Be a Service Innovator

A software developer from Sweden challenges ISPs to offer services not bandwidth, and says he can prove that it works. Service innovation is necessary because the triple play is boring.

by Alex Goldman ISP-Planet Managing Editor [May 6, 2005]

When Matt Wenger of Kista, Sweden-based (U.S offices in Nashua, N.H.) PacketFront got up to speak at the Freedom To Connect conference, he needed an introduction and David Isenberg provided it. Isenberg said he'd seen Wenger get up and transfix a room full of engineers at a previous conference, and when Wenger applied to speak at F2C Isenberg wasn't interested until he remembered, "oh, you're that guy!"

This introduction didn't tell us much about what to expect. Wenger's company provides software for fiber optic ISPs in Sweden. Sweden has a large number of small, local (municipal?) fiber optic networks providing a lot of bandwidth to a relatively small number of customers.

At first, you have to learn
Refreshingly, Wenger first spoke about failure. "We ran an open access fiber network in Sweden in the mid-nineties. We ran it into the dirt. We built a 300,000 home FTTH network, and the opex killed us. We failed because there was too much manual shit, too little automation."

The problem seemed obvious. "We had sold bandwidth instead of value. Nobody gives a rat's ass about a connection. We spent a billion thinking people would pay for the freedom to connect, to go to 100 Mbps from $19.95 DSL connections."

The problem was also the triple play. "The triple play is boring. If that's all we're going to talk about, I can go home, or go live in Europe where they have it already."

Then you need another billion dollars
Like most people who have lost a billion dollars, he was given a second chance, and unlike many who get a second chance, he got it right this time. If you're running a high capacity network, Wenger said, you don't want to charge based on bandwidth, because that prioritizes low bandwidth applications and you want to enable high bandwidth applications to keep your customers and keep them happy. The company already has a success story.

So we looked to the web for some background and found a presentation on the website of Europe's FTTH council called "Who is initiating FTTH deployments in Europe" [.pdf].

An internet search finds the provider, a power company called Mälarenergi. The stats box on the provider's website claimed (at press time) that the ISP offered 61 services (Tjänster), and connected 1,875 companies (Företag) and 26,138 households (Hushåll) and these numbers may have risen by the time you read this.

The .pdf presentation says that the deployment uses an Ethernet topology with PacketFront's ASR 4000 routers (8, 16, and 24 ports) at the edge and Nortel Passport 8600 for the GigE core, with Optivity NetID and Optivity Campus 9.2 management.

The presentation further notes that ILECs and ISPs are not deploying, citing a focus on DSL as the cause. "Most European incumbents are currently heavily investing in large DSL rollouts and are focusing their often meager financial resources on this technology, which is well suited to less densely populated areas compared to Asian countries."

That leaves municipalities financing fiber in nations that permit this, with a wide variance in municipal deployment throughout Europe. The presentation says that two European broadband ISPs, B2 and FastWeb, however, account for 73.1 percent of all fiber homes passed in Europe.

Quality, not quantity
But these larger deployments, Wenger said, are not providing the value that Mälarenergi is because there are few service providers on the network. He said services provided include remote IT support, financial services, remote alarm and video services (lower the insurance costs by $80 per month and charge $40 for the service), remote backup costing $1 per year per 10 GB.

It's all about providing opportunities. "A 16 year old kid makes more than his parents on gaming."

Once you've provided the broadband cornucopia, Wenger said, you need to focus on getting services to use your network (an idea the RBOCs will never understand, we fear). "Don't force them to buy their own infrastructure, don't charge per megabit, do a revenue share," he advised.

The pricing structure has a clear guiding principle. "Everyone's interests must be aligned towards providing value to the customer."

"Aren't the services tied to the network," asked a skeptical Isenberg.

"We don't own the network," replied Wenger.

"So you sell service platforms," said Isenberg.

"We are the Linux of open networks," replied Wenger.

The company is privately held, with funding from European Equity Partners, TLcom, and Amadeus Capital Partners. It was founded in 2001 by graduates of two centers of fiber learning, Cisco and the fiber ISP B2 (a.k.a. Bredbandbolaget).

— End