CAPEX Obsession

I’m just back from a short visit at Broadband World Forum in Amsterdam. As usual, good networking is what I get most out of it, as well as some views on trends and announcements.

In terms of buzz words, Vectoring is still hot in this year's editions. Not as big a hit as last year, but still high up on the billboards. The new buzzword was SDN (Software Defined Networking) which is essentially a virtualization of all (or most) network elements. It's not an entirely new conceptual framework, and it raises interesting questions in terms of the strategy of vendors advocating it. Still, it was everywhere to be found. Everywhere. Curious to see if we still here so much about it three years for now.

Through discussions with various vendors, and a number of telco people, I was made aware of another underlying thread, one that relates more directly to access and explains a fair bit of the issues we're seeing in this market today. It seems that while TCO analysis is prevalent for high-level strategy decisions when it comes to broadband access (in other words, OPEX considerations are really looked into when deciding on broadband access strategies), they aren't when it comes to actually purchasing equipment. Basically, purchasing rules when it comes to actual contracting, and then OPEX analysis flies out the window and it's all about the price of the box. This, it seems is more prevalent the larger the service provider (you'd expect the opposite, with big players being more mature...)

What's interesting about this is that it's the first time I've heard vendors coming out openly about it. And - it seems - it's not even about customer education: the technical people usually understand the value of not picking lower priced equipment because they know of the implications on durability, maintenance, supervision and other costly OPEX aspects of running a service. But their opinion on that matter apparently weighs very little when the deals are scrutinized by purchasing.

Remember BTs cabinets I mentioned in a post recently? Why are they so big? Not because they need to be (both of BTs FTTC vendors sell smaller enclosures) but because smaller form factors cost more. Forget about speed of deployment, risks of vandalism, and - as it turned out - issues with communities concerned about their appearance: BT went for cheap and now pays the price.

What concerns me about this is that I'm not even sure there's anything anyone can do about this: it's not related to the people who know what they're doing, or what they'd want to be doing, it's related to the power in these organisations being in the hands of CFOs as opposed to people who have to run the business on a daily basis, deploy and sell...