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September 29, 2006

Telco 2.0 Brainstorm - Full to bursting point

The Telco 2.0 team is feverishly preparing for the big brainstorm next week. We’re processing the 60-odd stimulus presentations that will be given (helping to cut them down, make them audience-friendly, keep them to brief, make suggestions to improve) and planning the precise brainstorming process so we can generate some new industry insights and actions. We’re delighted that people have spent a considerable amount of effort preparing special presentations to fit our focus and format. A big thank you to all.

We’ve now exceeded our target participant numbers and will be bursting at the seams on the day. Building the Tower Bridge Hilton in London was only completed in August, so we’re asking them to put on an extension to house the extra people…

With the ‘Mindshare’ brainstorming process, we should be in for some very exciting discussion next week by the Thames.

For those who haven’t been able to make the event, we’ll be producing a number of in-depth Reports (Telco 2.0, Voice & Messaging 2.0, Ad-Funded Content, Broadband Connectivity, and IMS Services) after the event. These will be available from the end of Oct at very reasonable rates. More on this later…

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September 25, 2006

Profiting from adjacent businesses

I can commend this short article by Doc Searls to readers. The nub is in the last few paragraphs:

I’m especially interested in exploring what I’ve been calling the because effect. This is what you get when your new business isn’t just about inventing and controlling technologies and standards, but about taking advantage of the new opportunities opened up by fresh new technologies and standards. For example, making money because of blogging, or RSS, or desktop Linux, or whatever — rather than just with those things.

The because effect is a kind of jujitsu. While other people look to make money with something, you’re finding ways of making money because of something.

Prime example, because of search, Google and Yahoo make money with advertising. […]

This morning I flew from Edinburgh to London. The airport operator, BAA, makes money because of the foot traffic passing retail outlets on the way to aircraft; it doesn’t make serious money with flying, as that’s heavily regulated to a fixed rate of return. (It might however explain the telecomesque need to build glass palaces to ensure maximum capital deployed.)

In our Telco 2.0 market report, we propose that the growth engine of the telecom industry is shifting (in Doc’s language) from making money with the network, to making money because of the network. We’re not alone. Motorola wrote back in 2004 [PPT] that:

In an increasing number of cases, the conclusion is that although the mobile network is core to the business, the network is not the core business itself!

Furthermore, they conclude:

We have already established that this view is evolving, that the network is not the business itself. Indeed, the mobile telecoms market is moving away from describing businesses engaged in running a mobile network as ‘network operators’ or ‘carriers’. Surely, the businesses that successfully separate the design, implementation and management of their infrastructure from their core, customer-focused, service-driven resources will free resources and expertise to concentrate on the development and marketing of services that customers will value.

There’s a huge body of economic literature on vertical integration of industries, and Coase did his seminal work on the structure of the firm based on analysis of internal and external transaction costs. This horizontal federation of adjacent businesses is not so well studied. The crashing co-ordination costs driven by hyper-abundant and cheap technology and communications is fairly new. It shouldn’t come as a surprise to find it confusing and hard to react to: they don’t teach it in business school yet.

So, what are the because of businesses that you should be considering as a network operator? We suggest three growth areas:

  • Data assets. Google made billions out of the latent value of hyperlinks. Telcos are also sitting on a goldmine of digital social gestures in the form of call detail records, network address books, text messages and voicemail responses. With the user’s permission, you can mine the value to create new businesses.
  • Platform APIs. The really hard-to-replicate parts of the business are all the call centres, logistics, servicing, tax remittance, and so on: a long list of non-network assets, each somewhat dull, all deeply profitable if milked by allowing third party access. Amazon do it, Google do it, and a Telco 2.0 will do it too.
  • Advertising and attention. You’ve got that little screen in the user’s hand at great, subsidised expense. Shame there’s so little for sale. Buying stuff makes people feel good: empowered and in control. It’s almost as good a dopamine buzz as getting a text message. Fix the missing links to telco-assisted commerce and ads.

You won’t be surprised to know we’ll be looking at this in more detail at the Telco 2.0 industry brainstorm event next week — particularly the ad-funded content, as it has a whole day’s breakout dedicated to it. It looks like we’re getting a big crowd coming, and a rare event where participants from operators will greatly outnumber the vendor salesmen buzzing around them. Book your tickets now whilst there’s room, it’s going to be quite a show. And with that I’m off to bed, because I’m tired.

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September 20, 2006

Will IT vendors displace network equipment suppliers?

Whilst we don’t cross-post articles from our sibling IMS Insider blog, many Telco 2.0 readers will find our discussion of the upcoming battle for service delivery platform dominance of interest. Will the IT vendors get to eat the lunch of the network equipment providers? You decide…

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September 19, 2006

Business platforms vs. technology platforms

My regular flow of PR releases today includes the following typographically-challenged news from AOL:

AOL LAUNCHES DEVELOPER PROGRAM FOR AOL VIDEO SEARCH ENGINE
Open Platform Enables Developers to Integrate AOL Video Search Results Into Third-Party Web Sites
Also Makes it Easy for Content Owners to Submit Video Feeds in Real-Time to AOL Video Search Index

Whilst it’s easy to poke fun at their copywriting skills, this is part of a bigger and important trend among the Internet players to open their platforms. AOL have already announced their open voice platform approach. Yahoo enable plug-ins for their IM client; Skype have made many mis-steps with their partners, but are clearly hitting the channels with co-branded hardware. This could become an innovation space that telcos, who mostly lack vibrant developer and partner programs, find hard to match, even on the promised rapid deployment cycles of IMS.

There’s a deeper cultural issue here where operators struggle to market to niches and make their brands relevant to narrow sub-segments. The DNA of operators is to launch mass-market, closed and standardised products. Would any operator expose the underlying signalling to network end points under IMS and allow the users to buy the devices with the functions they choose? What’s the telco equivalent of “Intel Inside” that assures common interoperability? Is there a “long tail” of communications and content that isn’t making it to market?

We’ve previously discussed the need for operators to concentrate on the assets which differentiate them (not necessarily the network) and choose a “horizontal” strategy of customer intimacy, platform or pipe. By “platform”, we mean easing 3rd party access to the complete suite of business functions necessary to deliver services to market, and not just network APIs. Think of it as automating business development in the same way we’ve computerised HR and Payroll using self-service apps. Any partner should be able to tap in and see how their product is generating service calls, causing bad debt, or creating inventory in the retail channel. Create APIs to the assets that the Internet players don’t have, such as logistics, CRM, care, revenue assurance, etc. Today’s news is that Amazon are doing just such a white label platform for their business. As I discussed with a client last week, a platform is a thing that enables an entrepreneur to pay the mortgage, not just build techno toys, and Amazon clearly gets this.

The driver for this must be metrics that make management do the right thing. Today’s operator business models are very heavy in products susceptible to disintermediation, arbitrage or regulatory assault. The regulators themselves use metrics for market concentration, and we’d suggest you seriously consider “product concentration” a commercial risk that requires diversification. The enablement of more partners and revenue sources must be key to that process. The granularity can vary — at one extreme is the co-owned MVNO (e.g. Sprint/Virgin Mobile); at the other the mon-and-pop garage developer who signs up on the web for a commerce account and API access, just like Google AdSense; in the middle is the traditional BizDev deal with someone like MSN to put Messenger on handsets. Today’s management metrics, like ARPU, may be deeply counter-productive because they make it more attractive to place risky long-odds bets on new own-brand services. (We’re not too hot on IPTV here at Telco 2.0, but another day…) You have to remember that i-mode — the platform strategy of reference — launched largely despite, and not because of, the culture and incentives at DoCoMo.

There are some operators like BT who have reduced their exposure to basic communications applications, focused on connectivity, diversified into services, and promise (semi-?)open platforms like 21CN. Yet even the best of the bunch struggle to match the breadth of business process and technology support the Internet’s platform leaders are offering. Will I be able to track trouble tickets relating to my service running over 21CN and integrate that with my call centre, or will I have to hire BT to do it for me in a closed ecosystem? Another difficulty for BT could be that the wholesale 21CN platform is incomplete without the complementary CRM, billing, inventory, etc. assets stranded on the retail side of the fence.

There are three take-aways from all this:

1. You’re probably over-estimating your own ability to define and deliver services, and under-investing in partnership-enabling infrastucture.
2. A business platform requires a wider set of functions than you’ll find in technical standards like ParlayX, IMS, 3GPP, etc. If an event causes money to flow, it needs to be communicated externally.
3. You’ll find a strategic conundrum in that a business platform requires many enabling functions across the value chain, but at the same time strong competition is forcing you to focus on a few narrow “horizontal” activities. With the example of BT probably leading ultimately to a break-up of the access and retail parts of the business completely severing the links between the network and core IT assets.

So the “platform” strategy has challenges, and there’s no silver bullet. Yet we feel there’s a lot of opportunity here. A huge number of mobile-centric start-ups failed in the dotcom boom. Second time around, allow them to access the core voice and messaging systems, support more of their business processes, and look to be less greedy in revenue share.

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Working with Internet Giants: Google to Speak at Telco 2.0

I met up with Jim Holden, Director of Global Wireless Partnerships at Google last week. Jim is speaking at the Telco 2.0 Brainstorm on how Telco operators can best work with internet players. He will cover some of the partnerships already in place that are delivering trials of Google’s Mobile AdWords in US, UK and Germany as well as the successful partnership with KDDI in Japan.

I put to Jim that there is a lot of fear from operators about Google’s intentions in the Telco space. He is keen to dispel the view that Google is a threat - “we are the solution, not the problem”. For those interested in Ad-Funded Services on Day 2 of the event, Jim points out that Google makes 99% of its revenue from advertising and already shares a substantial chunk of this with operators and ISP’s.

Jim is also keen to educate Telco execs about Google. “I am keen to do interesting events like this to be more transparent about Google so that people do not think of us as some kind of secretive Opus Dei organisation”.

Really looking forward to Jim’s presentation and to see him tighten that cilice!

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September 14, 2006

Building a Telco 2.0-Compliant MVNO

I have been talking to several middle and senior managers at mobile operators around Europe in recent weeks and the overall mood is grim. Several are sitting on or waiting for redundancy packages (which are generally quite generous), but most are not positive about securing another job within a competitor. The ‘musical chairs’, where employees could walk out of one operator and into another, of the last few years has come to an end and lots of people are wondering what they are going to do in the future.

Despite the bleak prognosis for many MVNO’s, as blogged by Om Malik amongst others, many coming out of mobile operators are considering a move into this area as a way to leverage their existing skills and earn an honest crust.

This got me thinking: what would a Telco 2.0-compliant MVNO look like? We have already blogged and covered in our manifesto and report in detail about how the integration of handset, UI, Services and Network is breaking down and how this will continue in the Telco 2.0-world. The premise for an MVNO start-up would thus be about customer control and choice versus traditional operators: the ability to choose any handset, customise your own UI and select own and third-party services.

I have jotted a few thoughts down below for a prospective Telco 2.0 MVNO. Please feel free to throw stones or, better still, come up with an alternative. The key assumption is that you do not have a bundle of capital to build infrastructure and market a brand. Rather than KISS, the CASH (Conserve All Spondoolies Herbert) principle applies.

Would this model make money? Don’t know, there is not much new here except the concept of putting it all together and focusing EXCLUSIVELY on customer control and value, but if anyone nicks the idea then I want 5% of all revenue achieved.

Background

  • UK Mobile players battling for unique position in mind of consumer - high advertising but low differentiation = lots of noise:
    • Vodafone (formally positioned as quality premium brand) now premium + innovation (live!) + value & simplicity (Stop the Clock, Vodafone Simply) + instant gratification (Now!) - all for essentially same product
    • Orange used to be positioned around optimism (The future’s bright…) but now lots of mixed messages
  • Growth in Young (16-35 year old) consumers with strong digital skills (web, mp3, mobile, pc) who are seeking control, participation (not passivity), flexibility and value with communications:
    • E.g. Big rise in social networking sites with user-generated content - MySpace, YouTube etc. where people exchange content and communicate
  • Under-served Corporate market (larger SMEs through to Nationals) also seeking greater value from and control over mobile voice and data.
  • Result is customers are confused, irritated by lack of control (contract lock-ins, hidden handset “subsidy” costs, little web self-service options), feel ripped off (stung when out of contract, locked in to high prices as prices move down for new customers)

Positioning & Customer Targets

  • Customers are Young ‘Digital Kids’ (16-35) and central corporate purchasing depts for larger SMEs and Nationals
  • Position in mind of customer is ‘you are in control’ of your mobile:
    • HANDSET: Get the handset you want free of any operator controls/portals/UI
    • PAYMENT: Transparent up-front or hire-purchase agreement for handset - nothing hidden; Pre- or post-pay options for services; Payment linked to usage NOT to predetermined contract bundle - no contract lock-ins
    • PRICING: Low-cost and prices reduce whenever market prices reduce - not locked in to high prices
    • ACCOUNT MANAGEMENT: Manage everything on-line - billing and payment, service activation etc.

Overall concept

  • Range of handsets - off the shelf from manufacturer
  • Customers buy handsets upfront OR via transparent high-purchase scheme over 12 months (this is the ONLY contract customer enters into).
  • Prepay or a ‘NO CONTRACT’ postpay - customer pays for what is used each month (same attraction as prepay but no top-up hassle). Really SIMPLE approach: handset selection & payment + pre/post payment choice = core service proposition
  • Most services automatically provisioned for use - e.g ‘pay-as-you-eat’ data package is available for all for web-browsing/email. Alternatively, customers select all-you-can-eat data service for monthly flat fee.
  • Same price on pre- and post-pay for minutes, texts, data etc. Any price reduction affects WHOLE customer base - nobody locked in to high-price contract
  • SIM-only option available - customers simply sign up for pre- or post-pay service and number is ported over
  • Prepay service via Paypal, Postpay via direct debit
  • Maximum customer control over account via web self-service for billing, activations:
    • Big benefit for Corporates wishing to manage purchasing centrally but control usage by dept/cost centre - numbers linked to cost centres through web interface.
  • Potential deals with Skype, M$ to offer VOIP and IM clients (subject to operator agreement)
  • Prices driven down by lowest-cost position:
    • 100%(?) web self-service - provisioning, customer service, billing. E.g. Drop-down boxes available for configuring Email solution on mobile for all major email accounts BUT no Email set-up support for exceptions.
    • Inbound email and IM customer service only - customer service issues simplified by single price plan, no airtime contract, simple and separate handset hire purchase, automatic/web provisioning of services.
    • Fulfilment for handset/SIM is outsourced and customers cover postage costs
    • Outsourced customer storage and processing infrastructure using Amazon’s S3 storage service EC2 CPU processing capability as described so eloquently by Thomas Angelero in his Telecom Tsunami blog
    • Outsourced billing capability
  • Additional revenue-generating options - suggested to customer at sign-up or personalised and pushed at customer on mobile or web (when they top-up bill, change service options):
    • (Outsourced) handset insurance option
    • Other hardware sales - mp3, Slingbox (latter for offering Mobile TV service at transport cost - flat rate all-you-can-eat monthly payment) etc.
    • Accessories sales (Why not get a … for your phone)
    • Content download channel for catalogue owner - film/music/other content (poss ad-funded)
    • xDSL sales (either as distribution channel or reseller for a ULL provider or BT), assuming (a) market matures (lower customer service issues) and is (b) attractive (ie can make money out of a paid service)
    • ‘Click to recommend a friend’ and receive £x off your bill if they buy a handset or sign up for service

Marketing - critical ‘make or break’ area

  • Low-cost viral Web 2.0 approach - blogospheres, get young film-maker to shoot quirky, humorous films of customers losing control of mobile and turning to the MVNO - “Take Control of Your Mobile…” and post on MySpace, YouTube etc.
  • Paid search and contextual ads on Google etc.
  • Email and SMS blasts - opt-in, of course
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September 13, 2006

BT 21st Century Global Summit - walking the talk?

We didn’t go, but we’ve had some interesting feedback on BT’s 21st Century Global Summit last week from those that did get the gold embossed invitation and accompanying chauffeur-driven limo. Lots of senior people there, very strong marketing/brand presence (for BT) but, although everyone ‘talked the talk’, there was little evidence that there was any clarity of strategy. Hopefully we can help to fill this gap at the Telco 2.0 brainstorm. More Group Strategy Directors signing up every day now…

One of our stimulus presenters (Day Two, Broadband Connectivity workstream), Malcolm Matson of the OPLAN foundation (Open Public Local Access Network Foundation) and ex-CEO of Colt Telecom, was invited to BT’s event and makes some very useful observations on his blog here.

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Ad-Funded Content: A Utilitarian View

I have just had an enormously enjoyable call with Rory Sutherland, Vice Chairman & Creative Director at OgilvyOne Worldwide. Rory will be speaking at the Advertising-Funded Content workstream at our Telco 2.0 event and, judging by our call, will be well worth listening to. He has an unfair advantage over many others in that he reminds me strongly of the doyenne of cricket commentators, Henry Blofeld, when he speaks which makes him very easy to listen to.

I am ashamed to admit that I assumed Rory would be a sterotypical advertising man and espose the views of Hollywood/Bollywood entertainment as being the key driver of digital advertising. Not a bit of it. He reminded me of economics lessons from years ago with his utilitarian views on content. For those a bit rusty on their Jeremy Bentham and John Stuart Mill, Rory subscribes to the view that content provides “the greatest happiness for the greatest number” by focusing NOT on entertainment (“I can get that anywhere”) but on CONVENIENCE and RELEVANCE. His view is that The Ivy is not the “best” restaurant in the world because there is only one and so the ability to serve a large number of people is poor - something like MacDonald’s is much better in terms of the overall value it provides.

Fair enough, if you take a macro view (though any individual dining at The Ivy would probably take issue). Applying this concept to mobile content, Rory says that operators should focus on content that makes users’ lives easier - such as SMS payments for the London congestion charge.

He says that advertisers will follow a strong content offering with targeted advertising (witness the social networking sites) but that operators need to move away from a small volume of high-quality content to a much higher volume of cheaper, contextually relevant offerings.

Touché!

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September 12, 2006

Telecom Italia U-turn

Just as we discussed in our last post the limited value of FMC, so we see that Telecom Italia has U-turned on it’s convergence plans with the likely divestment of TIM in Europe and Brazil. Lots of uncertainty about why exactly (but probably nothing to do with the subtleties of user value we describe below!)

Here are some useful perspectives from analysts today:
Communications Breakdown Blog
EuroTelcoBlog
Disruptive Analysis

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FMC: Do the users care?

Flavour of the month in telcoland is the idea that fixed-mobile convergence (FMC) will save voice revenues from collapse, extend high mobile termination fees into new domains, eliminate churn and generally make investors rich and executives happy (or was it the other way round?).

Needless to say, the Telco 2.0 opinion is that we’re unconvinced of the business case. The obvious thing to state up front is that the key fixed-mobile convergence feature was available on day 1 of cellular: the ability to call between fixed and mobile phones. So we’re only looking at some relatively small improvements compared to that monumental advance.

The problem is that FMC tends to be a network-centric vendor and operator solution in search of a user problem. Pretty much every aspect of the FMC value proposition can be replicated (at least in part) by cheaper, simpler solutions. Therefore whilst we see user benefit, we don’t see rewards that justify sky-high investment in network equipment and marketing. Someone else can come in with 80% of the solution at 20% of the cost and ruin the economics.

So what’s the user problem?

  • Handoff between fixed and mobile networks? This is already solved for mobile-to-fixed! You just keep your mobile on. The other direction just doesn’t make sense: going outdoors generally means putting clothes and shoes on, or driving a car. The use case just doesn’t seem compelling.
  • Single device? My smartphone can do WiFi calls already. No new network required. Given the chipset can do FM radio, Bluetooth, 2G and 3G, I suspect it’s not beyond the bounds of possibility the throw in DECT too.
  • Single address book? This could be done by other means. For example, an enhanced DECT phone — even without broadband — could dial a freephone number in the night to sync with a networked address book. Or you could put a SIM slot in and just shuffle the data around that way.
  • Single inbound number? Easily emulated with call forwarding, and bundling/pricing changes would erase the cost issue. With ever larger buckets, mobile-to-fixed forwarding isn’t expensive anyway.
  • Single outbound number (i.e. same caller ID presented to anyone)?. Easily emulated today by IP services — just as Skype confirms your mobile number before “faking” it as your ID for outbound SMS messages (using a code sent to your mobile you then have to enter into the client).
  • Single bill? Just pay by credit card and deal with it once a month, or direct debit and never think about it again.
  • Single voicemail inbox? More interesting, but doesn’t require IMS or UMA. After all, it’s nothing more fancy than an email inbox, and we have no problem managing multiple accounts today in a single client. Plus forwarding busy/no answer calls will solve the problem for you anyway.
  • Extend in-building coverage? The picocell/femtocell solution sounds like the way to go here: backwards-compatible, simple and incremental. (Just more bad news for UMA/IMS vendors…)

There’s benefit to the operator, no doubt. Getting the users to pay for their own backhaul, and lowering spectrum costs. Mobile operators have more control over service and handsets, and want to extend this control to the liberated fixed world. Yet the price in terms of customer service and support, dealing with user-supplied gateways and contention with bandwith-hungry P2P downloads and gaming just doesn’t seem worth the effort and hype.

So far FMC has only offered small distribution gains on “standard telephony”. What would make more sense would be to expand the “better telephony” opportunities of VoIP into the cellular device. Wideband audio, presence, privacy and improved multi-modal UIs. However, we’re not holding our breath. Unless we’re supposed to infer that downloading a Yahoo or Skype client to our mobile phones is the route to the converged future…

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September 11, 2006

Ideas for efficiency

Mostly the Telco 2.0 initiative is about strategy and changes to business models. We look outside the telco, and focus on the interface between the customer and the network. For a change, let’s look inside at execution.

Here are some quick ideas for making your organisation a leaner, more agile and efficient place by improving the supply-side equation of labour and capital.

1. Go commodity. Put a moratorium on proprietary equipment and software.

Google delivers incredible performance and up-time on specially managed farms of commodity hardware with tweaked open-source operating systems. Iliad apply similar ideas to the French telco market. You can too. At the very least, follow the lead of EnterpriseDB and use commodity software as a pricing lever: “We don’t tell Oracle users to convert from Oracle databases to us. We urge them to get some leverage with Oracle by converting just 5% of their databases to us.”

2. Don’t just expect productivity, teach it.

A ground-up change has been occurring in personal productivity. David Allen’s Getting Things Done has seeped into the management psyche, and sports a plethora of toolsets and blogs. They don’t teach you these effectiveness skills in school, and now it’s time to operationalise it and expect “effort management” to be a core skill of every employee.

3. Benchmark your IT costs again, the world just changed.

Amazon have done what Sun have long promised, and created a super-commodity computing cycle and storage service. As Thomas Anglero puts it with only the mildest exaggeration, you can build a telco for $0.15/hour utility costs. You can be assured Skype won’t be spending millions on IMS kit, so any centralised computing facility either needs to deliver massive benefits, or be delivered with all fat cut out. Your internal IT costs an order of magnitude too much compared to the best. Fix it before disruptive new entrants come in with negligible cost bases.

4. Empower and delayer.

We carry on the theme of senior management working on the business (making processes better), not in the business (reacting to daily events). They’re old buzzwords, but if Taco Bell can eliminate a layer of management whilst making their business improve, so can you. The good news is the timing is just right, since the ease of use and availability of collaboration tools to grease the process has never been greater.

5. Go agile.

The ideas that animated the Toyota Production System for cars have been applied to software with similarly spectacular results in terms of defect rates and throughput. Every telco has a software factory, even if sometimes outsourced to an integrator. You’re almost certainly using outdated metrics and methods. If this stuff is news to you, be scared — you’re late to the party. The good news is that Microsoft’s new developer toolsets will embody the best practices from the lean/agile development community, so this won’t be too painful to adopt.

6. Remove information gatekeepers. Share everything.

It sounds like philosophy, but if a piece of business intelligence or internal discussion doesn’t have a URL, does it really exist? You’re in a competition for the best ideas, and then executing on them. Any friction to the exchange of ideas needs to be removed, and that includes nasty communications silos like email. (“The boss’s inbox is where all good ideas go to die.”) There are big, traditional companies out there that have completely re-invented how they work together, and documented the process. Now’s the time to make blogs, RSS feeds, wikis, and advanced communications tools part of your standard internal repertoire.

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User Generated Content is King for Video on the Net

A new survey on video on the net usage from AOL in US shows that nearly the same number of people watch ‘amateur video’ (‘User Generated Content’) as they do Sport’s Highlights. What does this mean for IPTV business models?

Further ommentary at the Chaotica blog.

We’ll be probing these issues with the Marketing & Content Director for IPTV from Fast Web (Italy’s no. 2 broadband provider, and one of the world’s most experienced IPTV companies), and Ole Obermann, VP for Digital Business in Europe for Sony BMG (who are experimenting with new models re music-related content), on Day One of the Telco 2.0 brainstorm on 4-5 Oct.

The ‘Ad-Funded Content’ workstream on Day Two, looks in detail at how we can make money out of this phenomenon.

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Vodafone fixed-line broadband - good start, much, much more needed

News everywhere today that Vodafone UK is to sell fixed broadband via BT Wholesale…

So, another big name enters the fray in the UK (after Orange, O2 and Carphone Warehouse). This will put yet more pressure on the minnows (Pipex, Easynet etc.) and continue to drive margins down in the broadband space. The UK comms market is looking crowded again (reminiscent of the fixed market in 2000/1) - everyone is looking to take a piece of someone else’s revenue.

The contract could be worth up to £500 million to BT, depending on take-up. But Vodafone will not be installing its own equipment at local exchanges. Instead it will resell BT’s IP Stream product. This contrasts with the fixed-line broadband strategies adopted by Orange and O2 which use suppliers that set up their own kit at the exchange level.

Unfortunately, there is only so much wallet available so only the leanest will prosper. Vodafone has an advantage with its scale but we don’t see them making a bean out of fixed broadband. Vodafone’s share price had a rise today, but is still trading at a very low level.

Some thoughtful questions here and an initial response from Dean Bubley here

But the key question is still - where’s the money going to be made from providing ‘access’ and how? This is of course the focus of the Day Two workstream on Broadband Connectivity at the Telco 2.0 Industry Brainstorm. We’re getting more and more distressed broadband operators booking into this session (ingoing hypothesis here) right now…

…who will be stimulated by a keynote from James Enck of Daiwa Securities and EuroTelcoBlog. James will start the session by laying bare the facts and trends re broadband. See his extremely useful post today on Illiad and the fibre revolution in France.

From an investors point of view, James would like to see some genuinely ‘out of the box’ thinking from operators. Our challenge is to create some on the 4-5th Oct.

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September 7, 2006

Ad-Funded Content: Big Revenues…but for Whom?

The interest in Advertising-Funded Content is hotting up and Informa have recently published their prediction that the market will grow to a whopping $11.3bn (£6bn) in 5 years time.

Nice money… if you can get it. And getting a slice of the action seems to be on the radar screen for many operators. The mobile players in Europe, in particular, are recruiting advertising talent heavily, as they see this as a contributor to filling the revenue and margin hole created by market saturation and increased competition from MVNOs as well as new compeititors and technologies.

But Google, the masters of web advertising are not going to leave this market alone. They recently announced trials of their Mobile Adwords capability in US, UK and Germany. This enables websites to deliver adverts that are configured for mobile devices together with click-to-call functionality.

If Google and the other internet giants win the ‘battle’ (if one really develops), then operators may benefit from increased data transport (more people viewing cheaper content) and some additional voice traffic from click-to-call.

The trouble is, with prices in free fall in these areas, it remains questionable whether this will add anything to the top and bottom line. And what are they going to do with their advertising talent - look to drive more on-portal traffic with an advertising-funded content capability of their own?

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September 6, 2006

Deutsche Telekom 2010 initiative - make sense?

Coverage here of Deutsche Telekom’s re-structure. In it is says:

“The telco also introduced its Telekom 2010 initiative - which it describes as a 7-point programme aimed at securing market share in Germany, targeting sustainable revenue growth in European markets, and ensuring T-Mobile USA becomes the Group’s largest business unit in the consumer area. Deutsche Telekom is currently bidding for (and is likely to win) additional mobile spectrum in the US.

As well as the specific regional and country focus, the three-year plan also calls for Deutsche Telekom to achieve a top three market position across all European business customer segments. It also calls for the company to concentrate on the main fields of innovation in the industry, including IPTV, mobile Internet and ICT services. “

We’ll be hearing from DTAG’s VP of Strategy Development at the Telco 2.0 Brainstorm on 4-5 Oct. A few questions we”ll be probing him (plus Gordon Smillie, his BT co-panellist, and I’m hoping to confirm a senior corporate France Telecom panellist as well) :

- Is there really a growth business in IPTV (as currently conceived). Speaking with those who’ve spent most time testing this (FastWeb in Italy is a good example - Signor Petazzi will be covering this in his presentation later in the day), we don’t see it. However, there are some interesting developments in P2P TV and more creative models of content distribution which we’ll be hearing about in the Content Workstream on Day Two.

- Is there really a growth business in ‘Retail’ at all in mature markets? (heresy!)

- How does the value chain need to be supported in a very different way to make ‘Mobile Internet’ economically sustainable? (Again, we’ll be probing this in a lot more detail on Day Two in the Broadband Connectivity session where we look at the current economics and what needs to change.)

- ‘Top 3 market position across all European market segments’? Top 3 versus who? Other telcos? Versus Internet players? Versus Systems Integrators? Who are the players in your markets in 2010 that you’ll measure yourself against?!

- How ‘Telco 2.0-compliant’ is this strategy?

Of course, the participants at the Brainstorm can put forward their own comments and questions via the event’s Mindshare process. In the meantime, we’re helping the panellists prepare for these questions in advance, so that we can create some constructive industry next steps from the debate…

If anyone would like to suggest some ‘probing questions’ in advance, please let us know in comments box below.

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September 4, 2006

The Demand-side Equation in Broadband

Next week, in preparation for the Telco 2.0 brainstorm on 4-5 Oct, we’re briefing Stuart Collingwood, VP Europe for Sling Media, makers of a rather nifty piece of hardware called the Slingbox. A big disruptive success in the USA, Sling Media is now rapidly expanding in Europe.

Stuart is a stimulus presenter in the ‘Broadband Connectivity’ workstream on Day Two. He’ll be talking about the ‘Demand-side Equation in Broadband’. Slingbox is a technology that all telco Broadband execs should fully understand.

Below is the first draft description of Stuart’s presentation. Next week I’ll be looking to de-code this to ensure we have a rich stimulant for our brainstorming:

“In the presentation Sling Media will discuss how the company’s positioned to be a great partner for Telco’s looking to push customers to broadband services as well as bumping them up via tiered services (faster download/upload speeds).

We can all agree that broadband usage is increasing, but what is driving adoption of more than just introductory levels of broadband? Certainly faster download speeds are great for music or video downloads, but the average consumer who just uses broadband for surfing the web or email is not going to look for faster downloads.

However, Slingbox drives the adoption of “Turbo Broadband” services given the fact the Slingbox uses the upload capacity of your broadband connection to deliver your home TV or video signal to you wherever you are in the world.

Slingbox in Europe is moving into the market of mobile TV on handsets as it has done already in the U.S. The novelty of having mobile video or live mobile television on a handset has worn off as mobile TV is now appealing to a small percentage of early adopters. What will drive adoption of handsets capable of displaying mobile TV and services capable of delivering mobile TV is content that is familiar and relevant to that customer. What will drive the adoption of broadband services on mobile handsets is compelling applications that justify much higher monthly services and actually use the large “pipe” that is now available to consumers.

This means mobile TV has to be familiar to the customer and relevant to that customer. We believe customers expect the content and the ability to control and manipulate that content on their home TV to be the same on a mobile phone. If you have a more robust home TV set-up like a DVR or Video on Demand or Pay Per View, you should be able to watch a recorded show, pause live TV, cue a recording if you forgot to at home, etc. on your mobile phone.

Finally Sling Media will discuss when the next leap forward will take place (is it happening now?) and how the traditional broadcast models have already changed and will continue to evolve as companies look to monetize these new distribution models. We’ll discuss how each part of the mobile TV food chain (carriers, handset manufacturers, Consumer Electronics companies, content owners and content distributors) can be successful in this market.

The Slingbox is an additive technology and also a convergence technology. That’s why it does not replace competitive offerings, but rather it will drive the adoption of upgraded and new technologies that will benefit other members of the mobile TV/video food chain.”

I think we’ll get a demo as well…

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