many companies in the Western hemisphere more than seven years to pay off their capex investments.

Geography can be so unfair.

VDSL is a ‘lame duck’

It’s maybe no wonder Deutsche Telekom has fewer than 150,000 customers for its IPTV offer. According to Thomas Langer, who heads equity research into communications for investment bank WestLB, the German incumbent has been telling customers on its website that it can only guarantee them a service after they have placed an order.

When Langer told senior managers at Deutsche Telekom that such a clause probably wasn’t the best way to attract new business, he fully expected them to remove it. But nine months on it’s still there.

It shows just how bad Deutsche Telekom is at marketing and external communications, says Langer. And he doesn’t stop there, describing the high-speed VDSL network it is building to support IPTV as a ‘lame duck’. It’s little surprise to Langer that Deutsche Telekom is scaling back its national rollout to 40 cities, down from the 50 it planned to serve originally.

Chief executive René Obermann was quick to blame competition for a lacklustre set of quarterly results earlier today. But if his marketing managers don’t wake up soon, competition could be the last of his worries.

Build it and they might come

An obscure French economist from the eighteenth century would seem unlikely to pop up at a present-day conference about cutting-edge telecoms. But the rather grizzled image of Jean-Baptiste Say, born in Lyon in 1767, made a hard-to-miss appearance at the FTTH Council Europe Conference being held in Paris today.

 

Say hit the big presentation screen at the Palais de Congrès courtesy of Brett Swanson, the senior director of a thinktank called the Centre for Global Innovation. During his keynote speech this morning, and in front of a giant projection of Say’s portrait, Swanson reckoned the Frenchman would have been a major advocate of the investments in high-speed fibre networks that are the topic of this trade show. Known in some circles for his belief that ‘supply creates demand’, Say thought producers and entrepreneurs were the key drivers of any economy and far better at anticipating the needs of a society than the consumers within it.

 

The ‘build it and they will come’ philosophy has a encouraging ring to it, but delegates at this conference probably didn’t need reminding. Many of them are already deploying fibre networks without any firm evidence that a mass market either wants or needs more bandwidth.

 

In some cases, though, early indications are not promising. France Telecom says just 5–10% of customers in areas now served by fibre have immediately taken up the new offer. One wonders what Say would make of that.

Mugged in Barcelona

I can’t help feeling the Mobile World Congress has become rather like a juggernaut whose driver has fallen asleep at the wheel. Every year it slams into Barcelona in northern Spain (or Catalonia, if you’re from Barcelona), dragging more delegates and organisers along for a journey that seems to have no clear destination. There was a time when companies would use the event to announce a market-changing deal, or at least unveil an exciting new product. These days it seems to be an expensive post-Christmas distraction from the main business of running a telecoms organisation. ‘Unremarkable’ was the word a number of attendees used to describe this year’s bash.

It’s also gotten too big to be manageable. I found it harder than ever to book suitable accommodation, despite scouring hotels weeks in advance. A PR rep I know had to make do with a dormitory bed in a youth hostel, and ended up sharing the room with five or six other be-suited telecoms executives. Could it soon outgrow Barcelona, just as it spilled out of Cannes in southern France a few years back? OK, that’s unlikely to happen for some time. But I can certainly see a day when the GSM Association, which organises the event, is annexing island states or small countries with the MWC in mind.

I’m probably sour because I was an unlucky victim of crime during my trip. I was enjoying a cold beer in a café near the conference centre – after a hard day of slogging it out on the exhibition floors – when my bag was snatched from under the table. The wily thief got away with a laptop, two recording devices and all my notes from the first two days, rendering a large portion of the event a complete write-off from a personal perspective.

As I understand it, however, I wasn’t the only one. Several journalists had wallets and phones stolen by pickpockets, and one unfortunate soul was mugged near Las Ramblas, the main tourist thoroughfare. While Barcelona has always been a hotspot for petty theft, such crime seems to have spun out of control last week – much like the MWC itself. Sure, the police were sympathetic, but few appeared to be on patrol when all this was happening. If Barcelona is to play host again next year – as we all expect – I’d hope the city authorities do a better job of ensuring it’s relatively safe.

No doubt, despite all my griping, I’ll be there at next year’s conference, hoping somebody says something of interest while keeping a watchful eye on my possessions.

Of Reding and shindigs…

Iain Morris, currently at the GSMA’s Mobile World Congress in Barcelona, has sent in the following report:

Viviane Reding is at it again. Just months after she roped in Europe’s unruly mobile operators over their roaming charges, the EC commissioner istaking aim at the fees they extort from data customers travelling abroad. Disrupting the GSM Association’s official press conference during the Mobile World Congress, Reding told a group of journalists that if operators didn’t significantly improve their pricing behaviour she would be forced to take remedial steps. She’s given them until the summer.

Chances are Reding won’t be invited back next year - at least not as a panellist again. That would be a pity, because her outburst and uncompromising views are exactly what this event needs. Every year, the world’s mobile industry descends on  Barcelona  for its equivalent of the Oscars. Awards are dished out (categories include the catchy-sounding Most Innovative Wireless Device-Centric Technology and Most Innovative Mobile Application in a Vertical Market), champagne is drunk,  and platitudes are exchanged. Behind the scenes some hard deal-making is going on, but very little is actually said of any real substance. Most of the “breaking news” broke the day before.

While Yahoo! turned down Microsoft’s US$44.6bn bid back in Silicon Valley, Microsoft was categorically not answering questions about Yahoo! during its press conference (which, er, would have revealed that Sony Ericsson is to ship smartphones using Windows Mobile if the story hadn’t gone out that morning).  Nokia talked aplenty about Ovi and unveiled handsets that look just like the N95. Rousing stuff.

Several sessions from day two are given over to mobile advertising, but it’s unlikely, that any operator will actually say how it expects to generate significant revenues from advertising when up against the likes of Google and, possibly, Microhoo. Services that attach adverts to incoming text messages sound like a promising lead for operators, but a properly “open” mobile internet would put them at a big disadvantage to the web players.

 Virtually all of this will pass unnoticed to the people that matter the most - the customers. The iPhone’s proud parent, Apple, is nowhere to be seen, having already given away its secrets at its own self-congratulatory shindig. Nokia’s N95 must sound like a postcode to many. The hardest truth most operators must accept is that 3G - for all the recent hype - is far from being a mass-market service. Although data revenues are on the up, they still account for only 20% of total revenues in the most developed markets. And the people nudging them along are all here at MWC, fiddling with their HSPA data cards and USB modems. No wonder they’re so worried about VoIP. 

 

The Intel Factor

  The 350-page Information Economy Report landed on our desks this afternoon, courtesy of UNCTAD. Packed with data, tables and text, this is the latest in a series of worthy tomes which urges the ICT industry - and governments - to do more for the developing world.

Buried in all the facts and figures, however, are some interesting case studies. Take Costa Rica, for example. In 1985, 60% of its exports were perishable products and 3% were electronic products. By 2005, the share of perishable goods had dropped to 24% and electronics had jumped to 30%. The main reason? Intel had decided to make the country one of its main production sites.

In 2005, the direct and indirect effects of Intel accounted for 25% of GDP of the entire manufacturing industry and Intel now accounts for 20% of total exports. It’s also doing good things for wages. A study by the International Labour Organisation last year found that Intel pays its workers an average monthly wage of US$836 while employees in the general manufacturing sector earn an average of $491. 

Good stuff, Intel.