Europe: The crawl to DSL
01 June 2000
Europe's fixed line operators are not just losing their cutting edge image by their unhurried move to dsl - they could be losing their competitive advantage. Rival technologies could soon mean that it will be too little too late. By Eoin Licken.
It's definitely not a sexy time to be a fixed-line telecoms operator.
In recent valuations, mobile operators have tended to eclipse their fixed-line counterparts, with wap and mobile internet enjoying their day in the sun. The answer for fixed operators should be dsl. With adsl offering not only downlink speeds from 500kbps and upstream speeds from 128kbps, and other versions significantly increasing on these speeds, perhaps things aren't that bad after all. Even better all varieties offer the not inconsiderable advantages of dedicated bandwidth and always-on internet connections that still keep the phone line free to make calls.
But while dsl proponents argue that there were more than 600,000 customers at the beginning of this year they are mostly in the US. Most of Europe's fixed-line operators are losing image, and any new economy sexiness, by still sitting on dsl rather than rolling it out aggressively. Dsl rollout is still expected to be far slower than expected, or desirable, due to squabbles over access to the local loop.
Cue for political lobbying, for future disputes over access to incumbent premises containing line equipment, and for arguments over the cost and quality of whatever service is eventually offered to competitors. Cue for appeals to regulators to adjudicate and direct. Cue for everyone to delay investing in dsl. That may provide short-term gain but for Europe's incumbent telecom operators the fear of allowing dsl competition is myopic given the speed with which rival technologies look like establishing cheaper alternatives. European dsl rollouts could turn out be too little, too late.
Last year dsl central-office equipment shipments in Europe were a little less than 300,000, which isn't too far short of the figure of nearly 400,000 for cable modems, according to Susan Thomson, an analyst with the Gartner Group. However, as she points out, this is just the network equipment, and the number of actual subscribers is a lot lower.
Gartner's estimate for dsl lines in western Europe is only 44,000 in 1999, rising to 137,000 this year though projected to rise to 6.5 million by 2004. But most of the current lines are in Germany where there are several operators and unbundling is relatively well advanced. Deutsche Telekom says its dsl product, launched about a year ago, currently has between 15,000 and 20,000 customers in around 60 towns and cities and this will be extended to 220 towns and cities by year end, making it available to 17 million households, which encompasses almost half of the German population.
Telekom bundles the dsl product with isdn, and charges about $45 per month for residential customers, who still have to pay internet access fees to Deutsche Telekom's T-Online internet service provider. These range from $46 per month for 50 hours dsl access to $70 per month for 100 hours.
And as Deutsche Telekom points out, "customers can use other isp's, but at the moment only T-Online serves dsl internet. Downlink speeds are 768kbps, while uplink speeds are 128kbps.
Sadly for dsl deployment in the rest of Europe, the unbundling wrinkles are unlikely to be ironed out in many countries this year. Despite a recent EC recommendation to push all member states into unbundling local loops by the year's end, backed by the threat of legislation next year, only five countries have made any significant progress - Austria, Denmark, Finland, Germany and the Netherlands.
Some others have made limited progress. In Spain, for instance, Telefonica's competitors can get bitstream access to local loops, which isn't as good as putting your own equipment on the copper pair but at least allows you to offer services over the local loop. Other countries, such as Ireland, have announced plans to unbundle early next year, but notable heavyweight laggards include France and Italy, which was to have made a decision last November but has delayed due to "operational issues." The Gartner Group speculates that there are likely pricing issues involved.
Another reason for Germany's lead is the poor deployment of cable internet there. Deutsche Telekom still owns cable operations in nine regions where isdn has been a relative success. It has still not yet decided when to deploy dsl over analogue lines. Elsewhere, operators have been somewhat reluctant to invest in broadband digital local loop technology which would undermine any chance of attracting more isdn customers.
Other operators around Europe are now sluggishly getting dsl infrastructure in place - so far in around 11 countries according to the dsl forum, a California-based industry body. It points to a new wholesale carrier, QSC, which is offering service over Deutsche Telekom's unbundled wires in Germany, while in the Netherlands newcomer Versapoint is planning to challenge KPN's Mxstream adsl service this month. Versapoint, a 50-50 joint venture of Versatel Telecom and Northpoint Communications, is also planning to offer a service in Belgium, Luxembourg and Germany, starting this summer while in the UK, BT has announced the launch of dsl service to six million homes. The European market drivers for dsl are expected to be internet and video.
But not all the big markets are progressing. In France, Europe's second-largest economy, or third-largest, depending on the fluctuations between the euro and sterling, unbundling is temporarily off the agenda, despite the largest private operator, Cegetel, chewing at the bit to get access to the local loops still controlled by the state-owned incumbent, France Telecom. At the end of April, the French government withdrew legislation to unbundle the local loop at the behest of the communist party and much to the relief of France Telecom, which had complained that any move to unbundle the local loop should involve compensation and should coincide with the lifting of government control of its tariffs.
France Telecom's Netissimo adsl service costs around $37 per month for 512kbps downstream and 128kbps upstream, but users also have to pay over $100 for installation, $6 a month for modem rental while still incurring isp access charges. The professional version, offering double these speeds, includes modem rental but costs nearly $100 per month.
Predictably, the unbundling argument boils down to cost. "People should pay the same price to France Telecom as they would if they were investing themselves," Gerard Moine, director of external relations at France Telecom, told a recent news conference. He suggested that competitors' charges for access to local loops were too low though Gartner research in other countries suggest their prices are typical. It cites monthly access charges for accessing incumbents' local loops of $8.12 in Denmark, $12.25 in Austria, $12.50 in Germany and the UK, less than $15.19 in the Netherlands, and a range of $4.90 to $24.70 in Finland.
The EC view is that unbundling will lower the cost of high-speed internet access and is therefore imperative. But the previous lack of competition has clearly spoiled incumbents, who have got so used to charging high initial rates to recoup investments in new technologies, such as isdn or leased data lines, that enforced competition through unbundling means they're far too cautious about investing in dsl.
The problem with this approach, of course, is that it ignores the new and different types of rivals that should make them act faster not slower.
That competition is coming not only from new carriers, but also from cable television companies which are already offering broadband data and voice services over upgraded digital cable networks.
Furthermore, several European countries have already licensed or are in the process of licensing operators of wireless local loop technology, with Germany again a notable early starter. Unbundling may be crucial to opening up competition among dsl carriers and keeping prices down, but Deutsche Telekom must be given some credit for pressing ahead when it realised the biggest competition will come from rival technologies, regardless of unbundling regulations. |
