Feeds

Carphone Warehouse rescued with AOL buy

There's method behind the madness

  • alert
  • submit to reddit

Maximizing your infrastructure through virtualization

AOL to the rescue

AOL has 1.3m broadband customers, which gives scale (and LLU is all about economies of scale). It also has 400 DLEs unbundled with a roll-out plan to 1,000. This is all based on Fujitsu kit, and it has an engineering base in the UK and has been doing the roll-out for AOL.

Now CPW can instantly migrate its users onto its own unbundled DLEs (the 400 will be in the most population heavy areas, so probably most of CPW's customers too) and turn that £5.68 per month loss into a profit (albeit a small one).

Though the above figures are accurate in terms of costs (see assumptions below), it's very difficult to know what CPW is actually doing and how it loads the pipes, etc. According to its half-year results it made a (six month) loss of £37.7m (for the broadband service) and had 461,000 broadband customers, which works out to a loss of £14.94 per user per month. However, that loss probably covers LLU roll-out and other factors.

A big advantage in buying AOL (apart from maybe making some money out of LLU migrations) is that it has a working, scalable provisioning system. You don't hear of problems with AOL users losing connections when they sign-up.

So though £370m may initially seem a lot, its saved CPW probably a year's worth of unbundling and a provisioning system that works. It just needs to migrate its customers over to the AOL platforms as soon as possible.

Of course, now CPW has to go the whole hog and start running triple or quad plays, internet and free calls won't cut it for long. It'll be video and mobile integration and other services which make consumers pay and allow CPW to generate a profit for its shareholders. AOL brings a part of the solution with it, content which puts it in a strong position against the likes of BSkyB. Given it also has a mobile solution, this should give it the ability to offer a strong quad play solution of voice, video, mobile and broadband - which means it may well be able to offer competitive competition to players such as NTL:Telewest (soon to be Virgin Media) and BT.

Consolidation is going to continue within the internet and telecoms industry, but it looks like Carphone Warehouse is going to be one of the survivors. ®

Assumptions

IPStream is BT Wholesale's broadband service that allows an ISP to offer IP connectivity to their backbone. There are two elements to the service, the end-user connection, which is a fixed cost per user, and the connection (or connections) "fat-pipe(s)" to the ISP which are based on bandwidth (known as capacity based charging).

A BT 622Mb/s "fat pipe" costs £124,000 per month with a set-up £150,000 fee. These are limited to 32,000 sessions (ie, simultaneous users). Though the ISP can decide their own contention, it's likely that each pipe will be max'ed out (CPW encourages the sale of a modem. When someone switches off their PC, the connection will go down and the session can be re-used).

Unfortunately, this means that if everyone is using their connection at full speed (or trying to), they'll only get a usable 20Kb/s or so of bandwidth. However, it's assumed CPW is loading them to the full, which means it needs 25 pipes for 800,000 customers. They'll also get about 1.5% per cent discount for the volume.

The cost of the ADSL connection is £8.40 rental and £12.40 set-up.

Wholesale Line Rental costs CPW £8.95 per month.

It can be assumed that the set-up charges are absorbed over 18 months (which is the length of the customer contract).

Therefore, the total costs per month are the ADSL and WLR costs (including the part of the set-up costs) and the split of the fat-pipes -which is where the £5.69 loss comes in.

There are various other costs that have been completely ignored, they include any ISP infrastructure (mail/web/etc.), transit costs (ie, the costs associated with getting traffic off CPW's network - with 25 fat-pipes, that means potentially 15Gb/s of bandwidth).

Revenue which has been ignored are things like phone call revenue. CPW must be making some money from people making calls to mobiles/premium rate numbers etc.

Reducing security risks from open source software

More from The Register

next story
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
GoTenna: How does this 'magic' work?
An ideal product if you believe the Earth is flat
Telstra to KILL 2G network by end of 2016
GSM now stands for Grave-Seeking-Mobile network
Seeking LTE expert to insert small cells into BT customers' places
Is this the first step to a FON-a-like 4G network?
Yorkshire cops fail to grasp principle behind BT Fon Wi-Fi network
'Prevent people that are passing by to hook up to your network', pleads plod
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.