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August 30, 2011

Steve Jobs reaction in full; HP frenzy; Samsung speculation; and ‘federated cloud’ - Telco 2.0 News Review

[Ed. In preparation for our next big report we’re after your input on Apple, Google, Facebook, Skype and Amazon here. We’ll send you the survey results and a deal on the report when it’s out if you do. Also, book up now for our next Brainstorms in New York (5th-6th October) and London (9th-10th November) run in collaboration with the World Economic Forum.]

It was the week Steve Jobs retired as Apple CEO. Ars Technica has three case studies on big leadership transitions in the tech industry, at Microsoft, Intel, and Sun Microsystems. That doesn’t sound too optimistic when you think about it, although they make the point that Sun’s fate had a great deal to do with the economic crisis and point out that Apple has so much cash on hand it’s relatively invulnerable to shocks.

The Guardian acclaims Jobs as the man who persuaded the public to pay for content on the Internet with iTunes and its constellation of iProducts and apps. Wired draws attention to Jobs’ role as “Chief Advocate for the Arts” at Apple and his concern for the integration of the arts and humanities into Apple’s design process.

Wired’s Tim Carmody profiles Jobs’ successor Tim Cook, veteran IBM and Compaq manager, architect of Apple’s global supply chain, and boss of the Macintosh division. We’ve noted before that Apple’s success in supply, manufacturing, and logistics is an underreported but very important factor. Cook is, in Apple-speak, the DRI for this part of the business - the Directly Responsible Individual. He also described himself as “the Attila the Hun of inventory”, which will certainly be a change from Steve Jobs.

Not so long ago, we quoted a comment from The Register as saying that Nokia hardware tended to be “90% of great” - for example, the N8 got superb video and radio capabilities but no keypad, the E7 got a great radio and a keypad but not the N8’s awesome camera. Carmody argues that the Intel-era Macintoshes could never have been accused of that, and points out that Cook was directly responsible for that as well.

His old job as COO will be filled by Jeff Williams, who as SVP of operations executed Cook’s plan to essentially corner the market for Flash storage in the run up to iPhone launch. Felix Salmon at Reuters points out that Cook is now probably the most powerful gay man in business.

Inveterate Apple bull Horace Dediu looks again at price/earnings ratios in the industry and concludes that Apple is less undervalued than he thought. He also has Q4 forecasts.

Last week, Samsung hired master Android hacker Cyanogen. This week, Apple repeated the trick by giving the creator of jailbreakme.com, the Web site that roots your iPhone, an internship. And Foxconn, assembler of the sea of iPhones, announced a loss.

While the Apple transition went off with typical, bevelled Apple neatness, up US 101 at Hewlett-Packard, things were nowhere near as stable. A top executive in their Personal Systems Group, the bit that makes lots and lots of PCs and surprisingly few mobile phones, promised that the division would remain the world’s biggest PC maker but said that HP was still going to spin it off. And they might even restart making TouchPads after the spin-off. Hardly clear. The Guardian points out that PSG is the lowest-margin line of business at HP.

Ah, the HP TouchPad. Last week, HP decided to let the retailers clear their shelves and warehouses of the devices by slashing prices down to as little as $99. The result was the biggest gadget grab since…well, when HP was handing out free ones at Mobile World Congress, really. A succession of e-commerce majors’ Web sites fell over under the pressure, with Misco UK ill-advisedly tweeting that it was about to make an announcement in the midst of the frenzy. Both BT and HP itself saw their e-shops trampled by the mob despite their cloud infrastructure - we await the diagnosis with interest.

Apparently Linksys has two internal pricing metrics, “justify to self” and “justify to wife”, which are set at $199 and $99 respectively. It says here, anyway, and that’s on The Register so it must be true. It’s clear that people will buy tablets if they’re cheap, but it’s also clear that they’d rather buy them from HP than from some no-name box shop. However, it’s also clear they’d much rather buy them from Apple if they can afford it.

As a result, is Amazon planning to aim its own tablet at that price point? Interestingly, women are much more likely to own an e-reader (well, a Kindle - how many people have any other?) than a tablet device, so perhaps what they’re planning might just be a development of the Kindle.

The impact was already showing up in measurements of advert serving. That suggests WebOS has a future, at least, with several million units released into the wild.

However, HP then reversed course on the TouchPad’s little brother, the Pre 3 smartphone, which is still very much at full price. No wonder the Wall St. Journal thinks HP has a plan to kill itself within one year.

Samsung, meanwhile, may be thinking of buying WebOS off HP, which would come with a nice wodge of patents accumulated by Palm over the years. They also pushed out some more handsets, three for Android and three for Bada. We’re regularly surprised by the number of people who ask us to configure e-mail on their Samsung Bada phones, so perhaps the rumour mongers have a point.

Samsung also launched its own IM network this week, matching Apple’s integrated IM/SMS client and RIM’s BlackBerry Messenger.

LG, meanwhile, has joined the negative margin club along with Sony Ericsson, Motorola, and Nokia. Is an exit on the cards? And did you know RIM has the industry’s second highest operating margin?

Nokia pushed out Symbian Belle this week. As with the rest of the zombie Symbian lineup, response was positive, despite the general sense of wondering quite what the point of it all was (although we did spot someone filming at least quasi-professionally at the Notting Hill carnival with an N8). Meanwhile, hackers got into a Nokia web site and stole a database of registered developers.

And a telco wades into the mobile phone patents fight: Verizon asks the government to get involved.

Google is thinking about integrating data from its + social network and the +1 like button into its search algorithm. Wired makes the obvious point that this could be very vulnerable to spam and manipulation in general.

The BBC’s project to crowdsource mobile coverage data has landed, providing an interactive map of coverage information collected from 44,600 volunteers’ Android phones. Compare the enthusiasm involved with the 20 million Brits who could benefit by changing operator but don’t because it’s too much hassle.

In broadband news, Aussie regulators objected to how Telstra intends to implement structural separation. Specifically, it’s going to take 10 years to complete the build-out of the National Broadband Network, and they’re concerned that Telstra’s plans allow it to hamper its competitors during the transition. ACCC chairman Rod Sims said the company could fix the issue easily.

In Greece, Vodafone.gr and Wind Hellas are looking at a merger. This would make Greece the only European country to have only two mobile operators, so it’s likely to be more than controversial. Wind Hellas used to be an Orascom company, but was seized by its bondholders after it failed to pay a debt. Presumably the new owners, who never set out to be a Greek telco, are looking to a sale to Vodafone as an exit.

Telco 2.0 alumnoid James Enck has an interesting post on the emerging ecosystem of local fibre in Britain. He argues that it’s vital as the government won’t pay, BT’s balance sheet can’t pay, and neither can Virgin Media.

OK, so you’ve got a decent broadband link and you’ve got that HP TouchPad you bought for pence. But can you watch Hulu TV on it? No. Here’s how - turns out that there’s an unofficial hack that will let you disbork the popular streaming service.

Meanwhile, Aussie IPTV startup Quickflix has hired the head of IPTV from Telstra. And Horace has some interesting thoughts about TV in general, and how it resists change. Are you one of those riotous BlackBerry kids? RIM wants you to share music via BBM - we can see those 40-something hipster A&R men in the record industry loving this idea, which means their bosses might not sue it just yet.

It’s Tuesday, so there must be a Cogent peering war on. This time, it’s somebody else who’s depeered the lovable IP transit price leader. France Telecom, specifically, won’t route MegaUpload traffic. FTel seems to be suggesting to its users that this is because so much stuff on MegaUpload is pirate content of one form or another, but saying to its peers that all the MegaUpload traffic has blown the ratio on the FTel-Cogent peering agreement.

And AT&T, VZW, and T-Mobile are going to put $100 million at the disposal of their mobile-payment joint venture ISIS.

An app store for Skype? Phil Wolff has a good post for Skype’s 8th birthday - we agree with the idea that Microsoft might rebrand its whole unified comms solution as Skype, and also that the voice-hacker coolth has moved on to either Twilio or Tropo, or one of those companies that start with a T and end in O. (Although this testimonial borders on the creepy.)

Speaking of them, they’re off to Burning Man as part of David Burgess’s annual OpenBTS field deployment. Burgess and friends spend their weekend on the playa as the world’s smallest GSM operator - apparently nobody told them they could go there and dance - but this year there’s a special project. They’re going to run their own instance of Tropo, so the temporary cellular network will be more technically advanced than quite a lot of telcos, and they’re also going to have interconnect for the first time. More detail here, and if you’re crazy enough to want to help out, hop onto the wiki.

We like the note that if you’re really a China Mobile user you probably shouldn’t try it. For all sorts of reasons.

What else? Google Chrome has implemented the API for audio processing in JavaScript. The history of resi VoIP. Freespee in the USA.

Up in the cloud, VMWare has some good ideas about cloud federation. Specifically, they are proposing that cloud providers who use their software could offer standardised levels of interoperability and use their software tools to migrate virtual machines between each other. This makes more sense than most talk about this subject, which tends to be as insubstantial and fluffy as…a cloud. Amazon Web Services, which also offers the ability to import whole VMs from some operating systems, points out that import and export of canned virtual machines is an important feature for the enterprise.

AWS also now offers a special region for US government customers, which is compliant with legal requirements for applications that are considered to be weapons. Meanwhile, here’s how Werner Vogels runs his own Web site. Ashburn, Virginia: the home town of data centres. Red Hat hits back at VMWare with its own open-source cloud. Microsoft waps Salesforce’s annual conference with a special offer on its cloud version of Dynamics CRM.

A fascinating talk on Google architecture. Monitoring the cloud. Verizon buys CloudSwitch.

The FCC issued advice for mobile users during Hurricane Irene, but pros will find this fascinating NANOG post on being a GSM operator in the Christchurch earthquake more useful. In-depth reporting on Libya’s rebel BSC engineers. Ouch: dodgy SSL certificates in the wild, again, used against Iranian dissidents.

Analysing Twitter traffic in the UK riots. Looks like rioters use BBM and the clean-up volunteers use Twitter.

Finally, IMS deployments are moving - specifically to replace Class 5 softswitches. Interestingly, Genband and Huawei (of course) are the market leaders.

Facebook shells out $40,000 for bug reports and is criticised over developer relations. MySociety.org launches FixMyTransport, like FixMyStreet but with transport. Microsoft takes a look at the Windows Explorer. IPv6 ready stickers? Computing’s original review of WinXP.

And ZDNet takes a look at the Raspberry Pi, an ultra-low cost ARM-based hacker board for kids invented by Eben Upton. Who happens to be an old school colleague of Telco 2.0…

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August 25, 2011

Google, Apple, Facebook, Microsoft/Skype, Amazon - ‘Disruptor’ impact survey

We’re running a major online research survey to gauge views across the industry on the relative threats and opportunities presented to telcos by Google, Apple, Facebook, Micorosoft/Skype, and Amazon. It is to support our new strategy report on strategies for co-opetition with these players to be published in H2 2011.

To say ‘thank you’ for your input, if you complete the survey (click here - it should take about 10 minutes), we’ll give you a discount of 20% on a personal single-user license or a 10% discount on a multi-user license for your organisation on this report, as well as sending you a copy of the survey results when complete.

The survey covers:

- opportunities and threats in voice, messaging and data;
- impact on new opportunity areas - advertising, authentication, appstores, content and cloud;
- and recent deals - Google/Motorola and Microsoft/Nokia/ Skype.

Many thanks, the Telco 2.0 Team.

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August 22, 2011

China Mobile’s awesome No.s; the ‘HP-ocalypse’; Apple turns bear? - Telco 2.0 News Review

[Ed. After last week’s coverage on Google/Motorola, have your say via our 2 minute survey here. Why did they do it, and who is it good/bad for? We’ll publish the results next week. Also, August is often a great time for diary maintenance, so why not pencil in our next Brainstorms in New York (5th-6th October) and London (9th-10th November) run in collaboration with the World Economic Forum.]

China Mobile reported that it has 622 million subscribers at the end of the quarter. To put that in context, that’s more than twice the population of the USA. 37.6 million of China Mobile’s customers are on 3G, and interestingly, despite the fact that it doesn’t offer the Apple iPhone, hasn’t got a contract with Apple, and has limited network coverage for such a device, it has 7.4 million subscribers with iPhones. Fortune reports that China Mobile has had several meetings with Steve Jobs and other Apple executives about the possibility of an iPhone that supports the TD-SCDMA network the Chinese government insisted China Mobile build.

In the meantime, you can get an iPhone 4-sized micro SIM from China Mobile but you’ll have to content yourself with EDGE data rates.

In the other direction, Huawei’s Android devices are coming to the UK as a brand in their own right, sold via Phones4U. The most basic will cost around £100. China Telecom is also on its way - they’re planning an MVNO aimed at around 500,000 Chinese in Britain.

This week had another Android casualty - WebOS, to say nothing of HP’s mobile hardware business, which is shutting down, and its vast PC-building empire, which is for sale. It’s becoming something of a cliché that when mobile vendors walk away from a platform, they announce that they aren’t walking away from it. The HP VP in charge, Stephen DeWitt, says that development is continuing and they intend to licence the software, although the question must be “to whom?” DeWitt, for his part, blames the hardware.

He may have a point if this story is genuine. The Next Web claims that HP developers hacked an iPad to get WebOS running on it, succeeded, and discovered that it ran about twice as fast on the iSlab as on their own product. It is further suggested that the hardware goes back to Palm before the merger, in which case it wouldn’t be surprising if a much more recent device was faster. TNW also suggests that there was a much newer, 7 inch screen WebOS device in the works.

DeWitt also told Businessweek that they would keep supporting it, but also that they might compensate people who bought TouchPads. They may have to start by compensating the people who tried to sell them, as the retailers are reported to be stuck with hundreds of thousands of the things.

The substantial Palm fanbase is in mourning - note the excellent point about real unified messaging. Reaction has centred around deep scepticism about CEO Leo Apotheker’s judgment. Having killed the mobile business, put WebOS on death row, and the PC business on the auction block, they proceeded to announce a snap acquisition - taking out British software house Autonomy for £7bn, a mere 64% premium to its share price.

HP has borrowed the money from Barclays. Additional analysis.

Elsewhere, dark economic news - if there are two mobile vendors who are towering above the chaos, they are Apple in the Apple camp and HTC in the Android camp (well, they make some Windows handsets too). South Korean media is reporting that both of them are cutting back on their orders for semiconductors in Asia, implying that even with the next wave of hero phones timed for autumn, they’re expecting a plunge in demand pretty soon.

Best move of the week, though, may have been one of the cheapest: Samsung has recruited the hacker behind CyanogenMod, the main unofficial Android project, which permits all sorts of useful enhancements that the manufacturers don’t support. His mission there is to “make Android more awesome”.

And Symbian Anna has just gone generally-available, so users of various Nokia devices can upgrade. Comments say the UI is as good as anything in the droidosphere. And this is a good point:

There’s also Nokia’s habit of doing 90% of a great product in their hardware. The N8 is short of GPU RAM (20Mbytes), and if it had been given a bigger battery would be untouchable for battery-life. Small penny-pinching, and trying to launch comparable and competing devices in each segment, left Nokia with a lot of “nearly great” hardware.

The worst example was the N97, which was short of all kinds of memory. For the sake of saving a couple of euro on the BOM, it went from being the most advanced smartphone on the market to a complete joke.

Reviews of the new BlackBerries are filtering through, and they are positive. ZDNet tests three of them and likes them a lot. Computing tests the 9900 and likes it, but complains about the battery.

RIM also updated its WebWorks widget SDK. Back at MWC, RIM execs were keen to say that they had major plans for the BlackBerry Messenger service and wanted to use it to share video, music, files, and perhaps voice. They didn’t mention setting London on fire though. The Wall Street Journal reports that a BBM music-sharing app is coming, with some sort of revenue sharing deal with the labels.

Verizon Wireless announced more 4G coverage this week, which Connected Planet reckons means they’re getting close to the targets they announced at launch. It will be interesting to see whether they say that’s enough for the time being, like the fixed-line half of Verizon did with FiOS, or whether they keep rolling. CP points out that T-Mobile’s dual carrier HSPA is still ahead on coverage if marginally behind on speed.

There wasn’t much deployment of anything at VZ for the last two weeks, as 45,000 members of the Communication Workers of America and the IBEU went on strike and held a mass demonstration at the CEO’s house. They were angry about the company’s decision to re-open as many as 100 issues in this year’s contract negotiations. Over the weekend, the parties to the dispute agreed to return to negotiations and keep the existing contract for the time being.

Meanwhile, rivals AT&T accidentally released a large quantity of documents regarding their merger with T-Mobile. The leak is extremely embarrassing, as it contains an internal estimate of the cost of building out LTE from 80% population coverage to 97% that puts the number at $3.8bn. AT&T has given the expansion of broadband coverage as a reason why they should be allowed to take out one of the four national mobile carriers, but they’re proposing to spend $39bn on the merger. We’ve made the point in the past that it cost VZW $3bn, via Alcatel-Lucent, to build out their first wave of LTE.

AT&T has “pre-launched” some LTE devices, which (as Connected Planet) pointed out, didn’t give them very long to build a whole network if as they said they were going to launch before autumn. However, an AT&T spokesman said, the official beginning of autumn is the equinox, the 23rd of September. Clearly.

Clearwire, meanwhile, is the subject of more corporate action this week. Sprint bought it and reversed their WiMAX project into it, then they sold chunks to the cable operators and Google, then it looked like going bust and Sprint fell out with it, then they switched to LTE, and now Sprint is considering buying it back, feeling the need to control their own 4G system.

However, the combined challenges of the build-out and swapping over the equipment still need lots of money, so Sprint and its financial advisers are trying to come up with a plan that keeps the cablecos on board, maintains the possibility of access to their content, brings Clearwire in house, but also gets the cable guys to fork out. A swap of Sprint shares for Clearwire ones is a possibility. Meanwhile, Phone Scoop reviews their latest WiMAX handset.

French ISPs are thinking about tiered pricing.

Vodafone makes more money from M-PESA than it does from its stake in Safaricom. It sounds like a rah-rah GSM development story, but it’s actually less chirpy than that. Connected Planet explains - the software is proprietary, and is licensed by a subsidiary of the Vodafone mother ship to the operators who use it, including the ones within “the Vodafone family”. In essence, it’s up to Vodafone whether they choose to take their profits as dividends from the OpCo or as software license fees, a decision probably influenced by tax considerations as much as anything else. For the record, Safaricom has seen $130m in revenue from M-PESA this year, while Vodafone Group has collected $15.6m of that, out of a total return of $21m.

Germany is getting an intercarrier mobile payments platform, as DTAG, Telefonica, and Vodafone agree to start one up without getting the banks involved. MPass’s technology is being used. Vodafone is also offering carrier billing for Android apps in the UK and Germany.

Mobile ad company inMobi expects Android to be the biggest platform by ad serving fairly soon, although so far Nokia is still the biggest on 39%.

On Wednesday, bids are due for Hulu, with estimates ranging between $500 million and $2bn. Dan Rayburn reports that you can now get live NFL streaming on your PlayStation 3. Here’s another social-TV startup. And here’s advice on media-terminal PCs. A line of set-top boxes for the UK’s Freeview HD service is going to get integrated with the BBC iPlayer when the next software update ships.

But you might be better advised to give up TV entirely, as a study suggests that every hour of it you watch after the age of 25 shortens your life by 21 minutes. The actual paper is here, in the British Medical Journal no less:

Compared with persons who watch no TV, those who spend a lifetime average of 6 h/day watching TV can expect to live 4.8 years (95% UI: 11 days to 10.4 years) less. On average, every single hour of TV viewed after the age of 25 reduces the viewer’s life expectancy by 21.8 (95% UI: 0.3-44.7) min. This study is limited by the low precision with which the relationship between TV viewing time and mortality is currently known.

Note that those are some very wide confidence intervals indeed.

At the other end of the tube, High Scalability links to a fantastic white paper on how Akamai works. We really can’t overstate how fascinating this is, and we’ll be writing more about it this week. Until then, go, read, and instantly catapult yourself into the top 1% of the information distribution.

Elsewhere, it looks like Level(3) and Limelight Networks may be about to merge their CDN assets. LLNW has been interested in doing more media-services stuff and less packet pushing for a while.

Dan Rayburn has a good article on mobile CDNs and mobile content acceleration, and why this should be a business priority. We agree - see our research on Mobile CDNs and video distribution here. From there, we reach a rather good piece on the same topic from an actual CDN, Jetstream - they reckon you could offload 50 to 60% of your video traffic.

One good thing about CDNs is that whatever they do to speed up traffic, they do it with the content provider’s prior agreement. So things like this don’t happen. British democracy hackers MySociety have noticed that some UK mobile operators - well, T-Mobile UK - break one of their web sites. It seems that there’s a proxy somewhere in there that is trying to make them smaller en route, by stripping out anything that looks like a comment from the JavaScript in them.

Unfortunately, there are places in the very popular jQuery library where a substring like this: \* appears in another string. If it wasn’t in another string, it would be a comment marker. But T-Mobile UK’s proxy isn’t smart enough to make the distinction, so it breaks anything that uses jQuery. Whoops.

Interestingly, this also breaks a well-known hack for faster JavaScript pages Google invented - all the JavaScript on a page gets evaluated by the browser virtual machine when the page loads and then waits in memory for a call. This takes time. So why not pack your functions, having gzip-compressed the code, in comments? Then you can grab the requisite comment, unzip it, and load it only as required. But if T-Mobile’s proxy saw it, it would cut the whole thing out and render your app hopelessly broken.

If TV might KILL you, and your mobile operator is borking your code, how about some music?

Google has a music blog with subsidised downloads, apparently to support the Google Music lockers. They’re edging into content again. Meanwhile, if you want to show off your unlistenable and pretentious tastes in music, Google can help you with that. Wired offers detailed instructions on using Google + to play music from YouTube to a group of your friends (or enemies).

Sony Ericsson’s latest fancy Android phone is out, and it’s interesting. In general, it’s a high spec ‘droid with a fancy white case and a generally pretty easily identified “SE Walkman phone” aesthetic. But the “Live from Walkman” also has a button you can push to “enhance the music output from the speakers at high levels”. This is going to annoy people. Usually the right people. And of course there’s all sorts of Facebook integration so you can tell your friends what a little blighter you’ve been.

But there’s also out-of-the-box Skype integration, with a dedicated front-facing video camera, so your friends can hear and see you being a little blighter. We predict a Christmas hit. It’s also a telling moment - a front-facing cam that’s dedicated to an over-the-top video calling service…

Skype, for its part, has bought group-SMS firm GroupMe. Phil Wolff discusses, and looks at some other startups. Hook a SIP ATA to Google Voice without running Asterisk.

The future of chips, and ARM. Jamming police radio with a kids’ instant messenger. Mark Shuttleworth interviewed on the future of Ubuntu, Apple, and Microsoft. O2 Priority Moments. Meet the Windows 8 developers. Hacking insulin pumps. DIAMETER routing in the IMS: you know you want it.

The final battle for Libya’s ISP. (We can add that reports were circulating last night that the rebels had seized the LTT headquarters as one of their first targets, having earlier injected a bulk SMS into the network calling for a mass uprising.)

And wasting time on the Internet increases your productivity.

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August 18, 2011

Google / Motorola: what’s the Industry reaction?

Here’s our round up of initial industry opinion on Google’s $12.5bn acquisition of Motorola Mobility. The main themes are: ‘It’s all about the patents’; ‘Impact on Android’; ‘Impact on other vendors’; ‘Google as Apple’; ‘Beyond Android’; and ‘Doom!’ - all outlined below.

We’d like your views too - there’s a 2 minute survey here - we’ll publish the headline results in the next couple of weeks (and send you a copy of the results if you want). We’ll also use this as input to our further in-depth analysis for ‘Apple, Google, Facebook, Amazon, Skype - Disruptors and Co-opetition Strategies’, the Strategy Report that we’re publishing next month (please email contact@telco2.net for more on this.

It’s All About the Patents

If there was a consensus of opinion, it was that Google really wanted Motorola’s intellectual property. Moto, after all, is the company that made the very first cellular phone call back in 1973, ringing up the then director of Bell Labs to needle him about it. They also developed North America’s first line of cell phones (StarTAC) and launched the first smartphone, as well as making major contributions to iDEN, CDMA, GSM, UMTS, and WiMAX networks.


Larry Page’s official statement on the Google corporate blog certainly supports this view:

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to “protect competition and innovation in the open source software community” and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.

He’s talking about the constant rows over Android intellectual property, although it’s very likely that the ones with Oracle about its home-brew Java virtual machine are more serious, and of course Motorola won’t help with that. (contd.)

The point is made over here that Google is getting 17,000 patents, although as a IPR expert points out, their existence didn’t stop MS and others suing Motorola. Much of Moto’s record of innovation in this field goes back to the 2G era, and some of the patents will likely expire soon.

ZDNet’s Steven Vaughan-Nichols notes that many well-informed voices doubt that the patents everyone is arguing over have much real technical content, and describes the system as “broken”. Instead, they are basically bargaining chips. Vaughan-Nicols argues that Google has just added a lot more chips, and notes that Google has also recently acquired significant numbers of patents covering database technologies from IBM. If the Motorola assets are needed to hedge against Apple and Microsoft, the IBM ones may be there to deal with Oracle.

The Register’s Andrew Orlowski is also sceptical of the real financial value of the patents, although he thinks that the rest of the industry is as deluded about this as Google. He makes the good point that the really critical wireless IPR is now either pooled, like GSM and UMTS, or open-standard, like WiMAX and WLAN, and that Nokia’s settlement with Apple proved to be disappointing in cash terms.

Also, Motorola outsourced much of its device UI and operating system work to Symbian, and who knows where those patents have ended up?

RCR Wireless points out that each single patent is valued at over $500,000.

The New York Times Dealbook blog reminds us, however, that Google has been emphasising mobile for some years as a central pillar of their strategy. Is Google actually trying to create a huge integrated mobile business, with Moto’s silicon, device design, and manufacturing assets, Android, and Google’s online services? And Moto’s network of relationships deep into the telcos?

Impact on the Android Ecosystem

Is Android becoming Symbian 2.0? Florian Müller points out that the ecosystem will be very different now that one of the Android vendors is the “official” vendor, directly linked to the platform’s makers, as well a competitor to the other vendors.

Horace Dediu draws the parallel with the history of Symbian, pointing out that the other partners in the original Symbian JV became progressively less interested and suspected that the whole thing was run in the interests of Nokia, while Nokia spent huge amounts of time managing the relationship. Will the Open Handset Alliance go the same way?

(Of course, Motorola was a founder member of Symbian.)

Another parallel might be Microsoft’s acquisition of Danger, not a triumph, even if the interpretation is more than a bit of a stretch.

A typically detailed story from Bloomberg points out that there is potential conflict here, and that some vendors may fear they will become “second-class citizens”. They also make the very good point that so far, Google has pursued a policy of having a preferred partner for each new Android release, which gets to see the code first. This role has been rotated between the vendors so far, but for how much longer?

Wired notes that Google has committed itself to keeping the platform open-source and free, but also uses this odd analogy:

Apple and Microsoft suing Motorola is like the United States and France separately fighting the Viet Cong. Google joining the party is like the Chinese army pouring over the Vietnamese border.

Not only did the Viet Cong beat both the French and the United States, the Chinese army poured over the Vietnamese border to attack the Vietnamese, not to help them fight the Americans. And the Vietnamese won, or at least came away with a score-draw.

FierceWireless notes that Google has agreed to a $2.5bn break clause, suggesting some concern on Moto’s part about the deal going through.

The Register’s Rik Myslewski argues that there is a trend towards re-integration of operating systems and hardware, noting that Apple, HP, and RIM have all gone this way and only Google and Microsoft are left. And both of those have taken a big step towards closer integration recently. You could also point out that, in the hoary old world of big enterprise systems, IBM and Oracle do a lot of business that way as well, as does the enterprise side of HP. Cisco and Juniper’s routers come with their own special purpose OS. It’s the open-source world that likes to keep them separate.

Impact on Other Vendors

Fierce Wireless argues that the biggest loser is Microsoft, which can expect to be shut out of one of the biggest mobile vendors and also to see a much stronger defence against its patents squeeze.

ZDNet’s Larry Dignan thinks the deal may be positive for RIM, either by stoking interest in a merger (perhaps with Microsoft or HP), or else by disrupting LG, HTC, and Samsung as major Android-based competitors.

GigaOM notes that Microsoft considered buying Motorola itself, and that Microsoft has been making eyes at the Android vendors again. It’s unlikely that Google would have paid quite so much without Microsoft’s interest.

ReadWriteWeb argues that HP may be moved to licence, or even open-source, WebOS, especially if the Android vendors fall out with Google and Motorola.

In Asia, the deal was greeted with optimism, on the basis that Samsung and other Android vendors would benefit from patent protection and that future Google-Motorola devices would mean good business for Foxconn and Samsung’s semiconductor division.

However, Samsung CEO Lee Kun-hee brought his long spoon to sup with Google:

“We must pay attention to the fact that IT power is moving away from hardware companies such as Samsung to software companies. [The company] must strengthen the competitiveness of its information technology, secure more human resources and also more actively seek mergers and acquisitions.”

Horace Dediu, for his part, thinks Google should have bought HTC.

The Android vendors’ carefully policed PR response to the news was widely remarked on. Perhaps this had something to do with it?

Alternative Strategy: Google as Apple

A lot of the patent hawks expect Google to sell off Motorola Mobility’s industrial assets and just keep the patents, and perhaps some of the design teams. An alternative view, however, is the one we briefly touched on above - that Google thinks that it’s increasingly necessary to integrate hardware design and software, that there is real value in the hardware, and that they need their own supply chain and production. Like Apple, or these days, Microsoft.


(Motorola’s Jaguarinha factory in Brazil - source)

ZDNet’s Robin Harris has some useful context here, pointing out that Apple is very much an industrial company and much of its value comes from its command of hardware design, manufacturing, and the supply chain. How many other articles on Apple do you see that count up the available CNC machines for titanium alloy fabrication in Foxconn’s subcontractor network? As we pointed out over the Google Chromebook, even if Apple hardware is pricy up front, it’s value for money in terms of TCO over the full depreciation period.

Steven Crowley leads off, tweeting curtly that “if you want patents, you buy InterDigital; if you want to make phones you buy Motorola”. Andrew Ross Sorkin agrees at Dealbook, pointing out that InterDigital has a comparably huge IPR portfolio at a much more reasonable price.

The Register’s Matt Asay argues that Google won’t hold onto the hardware business, but does intend the deal as a strategic move against Apple, whose defence relies on causing trouble about patents.

Eric Gonzalez argues that Google wants to make the hardware into a selling point, and that buying Motorola provides a better way of enforcing high standards on the other vendors than any amount of ecosystem management. Simply, Moto/Google will do a hero device that the others will have to match in order to compete. ReadWriteWeb concurs, arguing that there is no anti-trust objection to making a better phone.

Forbes’s Peter Cohan points out that mobile vendors are very much defined by their channels to market - both the upstream supply chain and the downstream marketing channel through the network operators and resellers. Google has struggled with its own efforts to sell hardware precisely because it lacks a channel to market that compares with the ones through the carriers. Motorola, of course, is as closely integrated into the carriers as any company is - it’s been selling telecoms equipment for as long as there have been telephones.

He also quotes Tavis McCourt of Morgan Keegan Equity Research as saying that Google might “take Android proprietary”, which they could only do by replacing the entire OS kernel, as the Linux core of Android is of course covered by the General Public Licence. (This would also have major consequences for the developer world.)

Horace Dediu almost joins the hardware team, arguing that Google made a strategic mistake in assuming that it didn’t need to own a chunk of hardware in order to keep control of Android, and that the deal is intended to keep Google relevant within it and see off a “Forkdroid” scenario in which other vendors or carriers trim out and replace the key ancillary software and services that Google’s patents and terms of service control.

Ars Technica’s Anders Bylund looks back to January 2010, when Motorola was in the doldrums and Google had yet to launch the ill-fated Nexus One adventure, and concludes that Google’s interests would have been better served by skipping the Nexus and buying Motorola at fire-sale prices.

Beyond Android

Motorola Mobility doesn’t just make phones. Oddly enough, the (huge) cable TV division ended up in the Mobility side of the company when it spun out. This makes more sense if you think of a modern set-top box/media centre/PVR as being a small, usually Linux-based computer with similar capabilities to a low-end tablet, just in an uglier box and including a DOCSIS modem and a SCART socket. Moto Video Solutions makes up no less than a third of Mobility’s revenues.

Benedict Evans points out that the cable-TV industry may not be best pleased that Google now makes the set-top boxes they pay for. Of course, the cableguys have their own standardisation system, CableLabs, but obviously Google is going to have a lot of input into that system now. What does this mean for Google TV?

Colin Dixon of TDG points out that there’s a risk of a major culture clash between the MSOs, the cable engineers, and the Googlers, and that therefore we shouldn’t be too forward in expecting the Googlisation of cable.

Reuters rings round its cable contacts and reports that they are distinctly sceptical.

Of course, there’s an argument that Google TV could benefit from shifting some of its heavy video needs onto broadcast cable, like Virgin Media did with the BBC iPlayer.

GigaOM is more enthusiastic, pointing to the fact that Motorola is the leader in hybrid broadband/broadcast STB technology. If anything, Wired is more enthusiastic still. Slow down on the caffeine over there on the West Coast!

Google’s WebM video protocol, meanwhile, may interact problematically with the MPEG standards used by the broadcasters. However, this isn’t likely to change much as a result of the deal - Motorola isn’t actually in the MPEG-LA patents pool.

ZDNet’s Larry Dignan notes that Motorola has a sizable enterprise business and Google wants to have one. Informa T&M’s Shailendra Pandey thinks it’s great news for NFC, as Google is keen and can now order Motorola to integrate it in about a third of Android unit shipments.


Henry Blodget of Business Insider doesn’t like the deal one bit. However, it’s worth remembering that Google might find it easier to integrate the bits of Motorola responsible for their Android devices - this division was run as a Californian skunk works kept well away from headquarters in Schaumburg.

Also, Google does make hardware - it makes its own servers and data-centre kit more broadly. And given Google’s huge requirements for these equipment classes, they must be doing it on an industrial scale.

Finally, don’t forget to give us your views via the 2 minute survey here - we’ll publish the headline results in the next couple of weeks (and send you a copy of the results if you want).

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August 17, 2011

Digital Entertainment 2.0 Update: Telcos vs. Apple, YouTube, Cable; Telco CDNs; social media meets TV

Four short online videos below on: key trends in digital entertainment, opportunities for telcos and the competitive state of the connected digital entertainment industry; a presentation by BT on their Content Connect strategy; a demonstration of Virgin Media’s TiVo video service; and an industry insider’s perspective on ‘Augmented TV’ - the innovative frontier between social media and traditional TV.

NB You’ll need to register to view these videos, which are part of our recent ‘Best Practice Live! global online event. You can also join us in person to discuss more on M-Commerce 2.0 strategies in New York (5th-6th October) and London (8th-9th December). Or, to book a place at our Digital Entertainment 2.0 workshop on New Business Models for the Home Video Entertainment market in Europe - Lessons from America at our London Executive Brainstorm on 8th November, please email contact@telco2.net or call +44 (0) 207 247 5003.

Digital Entertainment 2.0: Telcos vs. Apple, YouTube, Cable et al

Thumbnail image for Aug 16 Keith McMahon BPL Still image.pngIn this video, Telco 2.0’s Keith McMahon describes how consumer behaviour is changing, tablets are emerging as a ‘fourth screen’, and internet, cable and other major retail players are evolving digital entertainment strategies including ‘digital lockers’ that store consumer content in the cloud. Who will be the winners and losers, and where does this leave telcos? (Register and view here)

Content Delivery: BT Wholesale’s Strategy

Aug 16 Simon Orme BPL Still image.png

Simon Orme, Strategy Director Content Services, BT Wholesale, describes current market trends and how BT has evolved its wholesale strategy and division to serve new demands from the media industry, including media and broadcast, online and TV voting, and Content Connect delivering ‘next generation content delivery’. (Register and view here)

Next Generation TV: Virgin Media’s TiVo Service

Thumbnail image for Aug 16 Alex Green BPL Still image.pngThe UK’s Virgin Media claim to have ‘re-invented TV’ with their TiVo offering which offers personalised, targeted content recommendations and highly programmable storage. A short demo video and introduction by Virgin’s Alex Green. (Register and view here)

Augmented TV Opportunity: disruption, new devices and social media

Thumbnail image for Aug 16 Anthony Rose BPL Still image.pngHere Anthony Rose, co-founder and CTO of tBone, and former leading light in the development of the iPlayer and music sharing service Kazaa, describes how social media and new devices will transform TV into a seamless social experience. What are the opportunities and who are the new players? (Register and view here)

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August 15, 2011

Google buys Motorola, fights FTC; cheap iPhone rumoured, Apple surges and fights everyone in patent wars - Telco 2.0 News Review

[Ed. Don’t forget to check out our latest agenda ‘M-Commerce 2.0: How Personal Data will Revolutionize Customer Engagement’, including more details of our next Brainstorms in New York (5th-6th October) and London (9th-10th November) run in collaboration with the World Economic Forum.]

Google is now a huge phone vendor - it just bought Moto Mobility for $12.5bn. We’ll be analysing this in greater detail as part of our forthcoming research report on ‘Apple, Google, Facebook, Skype - the Disruptors, and Strategies for Co-opetition’ (email contact@telco2.net for more details).

Meanwhile, Motorola Mobility chief Sanjay Jha said that the company would consider doing a Windows Phone if they could get the same terms as Nokia from Microsoft. Somehow, we suspect you’ll be waiting a while for a Moto WP7 handset.

The Wall Street Journal has more detail about the US Federal Trade Commission’s investigation into Google. It seems as if the case, if any, is likely to centre on the Skyhook Wireless affair and Android, although that’s not the only issue. The question of content reviews on other web sites may remind people with long memories of when AFP threatened to sue Google to stop them indexing their news stories - for some odd reason it wasn’t enough just to set robots.txt to tell the Googlebot to go away.

Apple has taken out an injunction to stop Samsung selling Galaxy Tabs in Europe, except for the Netherlands. However, they haven’t technically claimed a patent violation, probably because European patent law doesn’t like software patents. They’re also pursuing Motorola over the Xoom. We shall see how contentful the patent actually is - an occasional series in the News Review has been patent rows that seem to cover features that are part of the core GSM specification, Internet RFCs from the early 1980s, or that were actual Psion products in the 1990s.

Horace Dediu has this month’s smartphone scoreboard. Everyone except for Apple and the ‘droids has been squeezed into negative territory - although there is just a glimmer of hope for Windows Phone 7 in May-June 2011. Android is steadily eating into the non-smartphone base and squeezing RIM, while Apple has hit a hard deck at 25% of the market.

He’s got more data here - it’s Horace, he’s always got more data - which shows rather well that Apple has surged ahead on every metric you can think of, while Sony Ericsson has been one of the biggest losers in terms of hard cash. Also, in the comments, the secret is out! The mystery behind those beautiful charts turns out to be a Macintosh-only visualisation app called Numbers, available from the App Store for a snip at $19.99.

Google, meanwhile intervened in Lodsys’s lawsuit against Angry Birds developers Rovio, arguing that the patent (which claims to cover any form of in-app payment) is invalid.

Nokia has announced the end of Symbian in North America, a couple of weeks after announcing a gaggle of new devices with Symbian Anna/Belle. Staying consistent, then. Apparently, in future, the Windows Phones will all be sold via carrier partners, which is only sensible. Also, although the N9 was launched in London, it won’t be for sale in the UK.

Want a phone with “just Android”, no sugar on top? Here’s a list.

The latest lot of Apple rumours are concentrating on a 5th September launch for the iPhone 5 and perhaps a concurrent launch for a new low-cost iPhone. This makes a certain amount of sense - think of those market share numbers and the apparent hard limit at 25% - but the rest of the rumour doesn’t stick so well. Part of the justification for the iCheap is that it’s meant to be an export version for China and India, so why does anyone think that it might be an “iCloud Phone” if it’s meant to go to places where always-on mobile broadband is not very likely, power supply shaky, and network latency high?

However, we did notice that Orange UK is offering the old iPhone 3GS free with a £25/month subscription, which sounds a lot like clearing the shelves.

The only cheaper way to get an iPhone is probably to steal one, which brings us to the third big mobile platform, RIM. This week saw a wave of riots sweep across British cities, supposedly coordinated by angry teens on BlackBerry Messenger. It was either the worst or the best way to mark the launch of five new BBs running the new QNX OS, depending on which of RIM’s split personalities you prefer. The buttoned-up, enterprise-focused provider of e-mail for suits, with really good device management features? Or the firm that made its tablet product a closet games console and delighted the world’s teenagers with a messaging network that’s like Facebook…except you can exclude people from it ‘cos it’s private! No wonder they have two CEOs.

At least in the UK, another Christmas No.1 is probably in the bag. TechCrunch Europe has a detailed report, while on the other hand, RIM signed up a new customer for hosted BIS…Saudi Telecom.

British Prime Minister David Cameron, usually something of an enthusiast for revolutionaries on Twitter and all that jazz, speculated openly about the possibility of turning off “social networks”. But this paper from scholars at ParisTech Telecom suggests that they’ll only be angrier if you deny them their Facebook fix.

In Libya, meanwhile, Renesys reckons that the problem isn’t that the government will turn off the interwebs, but rather just that they’re having trouble keeping the backup generators going.

Mobile is now the world’s biggest semiconductor market (although you might have wondered how it wasn’t before, given the numbers of base stations). Relatedly, Windows XP is finally on the way out, but it seems to be more due to people shifting to smartphones and tablets for their basic computing and to Apple Macs for heavier tasks than to people upgrading Windows.

Further, is Apple now the productivity leader in the PC market, like Dell used to be but with prettier computers? As if to bear it out, they’re launching an iMac under $1,000.

ZDNet’s Mobile Gadgeteer is disappointed with the HP TouchPad, and it turns out that the unofficial open-source community version of WebOS makes it perform like an iPad 2. The point is made that HP should perhaps open-source the whole thing if it wants people to run the unofficial version.

Bad day at Microsoft: first of all, Bing ads are caught serving up malware. Then, what a Patch Tuesday! This month’s crop includes a number of beauties - we especially like the one where you can use a recursive DNS server to murder any Winodws-based DNS server via a crafted NAPTR query (that’s the one that maps phone numbers and SIP IDs), although the latest Internet Explorer drive-by download exploit is pretty good too, and so is the blue-screen-of-death triggered by a sequence of ping messages.

No wonder they’re paying hackers for bugs.

Who’s got the cloud integrated in their desktop operating system? Ubuntu Linux, that’s who!

Out on the Web, LinkedIn reported strong results with revenue of $121m. For our purposes, the interesting bit is that something over two-thirds of their money comes from upstream customers - two-sidedness, how are ya.

Google’s Hotel Finder is sharply criticised by FastCo Design. But it can’t be as bad as MySpace, which turns out to have been carried on NewsCorp’s books for $300 million while they were selling it for $100 million.

Starting later this year, there’s going to be a new threat to NewsCorp in its back garden. The National Broadband Network will be providing end-to-end multicast as a packaged service. Content providers pay A$5/month for each 10Mbps stream into the multicast mesh, plus A$250/month per 100Mbps interconnect at the local POP. Has it suddenly got amazingly easy to be a national TV station?

Meanwhile, Telco 2.0 speaker and former YouView CTO Anthony Rose has given his social-TV startup a brand.

Apple’s streaming-music service seems to have been delayed, due to the problematic negotiations with the content owners. It’s enough to make you give up and go be a telco…which is what Virgin Media just did, selling their remaining stake in UKTV in order to concentrate on their network.

Someone else concentrating on his network is the founder of Megaupload, profiled here by CNET.

TalkTalk’s official blog announced some interesting numbers on network usage, and makes the point that the PlayStation Network coming back to life made it a very challenging day for their infrastructure. That had consequences elsewhere - Dan “Half Man, Half CDN” Rayburn reports that Limelight Netwokrs missed its earnings target primarily because of the lost earnings due to the PSN, a major customer, being down. Also, Akamai had a significant outage.

Rayburn also notes that Sony is cutting prices of its Internet TVs.

Brough Turner has a fascinating post on YouTube’s flow-control mechanism and its interaction with DSL networks’ buffers. Fans of Jim Gettys’ Bufferbloat Project will of course note that the answer might actually be less buffering.

We’ve mentioned Cradlepoint’s line of branch-office routers with cellular connectivity before, but now they’re official partners of VZW. Details here, but the take-home message is that VZW is pushing them out to make their LTE network a preferred option for out-of-band management networks and back-up connectivity. Of course, if you really mean it, there’s always this VZ product.

Oh dear, hackers have noticed M2M. And Cisco announced results above target.

In the exciting world of Voice 2.0, Google moved the ball down the field on standards and technology this week, announced a pure-web API for working with audio in Google Chrome. As there’s a W3C working group on this, we should probably expect that it will make its way into HTML5 at some point. Google also expanded the reach of Google Talk inside GMail.

Tips for working efficiently with the new Skype UI are here and here. Facebook and Skype status updates are now integrated - which implies that there’s an XMPP-to-Skype gateway somewhere out there.

An interesting interview. Collecting addresses from phone calls. And here’s a knock-out product: if you’re building a PhoneGap cross-platfrom phone app, you can now use the Phono softphone inside it

The US Army is considering binning its wearable computing projects in favour of something based on a smartphone-like device. Meanwhile, Panasonic and Samsung are working on a standard for 3D specs. HTC, however, has the best idea of the lot: buying Dr. Dre’s hi-fi company, presumably with a view to a line of music-focused devices. We never did work out why so many vendors ship “music phones” with horrible tinny headphones.

45,000 Verizon workers are on strike. US ISP Frontier gets caugh not just hijacking DNS NXDOMAIN messages, but forcing searches involving Amazon through a machine that tags on their Amazon.com affiliate account.

Amazon’s Irish data centre is struck by lightning, causing a major EC2 outage. Level(3)’s favourite fibre cuts. Scat-singing IPv6 addresses. 30 years of IBM PCs.

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August 10, 2011

Telco 2.0 Q&A: Alcatel-Lucent’s lightRadio innovation

Following their Best Practice Live! Presentation (that you can still view here - you’ll need to register) here are Alcatel-Lucent’s answers to our further questions on the impact and practicality of their new small, intelligent cellular radio unit called lightRadio™.

Thumbnail image for Valerie Layan 1 June 30 2011.png

Q1. What trials are being deployed? Where and with whom? Or (if confidential), how many trials are you undertaking, where (roughly) and when will you release results?

Multiple wireless customers have signed on for trials as well as joined forces with Alcatel-Lucent to perform research and development specific to their needs. We are currently co-creating with major operators today having different needs (US, Europe and Asia) and plan trials during 2011. In 2012, the first commercial products will be available and the market will ramp during 2013.

Q2. Describe some of the practical issues you foresee and your answers to them, e.g. what is the dependency on spectrum allocations?

The new Antenna and RRH is a small cube with very low emission power (<2watts) and covering the broad wireless spectrum and all technologies (2G, 3G, LTE). As such, lightRadio™ is designed to operate in different frequency bands and technologies, addressing macro coverage and also small cells. As for the classical architectures in use today in 2G/3G/LTE, the country regulator will manage the spectrum allocation and wireless technologies licenses. lightRadio™ solutions are flexible to support several frequency bands and technologies and adapt to the different regulatory environments in every country.

Q3. How does lightRadio fit with trends towards network sharing? Is the kit “shareable”, or would both operators need ALU kit?

On the base station side, lightRadio hardware can be shared among operators, the differentiation will be done at software level only. Different sharing models can be foreseen at the site: sharing site only (tower, power, …), sharing site and radio elements (WB-AAA and MB-RRH), sharing site and radio and backhaul elements … In addition, the lightRadio can allow new network sharing opportunities, for example with centralized BBU/pooling, the last mile (radio to BBU) fiber transport can be easily shared. The cloud controller could also optimize operators costs if smartly shared, for example each operators could pay only for the capacity used.

Q4. What are the regulatory trends about site permission for microcells / remote radios like this? Do these need to change? If so, how/when?

lightRadio™ solutions will reduce the number of elements required for wireless deployment. Fewer elements on the rooftops or cell towers will reduce the environmental constraints. Small cells deployments will allow operators to deploy added capacity where needed with low visual impact. In particular microcells or small cells, with lower transmit power and smaller physical size offer flexible site acquisitions. LightRadio will ease deployments and regulatory bodies are expected to welcome this trend.

Q5. What is the standardisation process around this type of innovation?

lightRadio™ solutions comply to the same standards that classical architectures for 2G/3G/LTE. One of the principles of this family of products is to integrate to legacy architectures and interwork with existing solutions.

Q6. What happens with mobility? Do small cells = more cell-to-cell handoffs = more signalling load on the network?

Small cells is an important part of the lightRadio™ strategy. The Alcatel-Lucent experience and leadership in 3G small cells has been key to anticipate such operators’ concerns. As for small cells deployed today the lightRadio™ will be using software mechanisms to reduce signaling load and avoid ping-pong between macro and metro cells. Alcatel-Lucent will also fully integrate inherent LTE Heterogeneous Networks mechanisms standardized in 3GPP. This will allow operators to optimize the performance in networks using a mix of macro and small cells solutions.

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August 3, 2011

Only 48 hours left to complete smart pipes survey

So far 110 people have completed our smart pipes survey. We are getting some fascinating results through so a big thank-you to all participants.

The survey forms part of a wider analysis of operator strategies regarding ‘smart pipes’ - what the term means, what value (if any) can be derived from being smart and what the key challenges are to becoming so. We are examining operator activities in Europe, North America and Asia and are evaluating specific operator actions.

The final report, published in September, will be made available to all participants.

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Industry Insight: On Being a Strategist at Google

This is what Matt Vokoun, Principal, Business Operations and Strategy at Google, had to say about our Palo Alto Brainstorm earlier this year, including a brief but interesting perspective on Google’s need to innovate and work with the telco-media-technology ‘ecosystem’.

(NB We’ll be publishing a new Strategy Report on ‘internet disruptors’ - Google, Apple, Facebook and Skype later in the year and sharing some of the findings at our next brainstoms in New York, London and Singapore. Email us at contact@telco2.net or call +44 (0) 207 247 5003 to pre-order or find out more.)

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Customer Experience: Using Facebook as your Telco Portal

Here’s a 5 minute video on Russian operator MTS’s and Roox’s ‘world-first’ innovation - a personalised portal on Facebook that allows customers to interrogate their balance and change tariff plan for example.

In this concise interview, Pavel Roytberg, Internet Services Director MTS, and Andrey Belevtsev, CEO Roox, explain how the innovation works and helps telcos ‘go to where the customers are’ - Facebook. See also our recent analysis Facebook: really ‘worth’ $30 billion max - $100 billion is hype and Facing up to Facebook. We’ll also be looking at Customer Experience in more depth at the Americas (5th-6th October, New York) and EMEA (9th-10th November, London) Brainstorms.

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Advertising 2.0: The Battle for Cross-Platform, Personalised Engagement

Will telcos and content companies be consigned to ancillary roles in the nascent personalised advertising market in which Facebook, Apple and Google are building increasingly strong positions? An overview of our hypotheses, and our research and brainstorm agendas.


Advertising 2.0 is a key part of Telco 2.0’s agenda at the special ‘Executive Brainstorms’ in New York (5-6th Oct) and London (9-10th Nov). These sessions, for which we’ve joined forces with the World Economic Forum, are for senior execs from the comms, media, banking, advertising, retail and tech sectors and part of the ‘M-Commerce 2.0: how personal data will revolutionize payments, advertising and customer experiences’ brainstorm.

Background - Advertisers Want to Get Personal

In Telco 2.0’s research on advertising and marketing and the potental uses of personal data, we’ve shown how these fields are increasingly converging and generating new and innovative use cases and market opportunities. For example, the data being captured by smartphones could be used in new ways to deliver personalised advertising across a wide range of platforms from televisions to tablets to PCs, such as by using location data to determine which members of a family are at home and, therefore, which commercials to show on their television.

What’s more, a personalised advert on an interactive device, such as a smartphone or a PC, can easily morph into a personalised online store, creating a compelling end-to-end experience for consumers. Similarly, in the mobile medium, an advert can easily turn into a digital coupon that can be redeemed at a local retail outlet or restaurant.

Personalised advertising generally comes in two forms. Firstly, there are pull services, which deliver adverts based on information consumers are actively looking for. For example, someone using Google Maps and Google Places to search for houses for sale might simply see an advert for a local estate agent. Secondly, there are push services, in which a thirty-year old man checking his email at 7pm might see an advert offering him a discount on dinner for two at a nearby restaurant, which is “liked” by ten of his Facebook friends. So-called vendor relationship management (VRM) systems, which serve as matchmakers between consumers and brands, could make both push and pull advertising more efficient.

The major brands’ interest in personalised advertising is rising fast, increasing the relative importance of the “third screen” - the mobile phone. By 2015, mobile advertising will be worth more than $20bn, up from $3.3bn in 2011, according to Gartner.

As mobile phones begin to be used to pay for content, goods and services, marketers will also have the opportunity to use a consenting consumer’s purchase history to send highly-targeted and relevant adverts to their handsets. Electronic loyalty schemes will also become increasingly sophisticated, encouraging consumers to share more information in return for personalised rewards.

Key objectives of this session

  • Identify the key sources of personal data for advertising
  • Explore the potential to use personal data and vendor relationship management systems to create highly-relevant and localised advertising across platforms
  • Identify the most effective forms of personalised advertising
  • Executed well, personalised, cross-platform advertising will be welcomed by consumers.
  • Google, Apple and Facebook are building strong positions in the nascent personalised advertising market.
  • Media companies can use the personal data captured by mobile handsets to offer tailored content services, while enabling advertisers to target very specific and localised audiences
  • Search and maps-based local advertising will grow rapidly as smartphones and tablet computers proliferate.
Key questions to debate
  • How well will personalised advertising across platforms work?
  • How much personal data do advertisers need and in what form?
  • What kinds of personalised advertising will work best?
  • When should mobile advertising be used as a standalone solution and when should it be part of a broader campaign?
  • How can content companies harness personalised advertising to increase their revenues?
  • Are the Internet companies going to dominate this market, consigning telcos and content companies to ancillary roles?

For further information please visit the New York and London brainstorm sites, email contact@telco2.net, or call us on +44 (0) 207 247 5003.

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August 2, 2011

Facebook: really ‘worth’ $30 billion max - $100 billion is hype

The news remains awash with stories about Facebook’s (apparently) imminent IPO and the (alleged) valuation of $100 billion. We have published several public articles on why we think Facebook will struggle to justify such lofty valuations going forward (and our subscribers have access to 3 presentations on the subject).

Ahead of a major strategy report on ‘Internet disruptors’ which we are publishing on Google, Facebook, Apple, Amazon and Skype, here is a little more analysis we have done on Facebook and why we have a maximum valuation of the business of $30 billion.

Maximum penetration likely to be around 50% in any market

We begin with Facebook’s user growth. Statistics from www.internetworldstats.com shows Facebook’s user numbers by geographic region and the associated penetration. Plotting this against Facebook’s user growth shows that there is a relatively strong correlation and that even in a regulatory light market with little direct competition for Facebook, such as the US, growth is likely to stall at around 50% penetration:

Facebook growth vs penetration.png

Asia, Africa, Middle East will max out at lower than 50% penetration

In many markets Facebook faces substantial regulatory and competitive pressure which means maximum penetration is likely to be significantly below 50%. In China, Facebook is largely banned and faces stiff competition anyway from domestic social networking sites QQ and Renren. In India, Google’s Orkut, despite being ousted from its number 1 spot by Facebook remains popular and Google+ is attracting followers fast. As a result, Facebook’s penetration in India is currently around 2.6% of the population. We have estimated the ‘theoretical maximum’ number of users that Facebook is likely to get in any region (based on competitive, regulatory and socio-demographic factors) and then estimated where it might get to in 5 years:

Facebook stats and estimates July 2011.png

Our conclusion is that Facebook will reach a maximum of around 1.4 billion users (double its current figure) and in 5 or so years will get to around 1.05 billion.

Monetising users: Facebook is getting better but behind Google

Its revenue numbers are not published, but we estimate that Facebook generated revenues of $1.5 billion in 2010 and will increase this to $3.5 billion in 2011. These estimates are not too far from others available in the news. This equates to average revenue per user of $2.6 in 2010 and $4.7 in 2011. This is a substantial uplift on previous years but a long way behind Google’s equivalent figure of around $17 in 2011. We have assumed that Facebook will continue to get better at monetising its user base (despite privacy issues continuing to be a problem) and forecast that it reaches $12.1 per user per year in revenue by 2017:

Facebook revenue per user.png

STL Partners valuation for Facebook of $30 billion

Our final assumption is that Facebook is able to generate a free cash flow margin of 12.5% on its revenues consistently going forward. This is a little bit lower than Google but still a healthy return to investors. Applying these numbers to our forecast user numbers and revenue per user gives the results in the table below. Note, revenue is forecast to reach $12.75 billion by 2017 (a major increase). A discount rate of 10% applied to the free cash flow stream, gives us a valuation of $30 billion:

Facboook valuation, July 2011.png

We undertook a little sensitivity analysis and reckon that for Facebook to justify a valuation of $50 billion it would need to either hit 2 billion users or average revenue per user per year of $23. This seems unrealistic.

Of course, this is not to say that any Facebook IPO wouldn’t attract enormous interest, and as our friend Richard Kramer at Arete Research likes to point out, many tech valuations are irrational. We doubt such irrationality will stretch to the $70bn difference between our top-end valuation of $30bn and the market hype of $100bn, but it’s possible that high initial interest will heat the price early in the trading.

Nonetheless, as a result of this work, we retain our stance that Facebook will be under enormous pressure to find new sources of growth and that a move into telecommunications seems likely. We are beginning to see early signs of this with the company’s deals with Jajah and Skype and we expect this to accelerate in future. In the upcoming report, we cover Facebooks’ business model and strategy in detail and how the telecoms industry should respond to it.

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August 1, 2011

Latest on Nokia woes, FCC/USF, VZW pays Voda £2.8Bn - Telco 2.0 News Review

[Ed. Don’t forget to check out our latest agenda ‘M-Commerce 2.0: How Personal Data will Revolutionize Customer Engagement’, including more details of our next Brainstorms in in New York (5th-6th October) and London (9th-10th November) run in collaboration with the World Economic Forum.]

It’s still going horribly wrong for Nokia, with smartphone sales off 34% and overall device shipments down 20%. Stephen Elop is pushing the emerging market product line hard - note the dual-SIM phones that don’t need to reboot when changing between them - but it’s worth remembering that the last major handset vendor to go all in on the low-end was Motorola with the GSMA-sponsored Emerging Market Handsets, and look how that turned out.

In better news, the for-real version of Windows Phone 7, “Mango” has been released-to-manufacturing, the slightly quaint Microsoft way of saying that the current version has gone into the feature freeze before release to the public. Before anything hits the streets, though, there’s still the carriers’ conformance tests to pass and the supply chain to fill. So it’s certainly no-move-before October, although it’s on course to hit the Christmas deadlines.

Oh, and Microsoft have given Project Mango a new customer-facing name: Windows Phone 7.5, obviously better.

That said, it seems that Apple’s iPhone 5 is going to be out in September, beating them to the punch. This one is going to be very like an iPhone 4 (and presumably somewhat less like an iPhone 3GS but still quite like one) but will pack Apple’s homebrew A5 CPU and a better 8 megapixel camera (putting it into the N8 class as a photo device, depending on the lens they use). Apple also got a favourable court ruling against HTC, in a week where their net profits were reported to have risen 125%.

Ericsson also had some good news, with their quarterly results up 59%, although sales were up much less and the high Swedish kroner helped their margins.

The iPhone’s assembler, Foxconn, is investing heavily in robots. Their CEO announced the target at a “workers’ dance party” this week, which sounds like the greatest buzz-kill ever.

Meanwhile, RIM zapped 2,000 staff and re-organised its management. The re-org creates a single head of product design and engineering, to whom a new head of marketing reports, and puts the current CIO in charge of all enterprise products, while giving the CTO of software responsibility for applications and developers, and creating the curious post of “Chief Operating Officer for Operations” in charge of manufacturing, rework, and logistics.

There’s been a big upheaval in the Apple App Store, where a succession of major e-commerce apps have withdrawn from it and transitioned their activities to a pure mobile web solution. Notably, Amazon and Barnes & Noble are out. The point is that Apple didn’t use to take a 30% cut of in-app sales - now it does. They don’t want to share the 30%, so they’re refactoring their apps into HTML5 web pages to cut out the middleman.

However, can you really do this stuff in a browser? Qualcomm’s Augmented Reality SDK is now, unexpectedly, available for iDevices.

Elsewhere, Dave Burstein reports on the US carriers’ response to the FCC consultations on broadband and PSTN shutdown. What he calls the “Big Telco plan” apparently foresees the end of universal service requirements and the Universal Service Fund, but (by his calculations) won’t actually deliver any more broadband.

There’s been a 50% surge in VDSL shipments as Eurocarriers begin to upgrade their copper networks to at least a fibre-to-the-cabinet standard. On the other hand, sales in Asia are dropping as VDSL is replaced by FTTH, and slowing down in the US as AT&T decides it’s done enough.

Meanwhile, Vodafone shares rose 7 per cent on the news that after years of waiting, Verizon Wireless is going to pay out a £2.8bn dividend to Vodafone. The enormous bag of money is expected on the 31st of January, 2012, and VF is planning to immediately kick £2bn of it to its shareholders.

Vodafone has announced a minimal smartphone for emerging markets, with EDGE only, which will be marketed as a “Facebook phone”.

VZ, for its part, has appointed Lowell McAdam as CEO in succession to Ivan Seidenberg.

Sprint-Nextel has a huge MVNO customer: LightSquared, which has decided to rent capacity on Sprint’s network rather than pay NSN a fortune to build its own. NSN has to content itself with doing a core network for the moment, and perhaps the radios further down the line, as Sprint has the right to use any network LightSquared ends up building in future.

It’s worth $9bn over 11 years to Sprint, for their part, and they need it after a rather painful quarter hit by the cost of handset subsidy. Meanwhile, RCR Wireless points out, Verizon Wireless is gaining six postpaid subscribers for every one AT&T gains, and the Big Two make up practically all the net adds in the entire industry.

Meanwhile, AT&T said it would impose rate limits on the top 5% of data users. They notably didn’t say how the top 5% was defined (the top 5% by average rate? by total consumption? by peak rate? in the busy hour? in the busy cell?) but did say the number would vary month to month. Neither did they offer to sell the top 5% more capacity for more money, although apparently it doesn’t apply to tiered data plans. To summarise: we might reduce the quality of your service to suit us, based on reasons we won’t say and that change without warning, and we won’t take your money. No wonder everyone loves telcos.

OFCOM’s Consumer Panel thinks that the revenue from more spectrum sales should be used to fill in the UK’s remaining coverage blanks, both in terms of broadband and in terms of basic GSM voice and messaging. The implementation would be to attach a 2G coverage requirement to the 4G licences. BT thinks this would amount to an illegal subsidy (although it’s not clear whether they mean a subsidy to the licensees who have a 2G requirement and get money from the government, or those who don’t and therefore don’t have to build any more 2G BTS), while 3UK points out (reasonably enough) that it would disbar them from taking part. We can remember when the government wanted an 800MHz LTE net to deliver broadband into the countryside. What, was that only May last year?

ABI Research reckons that wholesale service providers will be a leading sector in LTE deployment.

BT has also been ordered by a court to block access to Newzbin 2, a website that provides a search engine over the USENET alt.binaries.* newsgroups, a time-honoured way of sharing pretty much any content at all over the Internet, notably warez, porn, and pirate downloads. The original Newzbin was shut down by a court order but immediately reappeared, so this is the MPAA’s new tack. The court specifically orders that Newzbin 2 be added to the child-porn watchlist BT’s Cleanfeed system uses, thus overnight multiplying the proxy’s load by several orders of magnitude. If anyone sees a cloud of smoke over Martlesham Heath, you’ll know what’s up.

In even more packet pushing news, IPv6 pioneer Iljitsch van Bejnum has an excellent article for Wired on the history and the future of Ethernet.

Telefonica, TeliaSonera, and DTAG have a multilateral roaming agreement for their M2M subscribers, which therefore covers most of Europe in data roaming services for M2M. In other embedded connectivity and wholesale news, LA County’s joint blue-light network project is in trouble, with Motorola and Raytheon heading for the courts, and the FDA has opened a consultation on its proposed rules for medical apps.

Everyone seems to love Google + because, unlike most social networks, it built the idea that people control their privacy by keeping different people and things in different contexts right into the application’s logic and its user interface design. Google seems to be trying hard to shake them off, though. Last week, it zapped all the + accounts that didn’t have a real name or something Google thought looked like one. Outrage ensued. Violet Blue has some sensible suggestions.

The New York Times goes to talk to Microsoft’s Bing team, the heart of the Online Services division. It’s sympathetic but not particularly revealing, and certainly doesn’t reveal anything that’s likely to make it a meaningful business soon. Wired says they should stick with it because there are a lot of potential users in India and Mango…sorry…Windows Phone 7.5 might help reach them.

It looks like ISIS has cut Google Wallet out of the game for mobile payments - they’re down to only one payments partner, although that is MasterCard - but Google still has the only working device.

Google product watch: Page Speed applies standard optimisations to Web sites and serves them out of Google’s CDN.

Some data on Hulu and Netflix usage scenarios. It looks like Hulu users are almost always on a PC, while Netflix reaches a bigger range of devices. Also, gaming consoles are the second-biggest group of user devices for online video. Optus in Australia, meanwhile, has a PVR app for your mobile.

Third-biggest Bitcoin exchange’s sysadmin needs to start up a bigger Amazon EC2 machine. Stops first one. Rather, terminates it. Starts second one and tries to hook up the EBS storage volume from the first. Realises all the data in the first EC2 was in RAM somewhere in the Amazon cloud and is therefore gone for good. FAIL.

Slightly annoying something.gb.com/something.uk.com URIs fail as their operator goes dark. SMS propaganda announces death of Taliban leaders. Death near you. Free Libyana’s rebel BSC engineers strike again, bringing GSM to Misrata. Here’s the HOWTO version.

Dance your way to business success! We saw a movie like that once in the 1980s…right?

And finally, France Telecom has announced that the legendary videotex service, Minitel, is going dark next year. Starting in 1981, the French operator distributed the terminals absolutely free to every household in a bid to replace the paper phone directory, rather like Ericsson invented AXE digital switching to avoid needing the entire adult population of Sweden as operators by 1990. What came next was an explosion of creativity, community, e-commerce before it was called that, and of course, smut.

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