Why Operators are not opening their networks

Apparently cable operators are reluctant to open their networks, because this would strengthen the position of the incumbent telco's. This is an artifact of a somewhat shortsighted vision.

The response was to be expected and is caused by the view of operators on their competitive market. A known problem with Porter's 5-forces model is that of defining the relevant market. Cable operators traditionally regard their market as distributors of broad casted content. Therefore new competitors using DVB-T, such as KPN, are seen as new entrants and internal competition would come from other cable operators. This is a flawed definition of the market.

First of all, cable operators are hardly each others competitors, because the coverage of their network is non-overlapping. This means that cable operators compete with operators using different network technologies, such as fiber, DSL or DvB-T. In the Netherlands this implies that KPN is their main competitor.

Secondly, a significant share of the ARPU is not generated by analogue tv, but by other services and often in triple-play bundles. Since voice and broadband represent significant revenues, cable operators compete directly with incumbent telco's that use DSL in stead of Eurodocsis. Therefor, again, KPN should be considered an internal competitor in stead of a new entrant.

So what are new entrants?

In my opinion Over-The-Top operators are new entrants. Such operators do not own a network, but piggyback on operators networks to deliver services. This reduces integrated service providers to "bitpipe" providers wih a percieved low added value. Examples of such providers are Skype, Google, Microsoft, Yahoo, YouTube, Apple, Vuze (bittorrent), Joost.com, etc.

If cable operators -and incumbent telco's- would have defined their internal market larger, they could have a different perception of internal competition and competitive pressure of new entrants. This would have made them understand that there are other, new market forces at play and they cannot control it.

Only bold operators neutralize these new entrants by embracing them in there networks. Such bold operators would seamlessly integrate the OTT services in their offerings, likewise Apple has integrated YouTube on its Apple iPod Touch.