Telepocalypse

Danish pastry

Like James, I also read the summary of what’s going on with the mega Danish FTTH deployment.

A few thoughts:

• The risk profile of laying glass pipes is one that matches a “utility” company, not a “telco” (whatever that means these days). This activity creates value for shareholders of the electric company because it creates a broader basket of similar-risk activities. This lowers overall investment risk whilst maintaining the general risk and return profile they expect.

• The core competencies of a utility are maintenance of holes in the ground, negotiating wayleaves, buying upstream wholesale “supply” (power generation/Net connection/reservoirs) and simple recurring billing. Sending people on expensive jaunts to standards committees to invent NGN technology isn’t on the list.

• Delivering electrons, H2O molecules and photons via pipes all look like remarkably similar businesses. It reminds me of the master-stroke of Centrica a decade ago. They are a divestitiure of British Gas, and run (among other tings) the home appliance service business. Vans chock full of parts roll around to houses and fix broken boilers, paid for mostly through insurance. They shocked the market by buying the Automobile Association, a breakdown group. What on earth do cars and gas boilers have in common? Yet it was a great success! Why? Because the AA is a business that filled vans with spare parts that roamed around fixing broken-down cars, paid for by insurance.

Future success in network operation will probably come from doing the sort of supply-side tricks Dell mastered in the PC business. Bring all the supply chain into one tightly co-ordinated lean delivery system. And eliminate most of the marketing and distribution costs.

Doesn’t look much like a telco of today, I’m afraid.