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Bill St. Arnaud is a consultant and research engineer who works with clients around the world on a variety of subjects such as next generation Internet networks and developing practical solutions to reduce CO2 emissions such as free broadband and dynamic charging of eVehicles. He is an author of many papers and articles on these topics and is a frequent guest speaker. For more details on my research interests see

Wednesday, October 31, 2007

Some telcos "Get it"

[Excerpts from my post on Internet Evolution -- BSA]

Although many telcos are treated as the popular whipping boys for all that’s wrong with today’s telecom environment, there’s a small number that are starting to understand the dynamics of the new marketplace.

A good example is Netherlands-based KPN Telecom NV (NYSE: KPN), which recently announced that it's joining forces with Reggefiber to speed up the rollout of FTTH (fiber to the home) in Almere, the fifth largest city in the Netherlands. Reggefiber already owns some networks in smaller towns and in parts of cities, including the project in Amsterdam. [..]

KPN, like many other telcos, is losing many customers to the local cable companies. Cablecos can offer full triple-play services -- high-speed Internet access, television, and telephone -- quite easily, whereas most telcos can only deliver Internet and telephony. Telcos are positioning themselves to take advantage of IPTV, but it’s still an open question whether this technology will succeed over DSL networks. The rollout in Almere is likely to spur more cooperation between Reggefiber and KPN in other parts of The Netherlands.

Swedish telco Telia came to the same conclusion that municipal open access networks may not be such a bad thing. Telia used to be a vociferous opponent of municipal open networks. But over time, many municipal networks are discovering that they don’t have the necessary skills and financing to manage an open network. Many municipal networks in Sweden have issued calls for proposals from third parties to operate their open access networks. Guess who won most of these deals?

What’s even more surprising is that some telcos are also starting to realize that peer-to-peer (P2P) networks, and other nefarious applications, are actually good services that should be encouraged by their customers rather than penalized. Currently, most telcos treat P2P users as costly parasites on their networks, because only a small number of users consume most of the bandwidth. Their knee-jerk response has been to block such traffic with Layer 7 filters from companies like Sandvine Inc. (London: SAND) or, in extreme cases, to disconnect these power users entirely.

More advanced telcos are starting to deploy technologies from a number of P2P companies, such as BitTorrent Inc. and Joost , which enhance P2P traffic experience for their customers rather than try to block it. By distributing super node servers throughout the network, Telcos can reduce unbalanced P2P traffic loads and provide a much better P2P experience for their customers. Increasingly, when P2P companies obtain licensing arrangements with the music and film industry, the threat of legal action and charges of abetting and aiding piracy become less of a concern.

As more telcos understand that their own survivability is at stake, the smarter ones will realize that new business models and relationships are critical to their success.