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September 30, 2008

The inversion of the telephony business model

We are currently doing consulting work on the future of telephony and what future business models might look like. A recurring theme is understanding what the underlying sources of value are in the voice and SMS products that we take for granted. The excerpt below from our report on the future of consumer voice and messaging highlights some of our core ideas and themes.

As telephony becomes a feature of other applications, rather than a service in its own unnecessary right, we expect to see a corresponding inversion in the business model. The graph below compares average per minute wages in the US to average per minute fixed and mobile telephony prices, all rebased to 2006 prices. Ten years ago, it would have made sense to employ a college graduate for an hour if that saved you the cost of a one hour wireless phone call.


The graph tells us that the cost of a telephone call is increasingly accounted for in the time of the caller and callee, not in the cost of using the telephone network. Therefore, the opportunity cost of a call that does not end up meeting the objectives of the participants is rising. This suggests there is growing value in preventing unwanted calls, eliminating unnecessary calls that could be automated - perhaps through better presence, improving the comprehension of the caller and callee to avoid strain or repetition, and shortening calls where the goal is to communicate information.

In traditional telephony, access and long distance telephony were scarce resources. AT&T’s choice to retain its long distance network, rather than the local loop, when it was broken up, shows how easy it is to become attached to old modes of scarcity and be unable to adapt to new economic models.

As a consequence of people’s scarcity of time and attention, we think the business model for telephony will invert over the long term. Rather than money being given to the telephone company at a constant rate during a call, we will see a completely different pattern. This pattern will require an understanding of the objectives of the caller and callee, and the ability to deliver a successful outcome from the user’s perspective. Today, a telephone company is rewarded for failure - the call that goes through to voicemail that you immediately terminate. No industry with such misalignments in value can prosper in the long term.

Instead, we expect to see new sources of revenue: First, there will be revenue in managing the rendezvous and conversation process. Communications companies will be rewarded for getting the right people together, at the right time, on the right device.

Second, there will be revenue for assisting transactions during a call. Today, the user experience of interacting with interactive voice recognition systems and call centres is fundamentally broken. It is inefficient, insecure and inconvenient.

Third, there will be revenue from managing the metadata from a call. Just as Google recovers the latent value of hyperlinks as digital social gestures between web pages, a telco will use its social data to drive business processes as well as relationship and community forming activities. Users have invested their most valuable assets, time and money, in making those calls.

There is no guarantee that the telephony companies will be the beneficiaries of these revenue streams. To date, telcos have been lucky that companies such as Skype have also clung to the old model of access as the up-sell from their free voice products. For example, it is not possible to tell if another Skype user is in a call before you initiate a call. Ultimately, the rise of social networking sites will prove a far stiffer challenge as the sites are centred entirely around providing a presence experience, in the widest sense of the word.

This was an excerpt from our research report into new forms of voice & messaging, and how telcos can improve their traditional core product. Click here to find out more.

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September 29, 2008

Ring! Ring! Hot News, 29th September 2008

In Today’s Issue: Bankers’ favourite BlackBerry bears brunt of banking bust; IBM and Salesforce.com, again; MSFT’s new Unified Comms server, works with Asterisk; Cisco launches Web-based unicomms with VZ; Dell’s business model diverges; Apple lawyers’ war on books. FACT!; Motorola deploys android hordes; HTC keeps on making Windows gadgets; funny prepaid broadband prices; awful EU telecoms bill defanged; roll-your-own MVNO; Joost and the browser plugin to end plugins; CWN vs Pirates; Roshan’s M-PESA deployment vs Taliban; Singapore’s fibre deployment, none more Telco 2.0; global M2M alliance formed

Crisis at RIM; the maker of BlackBerrys issued a profits warning for the fourth quarter, as thousands of bankers handed their company-issued devices over to the administrators, filed last-minute expense claims, and packed their belongings in the traditional cardboard box.

RIM’s response to this appears to be as follows: keep taking the tablets. For some time, they’ve been trying hard to diversify and appeal to consumers and power users as well as their core enterprise market, hence their efforts to make the gadgets prettier (frankly, all the Blackberries up to the Pearl were ugly as hell), and more user friendly (the same went for the user interface).

After all, even without the banking crisis, push e-mail was never a technology that would defy copying. It is, after all, how an e-mail system should behave according to RFCs 822 and 2822 for over 25 years. Since Microsoft began providing it in MS Exchange Server, you had to wonder how long the good days would last.

One possible answer for RIM was to keep going with their business-focused strategy and integrate more enterprise applications on the handsets. They’ve had a fruitful partnership with IBM, who integrated them with Lotus Notes and also Salesforce.com; IBM, meanwhile, is getting on with getting closer to the SAAS powerhouse.

Relatedly, Microsoft is tightening up the last few bolts on its new unicomms product, OCS 2007 Release 2. Interestingly, one of the new features is “easier Asterisk integration”; that’s Asterisk as in the popular open-source IP PBX, very much a product of the Unix/Linux world. Perhaps MS is hoping to let its developers leave the telecoms stuff to Asterisk and concentrate on the application layer?

Cisco, meanwhile, announces a Web-based version of its unicomms system, and a lucky carrier as the main partner to market it - Verizon, with announcements for Asia and Europe to come.

Dell is rumoured to be splitting its PC manufacturing business from its sales and marketing business. As John Hagel astutely notes, this separates the product business from the customer relationship business, each requiring different skills and cultures. Telcos would appear to be equally unnatural beasts. You don’t buy your consumer electronics goods from the owner of the local power station. Why on earth are we so wedded to branding networks — that the user cares little about — and pretending one company will be good at infrastructure, product innovation and customer management?

The row over the Apple App Store Ts & Cs rages on; this time, it’s a handbook for iPhone developers that’s in trouble, as the publishers’ lawyers fear that publishing the book may breach the AppStore NDA. Is it even legal to mention that the book exists? Or will we soon need to downface a Cupertinan nastygram?

No wonder that Motorola has apparently assigned no less than 350 developers to work on Android apps, while even Nokia was represented at a recent Google devcon. Moto has a special reason to be interested; as members of the rival LiMo Foundation, not only would they be interested in what’s going on, but there’s also scope for reusing quite a lot of work between the two mobile Linux platforms.

HTC, meanwhile, promises that their involvement with Android doesn’t mean they’re going to stop making Windows Mobile devices.

Over on the network side, here’s an interesting insight into two rival carriers’ business models. T-Mobile UK is launching prepaid mobile broadband service. Once you’ve bought the USB dongle — the traditional Huawei E220, like enough — you pay for “unlimited” data service for a specified period of time. £20 buys you 30 days of Internet service. Now, consider this; 3UK already provides prepaid mobile broadband (and this blog was maintained over such a link for a while), but it charges by quantity. Over there, £15 buys you 3GB of data, which must be consumed within a month. Here’s the kicker — the cost of a bit is exactly equal for the two operators, and has been ever since the creation of their network-sharing joint venture (Mobile Broadband Network Ltd).

The EU “telecoms package” had its first reading in the European Parliament, where to the delight of many, the highly controversial provisions suggested by the French government and some British Conservatives which would have required mandatory DPI and content policing were struck out. Further, most of the rest of the bill was altered to devolve it to national authorities, including the key clause affecting OFCOM’s plans to refarm the 2.5GHz UMTS Extension band.

MaxRoam has launched a new product — specifically, it’s a set of tools to create your own MVNO based on their hosting infrastructure. Very cool.

Online video service Joost, meanwhile, has shifted from being a software application to being a Web service, using a special browser plugin to handle the P2P element. That sounds like quite a plugin, and there are complaints about crashiness and the fact that it keeps running after the browser is closed. Apparently there is a new Flash-based version coming. Despite the technology shifts, we’re still waiting for a viable business model to show up.

Surveys suggest that unlimited music services like Nokia’s Comes With Music might compete with piracy; it’s a pity everyone thinks it’s a lossmaker…

Roshan, Afghanistan’s biggest GSM network, has launched the M-PESA mobile banking system developed by Safaricom; great stuff, but they are still having to switch off 30 to 50 sites every night for fear of Taliban vengeance.

Singapore leaps into fibre with a national 1Gbps/s roll-out based on a whole wave of Telco 2.0 themes; there’s going to be Layer Zero unbundling, a shared fibre network, competition between operating companies at Layer 2 and above. And in other Telco 2.0 news, a new interoperator alliance is formed so that machine-to-machine (M2M) applications need only work with one set of standards, worldwide.

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September 26, 2008

Guest Post: Google’s First Handset - strategic implications

Both customer data and product-service systems are critical to future telco business models. Google’s Android platform puts Google in a better position to capture customer data and integrate its services with mobile handsets. This brings a powerful Internet player into direct competition with established telecoms players, such as Nokia and their Series 60 and Ovi platforms. Marek Pawlowski, a director at mobile consultancy PMN and founder of the Mobile User Experience conference, outlines the strategic implications of Google’s mobile ambitions below (this article was originally published at this link):

Google, T-Mobile and HTC this week announced the G1, the first handset powered by Google’s Android platform. The press event in New York confirmed specifications already leaked out through various fan sites over the last few weeks: a touchscreen 3G handset, with a QWERTY keyboard and trackball. Other features include GPS, a 480 × 320 screen and 3 megapixel camera.

It will debut in the US next month, followed by a UK launch in November.

The G1 device itself is already attracting considerable consumer attention: the BBC’s morning news programme picked it up on the day of launch and asked me to give an interview explaining what it meant for users and the industry (if you’re in the UK you can catch it on BBC iPlayer here until Tuesday, 30th September).

However, this is a much larger and more complex story than the single handset being announced on the T-Mobile network.

The ultimate goal of Google’s mobile strategy has little to do with making a success of Android or building so-called ‘G-Phones’. Google’s business is selling advertising space. Strip away the hype, the friendly multi-coloured logo and all those free services we’ve become addicted to and you’ll find Google’s revenue comes from a single source: connecting advertisers with potential customers.

Android, the G1 and future G-Phones from manufacturers like HTC, Samsung and LG are a means to an end for Google. It believes Android will have two effects: firstly, devices running the Google OS will make it easy for more customers to access mobile web services; secondly, the free availability of Android will force other companies in the mobile industry to improve their own mobile internet access features. Both of these should result in Google achieving its goal: expediting the growth of mobile internet usage so it can make money from mobile advertisements.

Don’t expect this to be immediately obvious. Google employs a lot of smart people who spend their time thinking about how customers interact with its services. They know that the quickest way to annoy users is to overwhelm them with advertising. As such, a lot of Google’s current mobile services have no obvious advertising at all - they maintain a single-minded focus on making it as easy as possible to access emails, view maps or any of the other features Google already offers to mobile users.

Google’s management has already stated it believes mobile advertising will become a bigger business for the company than its existing desktop franchise, but that this will be a long-haul. The truth is that no one really knows how effective mobile advertising will be or how to provide a customer experience users genuinely value. It’s going to require a great deal of experimentation. However, we do know that mobile platforms like Android make it easier for companies like Google to learn the behavioural traits and contextual factors which will enable them to deliver more targeted, appropriate adverts and services.

Here at PMN, we’ve long held the view that mobile will require a different approach to what we’ve seen in other advertising sectors. The unique conditions in which mobile devices are used mean that advertisers can no longer be in the business of capturing attention and distracting customers - instead, they must focus on learning as much as possible about the user’s background, current objectives and available time to ensure they can make it as easy as possible to reach the services they want. This is about delivery rather than distraction.

When you think about mobile advertising in this way, the billions of dollars Google has poured into developing ‘free’ services such as email, calendar, reader, photos, videos and maps start to make sense. The more information users entrust to these services, the more accurate a picture Google is able to build of its customers and the more valuable its advertising opportunities become.

The goal for Google is a world in which mobile devices enable it to know where users are, what they are doing, what they’re trying to achieve and how much time they have available.

Android, the G1 and subsequent G-Phones are both a testing ground for this vision and a short-cut to achieiving it.

If Android-powered devices succeed in the consumer mainstream, Google will have a good chance of ensuring the right market enviroment for its long-term business objectives by embedding its key software and services in the platform. However, this is by no means necessary for Google to ultimately prevail in mobile, nor is it guaranteed (Android is modular and open source - handset manufacturers and operators can choose which components they use and which they leave out).

Even if Android only captures a small percentage of the market for mobile platforms (the latest estimates from Strategy Analytics predict the G1 will account for about 4 percent of US smartphone sales in Q4 2008), its presence in the market should catalyse other players to include similar features. In the long-term, this will play into Google’s hands by ensuring all devices come equipped with the location-based technology and rich browsing environment it needs to deliver mobile services powered by smart advertising to users all over the world.

So what does this mean for existing players in the mobile business?

In brief: increasingly intense competition with new entrants who are willing to change the rules. Google’s approach - and it is worth bearing in mind that it is just one of several companies who share similar ambitions in this space - will challenge players throughout the traditional telecoms value chain. Operators, handset manufacturers and software developers will all need to consider their competitive response.

In the mobile industry’s rapidly maturing landscape, it will be the companies who best understand and respond to consumer needs that capture the lion’s share of the value. This is true in any mature business and, make no mistake, Google’s move into this market is a very clear sign that mobile is maturing.

The world in which handset manufacturers crammed the latest technology into devices simply for the sake of having the best specification sheet and operators flogged them to consumers on the basis of megapixels and memory is changing. If we as an industry are serious about providing a great mobile services experience which extends beyond voice and text, we will need to take a much more integrated approach.

It has been fascinating to watch ‘old school’ industry commentators pick apart the technicalities of the G1 spec sheet and Android platform, all the while forgeting to look at this announcement through the customer’s eyes. When we switch our world view around and put ourselves in the place of the average customer, the G1 represents a simple and attractive proposition: Google, email, maps, music and photos on the move.

End customers tend to look at these offerings very differently and that is one of the reasons why the industry is still struggling to expand into new areas despite many years of technological advances. Customers will measure the attactiveness of this proposition by metrics like the in-store experience, the number of seconds it takes them to find something familiar (like access to their Gmail) the first time they pick it up and whether the mapping interface looks like the desktop maps these use on their PC every day.

That’s the reality of what the world looks like when you see it through the customer’s eyes and that is something Google is very good at. It is worth remembering this is a company with the world’s most valuable homepage, yet it still refuses to cash in by cluttering it with anything superfluous to the user experience.

Consider the contrast with Nokia’s current Ovi offering. I received an email today informing me: ‘Ovi is open. Welcome’. It went on to advertise how it would help me ‘keep my life in sync’ and showed off the full range of Ovi services, from contacts and calendar to files, maps and games.

Excited to see the launch of Nokia’s new, integrated approach to mobile services I hurried over to the Ovi homepage to register. The process was simple and in a few minutes I had received the settings on my phone and ‘synced my life’.

Unfortunately, that’s where the great experience ended.

I was hugely disappointed to find Nokia’s first foray into the integrated mobile services business lacks one crucial thing: integration. As it stands, the Ovi sync process basically backs up my contacts and calendar to a web-site. The games portal, the photo sharing, the mapping and the file sharing all require separate accounts and sign-on. It is a shockingly disconnected approach.

I truly had high hopes for Ovi. Nokia has been making all the right noises about taking a new approach to developing mobile services and has even re-organised its business structure to ensure a more joined-up approach to building devices and software which work in sync.

However, in its current form, Ovi represents a classic example of what happens to the mobile user experience when a company uses company-specific rather than customer-specific performance metrics. Sure, Nokia’s management can now say it has ticked the right boxes to ensure it offers a similar range of mobile services to the G1 and the iPhone, but the customer reality is a world away from the total experience offered by these competitors.

Long-term, I still believe handset manufacturers like Nokia are best positioned to provide a truly integrated mobile user experience. Not only do they have the hardware and software development resources to develop truly customer-focused products, the economics are also in their favour.

As we can see from offerings like Nokia’s ‘Comes with music’ and Sony Ericsson’s PlayNow Plus, manufacturers can afford to finance these services in order to sell more handsets. While customer’s continue to associate the main value in mobile with the physical representation of their users experience (i.e. the device), the value equation will continue to slant in favour of the device companies.

However, this week - here and now - these companies should take heed of a very loud wake-up call. Google’s first foray into mobile might be a tiny ripple in the great sea of the telecoms industry, but it is the clearest signal yet that there is a new generation of companies who are setting out to eat the industry’s lunch by paying greater attention to the total user experience.

Do you believe Google really understands how to deliver a properly integrated mobile user experience? What does this mean for operator portals?

Article by Marek Pawlowski of PMN, originally published here.

[Ed - we’ll be discussing this and other issues with Pieter Knook, Global Director Internet Services, Vodafone Group; Andrew Bud, Chair of the Mobile Entertainment Forum, and others as part of a panel on ‘Mobile Internet’ at the Telco 2.0 event on 4-5 Nov. In the meantime, see our previous analysis of Google vs Telcos here]

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Ribbit and BT’s evolving platform strategy

One of the challenges facing telcos right now is to open up their network and IT assets to create more value. A common issue is how these initiatives are being driven from the IT side, who intuitively understand the importance of platforms and a developer ecosystem. Meanwhile, the rest of the business fails to comprehend the importance of external innovation, isn’t organised to sell and support it, and the technology platform struggles to have the impact on the business that was anticipated. It’s a familiar story.

In the inbox this afternoon we find a message from JP Rangaswami, BT Design’s MD Strategy & Innovation, telling us that their Web21C SDK platform is no longer going to be supported after the 10th of October. Their developer-ecosystem efforts are now concentrated on Ribbit. Web21C was always a great idea — an SDK for various programming languages that let you interact with BT’s voice switching, making, receiving, rerouting calls, sending and receiving text messages, and carrying out location dips and authentication checks.

But somehow it didn’t quite get traction; the forums over at the Web21C site are a fairly good index, there being hardly any activity. For some reason, having created the most capable telco API suite yet, BT didn’t really promote it. More recently, BT acquired Ribbit, “Silicon Valley’s Phone Company”, VoIP/Web integration specialists who aim to let Web developers build CEBP applications, which immediately raised the question of what they would do with Web21C. Now we know; it’s going to vanish.

What does Ribbit do better?

The first thing is something we’ve long since been aware of. By the very nature of a business with so many moving parts and so much that can go wrong, telcos are risk-averse and slow-moving organisations. They struggle to understand user needs, and quite simply, a lot of user demographics are too small to show up on the radar. This is why we need tools that radically cut the barriers to entry of developing new kinds of applications that embed voice & messaging capabilities. That means anyone can create their own telecoms service: either the users themselves can customise their experience (just as you do with a web portal or extensible browser); or more practically, small businesses and internal IT groups who are closer to the users.

Ribbit was a small startup that understood one particular group well — developers. We analysed no fewer than 70 new voice & messaging players in order to understand how telcos can cooperate with external innovators in order to cope with the decline of carrier voice, and we conclude that it’s precisely this kind of ecosystem they need.

The other advantage Ribbit has was underlined for us by David Sharpley, VP of product marketing channels at Oracle. As he put it, “BT essentially bought 100 developers working on Salesforce.com”. There’s a crucial strategic advantage for you — Salesforce, or rather their developer platform Force.com, gives them instant access to the enterprise, just as being a Windows shop did from the early 1990s until very recently. And CEBPs — Communications-Enabled Business Processes — are where the money is.

Ribbit is just part of the picture of what BT needs to assemble to become a viable and credible commerce platform. Ribbit, for example, is highly dependent on Adobe’s Flash technology for its user interface, just as browsers like Google’s Chrome remove the clunkiness from dynamic Web sites. We know the Web is the one unifying UI of the future, so BT has work to do to “webify” Ribbit. BT already has some of the other parts of the puzzle, such as its Tradespace e-commerce platform, and we can think of others that we’d have our M&A folk circling.

Telephony as the surprise growth engine of the future

In our Voice & Messaging report, we pointed out that what really matters is the social meaning of telephony — in a sense, there’s a shadow of metadata attached to every call and text message, strongly determining its value to the participants but hardly affecting its cost to the operator at all. As we said in the report:

The kind of research required is different to anything the industry has undertaken. It is not about statistics and user surveys, but about social anthropology. To create value, the issue that must be understood is the social meaning of telephony - not what was said or how long the call took, but what was intended by the call.

It’s in the nature of CEBPs that the bits transferred are attached to actual money. People call up freephone numbers because they want to buy stuff, not because they fancy a chat. The combination of low demands on the infrastructure and high social value means that these offer the potential for high margins. But at the same time, these kinds of interactions are valuable because they are tightly coupled to very specific problems in individual firms’ processes. You’ll never find a telco capable of spotting these opportunities. Hence the need for an external innovation strategy.

And it’s not as if telcos aren’t aware of this. Here’s a chart from the report showing the areas our fixed and converged telco respondents thought they should invest in:


Notice the big spikes for APIs and commerce. Of course, the real lesson here is that to achieve the promise of Telco 2.0, you need both those things working in close harmony; which might well be what Ribbit, Salesforce.com, and BT’s network have in store for their competitors. Web21C was nice in as far as it went — but it lacked the social and commercial elements, and so it never took off.

BT still needs to articulate to its investors a business strategy that joins together call centres, open APIs, CRM systems, and network management. These assets span across Global Services, Wholesale and Retail. If it gets this right, it could spell a revolution in how telcos make their money. We’ll be discussing these issues with JP Rangaswami and the Group CTO, Matt Bross at our event on 4-5 Nov in London.

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September 22, 2008

Ring! Ring! 22nd September 2008

In Today’s Issue: Symbian bashes mobile Linux; LiMo counterbashes; Cisco buys Jabber, threatens protocol switch; new Nokia E-series; iTrojan; building stuff for the BlackBerry; data roaming price war in Asia; Reding insists on open access to NGNs; Nortel exits optical Ethernet; EU telecoms packet in trouble; Vodafone+Vodacom; RIP Mobilink CFO

Department of “He would say that, wouldn’t he?”: Symbian claims there’s no hope for Linux on mobile devices, LiMo disagrees, and Google is accused of deliberately causing fragmentation to boost cross-platform and Web apps.

But perhaps there’s something in that. Here’s Cisco, buying Jabber, the open-source XMPP implementation that underlies some of the biggest IM networks and Telco 2.0 darling MXit. If Telco 2.0 is about anything, it’s about the collision of the telecoms and IT worlds, and this transaction shows the wind is blowing in favour of the IT crowd.

Cisco has been making dedicated enterprise VoIP switches and phones for years, based on SIP and using their media gateways to interconnect with either SIGTRAN or traditional SS7 voice. However, it’s a little remarked-on trend that XMPP is fast taking over from either IETF (or as we like to call it, “real”) SIP, or the version 3GPP came up with for IMS. After all, where’s the IMS support for XMPP?

Protocol warms might seem obscure, but as always in IT history, it’s the side with the best developer ecosystem that will win. We’re seeing the long, slow decline of the centrally-planned telco standards at everything above the hardware and link layer protocols.

Of course, a crude measure of developer interest is malware; the iPhone is facing a trojan attack this week, despite all the controls and requirements imposed by the AppStore. Whilst we’re on geeky subjects, here’s a walk through of the BlackBerry J2ME IDE.

There’s been a leak of two new Nokia E-Series devices. Something for your corporate Christmas stocking?

The long-expected data roaming price war kicked off in Asia, as Singaporean operators Starhub and M1 whipped each other with flat-rate tariffs for international data service. Another wave of pain appears to be heading for telco margins.

Viviane Reding is insisting on open access to fibre deployments, and the EU “telecom package” is under fire again.

Nortel is selling its optical Ethernet business, once the flagship of the company.

There’s still scope out in the emerging markets, right? Vodafone looks like it may snap up the rest of Vodacom while the financial markets are still exhausted from last week. Which is nice, except when you remember those MXit users frantically churning to the lowest low data prices to avoid spending any money on SMS.

Sadly, it seems that the CFO of Mobilink in Pakistan is missing after terrorists blew up the Marriott Hotel in Islamabad.

Let’s all hope for happier news next week.

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September 18, 2008

Embedded Broadband on the Verge

Just as dongles swept datacards before them, embedded chipsets for broadband connectivity are about to sweep dongles away. The Telco 2.0 team believe that eventually they will become as ubiquitous as WiFi connectivity is in today’s generation of laptops.

We can see the beginnings of a classic virtuous circle:

  • for laptop manufacturers, who potentially sell more products in a shorter replacement cycle;
  • for embedded chipset manufacturers, especially Qualcomm & Ericsson, who sell more product and indirectly create extra demand for their network equipment;
  • for mobile operators who develop and sell more connections and therefore gain more service revenue; and
  • users are offered ease of use and the potential to connect to any network where there is coverage - and the ability to change network over the approximate current 3-year lifespan of the laptop.

As production volumes increase silicon economics and miniaturisation will kick-in thereby opening up the market for a whole new series of devices with broadband data connectivity. In developed economies penetration of mobile device will shoot up towards the Verizon Wireless target of 400%.

However, challenges exist for mobile operators to develop an appropriate business model that not only provides a decent return for shareholders but also avoid the mistakes of the fixed broadband market.

In particular, whilst it’s OK to be a dumb pipe, it’s not OK to be a undifferentiated dump pipe where costs and revenue incentives are misaligned, and where there are no value-added upsell opportunities. Here’s how to think about it:

Archetypical Silicon Shrinkage

Space within the modern laptop is rather limited and previous generations of mobile connectivity have plugged into external output ports, whether PCMCIA or USB. The new generation of embedded connectivity chipsets come in the form of a standard mini-PCI card which slips into one of the two slots on a standard laptop motherboard — the other typically being taken by the WiFi card. The card is connected to an antenna which fits into the screen. This is important as the antenna is designed to minimise interference and is a big improvement on antennas in datacards and dongles.


The market leading modem chipsets from Ericsson and Qualcomm, both offer support for the full range of the 3GPP HSPA standards, as well as backwards compatibility with the old GPRS standards. Qualcomm additionally offer support for the 3GPP2 EV-DO standards which offers more network choice in the critical USA and Japanese markets. An international businessman can now buy a laptop which has the capability of connectivity at decent speeds in all the major world cities.

Connectivity and Authentication - made easy

An additional feature of the chipsets is that the modem software is now an image on the laptop - this means that the connectivity function can eventually be integrated into the operating system to simplify the whole connection process for the user and operator. This replicates the evolution of WiFi connectivity.

A SIM card is used for authentication and typically placed behind the battery. Operators face a challenge to develop a whole new range of roaming agreements to make connection to any network anywhere in the world simple and integrated into billing services. Most road warriors hate having to dig out their credit card for an hour of internet use. We’ve been impressed by services such as Boingo, where you open your laptop in the airport and it automagically works.

Market Estimates

Embedded chipsets are currently more expensive than dongles and are targeted at high-end laptop models. The recent deal with Vodafone & Dell to put the Ericsson chipset in the lower end Inspirion Mini-9 netbook highlights that mass market adoption is not far away. Operators are starting to sell laptops on a monthly payment plan with connectivity included - this can only accelerate adoption.

The worldwide market for laptops is around 200m units and we estimate that by 2010 around 50% will have embedded chipsets. As production volumes increase, silicon economics will kick-in and pricing will drop eventually making broadband connectivity a standard feature.

Moving into ‘Mobile Internet Devices’ (MIDs)

Today all sorts of devices offer some type of connectivity, for example:

  • Dedicated music players (eg Zune - Wifi),
  • Book Readers (eg Kindle - EV-DO); and
  • Navigation Devices (eg Tomtom with Bluetooth to handsets)

In another couple of evolutions of broadband chipset development, it is not beyond the realms of possibility to see a whole new class of devices connected to operator networks. Again, increased volumes will bring down prices.

This was one of the original promises for WiMAX networks - embedded 3G chipsets will put a heavy dent on the business case for WiMAX and probably be available before the WiMAX networks have decent coverage in most countries.

M2M - Rise of the Machines

Another couple of evolutions on - with further shrinkage of both form factor and price - and the machine-to-machine market will be open for everyday lower cost devices.

Assuming a development lifecycle of 18 months, this new mass market will only be six years away. It is not difficult to paint of picture of a future where within a decade mobile penetration hits 400%.

GPS - Yet to find its direction

Both the Qualcomm and Ericsson chipset offer GPS functionality as standard. Personally, we’ve never been satisfied with standard GPS which only seems to work outdoors. The Ericsson chipset also includes A-GPS which potentially offers a much better experience, but is not available on all networks. GPS is an important feature but currently doesn’t have the ecosystem of applications which makes it really useful to the end-user.

Business Model Challenges

The biggest challenge for operators is building business models to support this future.

The most obvious pitfalls to avoid are the marketing of mobile broadband access as either “free” or “unlimited”. Data traffic is already exceeding voice traffic on some European networks, although data access revenues are still a rounding error in overall revenues. It will be difficult to resist the temptation of unsustainable pricing in the forthcoming land grab.

The false assumption is that all this data needs to be sold to the end user directly in a bundled all-you-can-eat ISP plan. Instead, as well as retail, a rich wholesale market will need to emerge. Increasingly you will subscribe to services that are available across a range of connectivity options and devices, and come with “postage and packing” included. A mapping application that sucks up roaming data at £7.50/Mb could easily cost you more than hiring your holiday rental car — or even the whole car!

The key here is to offer services beyond pure connectivity. Standard two-sided offerings, such as authentication, billing, customer care, are obvious value adds.

With the right business models, the future mobile data world is bright — and becoming closer every day.

For those people wanting to find out more, our friends over at TelecomTV have conducted a very interesting interview with Ben Timmons of Qualcomm:

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September 17, 2008

Jazinga: SoHo voice done right

We’ve a bit of a fetish for little broadband boxes that sit around your home and office under desks and TVs. A key battleground for the future includes equipment like home hubs, femtocells, and set top boxes. If the edge of the network is where the smarts are, it’s also where the money will be made, since these are gateways to the customer for all kinds of voice, video and data services. They are also key enablers to two-sided markets.

We recently were loaned an interesting new box from Jazinga. It’s a PBX and wireless hub rolled into one, targeted at the SoHo/small business market. It highlights some key principles and issues in designing consumer premises equipment (CPE), and also raises some interesting questions around the role of telcos in a 2-sided market model.

Consumer premises equipment in its native environment: One Jazinga box

One of the largest problems the small business faces while looking for a phone system is cost and complexity. Current telephony or unified communication solutions generally require telecom expertise to install, configure and manage. Small businesses work with an IT VAR to set up their office network including printers, e-mail, fax etc. The problem is that when asked about phone systems they shrug their shoulders and suggest the business owner ask their telco or call a telecom expert.

Meanwhile, a telecom VAR will gladly install a system that requires their expertise to install, support and manage on an ongoing basis. A typical small office setup can cost US$5-10k. The business owner likely won’t even be able to add users, change IVR messages or move phones around without the VAR’s assistance.

Hosted systems providers have noticed that the cost of selling and supporting a 10 user implementation is about the same as a 200 person implementation, so they are moving their business upmarket. Some are even setting minimum user requirements for customers.

Enter Jazinga. It’s a simple box you plug into your broadband network, and plug in analogue or IP phones. When you plug an IP phone in, it autodetects and configures that phone. All it needs to know is who will be using the phones in the office and how they would like their callers to be greeted. It provides all the functions of a typical PBX, such as voicemail. Additionally you can create your own IVR (“press 1 for sales”). All done through a simple web-based wizard interface.

Simple non-technical user interface makes configuration easy.

Our experience was that it lives up to its claim. It’s still a job for someone with basic technological awareness, but anyone capable of managing a wireless access point could set it up. We’ve had far greater battles to get Windows printer sharing to work between Vista and XP!

So what are the lessons?

Making telephony better isn’t necessarily a matter of adding on tons of complex features. Value can come from democratising previously expensive technology and making it a mass market proposition. Jazinga simply packages up existing open source software and commodity-type hardware, with a simple user interface. It does a few things exceedingly well, rather than having a wide range of features nobody will use, and which work poorly.

The boundary lines between consumer and enterprise communications are blurring. Just as enterprises increasingly find their employees communications via Facebook, Twitter and Skype, high-end consumers are a target market for low-end enterprise features. Jazinga brings a consumer-like attitude to usability and provisioning to the small enterprise.

There is a bigger meta-trend of putting power back into the hands of users. Don’t think your call centre screen has the right fields you need brought up by default? Then you as a user should be able to change it.

Jazinga also shows how you can achieve a lot at the network edge, without having to invest in NGN infrastructure. This is a common theme: products like TiVo or Apple TV give you much of the benefit of network-based IPTV at a fraction of the cost, and with much greater flexibility. A distributed infrastructure lets you scale your without an up-front multi-million dollar investment. Even better, it takes the sting out of technically scaling your offer, unlike centralised services, and offers high resilience with no central point of failure.

What’s missing from the offer is the telco service component. As we’ve noted before, some of the most powerful value propositions are hybrid product-service businesses. Jazinga lets you choose any IP telephony provider you want to get PSTN dialling. It would be a natural thing for a telco to bundle in with a small business broadband offer, and for this part to be pre-provisioned.

Thus far, Jazinga has been rebuffed in its efforts to use the telco as a retail channel — particularly by the major operators. Jazinga are instead working through consumer electronics retailers and IT/telecoms VARs to get their product to market. Whether or not the telco makes a Jazinga box part of its formal product offer, the telco is likely to have as good an idea as anyone as to who is part of the target market. Retailers like WalMart and Home Depot use their customer data to drive their supply chains and act as a retail platform. A telco could be selling the ability to target subsets of its customer base with up-sell offers. In this example, it could be users who are most active during the day, indicating business use. (This need to become a better retailer and use customer data and analytics is precisely the message Microsoft is pushing — see our interview with Steve Zimba.)

There would also be a natural “support as a service” opportunity here for a telco. No dialtone? How do you know if it’s a broadband or telephony service problem? The telco is in a good position to help. Whilst Jazinga has no brand recognition on day 1 of launch, a co-branding with the telco brand says the offer is one you can rely on. It’s also worth noting that much of the need for support has been eliminated in the product design. How many other bits of CPE have put so much effort into the user experience of provisioning and configuration? The most basic things remain to be done, such as pre-programming home hubs with the right DSL username and password before mailing them out. Why shouldn’t it be truly “plug and play”?

Taking this theme further, the Jazinga folk are thinking through how such boxes can be used to auto-provision a wide variety of automated home and office products, not just IP telephones. That could make for a very powerful proposition as femtocells, home monitoring and smart utility meters proliferate.

Jazinga is not the first such good idea we’ve seen that telcos have overlooked, and we’re sure there will be many more innovative little boxes turning up under our desks. The question operators need to be asking themselves is why companies like Jazinga don’t see telcos as business partners.

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Telco 2.0 Interview: Steve Zimba, Microsoft

Continuing our series of interviews with major industry thinkers, Steve Zimba is Microsoft’s Managing Director, Global Telecoms Business. We interviewed Steve about their ‘Telco 2.0’ strategy. This integrates their PC, IPTV and mobile offerings with a combined software and services offering, supported by telecoms-specific capabilities and a third party ecosystem.

Steve Zimba

Microsoft is a particularly interesting company to us because they are in a unique position. They bridge the consumer and enterprise markets, which places them well to create technologies and operational businesses for two-sided markets. Their Internet competitors are consumer-centric, and don’t have channels into the enterprise. Rivals such as IBM don’t have the consumer brand or media properties to run experiments on the scale Microsoft can. Furthermore, Microsoft is active across all of the B2B value-added service areas we believe will drive future telco growth: identity, advertising & marketing services, e-commerce, order fulfilment, content delivery, billing & payments, and customer care/CRM. The difficult challenge is whether Microsoft can make the whole more than sum of its software conglomerate parts.

Telco 2.0: Microsoft’s Telco 2.0 vision is very much about supporting the current one-sided business model. This is a vertically integrated supply chain, which needs to be able to produce services quicker and cheaper. In contrast, our Telco 2.0 vision is much more about facilitating interactions between players in different value chains. How does Microsoft view the two-sided business model?

Zimba: We think there is a crucial missing element in this journey to two-sided markets: an initial B2B stage that aligns smaller businesses in new value chains. Telcos have a great opportunity to become a new channel to market for media content, and for all kinds of services based around communication and IT. This can also extend business services to consumers and consumer-originated ones back into the enterprise. Advertising and subscription are still very viable business models, but we now have licensing models in place that enable revenue sharing, and other measures in place to let telcos essentially become mass retailers [in a 2-sided platform model].

Telco 2.0: Do you see an evolution towards a 2-sided model?

Zimba: Yes, but I don’t know if we’ll even call it a telco — it may be much more like a retailer, like Home Depot. [Ed - For more info on this 2-sided business model see here.] They don’t develop their own products; but they are a very efficient transactional engine. This is where the telcos will have to go: they need to recognise the importance of third parties, the importance of user generated content, and how they can match those with customers.

Telco 2.0: How are they responding?

Zimba: Slowly and cautiously. They’ve got a certain business model in place that works, and their operations, transactions, and thinking are geared that way. But the higher levels are aware they need to get there. But not everyone will.

Telco 2.0: When will they start feeling the pressure?

Zimba: The people who are shaking this up are the new entrants. They don’t share the same DNA, the same experience. Once they start taking share from the core business, that’s the biggest wake-up call of all.

Telco 2.0: Which new entrants, in particular?

Zimba: Google. They’re clearly beginning to catch eyeballs and provide a lot of services. Amazon. It’s not a long stretch to imagine they could capture the core services, or least own a lot of the VAS. The telcos could be left with only their core services, which are getting less valuable. A company that excites me is Cbeyond — their key metric is applications per user, and they’re seeing it trend up.

Telco 2.0: What is Microsoft’s place in all this?

Zimba: We’re having to play the game both ways — direct to consumer with Live, which you’re familiar with, where a real customer base is building up. But there are limitations to what we can do alone with Live, so we’re working on what we can do with the telcos, and draw more subscribers to a combined Microsoft/telco platform.

Telco 2.0: How do you integrate them into Microsoft?

Zimba: If you wanted to do a next-generation service — address book in the cloud, with SMS/MMS, say — you need to know how to price it, how to monetise it. Can it be ad-funded? We’re executing on these questions now.

Telco 2.0: Any operators you think are leading the way?

Zimba: I’d point you to things we’re doing with Orange — on the desktop, on the mobile, with SMS. We’re establishing deep connections between Orange SMS infrastructure and the MSN Live Messenger cloud.

Telco 2.0: Telco customer data can be used to create services that would be difficult for purely “over the top” companies. How do we do this best?

Zimba: Don’t limit yourself to just customer data! Some disruptors are built entirely on understanding their customer data model; but telcos can know so much more. They need to develop a really deep understanding of their customers’ desires, wants and needs, across the PC, phone, and TV. They need to use this for genuinely innovative, new, and responsible applications. Of course, let me stress “responsible”.

Telco 2.0: Yahoo! recently created a Chief Customer Data Officer. Should there be someone like that in every telco?

Zimba: It’s interesting; I think telcos don’t realise the importance of customer data. There are efforts around business intelligence, but it’s not yet an integrated whole. It’s nothing like WalMart’s knowledge of its customers and what happens in its stores. Telcos need to act! Third parties, ISVs, Microsoft are expecting them to do it, but I don’t see it yet.

Telco 2.0: Moving on to something else, there’s an emerging competition between IPTV and Web video. What do you think the telcos’ role is in video delivery?

Zimba: They need to become a fully fledged, mass media system across different devices and media. In TV itself, there’s a race by all incumbents and some disruptors to get into TV. A range of devices will get deployed to provide TV, but the 10ft experience, the TV in the room, is still going to be valuable. But we see people using the Internet and TV simultaneously.

Telco 2.0: So interactivity wins?

Zimba: It certainly could. The TV may well become more of a big screen for the PC, with more traffic migrating to broadband. Will people still pay three hundred bucks for a TV package and then watch 10% of the channels, when they can mix-and-match and only pay for what they watch, or keep it all to watch later?

Telco 2.0: What do you think the best practice for online video distribution is?

Zimba: AT&T and Yahoo!’s integration of IPTV and Web; serious kudos to the Yahoo! guys. I’m intrigued by what Verizon’s doing on the Web - I watched football on there recently, and it’s pretty compelling. ESPN also doing interesting things.

Telco 2.0: Are there any disruptors you find particularly interesting?

Zimba: Nothing I’ve particularly noticed; the company I keep an eye on is Joost.

Telco 2.0: We’ve touched on business models for telcos. What about Microsoft? Qualcomm has an end-to-end applications ecosystem in BREW. How does the Communications Service Applications Framework benefit MS?

Zimba: We looked back at our own ecosystem of developers and ISVs, and we realised that we had to help them to develop products that the telcos will market and deploy. It’s a tough change; as well as a czar of business intelligence, telcos need someone high up in charge of developers and development. We have a pilot project with SingTel and they’ve done just that.

Telco 2.0: So Steve Ballmer was right that it’s “developers, developers, developers”?

Zimba: Yes. This is what SingTel has done — said “we’ve got these customers and they look like this”, and offered a revenue share to anyone who wants to develop for that market. As for service creation, there’s a need for new investment here, in things like Jamcracker. You clearly can’t have projects that spend 6-12 months working on OSS BSS integration any more.

Telco 2.0: The second part of the problem is operating the thing. Telcos have low self-care rates and a reputation for poor customer service. What changes are needed in operator technology and organisation?

Zimba: There are three messages I’m pushing at the moment. First, business intelligence. Second, investment in transactional engines - the platform for the old world won’t work any more. And the developers don’t focus on this — they want to do something cool. It’s no different, really, to the expectations of suppliers to Home Depot. They’re not interested in how their back-office works. Third thing is telcos optimising their sales and customer care activities, particularly in relation to leveraging their retail store presence; TVs should be bundled with connectivity as they become IP endpoints.

Telco 2.0: What’s stopping them making the necessary changes?

Zimba: It’s not really in their DNA. They need to invest in stores, and embrace online. Shame on the telcos for not becoming destination sites!

Telco 2.0: How does Microsoft help?

Zimba: Dual branding is important. All the stuff we’re rolling out is co-branded, like Orange Messenger. Orange and Microsoft together — there has to be something unique. We’ve always been focused on the enterprise, but now we’re doubling down on the consumer. We’ve got a new consumer channel organisation, and there’s a great new ad campaign with Jerry Seinfeld coming up.

Telco 2.0: One of the areas of ‘Telco 2.0’ that we’re getting more and more passionate about is “communications-enabled business processes”. What are you doing in this area?

Zimba: We’re embedding voice in both enterprise and consumer applications - Messenger and Xbox, for example. But we’ve barely scratched the surface of what’s possible. We need to continue to accelerate the drive to reach that level of integration.

Telco 2.0: Finally, what’s your over-riding advice for a telco today?

Zimba: Embrace the 3-screen experience, so your services embrace all IP endpoints. Without that kind of portfolio you won’t survive. Embrace being a mass retailer, mastering customer data and transactional processing. Telcos need to be able to do all these, and do them second to none.

Telco 2.0: And what should the Telco 2.0™ Initiative be doing to help?

Zimba: More of what you’re currently doing. Telcos will need more tactical advice on how to make this happen. Show them a roadmap.

[Ed - We are pleased to welcome Microsoft as a sponsor of the 5th Telco 2.0 Executive Brainstorm, 4-5 November, London, where Steve will be joining a panel on ‘Key industry next steps’.]

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Internet Video Distribution Survey - Some Interim Analysis

Our global Internet Video Distribution Survey is progressing nicely and we are collecting some very interesting data. (Background here. You can take part directly here, and you’ll get a summary of the analysis).

One question we’re asking our pool of experts is: “In your geography, on balance, how do you think Internet video will affect traditional video distribution?”

By a large margin (61%), our respondents expect online video to cannibalise traditional video distribution.

The content industry is being trapped in a classic game of Prisoners’ Dilemma:

- if I keep my content off the Internet then my content will be pirated, and I will lose income from my traditional revenues?
- but if I make my content available on the Internet and then it will cannibalise my traditional audience making it less valuable. Will my online revenues make up for this cannibalisation?
Which is the best, or least painful choice?


Interestingly the further up the respondent is in the value chain, the more pessimistic they seem to be.

However, the device manufacturers seem really positive - they would be, wouldn’t they? They need online content to make their new generation of devices look more attractive.

We’ve also had some interesting comments which we will analyzing in more detail as part of a larger report:
- “There will be increases in some areas but overall there are a limited number of eyeballs and hours in a day.” - demand for leisure and the allocation of time amongst competing activities is a complex issue, but one worthy of exploration.
- “We already have tons of data showing even the early adopters use this to catch up with broadcast and as a complement rather than replacement for traditional forms of distribution” - the bull case
- “Every 25 years a new generation rises, cannibalising previous generations. When cables/satellite entered the market, traditional TV was shaken. That was in the 1980s’, 25 years ago…” - the bear case.

Please complete the survey and share your thoughts here. We believe in the wisdom of crowds!

[Ed. We’ll be presenting a summary analysis and discussing it with industry leaders at the Telco 2.0 event on 4-5 November, London.]

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Credit crunch - silver lining for telcos?

We’re delighted to welcome James Enck onto the Telco team. Reknowned financial analyst, hedge funder and blogger James will be helping us to make the Telco 2.0 vision more tangible for senior execs, specifically in the near term via a series of ‘use cases’ that show in more detail how Telco 2.0 thinking can work in practice. He’ll also help us engage more with the finance community. (James will be presenting some of his work at our November event).

We asked him to give his thoughts on what the credit crunch means for telcos:

Each passing day seems to bring some dire new revelation about the poor state of the financial markets. While life remains tough in Telcoland, in relative terms the financial strength of the industry generally remains enviable.

The current liquidity crisis in the financial markets may provide telcos with some unique opportunities for enhancement and transformation of business models, if they are open to deploying their capital in a manner consistent with Telco 2.0 thinking. Some of those are explored below, but there are no doubt others, and we’d be interested to hear of further examples from readers.

The U.S. government has clarified its stance on “moral hazard” by allowing Lehman Bros, a major investment bank, to fail. The International Swaps and Derivatives Association is so focused on orchestrating an orderly unwind of Lehman’s positions that it held a special trading session on Sunday and has even canceled its own members conference, which should have taken place yesterday (perhaps they were afraid that the offer of a free lunch might trigger a riot).

AIG, which yesterday appeared to be on its knees, has been effectively nationalized. Apart from the human consequences for its 100,000 employees and consumers of its more conventional insurance and re-insurance products, its demise would have made the credit derivatives market significantly more complicated.

Sparing readers the tedious technical details, this is significant because: a) the market is huge - Moody’s estimated credit default swaps (CDS) at $62 trillion back in May (that’s the nominal, but replacement cost, which they think is more relevant, was a mere $2 trillion - in any event, as CDS has evolved to be a speculative trading, rather than commercial hedging, instrument, the contracts outstanding outstrip the underlying assets many times over, which may bring some problems of its own in time), and b) transactions are off-market, with limited visibility as to who’s doing what, and with whom.

So it’s only when the music stops that we learn which counterparties are exposed, and I assume an AIG implosion would have cascaded through similarly positioned insurers, hedge funds, and the remaining prop desks in a very ugly fashion. That nationalization was the final outcome is a symptom of just how dire things are, and does not fundamentally change the dynamic in the market, in my view. We dodged a bullet this time, but there will be more similar situations which do end badly, and my central thesis still holds.

We’re now more than $500bn down the road in the inappropriately named “credit crunch.” I say inappropriately named because, to me, “crunch” implies a sharp, ephemeral episode of pain or distress, but this is more akin to a pandemic wasting disease, and I think it represents a fundamental realignment of the way capital will be sourced and allocated in future.

Why should the denizens of Telcoland care? Well, because, as with most crises, there will be huge challenges and opportunities ahead.

First, the challenges.

1) Confidence, be it within the corporates (as we can see in the spike in inter-bank lending rates) or among consumers, is firmly in the toilet, ready to be flushed. Prepare for an aversion to spending, and for some of your customers to disappear.

2) Liquidity, where it exists at all, is going to be more scarce and costly. Given where LIBOR is at the moment, this could get very ugly indeed - in desperate cases, say where the margin over LIBOR is 1000 basis points or more, companies will be staring down the barrel of 17% annual interest rates. For the more creditworthy, things won’t be so dire, but it still will be a noticeable uptick.

Trawling through some Bloomberg data on debt maturities for six telcos (Vodafone, DT, FT, Telefonica, BT, and Telecom Italia), it is interesting to note that the average fixed coupon for this group’s current debt is just over 6%, i.e., below the level where banks are currently willing to lend to one another, let alone anyone else. However, these six companies combined have EUR37.5bn in debt maturing in 2009 - 2010. It will get refinanced, but every 100 basis point increment above where coupons are now adds EUR375m in interest payments. Not crippling, but not trivial either. Do you grow dividends at the expense of capex?

3) Speaking of capex, an industry contact yesterday described it as “the elephant in the room”. If we assume that the industry globally needs a $1 trillion access overhaul, as some are already under competitive pressure to provide, then something’s got to give. Do you play “squeeze the vendor” as your only card, defer certain projects, or find creative alternative structures to keep it off your balance sheet in the near term? Do you suddenly find that the municipal broadband “hippies” are worth talking to afterall? Some of them might have access to cheaper finance…

4) Back to liquidity more generally. It seems clear that those investment banks which do survive are likely to be constrained by commercial and financial realities, and possibly by regulation, to a narrower mandate in future. So those with a business falling outside the “suitable for widows and orphans” category probably won’t be able to reach out to the principal investing units of Wall Street nearly as easily as they could before.

Hedge funds with dry powder can always fill that gap, but it won’t be cheap money. And the hedge funds themselves aren’t exactly setting the world on fire as a group (keep in mind that this table may look different depending on when you read it, but at this writing, the Credit Suisse/Tremont AllHedge Index is down 6.07% year-to-date as of the week ending 8th September, i.e., before the most recent round of carnage).

There’s always private equity, but as per this analysis yesterday, we might actually find a bias towards disposal of assets here in some cases, and in any event, with the markets in the state they’re in currently, it is inconceivable that PE firms will achieve the kind of exit IRRs they might have envisaged two or three years back (I’m thinking here of some of the European cable deals which got done at eye-watering multiples - in some cases they’re very decent companies, but I can’t see an easy exit for any of them.).

And it’s probably really bad if you’re an early-stage company. There is not that much happening in early stage among the VC community, particularly in Europe, and those who are active can be extremely selective. We can expect a good number of the later-stage venture-backed companies may also struggle to attract fresh capital, especially if their funding is premised upon the promise of a traditional exit.

It ain’t gonna happen, at least not at 10x revenues, unless you’ve got something really special. The outlook is particularly poor for companies created to speculatively build large communities of users, in the hope of finding a revenue model down the road. These sites certainly create value and user benefit, but in a time of severe capital constraints, it’s going to be a hard story to sell. That pretty much leaves sovereign wealth funds ($3 trillion is a lot of money) and family offices, but they will know that they are in the driver’s seat and can be highly selective.

So, that’s a sufficient dose of pain on the challenges side. What about the opportunities?

Times may also seem hard in Telcoland, but let’s face it, telco margins are still at a level other industries would kill for, and it is not uncommon for even relatively small companies to produce EUR2 - 3bn in free cash flow annually. In the land of the broke, the man with one euro is king, so how might telcos deploy some of their relative wealth in a way that might really make a difference?

1) People - The collective stupidity of Wall Street should not obscure the real talent and intellect that rests with some of its individuals. As these firms implode, they will release some very bright people, some of whom have an intimate knowledge of their own industry and industries they have covered/invested in/done business with. Take this chance to diversify your telco DNA, particularly if you really have aspirations of competing with the likes of IBM.

2) Assets - Clearly, there is going to be a lot of distressed selling of assets. Fancy a Bulgarian incumbent or a Dutch cable company? There are deals available right now. But it won’t just be big iron assets. A lot of venture-backed companies are going to end up in distress, and some of them may possess technology platforms and/or communities that you as a telco actually can monetize.

However, you may need an outside perspective to do this (going back to the previous point), or you may need to radically change the way you think about where to take your business and how to get there. There will be huge opportunities, but it will require something other than conventional telco thinking, because the best answers will not be the obvious ones.

3) Engagement - Rather than simply waiting for companies to end up here before acting, why not partially fill the void left by the capital markets? This is not to suggest that telcos should play the pure VC role, but there is a great case for aligning strategic development goals with equity investment in companies that have something you can’t (or don’t want to) create yourself.

There is some of this going on in the industry, but not nearly enough today. Some of the companies which can help telcos reposition themselves are too small and young to be considered as suppliers - they typically can’t get in the door of corporate HQ. What might you be overlooking?

Encourage your workforce and your customers to find and evangelize interesting companies, and create a framework for vetting them, finding operational sponsorship for the suitable ones, and create a side-pocket for equity investments to let them develop.

All the evidence suggests that we’re all in for a fairly brutal couple of years, with the possible exception of talented distressed investors. Next spring may be short on roses, but they will come in time. Now go and start planting your garden.

[Ed - we will be discussing how to address the capital markets on day two of our November event.]

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September 15, 2008

Ring! Ring! Hot News, 15th September 2008

In Today’s Issue: Nobody wants landlines; Apple zaps apps, caps AppStore competitors, Winer flaps; Open Hack Day@Yahoo!; implementation of sci-fi dystopia for the iPhone; Vodafone deckchair redeployment; T-Mobile Android phone; C&W builds non-virtual GSM operator for Tesco; free airtime for ad viewers, human or not; attack of the terminators; 3UK says no; KPN-Bouygues MVNO deal; the Internet interprets America as damage and routes around it; screen-scanning check-in; warrants needed for LBS snooping

A sign of the times: David Isenberg points out that the University of Kentucky has stopped providing fixed phone lines in the halls of residence, as nobody wants them. And before mobile operators start to gloat, don’t think those same students will forever tolerate voice and messaging services that in no way integrate with the rest of their online lives. Where are the voice and messaging applications of the future?

Perhaps not on the iPhone, whatever Apple says. Blog legend Dave Winer says you can’t trust them not to kill your application. If you want to market something through the App Store, it has to be approved in advance by Apple. And as usual, once you start censoring for one reason, pretty soon you find all kinds of others:

Yesterday it came out that they rejected an app called Podcaster because it competed with iTunes, an Apple product. Maybe it was better than iTunes in some way, or simpler, more focused, had features iTunes didn’t have? It doesn’t matter, it illustrates exactly why Apple shouldn’t assume this power, or if they insisit on it, you’d have to be crazy to develop iPhone apps. Consider this possibility. Next year Apple announces an app that does what your previously authorized iPhone app does. You have competition, so another competitor, even if it is the platform vendor, isn’t that big a deal, right? Well what if they de-authorize your app because it duplicates functionality of theirs? Think you could live with that?

Read the whole thing. Now that the 3G iPhone is actually subsidised, as well as subject to revenue sharing, by the mobile operators, well… you have to worry. iPhone developer Fraser Speirs agrees. This whole saga is a foretaste of the upcoming tension in the telco business model: partners will want to integrate with core voice and messaging network elements, and this same process places them in a position to compete with those core services. Embrace, extend, extinguish — a well trodden path.

Compare, if you will, Open Hack Day over at Yahoo! They are busy bringing on as many new ideas as they can manage. Mind you, some people aren’t put off by Apple’s heavy-handed approach; here’s an implementation of augmented reality for the iPhone. And you thought reality was bad enough without huge green porn-spider avatars lurching around street corners.

Vodafone, meanwhile, spent the week reorganising; the Europe, Middle East, Asia Pacific and Africa division, which despite its name didn’t include France, is being split up, the Verizon Wireless holding put directly under the CEO, and a new job of “Strategy and Business Improvement Director” created. That would make finance chief Andy Halford about the last survivor of the men who were the Newbury Gang.

T-Mobile USA may be launching the first Google Android device in a few days’ time.

There are better things we could all be doing; and here’s one of them. C&W buys a gaggle of Ericsson GSM gear; apparently to build Tesco its very own private mobile network. Not to be confused with Tesco Mobile, the O2-fuelled MVNO. This is going to make use of a sliver of low power 1800MHz spectrum OFCOM sold last year in order to run an internal, fixed-mobile convergence/unified comms system for the supermarket’s 400,000 employees. We also wonder how many non-human customers it might have.

Surely this is crying out for a non-human solution. Cellcom in Israel is offering free airtime to people willing to watch adverts. How long before someone thinks of a way to have a machine watch the adverts, and collect the free minutes? (Remember, people absolutely love free phone calls.)

Meanwhile, a whole gaggle of European incumbent GSM operators joined Vodafone in pushing the line that a cap on termination fees would lead to the mass abandonment of mobile telephony, anarchy, street riots etc. 3UK CEO Kevin Russell disagrees (as it’s very much in his interest to do); he says that the true cost of termination is low enough that there would be no need to charge for inbound calls. His prepaid mobile broadband service, it seems, has attracted the flattery of imitation in the US — Cricket is now offering prepaid EV-DO Internet service.

Whilst this goes on, KPN is buying MVNO capacity from Bouygues. We shall see what’s developing here, but it looks a lot like a cross-European virtual operator of some sort.

The New York Times reports that Internet traffic is beginning to avoid the US; the increasing diversity of submarine and overland cables, more Asia-Europe capacity, the proliferation of local Internet exchange points, and increasing political dread are cited as reasons. Read the whole thing; they interviewed a full house of the right people, including Andrew Odlyzko, k c claffy, and Earl Zmijewski of Renesys. (Renesys’s report on post-Hurricane Ike outages is here.)

Here’s a nice, enterprisey, low-bandwidth, high-value service: get your airline boarding pass sent to you as a QR barcode which the airline staff scan off your screen (neatly circumventing the possible Bluetooth etc security risks). Of course, there’s no mention of a telco being involved. (Does anyone still think upping the size of your minute bucket for Christmas and slashing your prices constitutes a business strategy? If so, click here urgently.)

And finally, a US judge has ruled that the police do indeed need a warrant for mobile location data. How quaint!

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September 9, 2008

Hulu and MediaFLO - visions of a world restored

We often talk about disruptive technology, emergent phenomena, and the collapse of old business models and power relationships. In our forthcoming Online Video Distribution report, that’s precisely what we’re going to be doing. Perhaps we should look at some of the ways the old established forces — Hollywood, TV networks, cable MSOs — are trying to respond?

Because although their problems are serious, some of their newer ideas are far from weak. We studied two in detail as part of the project: Hulu and MediaFLO.

Essentially, these represent two different but complementary approaches to video. Hulu’s competitive position is based on its owners’ content stash, with a further twist in its user interface design. MediaFLO is based on its potential as an aggregation and distribution medium, essentially indifferent to content. Both of them, however, are strongly coupled with the existing content economy: Hulu is owned by content rights holders, and MediaFLO is owned by a vendor, with a role for TV networks as “programming partners”. Although one is a broadcast system and one a CDN-driven Web site, the most important similarity is that content “ingestion” - or aggregation, as we would usually say - is tightly controlled in both.

Hulu: the Web like Dad would have wanted

If it wasn’t for its ownership and the content on offer, you might think this was just another Web video streaming site like all the others that boomed in the adult business, and then outside it, after the success of YouTube. But it’s not. The difference is that the owners are NBC-Universal and News Corp, who are making their mountainous back catalogue available through it. For a start, this is an example of content owners developing their own distribution.

It’s also an example of a sort of implicit bargain with the user. It’s harder to pirate streamed, rather than downloaded, video — but it’s far from impossible. Instead, Hulu content is free to the user, and unlimited, so presumably the owners are hoping their users will not have much of an incentive to steal. Comparing it with, say, BitTorrent shows another way in which it is meant to dodge the piracy problem: the so-called ‘activation energy’ of browsing over to Hulu and watching is very low compared to using a BitTorrent client.

The money comes from advertising. Essentially, it’s a content honeypot intended to generate huge volumes of Web traffic, which can then be sold to advertisers. In this sense, it’s something like a re-implementation of traditional commercial TV — free to air, uninterested in DRM, supported by content owners, funded by advertising.

As a delivery system, Hulu only provides content and a front-end; the actual video delivery relies on Akamai’s CDN infrastructure. We can therefore conclude that its business model is reliant on the ratio between the ad rate per-click and Akamai’s pricing per byte. However, we suspect that so long as this is OK, it should be highly profitable as it has practically no other costs.

MediaFLO: a new distributor for old rightsholders

MediaFLO would seem wildly different to Hulu. It’s a distribution technology, it’s based on radio, it’s mobile, and it’s broadcast (although, as we’ve already seen, this isn’t all that different). But it shares more things with Hulu than you might think.

MediaFLO is a Qualcomm OFDMA-based broadcast system designed to deliver mobile TV. That isn’t quite what we’re interested in here. What’s much more interesting is the business model under which it’s being deployed in the United States. MediaFLO, Inc, owns the network, and is itself owned by Qualcomm. At the other end of the pipe, mobile operators are paying MediaFLO to take part in this by including mobile TV services on their handsets. And existing TV networks are also participating as “programming partners” who provide content in bulk to MediaFLO Inc.

Yes, it might be a two-sided business model, just with a different actor in the centre, depending on the terms of the relationship between MediaFLO and the programming partners. (If they are paying to distribute their stuff, it’s two-sided; if Qualcomm is wholesaling the content with the distribution service, it’s less so.) Despite the emergence of this new distribution system, though, it’s still a force for the defence of the powers that be. Existing cablecos control what content goes into the system, and perform the aggregation function. At the moment, existing mobile operators control who gets to see it and, to a large extent, what kind of a user experience they have. Further, being a streaming, broadcast only system, you don’t get to keep the content, and there are fundamental limits to how on-demand it can be.

It’s possible that someone might integrate a Web-based UGC service with MediaFLO - pushing the top 50 YouTube channels over the TV link, and tying it all together in a client on the device, rather as Virgin Media does with the BBC iPlayer and its cable TV network. But as it stands, it’s an example, like Hulu, of technological change being used to defend the traditional video value chain, re-implementing its business model in new ways. The empire can still strike back.

Correction: An earlier version of this post described MediaFLO as a CDMA technology and stated that the TV programming partners funded the deployment; the original text has been corrected.

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September 8, 2008

Ring! Ring! Hot News, 8th September 2008

In Today’s Issue: Cult of Ben? Verwaayen to ALU; “company under siege”; killing Bell Labs; police raid at Newgate Street threatens BT execs with Newgate’s knocker; AT&T 3G KO; fibre lobby thinks fibre cheaper than BT does; Telefonica fibres up, ignores protesting pipsqueaks; there are limits to Nokia; 3 offers “unlimited” “e-mail”; Vodafone mini-laptop HSPA bundle; Orange boots RIM mapping, reverses course; Qualcomm’s robo-medic; 10 years of Google

So what would Ben Verwaayen do after BT? The speculation was rampant; a hedge fund? a return to Holland to become prime minister? The creation of a weird, telecoms-focused religious cult? Now we know. In fact he’s going to run Alcatel-Lucent, in which he has the advantage of having worked in both halves. At the same time, Philippe Camus becomes chairman and will be based in New York; a nice idea, but you wonder how the American half of the company will respond to yet another Gaullist industrial-establishment figure. Camus’s last gig was, of course, the huge Franco-German aerospace firm EADS, which is about as French a company as it’s possible to get, and he’s still a managing partner of Lagardere, the conglomerate that owns most of the French media, a chunk of EADS, and the bits of the aircraft industry the French government didn’t trust the Germans with.

There’s a good interview here, and this bit stuck out.

So both companies had lost purpose and didn’t know what they were for any more? For once, Verwaayen doesn’t disagree, saying he has asked people he has met in at Alcatel-Lucent’s Paris headquarters to say exactly what they see the company as doing and has discovered that the internal view of the company is completely at odds with the external view, which is one of “a company under siege”.

But will he save Bell Labs Fundamental Research? After all, Intel R&D is getting into “programmable matter”.

Back at BT, meanwhile, the police are in the building. City of London Criminal Investigation Department paid a visit last week to grill BT executives over the Phorm phiasco and possible violations of the Regulation of Investigatory Powers Act (i.e. wiretapping without a warrant to insert your ads). “Get out or I’ll call the police!” “Madam, we are the police…” (Unrelated historical note: BT’s HQ is sited near the former site of infamous Newgate Prison.)

Over at AT&T, more customers are suing about supposed poor performance of their 3G iPhones, and it can’t have helped that their UMTS data network fell over in a large chunk of the northeastern US last week.

There’s a range of slightly unconvincing theories, the best of which is probably that AT&T might have tried to shoehorn the UMTS equipment into the same radio plan as their GSM net. Not a recipe for high performance, but it’s worth remembering that optimising the first few 3G networks often involved having fewer cell sites to reduce the inter-cell interference. Radio: it’s difficult.

So you might prefer fibre. The Broadband Stageholder Group estimates this week that it would cost £28bn to fibre up the whole of the UK, with dedicated fibre to every door, but about £5bn to do a national FTTC roll-out. Interestingly, they reckon the first 58% of such a build would fit into £1.9bn; this suggests their cost estimate is somewhat more optimistic than BT’s.

Telefonica is the next carrier to leap over the parapet; fibre is coming in November. So far, they’ve been arguing about the terms on which other operators can have wholesale access. No doubt they’ll keep arguing, but the fibre is coming and they’ll just have to deal with it.

So too will Nokia: they recognised this week that if something can’t go on forever, it won’t, and specifically that their market share is unlikely to keep rising much above the recognised world domination mark of 40 per cent. Perhaps fear of a Google planet had some impact? They claim that 80 per cent of the users in a trial “want” NFC payments; they don’t, however, say how many actually used it.

3 is offering unlimited mobile e-mail for £2.50 a month, with a higher rate for Exchange users. Well, we’re all in favour of a fine for using that…but we thought they were offering cheap data buckets up to 15GB for similar prices? Somebody must be playing with a new billing system. And for those who get excited at the word ‘billing’, here’s a story on VZW’s efforts to integrate its various BSS.

Vodafone is bundling HSPA modems and airtime with Dell’s Inspiron Mini 9 “small, cheap computer”; Orange debundled BlackBerry Maps from the RIM GPS devices it sells, before rowing back under user disgust.

But how many minutes of airtime do you get with a robot from Qualcomm? And we’d be remiss if we didn’t mention it’s Google’s 10th birthday.

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September 2, 2008

New Internet Video Distribution Survey - have your say

Today we launch a new survey, part of a major investigation into new business models for internet video distribution (kindly supported by the TM Forum, TelecomTV, the Mobile Entertainment Forum, and TVoverNet.)

By ‘internet video distribution’ we mean: any video material (movies, TV, infotainment, sports, UCG) distributed via internet technologies (IPTV, web streaming or P2P downloading) over any bearer (fixed or mobile broadband networks) to any device (PC, TV, handheld). We exclude traditional broadcasting and physical means of distribution, although the consequences of internet video distribution are looked at.

Do take part here. It takes 15-20 minutes to complete and you’ll get a free copy of the summary results if you invest the time to complete it properly. (The system allows you to come back to complete it if you need to take a break). Survey closes 1st October 2008.

Some of the questions are pretty challenging, so it’s well worth reading the context for it below first:

How will the internet video market develop and what are the best strategies for aggregators and distributors?

As broadband pipes have grown fatter and fatter, the capability to deliver a quality video viewing experience over the Internet has grown. This broadband capability has driven a tsunami of innovation in hardware, software and services. And the eyeballs have followed. All recent data point towards video being the fastest growing segment of all internet traffic and the trends to continue for the foreseeable future. This is true whichever metric is used: absolute number of viewers, total time spent viewing, data traffic volumes.

Growth is not limited to a content category: adult, sports, movies and music are all rapidly moving online. The internet has also led to a completely new category: User Generated Content - home movies have moved out of the privacy of the living room and are becoming more and more professional.

Growth is also not limited to a specific geography: the movement online is a worldwide phenomenon. The internet has no respect for traditional geographies and boundaries.

All the evidence points towards a future where the internet will be a critical distribution channel for all forms of video.

Innovation in video distribution is nothing new - over the last century we have seen cinema, broadcast networks and physical media creating temporary shocks to older methods of distributing content. Despite the gloom of some predictions, live events whether sporting, theatre or music remain popular, and happily co-exist with home entertainment. The transition to and evolution of these distribution channels and the associated business models will probably provide clues as the outcome as more or more content moves online.

However, there is only a certain amount of time in the day available for entertainment in general and watching video specifically. Legacy distribution channels are understandably worried about whether internet video will be additive to or cannibalise their audiences.

A new distribution channel brings opportunities for new entrants to enter markets and disrupt existing markets and business models. The key feature of the internet as an interactive distribution channel only adds to the opportunities and adds to the challenge of existing players to adapt.

User empowerment - for good or ill, it’s happening

This interactivity has even allowed individuals to become distributors in their own right. Positively, individuals have generated their own content and made it available to the world. Negatively, some individuals have used interactivity to distribute content without regard of the rights of the copyright holders. Copyright holders have struggled to enforce their rights. Illegal distribution of content not only threatens the absolute value of content, but has lead to unpopular and complicated mechanisms to protect content.

The absolute volume growth has also placed the internet access providers under severe strain: attempt to increase prices to compensate for the growth in traffic and gain extra revenue through developing additional services is proving very difficult. These forces have generated a considerable amount of experimentation in the market especially in the area of pricing models: subscription, pay-as-you-go, advertising funded, bundles with other distribution channels and offset/subsidy - all exist in a variety of forms.

The net result is the video market is in a state of flux and to most eyes, chaos. Will order emerge from the chaos? In what form will this new order take? What will be impact on the existing players in the video value chain? And, will powerful new players emerge?

We identify three possible scenarios

We are using a scenario-planning methodology to understand the future. This is specifically designed as a way of dealing with uncertain times and rapid change. We’ve identified three likely future scenarios.

Pirate World: Distribution ceases to be valuable, and copyright ceases to be relevant - a new business model is required.

Back to the Future:Traditional distribution methods/business models are replicated on-line; existing actors succeed in reasserting themselves.

New Players Dominate: Rather than the total breakdown of Pirate World, new distributors replace existing ones, as it turns out we still need aggregation as a guide through the jungle.

This study will evaluate the likelihood of these scenarios, each of which paint a picture of the future internet video industry in terms of technology developments, consumer behaviour, service uptake, and usage. These scenarios will be self-consistent and accompanied by a clear “back-story”: the set of assumptions regarding drivers that lead to the scenario as an outcome.

The study will place the drivers of future internet video distribution in a Technological, Economic, Social and Political framework and also evaluate the implications by content type for the value chain of creators, aggregators and distributors. Research will be performed including literature reviews, other desk research, industry research and interviews with key staff from relevant organisations. Case Studies will be produced to bring the “back-story” to life and provide a historical context for both successes and failures.

The study will be an invaluable guide to value chain players who will gain insight to where the current value chain is broken and the steps required to be taken to fix it.

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September 1, 2008

Ring! Ring! Hot News, 1st September 2008

In Today’s Issue: Vodafone calls serpents out the vasty deep over termination fees; AT&T’s cheaper data roaming - not very cheap; Google nixes XMPP on Android; Nokia kills native SIP on N-series; Mobilkom’s new SIP softphone; Comcast’s huge bandwidth cap; TiVo turns to telcos; new navigation-focused Garmin GPS gadget; what about XOHM and Navteq then?; Skype - not compatible with mortality; Broadcom sues Qualcomm again; 21CN will eat your granny; MTN looking for mergers; Vodacom buys Gateway

WOLF! WOLF! Vodafone reckons changing the termination fee regime will cause 40 million Europeans to stop using their mobiles, and even “bankruptcy”, in a bid to stop Viviane Reding’s effort to cut the termination rates drastically. We’re sure Vodafone has threatened this sort of doom and mayhem before, possibly a year or two ago, without any of it happening. Wolf!

Frankly, if you were to ask us where the telcos are really milking their customers, it would be data roaming; AT&T’s iPhone users can now get all of 100Mb of overseas data service for a mere $119, while in contrast 3UK mobile broadband subs can get 15GB abroad for £15 (approx. $30) under the right conditions.

Of course, the point about the boy who cried wolf was that in the end, there was a wolf. This week’s news gives a strong sense that the alternative voice wolf is howling at the door; everyone was surprised that Android 0.9 was missing Bluetooth support, but far more significantly, Google has quietly removed the GTalkService API from the current build.

Why significant? Google Talk uses the XMPP protocol, familiar to Telco 2.0 readers from MXit and Jabber, for both messaging and voice. And some of the SIP phone people — Fring and Gizmo come to mind — offer interworking between GTalk and other XMPP networks and their SIP-based phone service. So you get your SIP ID for free, and SIP service free, buy a phone number and PSTN peering for cheap, and set it up to forward everything to GTalk; then you whip up something to wrap the Android GTalk API, get a cheap data plan, and you’re doing Voice & Messaging 2.0 service all by yourself. You can see why carriers wouldn’t like this at all.

And you have to wonder if there’s any connection with their big deal to make Google the default search engine for all things Verizon. Still, always worth keeping in mind Intel founder Andy Grove’s famous quote: A fundamental rule in technology says that whatever can be done will be done.

As if by magic, Nokia has quietly disappeared the SIP stack from its latest N-series gadgets, thus breaking at least three mobile-VoIP services. [Ed - Oops! We got one wrong here. See at end. ] You have to assume that N95 buyers tend to be power users and therefore more likely than average to use them; is Nokia being pressurised by operators? However, this is rather ambiguous:

A Nokia VoIP client is not included with the Nokia N78 and the Nokia N96 and VoIP solutions based on this particular client such as Gizmo will not work. However, Forum Nokia will cooperate with third-party developers to support them in porting their applications from S60 3.0/3.1 releases to S60 3.2. One example is Fring, whose popular application will be offered via Nokia’s Download! service for the Nokia N96.

So you can’t have SIP, except when you can. That’s almost as conflicted as…a telco! Meanwhile, Mobilkom Austria launches a new SIP-based VoIP client. And telco PR guru Andy Abramson is using Boingo’s WLAN roaming with Truphone’s mobile VoIP on his E71. Apparently the E-series gadgets get to keep their SIP stacks so those fancy corporate unicomms systems don’t die. Goodbye, mobility price premium (yes, even at 35,000 feet).

Comcast, after its bruising experience with Chinese-style TCP RST forging and the FCC, has announced a bandwidth cap, set at 250GB a month. Which mostly makes us wonder just how many flicks their bandwidth hogs were pulling off BitTorrent.

TiVo, meanwhile, is suffering the loss of its distribution partner DirecTV, which went off to do its own PVR thing. They are now looking to promote the boxes through licensing deals with cable operators — and why not telcos?

Here’s a new threat for you: as well as CE makers adding voice functions to their products, watch out for completely new and different things — like specialist GPS makers Garmin launching a navigation-focused phone. Now there’s an interesting idea, and the device looks fantastic. You could wonder what might happen with Sprint XOHM, as they are talking up the WiMAX service as a location-based platform, and rival GPS firm Navteq is a partner. (And don’t they have some sort of relationship with Nokia?)

On the subject of WiMAX, this chap has an unusual concern regarding his spanking new P1 WiMAX box: will it catch fire? He also raises an interesting point: what happens when a Skype user dies? It sounds morbid, but as he points out, this is a reason why the banks will never accept Skype IDs as verification. Remember those key telco data assets! Managing user identity is a business, not just a cost.

Remember the golden era of Qualcomm-related patent disputes? They’re baaaack; it seems that after coming to an agreement with Broadcom, Qualcomm…err…didn’t pay them the money. Back to court it is, then.

Hard to know where to start with this one, “Experts” promising “deaths” due to the roll-out of BT 21CN. What — someone might choke on an Ethernet packet? No. Apparently some telecare and burglar alarm systems might not work, but doesn’t the system offer backward compatibility with steam voice? We thought it did… so we’ll confine ourselves to noting that it’s the telecare industry lobbyist who reckons we need to buy a whole lot more telecare gear.

After the merger with Reliance flopped, MTN is looking for more acquisitions, and being half as geared as an average telco they can afford them. Good news for African backhaul providers — which is handy, as their arch-rivals at Vodacom just bought one.

[Ed - Correction - An informed reader writes to point out that the Nokia SIP stack was not removed in the N series handsets referred to. Rather, it was the Nokia VoIP client that was removed and only in the N78 and N96. This means third parties can do what they like to make a VoIP client for it, with their own SIP stack with the features and functionality they need. Our mistake.]

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