February 28, 2024

The mountain of shit theory

Uriel Fanelli's blog in English

Fediverse

KKR and TIM

I hate to say I said that. But in the end, (and I'm referring to consumerist skeptics like Quintarelli), what I predicted happened. TIM's Italian network infrastructure, perhaps the most strategic structure of the new millennium, is sold. But not to another telco company: to an exclusively financial fund.

Congratulations. Congratulations because it wasn't hard to predict. There are many companies that have outsourced their networks:

https://www.telefonica.de/news/press-releases-telefonica-germany/2020/06/passive-infrastructure-telefonica-deutschland-sells-mobile-sites-to-telxius-for-1-5-billion- euros.html

https://www.reuters.com/markets/deals/telefonica-sells-controlling-stake-peruvian-fibre-optic-network-kkr-2023-07-07/

https://telecoms.com/516612/telefonica-sells-e1-billion-stake-in-spanish-fibre-ops/

https://totaltele.com/vodafone-pockets-half-a-billion-euros-from-vantage-towers-sale/

and I could go on.

It was therefore not a prediction: it was a trend, in which it was easy to notice the entry of TIM. Nothing difficult to predict.

Just as it is not difficult to predict what will happen to the network. KKR, to maximize the value given to shareholders, will no longer invest, and will limit itself to milking the infrastructure that exists, as long as it can. When it gets too old, it will simply tear it into pieces and sell it to even smaller entities, or it will cry misery to the state and invest other people's money.

Customers will see service get worse, certainly not better.


What's the problem? The problem is that the telcos work for GAFAM. When the telco brings fiber to an area, the price remains low because that's what subscription prices are supposed to do. The world is now used to getting more for less when it comes to IT.

In this way, the telcos invest to keep the crumbs, that is, a simple subscription. The GAFAM then make money from it, because if you include the Netflix subscription, the advertising you receive and the data collection, you immediately understand that for every 25 euros per month of subscription the GAFAM make about $100/200.

Telcos invest, others earn.

This turns the network into a financial hot potato. Also because the fixed network is made up, financially, of opex costs, i.e. fixed expenses, which investors don't like to read on the balance sheets.

The solution would be to throw away Net Neutrality, a law that was passed to benefit GAFAM, and was pushed by a massive campaign by GAFAM lobbyists, and allow telcos to charge GAFAM for traffic.

When I say this, the Quintrelloids come with arguments that are so stupid as to be incomprehensible.

  • The price of domestic connections is the right one because a resolution of the Casalecchio di Reno municipal council says so. Ah, no, sorry, it's AGCOM. Which, on a global market, has exactly the same value as the municipal council of Casalecchio di Reno.
  • The telcos of other nations can get by with that price. The proof is that Proximus, in Belgium, which has no mountain areas and has a very high population density, can do it. A topic that forgets physics and geometry, but if the municipal council of Casalecchio di Reno says so, sorry AGCOM, then it's fine.
  • They are among the telcos that operate even with low prices of companies that are owned by the state or receive copious aid, in many hidden forms, from the state itself, as in France and Germany.
  • A complete lack of understanding of a global problem involving global actors. Irrelevant bodies such as AGCOM or some European authorities are brought up, without instead observing the global market, which apparently is of little interest to them. Resolutions count.

When I said: "Look, the material facts show networks that are becoming hot potatoes to be hashed out", the Quintrelli supporters laughed in my face. Imagine if the state will sell off something as strategic as the TIM network to foreign private individuals.

Well. It just happened. And with all due respect to Vivendi, which isn't very Italian either.

The problem is simple: money talks. You can talk about authorities and AGCOM and all the acronyms and all the guarantors you want, but in the end, the facts of the economy win. The rest is political nonsense.

The telco world, all over the world, is suffering. A table won't tell me that things are going well. I've been working on it for over a decade now. And it is suffering because the "net neutrality" rules, sponsored by the GAFAM world to rein in the telcos themselves, are prohibiting the telcos from demanding remuneration from those who make most of the money using their infrastructures.

Oh, sure. You bought net neutrality exactly as Gafam wanted. A question of democracy that would defeat the evil monopolists. We've seen how it ended.

There are no monopolists online. They see it all. Ewwiwa!


Now, what will happen?

Two things can happen. The first is that the funds that are buying telco companies, like KKR, are doing so to resell them to some American operator. In this way, we will soon find American telcos here, and I wish you all of them, because the relationship between costs and bandwidth in the USA is simply pathetic, as soon as you leave the right neighborhood (not even the city, I'm talking about the neighborhood).

The second chance is that, after years of milking users by investing the minimum, KKR decides to go for the hotpot solution, or ask the state for money to update the infrastructure. In the first case, the network will be sold piecemeal, I would say to local companies such as municipal companies, or to a large basket of foreigners (I would say Europeans) who want this or that piece. For southern Italy, this is not good news.


But don't worry.

AGCOM is watching over you, and so is the Casalecchio di Reno City Council.

The two greatest world powers are with you.

Not like "the global market".

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