The Giant Awakes?
Proximus announced it will start its fiber roll-out in 2017
Proximus made its big announcement this week: Fiber for Belgium program. It will start rolling out fiber to the home next year. Is it good? Is it bad? Is it sufficient? Let's dive in.
It is likely the first time many Belgians hear about fiber. I, for one, am glad that Proximus is talking about it. Belgium's telecom infrastructure is seriously behind bordering countries.
FTTH or FTTPR?
Proximus is announcing that it will invest over €3 billion in FTTH over the next 10 years. That is huge, isn't it? Or is it?
Proximus already spends a hefty amount in infrastructure on an ongoing basis. In their financials it is referred to as CAPEX: Capital Expenditures. Proximus's latest announcement (2016-Q3) it had already spent €635 million.
Will Proximus add €3 billion to this CAPEX envelope or will it reshuffle it?
Looking at the official announcement, this quote pops out:
"… [Proximus] intends to return to its shareholders a stable dividend…"
The answer is the latter, it is a reshuffle of the CAPEX envelope. Also, it shows the tip-toeing that large publicly-traded companies have to perform in order not to enrage shareholders. Shareholders might understand the value of upgrading infrastructure, but do not want to pay for it.
The next logical question is: if it is merely reshuffling, then why has Proximus not done this before? Why now? Maybe the announcement is the formalization of the investigation Proximus started in early 2015. These large roll-out projects are difficult and messy. Maybe it is the end-of-the-year-crunch, budgets need to be finalized, and it had to get some announcement out of the door.
Incumbent operators are notorious for making big ambitious announcements about fiber roll-out and never follow up. It is so widespread that there is an actual term for it: Fiber to the Press Release or FTTPR.
Maybe it has no substance and it is indeed FTTPR. Only time will tell.
Good For Competition?
New technology, higher speeds: that is sure good for competition, correct?
Kind of. For the end-consumer in the short-term, yes, the consumer is getting a better offer from one of the existing sellers. In the long-term, the picture gets grimmer.
Proximus’s Independence
See, Proximus is an “independent” company with big air quotes. Proximus is a limb of the government. The Belgian government retains a 53,3% stake on it. Any new initiative by Proximus has to be seen as a government program.
The current telecom market is an oligopoly (or duopoly as De Croo calls it). In most places in Belgium you have 2 options: Proximus or 1 of the Coax Triumvirate, Telenet x Voo x SFR.
The telecom regulator — BIPT — has mandated that Proximus makes a wholesale offer so that alternative providers (referred to as OLOs) can play. On top of that, BIPT recently opened up the Coax-Triumvirate's cables to OLOs.
That should be awesome for OLOs, correct? No huge CAPEX to build a network, the OLO gets network as a service (NaaS?). Great in theory, however, in practice, the OLO is competing against its biggest supplier. Many have tried and fallen — remember BASE’s SNOW? eLeven? Billy? The list goes on.
3D Tactics and the Selected Technology
Is Fiber for Belgium improving competition?
The answer to that question lies in technology selected for the residential roll-out: GPON.
GPON is a weird technology. It is as if Henry Ford would have listened to his customers and built a faster horse, a mechanical horse. GPON is fragile, fiddly, slow, and difficult to upgrade. It is a technology born out of telecom operator’s 3D tactics: Deny, Delay, Degrade. The parties who benefit are equipment vendors — who get to sell a lot of gear and consulting services — and the incumbent — who does not have to change at all.
Access to Proximus’s network remains complicated and the power concentrated on Proximus’s hands.
The announcement excites me because fiber is a public topic. Finally. However, I am not optimistic about the Fiber for Belgium program. Nothing meaningful will change. Proximus (aka “the government”) is missing a huge opportunity to actually bring Belgium into the future. It is a missed opportunity to effectively increase competition, lower prices, and improve services for consumers.
From where I am sitting, this announcement looks a lot more like FTTPR than FTTH.
