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December 20, 2010

Telco 2.0 News Review


Telco 2.0 Top Stories

[Ed. New Telco 2.0 Facebook analysis is published now here, plus don’t forget to pencil or key into your diaries the dates for the second FREE online Telco 2.0 Best Practice Live!, on 2-3 Feb 2011, and the next Executive Brainstorms in San Francisco, London and Singapore.]

Benoit Felten, Yankee Group fibre analyst, raves over the Freebox Revolution, which as it turns out also breaches the last holdout of volume pricing for voice - all calls to mobile devices, as well as to landlines in 103 territories, are now bundled. (Does that leave anything? Antarctica? Inmarsat shore-to-ship? The International Space Station? But you can call the ISS by ham radio for nothing…) While Felten raves, so does Dave Burstein of DSLPrime.

French-speaking readers can read a detailed technical briefing here. Not only does the Player media-centre element have an Intel Atom netbook CPU, the Server network/fileserver element has a 1GHz class ARM-based system-on-a-chip, speakers so it can play at being a web-radio or hi-fi streamer as well, and an integrated BitTorrent client to help fill up the hard disk with content, no matter where it comes from. Note also that the marketing department at Free has bulked up to a total of four employees.

The same French blogger has a very detailed review of the box’s software and user interface components. It’s clearly an attempt at a complete replacement of the TV experience, integrating Web video, catch-up streaming (which you pay for - there’s a business model for you), BitTorrent and other download or sideload to local storage, and classical digital-terrestrial TV. The user interface is written using Nokia Qt and specifically its QML scripting language, and the Web browser is Free’s own development based on WebKit, the open-source browser engine that is found in Safari, Chrome, Konqueror, and the Nokia browser. As a result, some people are asking if this is the first major MeeGo product - it contains Intel and ARM chips, it’s a Linux, with a GUI built in QML, and a Web browser based on WebKit.

And there’s more: something on the business model and pricing, which is arranged to protect the headline pricing. Upgrading subscribers will have to pay, but the pricing is tapered so that the longer you’ve been a customer, the less you pay. There’s an attempt at a teardown analysis here, which concludes that the BOM is of the order of $200. However, it’s pointed out elsewhere, Free is almost certainly now the biggest customer for the Intel Sodaville chips and could expect to get them at attractive rates.

The big question, in the light of Free’s 3G licence, is whether or not there is a femtocell integrated in the device. Xavier Niel didn’t mention any such thing at the launch although he’s suggested it before. Until the devices actually ship, it’s impossible to open the box and check (and equally impossible to do an iSuppli-style full teardown). It’s possible that the hardware is present and will be activated at some point in the future via a software update, or alternatively that the boxes are, as they say in the Navy, “fitted for, but not with” and that femto capability would arrive as an expansion card.

While Niel’s Rafale squadron blasted off into the Christmas rush, things were very different at Google. It appears that Google has asked vendors working on Google TV products to make themselves scarce during CES, the monster electronics shindig in Las Vegas in the first week of January. So it seems that the deals with the content providers are stalled, the business model is far from clear, and the product is still too beta to show its face in public. Apart from that, it’s a roaring success.

Google does have a new shiny gadget out, the Google Nexus S - this Googlephone is actually a Samsung product and its key new features are that it has the new version (2.3) of Android, NFC support, a “slightly curved” screen (hmm…), and no expandable storage slot. Apparently you’re meant to keep all your stuff in the cloud, which has obvious downsides for a mobile device. To begin with, it retailed in the UK for £549 - until Carphone Warehouse slashed the price by £120. Not moving too well? Bizarrely, it can’t send vCards as SMS/MMS messages for some reason.

Even if TV is looking dodgy and the Nexus S hasn’t exploded off the starting blocks, Google can still be well pleased with 300,000 Androids being activated a day. However, we’re not sure about “push search”, which sounds far too much like an unusually pernicious form of spam, that or a script that regularly performs Google searches.

On the other hand, it looks like Android is all that keeps Verizon Wireless customers from deserting. There’s quite a lot of BlackBerry bashing in that story, but they are unlikely to care, having just posted their best quarter ever. RIM upped its shipments 40% and its profits 45% year-on-year.

Google has also introduced a new version of Maps for Mobile, which includes 3D mapping and local caching of map data. Hardcore Nokians will no doubt point out this brings them right up to date with Ovi Maps - Telco 2.0 recalls seeing Nokia Research demonstrations of 3D mapping on mobile devices at 3GSM 2006. And you still can’t pre-load mapping before you set out. But it won’t matter, will it…

And Google’s started selling e-books.

One problem with keeping all your stuff in the cloud is that sometimes clouds melt away. Yahoo! gave the impression this week that it was planning to close down the hugely popular online bookmarks site Delicious, to the horror of bloggers in general (who tend to be heavy users of it). They also worried Flickr users after news of layoffs there emerged. The upshot was a sudden explosion of traffic at subscription-only rival Pinboard as the migration began. Now they say it’s all the press’s fault and they really want to sell Delicious, not kill it. In the meantime, either the Delicious API or the Firefox extension, which stores your bookmarks locally, will work to salvage your data from the sinking ship.

In other cock-up news, Dan York of Voxeo and Disruptive Telephony is not happy that some companies are referring queries about Skype to his personal phone number. Which is especially amusing as Voxeo is a competitor to Skype in some markets. Skype also had a technically sporky moment this week.

Freetalk’s new SMB IP-PBX box gets a good review from Tom Keating, who likes the Web-based GUI that also provides a range of unified comms features, likes the fact it’s an Intel Atom-powered device running a fork of Asterisk, and also likes the fact it integrates with Skype in both directions - it can use Skype Connect for trunking, and also support Skype clients logging in.

Meanwhile, the Tropo Blog has interesting posts on detecting answering machines, integrating XMPP real-time messaging and signalling with VoIP, and doing the same as part of a web page.

Here it comes again: default-on parental filtering of the Internet. Politicians do love that one don’t they? As usual, it looks like ISPs get to do it at their own expense without any legal authority behind them. Ho hum. RevK is spitting tacks.

Meanwhile, a Wikileaks disclosure shows that the US embassy tried to pressure Spain into passing a HADOPI-like law.

In pure connectivity news, the FCC gave details of the next lot of 700MHz auctions, scheduled for next July. 3 Scandinavia marks a data point of sorts: Sweden was one of the markets where Intel bought 2.6GHz spectrum as a foothold for potential WiMAX operators. Now 3’s buying it back to cram in more 3G.

Relatedly, there is a problem with the UK Government’s promise to find another 500MHz of spectrum. Namely, it’s far from clear that the spectrum is actually available. An ill-thought out and vague policy announcement? Whatever next?

3 Italia, meanwhile, outsourced much of its network to Ericsson as a managed service.

3UK has brought back unlimited mobile broadband, daring the other UK operators to follow. The explanation is that they are feeling confident about their recent waves of investment. Andy Abramson at Voyces visits the UK and raves about 3’s service - faster than anything AT&T can provide.

This comes at a price - 3UK dongle customers’ £15 packages just went up by 3.7%.

The UK regulator, OFCOM, is planning to shake up number assignment and iron out some weird anomalies, like the local-rate 0845 prefix that actually costs more than any national call if you call it from a mobile phone. The proposals are open for consultations and make up a mere 482 pages.

Meanwhile, the Phorm case has been delayed yet again.

Indian prime minister Manmohan Singh offers to testify in the inquiry into the auction of GSM licences.

Will we soon place servers at sea in order to get the lowest latency between major financial centres?

NBN Co wants to have peering in eight capital cities, Telstra, VHA, and Optus want 400 peering points, the Australian Competition Commission rules there should be 120. And the final NBN costs are estimated at A$40bn, with the state providing A$27.5bn of that. Revenues are expected to be around A$5bn a year, rising to A$7.6bn. The Aussies also do some interesting R&D.

Vodafone.pt and Optimus are sharing a fibre network.

Unmissable Arbor Networks ASERT blog post on today’s DDOS attacks, Anonymous, Wikileaks and more.

Lawspammers having a bad day, again. Comment on UK government IT by the 21st January. Facebook scalability engineering and security disclosure policy. Using scratch-off codes and SMS to fight drug counterfeiting. The fate of Nortel’s vast patent portfolio. Groupon as a two-sided business model.

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December 14, 2010

Analysis of UBS Media & Comms Conference - Some like it Hot



As part of our increasing focus on ‘Digital Entertainment 2.0’, here is an analysis of UBS’s recent Global Client Conference:

The top brass of the Media and Communications industries gathered in New York last week for the final investor jamboree of the decade and the word on everyone’s lips was “online”, and specifically, whether it was a creator or destroyer of value for the industry.

It was apparent that it is far too early in the game to pick winners and losers. Perhaps more importantly, the playbook of the move online in the video world will be completely different from the music and newspaper industries where significant value was, and still is, being destroyed.

The Price is Right

Leslie Moonves of CBS drove this point home, with the example of NCIS Los Angeles which was recently syndicated to the cable channel, USA Network, for US$2.35m per episode including streaming rights. That you might pay US$50m for a 22 episode series which has already been aired on one of major broadcast networks gives an indication of just how valuable hit TV shows have become.

On the other hand, Hulu is expected to make a relatively meagre US$240m in total revenues in 2010 for huge volumes of broadcast content, of which an estimated 70% is returned to content owners. Three of the main broadcast networks (Disney-ABC, Newscorp-Fox and GE-NBC Universal) are shareholders in Hulu and serve up the majority of the content. The challenge for Hulu is to ramp up its revenues and become more relevant to the revenue line through increasing penetration (in October at c. 22m unique visitors, 654m minutes and 1.1bn Ads) and extension beyond the laptop (the launch of Hulu Plus at $8/month for devices connected to the TV).

The End of the Rainbow

In the short term, the biggest pot of gold that the major broadcasters are after is a share of the basic channel fees charged by Cable MSOs, DSAT operators, and telcos, which represent the traditional partners of content owners. Chase Carey of Newscorp was very clear that as audiences fragment, a sole reliance on advertising revenues is foolhardy. And deals are being done on the quiet outside of the big public spats as represented by Fox vs Cablevision. CBS alone has done over 40 retransmission deals over the last two years and expects US$250m in revenues by 2012 alone. With the largest payTV operator, Comcast, buying NBC, it is a racing certainty that everyone will be paying broadcasters a lot more money in the near future.

The biggest questions therefore become how much will they pay, and what will be in the bundle. The $64,000 question, in fact. I’ve seen estimates of fees in the range of 25c-US$1/per channel/month which could bring a huge bill of up to US$5bn. Interestingly, CBS said they were bundling some online streaming rights as part of the license. And Newscorp said it was in everyone’s interest to continue to serve the 10m US homes which get TV over-the-air for free - but you can be certain that it will be a very basic service with none of the HD bells and whistles.

The situation in the USA is unique with both a high penetration (90%) of payTV and no state broadcasters supported by a telly tax. It’s a situation not really matched elsewhere in the world. It will be interesting to see how broadcasters move away from a complete reliance on fragmenting audiences and advertising fees. I suspect that we will see a combination of moving secondary channels to payTV and charging, whether pay-as-you-view, subscription, or licensing for on-demand content.

Here, There and Everywhere

While the jury is out on cable cutting and shaving, what seems to be more certain is that authenticated TV Everywhere will be rolled out in 2011. Warner is committed to having HBO Go on all devices and through the majority of distributors during the first half of 2011. The message seems to be far from worrying about HBO, investors should be more positive - with subscribers flat during the recession, viewing up and revenue up because of pricing power with the distributors. It doesn’t seem the much vaunted Netflix threat has affected HBO much.

In fact Jeff Bewkes swatted off any noise about Netflix like dealing with a pesky bluebottle. He compared their measly little offers of US$50k-US$100k per episode to the millions on offer from syndication deals. He also stressed that the Starz deal is up for renewal in 2011. This is a crucial deal which gave Netflix access to Sony and Walt Disney Pictures movies. The noise on the jungle grapevine is that Netflix got the streaming rights for US$25m/year compared to a market value of US$200m.

In the same week on the other side of the USA at a Barclays conference, the departing Netflix CFO said not to worry about content, as no single deal accounts for more than 20% of overall viewing. He also said that they were structuring deal values to manage margins over time. A quick back of the envelope calculation show how much Netflix can afford to pay for streaming & DVD rights. Currently, 16m paying subs @ US$9/month - low cable payout case 40% of revenues = US$700m/annum - high Hulu payout case 70% of revenues = US$1.2bn. Even if the base doubles within a couple of years to 32m paying subs, Netflix will only have an annual content acquisition budget of around US$1.5bn to US$2.5bn.

Given that the TV Industry is currently collecting US$30-US$50bn on content from current distribution partners (the MSOs, DSATs, and telco industries) and approximately equal that in advertising, Netflix can’t possibly act as a substitute. Therefore, all the effort is in extending streaming rights to current partners.

That is not to say that Netflix can’t exist as a standalone entity, either as a complement to payTV or serving the small percentage of people in the USA who can’t afford a full payTV service. But, the second Netflix starts disrupting the current ecosystem, expect the empire to strike back and start disrupting Netflix. Ultimately, Netflix might end up in the long tail and there is an economic reason why nobody wants to be there.

Fine Young Radical

The only dissenting big media voice came from Robert Wiesenthal from Sony, who is a relative newcomer to the industry and ex-investment banker. Amazingly, he believes the consumer has voted and wants to break the cable bundle, moving to à-la-carte menus. Of course, Sony is in prime position to exploit this with its estimated 50m connected TVs, via Playstation, BluRay and GoogleTV by Mar 2011, and with its Qriocity service.

The message from Sony is not to think about the 5% margin they get on hardware any more, and instead think of the lifetime value of each connected TV to Sony. This requires everyone to take a big leap of faith. The big difference from Sony and other manufacturers is that they don’t see internet connections as a feature, but as a platform. Interestingly, he also added that consumers also want to move from ownership to access, which implies less Apple iTunes music deals and more Spotify subscription type licensing.

On technology, Sony seems to be joined at the hip with Android, both for phones and TVs. The much criticized GoogleTV is just phase I of a long term plan, with the end result being a 1-cord TV with really simple content discovery and acquisition. The traditional twin input technology of the remote control and EPG hasn’t really changed in the last 10 years, which seems incredible seeing the advances elsewhere. Sony also thought the consumer was suffering from box-fatigue and all the new age boxes such as Boxee, Roku, AppleTV faced a limited future.

The only thing that Sony seems to have in common with the other studios is a belief in a new window opportunity for movies between theatrical release and being available on DVD, targeting a certain demographic who don’t want to go the theatre but have fantastic home cinema equipment. Warners already said they will experiment in 2011 with so-called premium VOD 45-days after theatrical release for US$20-US$30. Good luck to them with that, for that price I’d expect waiter service in the home for popcorn & sugared water.

Escape to Victory

Everyone was in agreement that the biggest growth area was outside of North America, whether they were building new payTV territories, such as DirecTV in Latin America, building new channels such as NewsCorp and Discovery, or syndicating content, such as CBS. Obviously, driving payTV penetration is the biggest win for all.

CBS gave an example of the scale in syndicating all its new autumn TV shows, Hawaii-Five-0, Blue Bloods and the Defenders internationally, all of which got in excess of US$2m per episode, which made them profitable before even reaching the screen in the USA and generating advertising revenues.

Additionally, NewsCorp expects to be making over US$1bn per annum in operating profits from its overseas channels in the few years. And that is before counting its distribution business in Italy, Germany, Ireland and the UK.

There will be Blood

The ever quotable Leslie Moonves of CBS dealt with the question of escalating costs with aplomb. “Without a Trace” was costing a US$4m/per episode with CBS owning 50% of the equity in the show. The underlying problem was too many writers and in the cast. They decided to kill it after eight seasons and replaced it with “The Good Wife” which costs US$2m/episode with CBS owning 100% of the equity. The end result was lower costs, similar ratings and bigger share of syndication.

He humorously added that if a cast member was getting too expensive, the best option is to kill them off in the final episode of the season. The best historical industry example was the decision to blow up the Dynasty house in the final episode of a particular series. Whether cast members survived or died was dependent upon contract negotiations which were up for renewal.

The Final Curtain

The big media houses seem to be spreading the message that they are in fine shape and the online challenge will not destroy value, but instead is an opportunity. Hit content will continue to be expensive for the foreseeable future, online-only players will have to pay the going rate going forward, and they are going to protect their current partners. And, if that isn’t enough to buy their shares, think of the international seam of gold waiting to be mined.

For Telco 2.0 and our new ‘Digital Entertainment 2.0’ Initiative all this means that instead of looking at black and white scenarios, we’ll be looking at shades of grey. It means viewing VOD not just in the context of the laptop, but throughout the home including the living room. It means comparing traditional distributors to new aggregators and keeping an eye on content deals. Finally, it stresses the importance of getting to grips with payTV markets throughout the world and noting the subtleties in each geography.

(Ed. - more on this and other related topics in 2011 in our research and events programme).

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Digital Entertainment 2.0: Tablets / Smartphones to run Multi-Screen Experience?

New consumer research by Ericsson shows enthusiasm for using tablets and smartphones to control and consume the in-home multi-screen experience (TV, Phone, Computer, etc.). Video interview with Michael Adams, VP Software Strategy, TV Solutions, Ericsson, outlining Ericssons’ findings and intended role in delivering the future TV experience.

 

There’s more on Digital Entertainment in the Telco 2.0 Research stream here, and it will be a key theme at Best Practice Live!, our online event running 2-3 Feb 2011, and at our US, EMEA and APAC 2011 Executive Brainstorms (dates and agenda details here).

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Strategy 2.0: Vodafone’s ‘Happy Pipe’ Vs NTT’s ‘Two-Sided’ Approach in APAC.



Presentations by NTT Research and Vodafone’s division containing its African, Indian, and Asia-Pacific operations revealed very different market strategies. Here’s a quick preview - we’ll be looking at these in more depth in the strategy report ‘The Roadmap to New Telco 2.0 Business Models’, plus a more detailed Analyst Note on these two case studies, and at our US, EMEA and APAC Brainstorms in H1 2011.

At the recent FT World Telecoms event, Naohide Nagatsu, general manager of NTT Research in Europe, presented on their plans for transition to an all-IP NGN. They intend to switch off the PSTN relatively quickly, which is hardly surprising as 68% of Japanese subscribers are on either FTTH or DOCSIS 3 cable and 96% of mobile subscribers are on one 3G technology or other (there being a choice of NTT DoCoMo’s Japanese-flavour 3G, Softbank’s UMTS, or KDDI Mobile’s CDMA-2000).

ntt-slides.png

NTT is currently making an actual majority of its revenues - 58% - from its ISP and IT solutions businesses, the ones BT terms its New Wave operations. They expect that voice will be down to 25% of revenues in two years’ time - a little behind the schedule Telco 2.0 delegates expected way back in 2006, but not by much.

ntt-slides1.png

Their response, technically speaking, is heavy on the classic telco elements. The future NGN is intended to provide multiple classes of service over IP, to allow for geographically-targeted quality-of-service, and its edge routers will validate packet headers against e164 telephone numbers in order to prevent evil-doers from disguising the source of their traffic. However, rather than planning to use these powers for evil, a primary use-case is to ensure the voice service works during natural disasters - notably earthquakes.

The most interesting element from a Telco 2.0 perspective is probably organisational - part of the plan is the Service Creation Business Group, which exists to help upstream customers create new applications and services with the capabilities of the core network. This is essentially the original Telco 2.0 platform vision.

Vodafone Africa, Middle East, and Pacific, however, is very different, and not only because they’re mobile-centric rather than fixed. Many of the issues its CEO, Nick Read, raised are classic emerging market mobile - for example, OPEX is 14% of service revenue in his division compared with 8% for Vodafone’s European operations. They expect that 95% of the total incremental telecoms spend in 2009-2014 will be found in Africa, Asia, and the Pacific, and that 85% of that will be concentrated in mobile.

So far, so typical - it’s all about cost control and coping with blindingly fast subscriber growth. However, the really interesting point was that it’s possibly mistaken to talk about emerging market operators. In India, mobile penetration is at 140% within the major cities, and 32% in the countryside. ARPU is twice as high in urban India as it is in the country. (This also came up in a recent consulting project for a major African operator - there was very little difference in their CAPEX plans for South Africa and Nigeria.)

So rather than facing either developed markets or undeveloped ones, the industry will increasingly have to deal with all the market types at once, just as radio planners have to deal with urban, suburban, rural, and other propagation models at once. Within the same markets, we have to get good at serving a significant iPhone/BlackBerry userbase while also providing ultra-low cost basic voice and messaging, supporting an emerging developer community, and providing bridge products like Orange’s low-cost own brand Android devices.

Read cited infrastructure-sharing, specifically tower-sharing, and innovative network equipment as key enablers in achieving this. Vodafone Essar currently uses 100,000 shared towers (this post is worth re-reading) and is deploying solar power and special “Diet BTS” stations aggressively.

Another issue is operations excellence. Vodafone Egypt, for example, is in the habit of doing extensive analysis of live network utilisation data at the cell site level and plotting the locations of both its own retail outlets and resellers, and those of the competition, against this to see where its customers need to be able to top up, and where their resellers are likely to be able to offer a better service.

Essentially, this is an example of Happy Pipe implementation (in fact, the phrase was used by more than one presenter). Similarly, Matthew Key, CEO of Telefonica O2 Europe, remarked that operators’ core business is now about yield management.

And there was an interesting discussion between Rick Halton, VP of Worldwide Marketing for Communications and Media Solutions, HP, and Stephen Howard, HSBC’s head of global TMT research, regarding whether fancy pricing models, as opposed to just setting the right price, are worthwhile. Vodafone has had some success with dynamic pricing, offering targeted discounts to encourage usage in underutilised cells and hours. HP, as a major billing vendor, has its own reasons to be keen. Howard made the point, though, that it takes a lot of micro-managing to match the benefits of setting a sensible price across the board, and the IT costs are non-trivial.

The key conclusion here is that the co-existence of multiple market types means that there is scope for both approaches. Operators need to be aware that they might do well to be Telco 2.0 in one market and the Happy Pipe in another, and also that this could be true of different segments or geographical areas within the same market. Of course, the engineering fundamentals for this are the same - efficient basic connectivity in the access layer and service-oriented, developer-friendly architectures for the core.

NB, this post is a preview of a forthcoming Analyst’s Note that will go into more detail on this subject. Watch the research site.

See our Mobile & Fixed Broadband Business Models Strategy Report for more on the Happy Pipe and the Roadmap to Telco 2.0 Strategy Report for more on the latest Telco 2.0 thinking

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December 13, 2010

Telco 2.0 Exec Brainstorms - view from the market


Feedback from our Telco 2.0 Executive Brainstorm participants, including representatives of Telecom Italia, BSkyB, the World Economic Forum, Vodafone and Orange France Telecom, is now out. (The list of 2011 events here).

The videos are now up at TelecomTV.

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Telco 2.0 News Review


Telco 2.0 News Review

[Ed. New Telco 2.0 Facebook analysis to be published this week, plus don’t forget to pencil or key into your diaries the dates for the second FREE online Telco 2.0 Best Practice Live! 2-3 Feb 2011 and the next Executive Brainstorms in London, San Fransisco and Singapore.]

Network-sharing watch: MTN and Vodafone both outsource and share their towers in Ghana. A new company, part owned by American Tower and part by MTN, is taking over 1,876 Base Tranciever Stations (BTSs) for some $428m. At the same time, Millicom’s Tanzanian network is parting with 1,020 BTSs for some $80m plus a block of shares in the tower company. And Tele2 and Telenor are building a shared fibre backbone.

Meanwhile, Vodafone Qatar completed LTE trials and deployed 17 base stations designed to look like minarets. Now there’s lateral thinking for you, although we can’t help suspecting that a base station designed to look like a church tower might stick out a little. Speaking of LTE, TeliaSonera turned on its LTE network in Denmark, while Elisa opened for wholesale customers around Espoo. Telia may be in the market for Swedish triple-play cableco ComHem, which is for sale.

Benoit Felten has a quick hit roundup of fibre news.

Brazil is auctioning the last round of the original 3G spectrum, with the odd detail that so far only Nextel is technically compliant with the bid requirements, on the grounds that it’s an iDEN operator and therefore a new entrant to UMTS. That implies a shutdown of the iDEN network will eventually happen, and as it turns out, Sprint-Nextel USA is planning exactly that. The operator announced a $5bn wave of investment over the next three years with the goal of integrating its various networks into a single platform. The Nextel iDEN assets are going to be shut down in 2011, and Sprint is planning to migrate the special voice services over to their CDMA network next year.

The lucky beneficiaries are Ericsson, Samsung, and Alcatel-Lucent - the job is being split into three vertically integrated contracts divided up geographically, with ALU getting New York, Washington, and LA (so, the first and biggest three area codes in the NANP then - no pressure…) plus Boston and Philadelphia, Samsung getting Chicago, San Francisco, Seattle, Denver, and Pittsburgh, and Ericsson getting Atlanta, Miami, Kansas City (Sprint’s home turf), Houston, and Dallas.

If NSN lost out there, it’s done well elsewhere, having landed an HSPA+ contract with Aircell to deploy in Punjab, Kolkata, and West Bengal. They also snagged Orange Armenia for HSPA+ data and HD voice.

Hong Kong’s regulator OFTA announced the coming auction of 850, 900, and 2000MHz spectrum. A total of 20MHz of paired and 10MHz of unpaired/TDD spectrum is going, with the auction planned for February. According to OFTA, mobile data usage in the territory has gone from 32TB in December, 2007 to 1,236TB today, a factor of 38.

In other “data explosion” news, Telco 2.0 Alumni Joe Weinman, of AT&T has a two-part piece out in GigaOm on why he thinks volume pricing, or at least tiered pricing, for broadband is inevitable.

Google showed off a laptop running Chrome OS this week, essentially shoving the whole graphical user interface inside the web browser. A little like a Palm WebOS device, you might say. They also announced an app store for Chrome extensions - a little like Mozilla Add-ons, you might say.

Network analytics and design specialists Arieso churned through a day’s logs from a major carrier in a major city, and concluded that the heaviest data users are the Androids. HTC Desire users pulled 41% more data than iPhone users. Interestingly, some Android users are also heavy uploaders, suggesting that there may be something to the notion that the iOS devices are fundamentally consumption-optimised. Samsung Galaxies, for example, pushed 126% more data uplink than iPhones.

Android 2.3 is coming, and according to Dan York @ Disruptive Telephony it includes a native SIP stack. Rather like a 2005-era Nokia N95 or E61, then. In fact the similarity goes further - carriers and OEMs will have a veto over whether the VoIP capability actually works or not in their devices. Way back when, Vodafone specified that the SIP stack in their Nokia N95s wouldn’t work…although they left the E-series suit-o-phones intact. The OS will also gain support for NFC. There’s a sample app here.

Meanwhile, York continues his HOWTO series on developing voice applications with Python and Tropo.com. The Tropo blog also points to Santa Call.

The Voice over IP Security Alliance has an interesting article on using the Nokia N900’s powers for evil, specifically using it as a silent tracker bug.

Andy Rubin reiterated the claim that Android is a profitable operation, based on its share of mobile Google search activity, but didn’t cite any numbers.

Skype has announced a special low-bandwidth version for the UN High Commission for Refugees, intended to provide a robust Skype service over latency- and bandwidth-constrained satellite IP terminals. Among other things, it naturally prioritises voice over video calls. There’s no word yet as to whether it’s a fully caffeinated Skype node, or whether it’s another SIP-to-Skype thin client - given the application, it would certainly be useful to make sure calls within the local network were routed locally rather than transiting the backhaul twice. On the other hand, you probably wouldn’t want to participate in the general P2P cloud and route other people’s traffic - and they probably wouldn’t want their Skype passing over your jittery VSAT, either.

Voyces reckons that the arrival of LTE and WiMAX will be big news for Voice 2.0 developers - it’s not so much that there’s more bandwidth, but the flatter network architectures mean less latency. It’s worth adding that most of the HSPA products on the market now offer a flat network architecture or at least direct breakout of Internet traffic - NSN’s Internet HSPA line has been doing this for some time.

Speaking of Skype, Skype Journal describes three different kinds of social graphs - one for relationships, one for tastes, and perhaps one for getting things done. SJ also asks why any game developer would implement their own chat when they could use Skype’s new API. You could ask the same thing about Facebook, and indeed they did.

There’s also an interesting new product out: OpenTok is a Web-based video conferencing tool with an extensive REST API for developers.

In other Voice 2.0 news, Microsoft is planning something interesting - they are pushing on with research into better integration between speech recognition and natural-language processing, in order to improve voice command functions. The first fruit of this work is the background voice command feature in the Kinect games controller, but if it works, there are obvious enterprise applications.

Yet another of those voice-web marketing integration companies, RingRevenue, has closed a major financing.

Here’s a fascinating example of how much data is embedded in the CDR piles of major telcos. BT let a group of scientists analyse theirs, and the results are out in a paper for the open-source journal PLOS One. Having filtered out all numbers that only made or received calls, and therefore got rid of the call centres and robo-spammers, they analysed the rest as a massive directed multigraph, and discovered that the social geography of the UK is very different to its public perceptions.

Wales, for example, disappears and instead forms three regions closely integrated with the urban North, the cities of the West Midlands, and Bristol, which don’t interact much. Similarly, the northern cities talk to each other and to North Wales, forming an integrated northern identity. There is an unnamed tech-corridor identity curving around the west side of London. But Scotland is better defined than ever.

Orange has rebranded and consolidated its developer environment, initially for Android only. They’re also considering moving into Kurdistan.

Microsoft is making some tweaks to its Windows Phone 7 developer market. Computer Weekly reviews the HTC HD7 and concludes that it’s the best Windows Phone 7 device, but that’s not the same thing as saying it’s the best device.

Also from Computer Weekly, how to get a public sector IT contract without really trying. It helps to be Oracle, apparently.

Salesforce.com has launched a new enterprise database product in the cloud, Database.com, targeting Oracle’s smaller clients head on.

ZDNet relates the tale of how an unnamed tech CEO forgot to remove their passwords from a product-review gimmie smartphone. The shiny was later offered by the vendor’s PR agency to a journalist, who discovered they could access the CEO’s e-mail, messaging, contacts, call log, shared calendar, and some “personal” photos and video. (Stop. Stop. Don’t make us think about it.)

Don’t be naive about this - in Telco 2.0’s tech journalist days, this used to happen all the damn time. PRs would receive the shinies from vendors and would then hand them progressively down the gravy-train, starting with the execs and working their way into the journalistic food chain. Time after time, they came complete with somebody else’s e-mail and accompanying embarassment.

Amazon denies that last night’s outage in Europe was anything to do with a counterattack from Anonymous over the Wikileaks affair. Tangaza is a mutually-owned money transfer company. Vodafone publishes tweets to #mademesmile hashtag on front page of vodafone.com, UK Uncut protestors notice, hilarious consequences.

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December 10, 2010

It’s Cloud Week at Telco 2.0!


Telco 2.0 has just published five new articles relating to telcos and the cloud. They include the report back from the Cloud Services sessions at this autumn’s Telco 2.0 Executive Brainstorms, video presentations from Oracle, with seven use cases, IBM, and Cisco, who reckon there is a $44bn opportunity here, as well as an entirely new Telco 2.0 Analyst’s Note, Cloud 2.0: What Are the Telco Opportunities?. All are available to subscribers now.

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December 6, 2010

Virgin Media: a UK “Happy Piper”

As part of our increasing focus on ‘Digital Entertainment 2.0’, here is an analysis of Virgin Media’s recent investor day:


The last man standing in the UK Cable Industry, Virgin Media (VMED), appears to have turned the corner and now for the first time in two decades is actually providing a return to shareholders. Although it is outperforming BT, VMED is still trailing BSkyB - especially in terms of revenue and overall converged home market share growth. The big question is whether VMED has a sustainable competitive advantage going forward, and more generally, who will be the other industry winners and losers as VMED moves onto the front foot.

Virgin Media held their first Investor/Analyst day in two years a few weeks ago, with CEO Neil Burkett showcasing VMED strategy going forward and described its competitive advantage as having three arms: network, brand and people. Here are our two pennies’ worth:

The fatter pipe

Cable has always had a fatter pipe into the home than incumbent telcos. At its most basic, co-ax cable has around 750MHz of bandwidth compared to 30MHz for a copper pair. We fully agree that whatever BT does with the copper pair final mile, whether fibre-to-the-cabinet, bonding or whatever - co-ax will be a better technology. However, this logic reverses if BT ever did a mass roll-out of FTTH. But, despite the noise in the market, we can’t see this happening within the next 5 years. Having a fatter pipe is not the whole story, and the history of cable in UK has meant that different systems were deployed in different municipalities at a varying level of quality. VMED have spent the last few years upgrading all their plant and the fact that they feel confident in offering 100-meg broadband to the majority of their UK footprint seems to indicate that they have been pretty successful. Historically, coverage has been another of VMED’s Achilles heels. They are only able to serve 50% of UK homes, or about 13m households, with penetration currently of around 5m households. The biggest sign that VMED was back on the front foot was last year, when they announced a programme to pass another 500k households by the end of 2011.

Additionally, recently they did a deal with one of largest UK home builders, Persimmon, to provide hook up their new builds. People moving into these new homes are ripe for sign-up and VMED will have a presence in Persimmon’s sales rooms. If VMED manage to sign-up a few more house builders, they could easily add another 100k/pa to their footprint, although construction is still in the doldrums after the financial crisis.

Beyond these initial projects, VMED claim they will be looking for other areas where they can meet their target of £GBP300/home passed. Even applying strict discipline to this target, this could potentially open up another 2m UK homes. There is bound to be a regulatory bunfight over access to BT ducts and the access to the £830m government subsidy for rural broadband roll-out.

In short, VMED has a competitive advantage with their network in the short and medium term. This is especially true for raw bandwidth and internet connectivity.

However, a fatter piper into the home doesn’t really matter for linear broadcasting. BSkyB has an advantage, although it is not significant, with their DSAT service in terms of bandwidth. We do, however, suspect that VMED has a cost advantage with a sunk network cost versus rented transponders. But when compared to BT and others with their DTT based services, VMED have a significant advantage which will never be matched by DTT.

The over-hyped brand



Any advantage from the Virgin brand itself is much harder to believe. Admittedly, we’ve not seen the statistics, but we do suspect that both the BSkyB and O2 brands are much stronger in the UK and the BT brand is still loved by a particular demographic (although it’s questionable whether this demographic will ever get around to using advanced TV or internet capabilities is open to question).

People always claim ‘people’ are a strength



Again, we struggle to believe that VMED has a stronger team than, say, BSkyB. Even BT has strengths in key areas such as government regulation and lobbying which VMED would struggle to match. As Berkett himself notes, the key to strategy is execution - if his team can do it, that would be sufficient, but we wouldn’t go anywhere near claiming that this is a sustainable advantage over the others.

Of note here is the VMED claim that their field force is a key competitive advantage. We tend to agree here especially as home technology becomes more complex. BSkyB may have the best TV installers, but they can’t touch BT’s local loop infrastructure which will become more and more important over the next few years.

And the functional separation of OpenReach from Retail handicaps any plans BT has to improve in this area. Several other case studies - notably Verizon FiOS and the Australian NBN Implementation Plan - suggest that operational excellence here is both important and usually undervalued.

Overall, Virgin Media has some competitive advantages, but we think they may be over-egging them with respect to brand and people.

Using connectivity to drive growth



Having the best pipe is pretty useless, if there is no customer demand for it and you can’t claim a premium price. The good news is that Virgin Media is showing there is demand at a higher price - most of their on-net broadband base of 4m subscribers is on 10Mbps or above, with 800k on either 20 or 50-meg and 24k pre-registrations for 100Mbps even in advance of any promotional efforts.

Broadband alone was never going to be the key driver for a company where triple and increasingly quad-play customers are vital. That is why the launch of theirTiVo box, and the way it leverages VMED’s network advantage, is so exciting.

TiVo as a TV differentiator



We are enormously impressed by the TiVo box, and we have no doubt that this is a better product than either the Sky+ HD box or the forthcoming YouView box.

The User Interface looks great and vastly improves search and discovery. That is before the forthcoming tablet and mobile applications. Our favourite bit is that VMED now has total flexibility between nVOD based on their catch-up service, and user defined record+play through the PVR functionality - and it’s all done in a easy to understand way.

Of note here is that Berkett never seems to get carried away with the technology, but he rightly states the important differentiator between nVOD, OTT streaming and PVRs for on-demand viewing is about the content rights.

What sets the box apart is that there is an in-built modem with a dedicated 10-meg connection to the Internet on totally separate bandwidth to normal household access. No-one else will be able to match this fire power. There are rumours suggesting that the reason for the dedicated bandwidth is that there is content caching and p2p technology within the box which will further improve experience within cable network segments as penetration increases.

This follows a key principle of network theory - the cheapest and wisest place to put intelligence is at the edge of the network. It relegates BT’s Content Connect service to a second rate citizen before it is even launched.

That is before the all the other features and upstream benefits that the TiVo platform offers, especially in the area of audience measurement and advert insertion - which will become more critical as more TV consumption moves from linear to on-demand. In addition, the TiVo box has the ability to add applications, such as games, within a well-known flash-development environment.

The VMED plan that the TiVo box is a product for all their customers is eminently sensible and follows BSkyB’s simple-is-better philosophy. There is a 3-to-4 year timeframe to replace their current Liberate platform in all their homes. However, BSkyB definitely have a big head start with most of their c. 3m HD-boxes ready for the on-demand upgrade.

Curbing our enthusiasm, this is currently a strategic advantage, but it is one which is replicable over time. TiVo is a great partner, but whether they can keep up with the rate of industry innovation is another matter.

The coming convergence play



The third leg of the triple play is voice, with mobile being the quad - and this is the next area where VMED plan to improve. We don’t quite get their “mobile credits” play which seems to be a swapping of minutes between the home phone and mobiles - but perhaps the fog will lift when they actually launch.

Four things leap out at us, though:

  • VMED has lots of potential customers with only 14% of their homes taking mobile ,and there are multiple people in each home
  • they are putting their wallet where their mouth is - with a £40m handset subscriber acquisition investment over the next twelve months
  • on a statistically insignificant sample, the Virgin Media shop (near this analyst’s home in Leeds) always seems to have a lot of footfall, at least the equal of the MNO shops
  • VMED are capturing c. 15% of the UK contract gross adds which is exceptional performance for any MVNO in any country
Unbelievably, VMED is claiming that they can make the same Return on Capital as any MNO. We need to fire up the spreadsheet to analyse this further - this is staggering news and suggests the pricing of wholesale services by MNOs is too low. There were quite a few comments about WiFi as a differentiator for mobile data - whether in the home for offload and improved customer performance, or metro-WiFi with VMED putting equipment in their street cabinets. We remain to be convinced on this and see it more as a competitive realignment to the bundling of BT OpenZone with BT Home broadband.

Our current belief is that technically and user-experience wise WiFi is a poor second best to Femtocells - and the difference will only grow as the transition to 4G occurs.

We remain unconvinced on the VMED mobile play, but admit that they have made giant leaps from when they purchased Virgin Mobile.

Growing Virgin Media Business



We really couldn’t get too excited about this element of their strategy. For sure, they pass 95% of business, only currently have c. 5% market share of the B2B market, and their core network will have plenty of spare capacity during the day. But we don’t think selling big 1-gig pipes extremely cheaply is going to set the world on fire.

Firstly, most b2b customers want something else than big pipes. Secondly, BT, C&W or whoever can simply meet their price rather than losing customers - they also have sunk fibre connections to the buildings. And finally, we don’t think VMED has a sales distribution network anywhere near the size of the rest.

We’re sure that VMED has something else up their sleeves, or else the renewed push will come to nought. And we will see VMED reconsidering whether to sell the business or not.

Finances



Finances have always been the brake on this business since the collapse of the tech-bubble at the turn of the millennium, but they have really improved of late, and the disposal of the vmTV venture will only strengthen them further. It seems that they can both now invest for the future and give hard cash returns to the shareholders, which was unimaginable even 5 years ago.

We also sense that financial discipline is one of VMED’s strong points, and that they will avoid the temptation to go for any massive market capture exercise. They can probably deliver 5% growth in revenues and c. 20% growth in Free Cash Flow over the next few years without breaking into a sweat.

This is where we get worried. Our gut feel is they are wasting their opportunities - at a minimum they should be looking to match BskyB’s growth profile. BskyB and the rest can always outgun VMED with marketing spend - although we promise to scream if we hear the ridiculously misstated BskyB figures (including SAC) again.

Sooner or later, if VMED really have more compelling services, their customers will do their marketing for them. Advocacy is much more powerful than TV above-the-line branding. We wonder whether they really believe that is all the growth they can really capture, or if their lack of ambition is stock market expectations management.

Given this timidity, we don’t feel BskyB will suffer from a rejuvenated Virgin Media. But it certainly raises the bar for BT - there is nothing here to indicate anything but a continual slow drip of customers away from them. The endless hype of BT Infinity and YouView is looking more and more like the fable of the Emperor’s New Clothes.

Even worse is the situation for the other main home player, TalkTalk, where growth is grinding to a halt and the competitive situation is getting worse by the quarter. With VMED’s market capitalization of £5.5bn and TalkTalk’s of £1.5bn, I know where I would rather invest or, if I was a mobile operator wanting to have a home arm, buy.

(Ed. - more on these and other related topics in 2011 via our research and events programme).

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Telco 2.0 News Review


Telco 2.0 Top Stories

[Ed. Analysis from the 11th Telco 2.0 Executive Brainstorm will be be out later this week, plus don’t forget to pencil or key into your diaries the dates for the next brainstorms in London, San Fransisco and Singapore.]

First order of business today: FCC Chairman Julius Genachowski is planning to bring net neutrality regulations to a vote before Christmas. It looks like Genachowski is hoping to pass the regulations under Title I, rather than trying the politically critical step of declaring broadband a telecoms service under Title II. Expect heavy litigation, whatever happens.

The Level(3)-Comcast peering dispute raged on all week; here’s an excellent post from the Voxel blog. Perhaps the most surprising news was that it’s not really a peering dispute - Comcast is actually a L(3) transit customer. Getting your suppliers to pay you is quite a cheeky move! On the other hand, L(3), unlike Akamai, doesn’t have CDN assets forward-deployed into the eyeball networks, so arguably their success in winning a big chunk of the Netflix streaming bill was based on not much more than hope. It also turned out that Comcast is deliberately letting its transit link through Tata Communications run congested, so as to encourage content providers to peer directly and perhaps fork out as well.

To add a further twist to a story that already looks like a strand of DNA, it seems that Comcast rents a lot of dark fibre and buys a lot of long distance voice service from L(3), whatever is happening at the IP level. CDN guru Dan Rayburn, however, thinks the real problem is that Comcast really makes its money from being a TV station and it resents competition from Netflix. And they need to watch out: Microsoft may zap them on the other flank.

Just to add further complexity, Comcast now does significant wholesale business and is close to a 50/50 traffic ratio across the whole company (although obviously the access network is very downlink heavy). So they may want to be perceived as a “tier one carrier” and try to customerise their peers.

But a lot of that wholesale traffic will be travelling over L(3)’s fibre under IRU contracts… so isn’t it peering after all?

Whatever the definition, what this episode has proved so far is that the value chain is complex, and that the last mile access provider is in a strong position and in some cases is already getting paid for upstream content.

The UK’s regional ISPs cry foul about BT’s response to the new OFCOM requirement to provide passive infrastructure access (PIA), i.e. duct and pole access. Part of the problem is that if you use PIA, you’re not allowed to provide mobile backhaul or services to business customers. We do wonder if WLAN access points count as backhaul, in the light of Virgin Media’s plans. What if they’re like BT and FON, technically the property of the end users?

Culture Secretary Jeremy Hunt announced that the UK Government would kick in £830m towards further fibre deployment in the UK, specifically to install “digital hubs” in rural areas. Rather than obsolete Ethernet devices, this seems to mean that the money will subsidise BT’s deployment of FTTC into areas that wouldn’t otherwise get it. It also seems to be suggested that sub-loop unbundlers or local FTTH projects might do the rest.

However, on the other hand, Hunt also abandoned the commitment to deliver a 2Mbps minimum service on the grounds that “what people use the internet for is changing the whole time”. Well, there’s no sign of them using less bandwidth, is there? On the topic of exactly what would replace this goal, Hunt hid in a cloud of ink like an octopus - the new measure is described as follows:

“In order to determine what constitutes ‘the best’ network in Europe, we will adopt a scorecard which will focus on four headline indicators: speed, coverage, price and choice. These will be made up of a number of composite measures rather than a single factor such as headline download speed.”

On the key issue of the business rates on dark fibre (BT doesn’t need to pay them, everyone else does), it looks like nothing has changed. Apparently there’s going to be an OFCOM review of the small business market next year. This chap probably still won’t have broadband.

It’s traditional that incumbent telcos announce something whizzy immediately before a major regulatory announcement, so BT announced that a tiny number of premises close to the Martlesham Heath Research Centre would get gigabit FTTH.

Elsewhere, the iconic (to network engineers) 111 8th Avenue colocation facility in New York has been sold. The buyer is none other than Google, whose New York City offices are already in the building. In the 1990s, 111 8th was considered to be the topographic centre of the Internet, and it remained so for African and Latin American networks years later.

Verizon Wireless flipped the switch on their LTE networks in 38 US markets this week. Clearwire used the opportunity to mock their usage caps, in an effort to distract attention from the frantic financial rescue operation at the WiMAX operator. They announced an issue of $1.1bn in debt this week, as they ran desperately short of cash. Google and some of the other initial investors (see also Intel, and a number of major cable operators) have apparently turned down the option of acquiring more Clearwire stock.

Phone Scoop got a preview USB dongle, and reports back. In Verizon news that was entirely overshadowed, they’ve launched a femtocell product that provides a single converged phone number. It’s called Home Phone Connect, which is at least slightly better than Vodafone Access Gateway.

Google’s latest good idea: personalised YouTube channels. Also, how Google bends the Internet’s rules to squeeze out faster page loads.

Skype is furious about restrictions on UK mobile broadband. Odd really when you think 3UK was the first mobile op anywhere to partner with them. Speaking of 3UK, they like to run adverts with the results of a poll of users commissioned from YouGov, but this week a rival survey panned them.

Swedish Voice 2.0 player Freespee has announced its launch in the UK - it’s another product that provides a combination of special phone numbers and richer click-to-call from the Web in order to provide better business analytics and voice-web-CRM integration. It’s good to see some Voice 2.0 activity coming from Europe - Skype’s a bit lonely up there in Estonia. They also seem to have plans to integrate with Yellow Pages. Meanwhile, Google buys bargain-hunter community Groupon.

Worse e-commerce: a Russian spammer goes to jail. Worse e-commerce 2.0: a rogue insider in Sainsbury’s IT shop stole…£70,000 worth of loyalty points. That one’s more like “worse e-crime”, perhaps.

How do innovative Voice 2.0 companies handle their internal communication? With Skype, clearly. Dan York of Voxeo explains why - it’s the persistent group chats, apparently, that retain context between sessions.

Here’s HOWTO make a phone tree with Tropo and a bit of PHP. Here’s something close to an implementation of our Group SMS use case in a few lines of Ruby, again at the Tropo blog. And just for balance, here’s a Tropo app in Python.

Business Insider reckons it was a Thanksgiving for smartphones. It’s another data set based on somebody’s weird analytics, though, so the usual health warnings apply.

Motorola’s latest Android device, the Flipout, gets a great review from Computer Weekly. They aren’t keen on the screen but they do like the QWERTY pad that pivots out from under it at 90 degrees. They also tried the Milestone XT720, their iPhone 4/Desire HD/Nokia N8 fighter, and were disappointed. Meanwhile, one of their Droid 2 devices is reported to have exploded.

CW also tried out Acer’s new low-cost Android and found it to be cheap rather than low-cost.

RIM, meanwhile, have acquired Swedish UI/UX design consultancy The Astonishing Tribe. Yes, the company really was called that, and we hope RIM rebrands it something like RIM Stockholm Whiteboard Operations as soon as possible.

There’s a new book on mobile Python development with Symbian S60 out, which is surely of academic interest only as Nokia’s going to turn off the source repository very soon.

Nokia Developer News has an interesting interview about Orange Wednesdays and how the project became a Qt app for Nokia devices.

Mobile Money Transfer people may be delighted to know that the GSMA has prepared a database of regulatory information for your potential markets. Talk about light reading…speaking of which, High Scalability has fascinating details of Amazon Web Services’ new GPU-based cloud computing service, including links to an even better talk by Telco 2.0 ally Werner Vogels.

Meanwhile, Amazon is denying that it pulled cloud hosting of the Wikileaks diplomatic cables on a request from Senator Joe Lieberman’s office. Something similar seems to have happened to a visualisation website. Data Center Knowledge has a handy roundup. You’ve heard of ChatRoulette - now try Cablegate Roulette for random diplomatic cables.

Apple FaceTime has a fascinating bug - spurious, apparently random, video calls that occur around 2.30am.

US iPad users will soon be able to subscribe to the BBC iPlayer. Russian hackers try to infect cash machines. Watching the UK’s social trends. Hacking the XBox. Buying a satellite.

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December 3, 2010

M2M doomed to remain a cottage industry?


Is the machine-to-machine market doomed to remain a cottage industry dominated by overpriced SMS? Delegates at the ‘M2M 2.0’ session at the 11th Telco 2.0 Executive Brainstorm in London last month were quite clear what the problems, opportunities, and solutions are.

m2m-delegates.png
As this chart shows, the biggest barriers to greater adoption of M2M were the costs of switching between operators, the technical and commercial interfaces between operators and customers, and the lack of global solutions for seamless and economic roaming.


This problem set is no coincidence. In fact, the first and third problems are consequences of the second. Until the GSMA was persuaded to accept OTA SIM update last week, there was no practical way for an M2M customer to switch operator. The security assurance and competitive freedom the SIM provides to individuals was unavailable to machines. At our recent brainstorm, we learned that even in the relatively benign environment of the Netherlands, replacing 10,000 SIMs costs €1m. This represents a major obstacle to adoption, for both private and public sector customers.

OTA SIM update potentially removes the problem of SIM-swapping - but it may need regulatory action to ensure that the operators, who have the keys to the OTA gateways, play ball. It doesn’t solve the roaming issue, though, either nationally or internationally. National roaming is unusually important to M2M devices - a beer keg can have a phone number, but it can’t walk around until it gets 5 bars. Also, M2M customers may ship products anywhere and be unable to predict where they will end up until the last moment. They therefore require a global solution, and the ability to negotiate pricing certainty in advance.

We expect an increasing demand from customers, systems integrators, and the developers of M2M software, for MVNO status. That brings the right to issue their own numbers and SIM cards, and to negotiate their own wholesale capacity and roaming contracts. More likely, it would give them the right to delegate this to expert third parties. Operators need the capability to create such tailored M2M entities on-demand using their connectivity.

We should expect that the growing M2M software/Web services ecosystem will increasingly develop the features needed to manage the devices and their connectivity - which threatens operators’ traditional role as anything other than radio networks. To counter this, operators need to accept that a business model based on lock-in will collapse as soon as the customers defeat the lock, and either partner with or develop the best M2M service enablement technology going.

What do we mean by “service enablement”? M2M deployers need to identify, authenticate, provision, and maintain their device fleets. They need to update and rollback software on the devices. Increasingly, they will need to deploy processing logic into the “Internet of things” in order to render the system more robust, distributed, and autonomous. For us, this is a massive challenge in a field - device management - operators should make their own.

(For more Telco 2.0 analysis on M2M, please go to www.telco2research.com)

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December 1, 2010

Telco 2.0 Research/Event agendas H1 2011


STL Partners, the analyst firm behind the Telco 2.0 and Digital Entertainment 2.0 Initiatives, is expanding the scope of its research and events agendas over the next 6 months to cover key strategic topics in greater depth and help foster richer dialogue between telecoms and other industries who increasingly rely on their infrastructure.

As well as new analysis available via our reports and subscription research service, we will be running Executive Brainstorms using our ‘Mindshare’ interactive process in San Francisco (5-6 April), London (10-11 May) and Singapore (22-23 June). The draft agenda for these is described below. We’ll be fine tuning these in consultation with our community over the next few weeks. (Please mail us any thoughts here).

In the meantime, a key date for your diary is our FREE ‘virtual’ event - Best Practice Live! -on 2-3 February (registration opens this Friday).

Executive Brainstorms/Developer Forums - Draft Events agendas, H1 2011

Focus: Business Model Innovation in Communications, Media and Entertainment

The events incorporate: Telco 2.0, Digital Entertainment 2.0, Personal Data 2.0 and a new coverage of ‘Mobile Apps 2.0’.

Day One - New Market Opportunities at the intersection of Communications, Media and Entertainment

Investment Strategy & Growth Planning

  • Where’s the money?
  • Business Model Innovation
  • Investment prioritisation

Broadband Economics

  • Profitable mass adoption of mobile internet
  • Embedding connectivity into 3rd party products
  • Yield and Cost Management

Cloud Services

  • Prioritising opportunities in SME and Enterprise markets
  • Opportunities in CDNs and Federated/Interoperable Clouds
  • Monetising cloud services

Business Transformation (in Multi-Sided Markets)

  • Enhancing consumer experience
  • Dramatic cost reduction
  • Leveraging personal data

Day Two - Drill down on Digital Entertainment 2.0; Mobile Apps 2.0; Personal Data 2.0 (three parallel sessions)

1. Digital Entertainment 2.0

Clarifying the Vision

  • Multiplatform Services & Digital Lockers
  • New Broadcast Economics and the Effects of ‘On-Demand’
  • New Opportunities in Online Games

2. Mobile Apps 2.0

From Playing to Profiting

  • Best App Store strategies & biz models (operators, handset, internet)
  • Marketing, merchandising and monetising apps
  • Future industry requirements

3. Personal Data 2.0

From Privacy to Empowerment

  • Key roles in the Personal Information Economy
  • Cross-Platform Authentication Solutions
  • Next Steps to interoperable trust frameworks

Afternoon (Plenary): New Growth Opportunities at the intersection of Entertainment, Apps and Personal Data

Connected Homes, Things and People

  • Tablets, Connected TVs and TV Apps
  • Role of mobile devices and personal data
  • Opportunities in Augmented Reality

Out-Appling Apple

  • Apple’s strengths and weaknesses
  • True impact of the iPad
  • Fostering alternative ecosystems

Day Three - Workshops on ‘M2M 2.0’ and other topics

For more information please keep an eye on www.telco2.net/event or contact directly: tom.davies@stlpartners.com

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Telco 2.0 Strategy Report Out Now: Telco Strategy in the Cloud

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