Mobile Giants Size Up DSL
Good news for DSLAM vendors: Pure-play mobile operators such as Telefónica Europe plc (O2) and Vodafone Group plc (NYSE: VOD) are set to enter the fixed-broadband fray in Europe, and are sizing up local loop unbundling (LLU) options that would see them procure and deploy their own DSL equipment.
Vodafone last week announced a management and structural shuffle, including the creation of a new division called "New Businesses and Innovation," to be led by the operator's CTO, Thomas Geitner. According to Vodafone, "This unit will focus on converged and IP services in order to deliver new revenue streams as Vodafone seeks to provide innovative services to its customers." (See Vodafone Shuffles the Deck.)
For some analysts and industry watchers, this means Vodafone will likely wholesale broadband services from incumbent carriers and sell them in a fixed/mobile package. For others, it suggests Vodafone might look to acquire fixed-broadband specialists to get an immediate position in the DSL market.
But, according to industry sources, Vodafone is set to follow the example of fixed-line competitive operators by procuring and deploying its own DSLAMs, potentially in multiple territories. The mobile operator has had presentations from at least one major vendor, the world's leading DSL equipment maker -- Alcatel (NYSE: ALA; Paris: CGEP:PA) -- and has likely been briefed by others. (See Unbundling Heats Up in UK.)
Adopting an LLU strategy would enable the operator to utilize an IP Multimedia Subsystem (IMS) and centralized service delivery platform (SDP) architecture to develop and deliver its own converged services to its fixed and mobile customers, something it couldn't take advantage of when it is was simply wholesaling and reselling an incumbent operator's DSL service.
Graham Finnie, senior analyst at Heavy Reading, believes a local loop unbundling approach would make sense for Vodafone and other mobile operators that don't currently own fixed-access network assets, because it would "give them much greater flexibility -- they could make their own decisions about the range of services and access speeds they could offer."
It would also enable the wireless carriers to develop their own fixed/mobile convergence services similar to the Fusion offer launched in the U.K. by BT Group plc (NYSE: BT; London: BTA), says Finnie. (See BT Goes Blue and BT Offers Fusion to Businesses.)
In addition, he notes, "There's a need for big brand-names to reach the maximum possible range of customers, including fixed-line users, with a service combination of broadband and mobile. They also need to find alternative ways to generate revenues other than from conventional wireless services."
For Vodafone and other mobile players leaping into the LLU market, there are two alternatives. They could build out their own broadband capabilities from the ground up and rely on their marketing machines to exploit their existing mobile subscriber bases. Or they could acquire one or more existing LLU-based broadband service providers and invest further in those businesses, a strategy deployed by both Cable and Wireless plc (NYSE: CWP) and Sky (NYSE, London: SKY) in the U.K. (See C&W Has $150M Broadband Plan and Murdoch's Sky Takes on BT.)
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