New operators on FTTH market shun Reggefiber

Wednesday 16 September 2009 | 15:21 CET | Market Commentary
Another new FTTH operator has appeared on the Dutch market, shortly after the launch of the FTTH network at the Red Apple luxury flats in Amsterdam by OONO. The new operator Teleplaza has just started services at a student housing project at the University of Tilburg. The new operators provide competition for Reggefiber, which has dominated the FTTH market to date, and also underline the attractiveness of deploying FTTH. While KPN is still struggling with its plans for moving from copper to fibre, newcomers (including Reggefiber) apparently see a crystal-clear business case.

Notable is that OONO and Teleplaza have chosen for different technical approaches. OONO is working with Alcatel-Lucent and focusing for the moment on GPON (although both parties are technology-neutral). Teleplaza has chosen for PacketFront with the deployment of point-to-point networks (although it's leaving its options open for managing GPON networks). While we can't rule out that the newcomers will build up portfolios with both GPON and PtP networks, Teleplaza's choice appears more sensible from a business sense. If Reggefiber were to come knocking on its door with a pile of cash, Teleplaza has the advantage of being able to integrate its PacketFront technology easily with the Reggefiber portfolio. Reggefiber has chosen to work exclusively with PtP and PacketFront is one of its suppliers. So, Teleplaza's owners have an easy exit strategy if needed.

There are also similarities between OONO and Teleplaza. Both are focused on the active network layer (although OONO is stronger here than Teleplaza, which is also active at the passive and services layers). Both are also focused on appartment buildings (preferably luxury developments such as the Red Apple and Kwartier for Teleplaza) and business parks. For business areas, they are not competing with Reggefiber, but more with KPN, Tele2 and Eurofiber. The decision to focus on densely populated areas is clearly sensible, as scale is needed in order to turn an eventual profit. This was a lesson already learned in the DSL era, where the focus was initially on unbundling exchanges in areas with a large population.

So if OONO and Teleplaza are focused on the active layer, and Reggefiber serves the passive layer, a partnership would make sense, right? At first glance yes, but the ODF tariffs loom large in this discussion. These are the prices the operator pays to the network owner. At the Red Apple, the initial tariff was set at zero; the housing corporation VVE owns the network and residents receive a discount on triple-play services. Informed sources tell Telecompaper that Teleplaza is paying a price for the Tilburg campus well below the ODF rates proposed by regulator Opta for Reggefiber. Furthermore OONO told us that they see no business case with the current Reggefiber prices.

If OONO and Teleplaza don't want to operate on the Reggefiber networks, and only three other parties have said they will to a limited extent (Online Breedband in Almere, Solcon in Dronte and BBned in Amsterdam and Rotterdam), Opta needs to have a rethink. Online is only running a trial of the services, while BBned is rumoured to be not interested in expanding with the Rotterdam and Amsterdam networks. Normally one would expect operators (such as Tele2, Scarlet and Online) to be forming a queue to get on the Reggefiber networks. The lack of such agreements so far should be a signal to Opta that the proposed tariffs need to be reconsidered.

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