OONO shows small scale can work on FTTx market

Thursday 21 January 2010 | 15:07 CET | Market Commentary
OONO, the Dutch open fibre network operator, has had a good start to the new year. After its first project for the Red Apple building in Rotterdam, another three projects are underway. These include fibre-optic networks for businesses (Waalwijk), institutes (Tilburg) and private households (Vught). The model is the same on all the prokects: OONO is the operator, the networks are owned by the customers and the network is open to all service providers. The equipment is still provided by Alcatel-Lucent and based on GPON technology.

OONO's success is remarkable for a variety of reasons. To start with it's a small company, although with financial and strategic support from a couple of shareholders in the construction and engineering sector. This suggests that the deep pockets of companies such as KPN and Reggefiber are not required for this kind of business. The Utrecht-based company LomboXnet already proved this, as that is more or less a one-man show.

OONO also shows how a sharp focus on the operator's role can open up the market. There are plenty of small initiatives and willingness to invest, both on the consumer market (FTTH) and the business market (FTTO), but what's been missing is the expertise, backhaul and service providers. This is right where OONO acts as a catalyst. While the number of servcie providers on OONO's networks is still limited, the case is similar at Reggefiber. OONO is also working on bundling demand, which Reggefiber also uses to ensure before network construction starts that there is enough demand for services.

Over the longer term, one can wonder what will happen with the OONO networks. Will the big players (KPN, Zggo, Tele2, etc.) offer their services on these networks? Or is OONO a typical takeover target? Reggefiber could be a buyer, although the GPON technology deployed does not match up with the architecture used by the KPN/Reggeborgh joint venture. In that respect a bid from Ziggo or UPC can't be ruled out, as their HFC networks could in theory evolve towards GPON.

One thing is certain: no one will want to duplicate the networks where OONO works as operator. The little company is making clever use of the natural monopoly created by FTTx networks. With limited overhead, OONO should be able relatively quickly to finance further growth from operating cash flow. That underlines the attractiveness of the FTTx business case. And it again makes painfully clear why the incumbents are only gradually moving towards FTTx: they still have to take account of their legacy networks. The lack of legacy network is just another factor in OONO's success.

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