Tuesday, March 30, 2004

Daiwa EuroTelcoblog No. 19, Wednesday, 4th February, 2004 (original email blast 3:33 PM Wednesday, 4th February, 2004)

VoIP update

Much of the market still seems to be eager to dismiss VoIP. In its conference call today, FT management said that Iliad SA subsidiary Free.fr is benefitting from a "regulatory niche, which is unsustainable in the long-term." And reading a trade publication yesterday we noticed that a sector team at a competitor has apparently proclaimed that there will be no significant VoIP deployment outside the corporate market in Europe. Interesting, then, that UK regulator OFCOM is planning to convene a meeting on 25th February to address issues of consumer protection in the area of Voice-over-Broadband (what we described in our 30th January sector note as "access-independent-VoIP" - probably best represented so far by Vonage).

Is this yet another case of government seeking to protect its constituents from a non-existent threat? OFCOM's discussion paper produced for the event states early on, "These services are no longer niche products aimed at early adopters and businesses." Apparently they think something is about to happen in the UK, and so do we - probably by the end of Q1. Hopefully the OFCOM event will put the technology more clearly on the industry map, even for bulge bracket research departments. Details are to be found at:


FTTH public projects

Anyone having ingested enough caffeine to make it all the way through our recent sector update will have noted the prominence we gave to the subject of Big Broadband, or the provision of fiber to the home to consumers and businesses, as funded and delivered by municipal or regional governments. One case we discussed in some detail was that of UTOPIA, the Utah Telecommunications Open Infrastructure Agency, a joint initiative by 18 municipal governments to bring 100Mbps Ethernet to 249,000 households and 36,000 businesses in the region. In the past week, five of the 18 city councils involved in the project have voted in favor of it, and pending full approval, UTOPIA plans to tap the municipal bond market for the estimated $450 - 530m project cost. We think it is going to be a closely watched development, and potentially something of a watershed, particularly given the anecdotal evidence available on the success of similar municipal projects and their perceived benefits. The link below is to a presentation given late last year to Congressional staff members by Bristol Virginia Utilities, a municipal project launched five years ago, which overcame a number of legal challenges to launch a FTTH triple play in July 2003, known as OptiNet. The initiative already has 25% telephony penetration and aims to expand this to 34% by year-end, and interestingly, it has an expansionist agenda, tapping state and federal grants for $3.6m to expand links to surrounding communities.


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