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February 20, 2012

Disrupting Cloud; privacy gaffes; UK M-payments collaboration, M-termination rates; & LightScrewed? - Telco 2.0 News Review

[Ed: We’ll be at the Mobile World Congress in Barcelona next week - see our article on Seven Good Reasons to Go to MWC. After that, the New Digital Economics Brainstorm in Silicon Valley is on the 27th-28th of March, and our spring EMEA event is in London on the 12th-13th of June. Last but not least, apply here to view vdieos now available from the free, invitation only New Digital Econmics Online virtual event. Email contact@stlpartners.com or call +44 (0) 20 7247 5003 for more on any of the above.]

Four UK mobile operators have filed for regulatory clearance from the European Commission for their joint mobile payments initiative. They plan to create a company to manage the technical platform and act as the point of contact with merchants and banks, on the model of Zoompass/Enstream in Canada and ISIS in the United States. 3UK has not been invited which may spawn a regulatory complaint.

Elsewhere, Vodacom Tanzania reported that its user base has grown by a third, and that the main driver of subscriber growth was the M-PESA mobile payments platform. Managing director Rene Meza said that their next strategic priority was to expand data services, with Internet penetration in Tanzania being much lower than in Kenya.

Orange, meanwhile, selected Myriad’s USSD-based platform to deliver Facebook and other social networks in Africa.

Opera Software is continuing its efforts to build more services around its mobile Web browser and its associated infrastructure of accelerator proxies. The company has acquired two mobile advertising networks.

And Faultline points out that, if Google Wallet has been a decided flash in the pan, Apple’s iAds venture into Google’s online advertising territory has been a big disappointment too.

Information Week reports back on telcos’ increasing involvement with the cloud and argues that they have a major opportunity to disrupt the enterprise market for cloud computing. We think Cloud is important too - in case you missed our recent content on this, see Cloud 2.0: winning the next phase, and why ‘PaaS’ / ‘NaaS’ are important, and Cloud 2.0: what is it, why it matters, and what’s next.

KT apparently saw a major reduction in churn after launching a range of cloud services. They also note that CDNs are in some ways a special case of cloud computing, and one that’s likely to get very important. Brightcove floated on the stock market this week and saw an immediate 32% run-up, valuing the video platform at $382 million. Meanwhile, Cedexis is a French web optimisation company that specialises in CDNs and the cloud, and owns a dynamic load balancer solution.

Here’s another new CDN. Yottaa (not to be confused with YoTa) provides a Web application acceleration solution for SMBs.

Some context about just how much data Twitter users generate and Google has to index.

Red Hat has been building an Apache server that interfaces with basically all the clouds you can think of, to provide a unified management API over them.

Who moves massive amounts of video and user data? YouPorn.com, and via High Scalability, here’s some details of how they manage it. In other video news, Dan Rayburn at Streaming Media discusses Barry Diller’s Aereo OTT TV play and isn’t convinced.

Is Amazon going to build a TV?

On the frontier between the cloud and privacy, the Cambridge Computer Lab’s Light Blue Touch Paper blog notes an interesting approach to protecting user data in social network applications. What if you could tell the platform to put data into named fields in your application without showing you? Until quite recently, that’s precisely how Facebook’s FBML worked - and it was originally engineered to provide high performance rather than privacy as such.

It turns out that Google deliberately defeated security precautions in certain Web browsers (notably Safari), by adding an invisible Web form input that reloaded any DoubleClick.net display ads on the page and therefore letting the ads set a tracking cookie. The EFF explains, and demands that Google apologises.

Here’s a fascinating story about the use and abuse of personal data - US retailer Target discovered they knew which of their customers were pregnant, but they had to add random items to their special offers to conceal the fact they knew, which tended to scare the customers. And they accidentally informed one girl’s father. It goes to show that yes, normal people do care.

We think it all goes to show that the guidelines we’ve been working on with the World Economic Forum and others really matter.

Groupon buys a ton of data.

In the UK, the voice market is heading for a disruption as OFCOM imposes a dramatic cut in mobile termination rates. MTRs are going to fall from 4.18p a minute to 0.65p a minute by April 2015, after the competition appeals tribunal decided that the original cut wasn’t enough.

Rogers Wireless brings One Number, its integrated mobile-softphone VoIP product, out of beta. Rogers is partnering with Counterpath, an OTT developer specialising in HD voice, and offering a web-based version of the service.

Interesting technology from NEC - they’ve patented a smartphone app that works out from context which would be the best way to handle an incoming call between telephony, videotelephony, messaging, voicemail, etc. Synchronica, meanwhile, plans to demonstrate a hosted RCSe server at Mobile World Congress, to permit operators to use RCSe without deploying an IMS core network.

And RevK at Andrews & Arnold is integrating a SIP server into his homebrewed Firebrick CPE router, in order to get rid of the pain of SIP NAT traversal.

US lobbies fight over whether to keep sending out phone books. And it only gets easier to hack GSM voice.

In broadband news, Ars Technica reports that LightSquared’s GPS problem is likely to be fatal, with the FCC convinced that their operations will essentially jam chunks of the service after NTIA carried out tests. LightSquared retorts that the GPS manufacturers could put in better filters, but then there are enormous numbers of GPS receivers out there and some of them (indeed many) are in safety-critical applications.

Inmarsat, meanwhile, announced that LightSquared had failed to make a $56m payment to them, and investors in Philip Falcone’s fund are suing him. What a mess.

NSN thinks deploying fixed-wireless TD LTE in Brazil would be a dramatically cheaper option than VDSL. Look for more of this in any market where FTTH or modern cable plant isn’t available.

Patents: Apple won a lawsuit in Germany regarding “slide to unlock”, but it looks like Google might have published earlier. But it’s not that amazing a feature, and of course touchscreens existed before the iPhone. Android Central has video of a Windows CE device from 2005 with the feature.

A study shows that 55 per cent of the most important mobile patents belong to Nokia, Samsung, Qualcomm, and LG.

And new HP boss Meg Whitman is surprisingly bullish about now-open-source WebOS.

Apple’s latest results included quarterly figures for app payouts, which permits Horace to conclude that on average, each iOS device brings $12 in revenue to the developer community, and that Apple is selling about $1bn a year of apps.

Apple’s contractor, Foxconn is going to raise wages by as much as 25% after the combination of a wave of outrage among customers and the continuing wave of labour militancy in China put pressure on them. Meanwhile, ZTE ordered $5bn worth of chips from Qualcomm and Broadcom.

Microsoft’s decisions about Windows 8 and WinRT are controversial thanks to this diagram, our Chart of the Week. Is Microsoft really trying to take Windows development back to 1999, before .NET and Java? Or is something else going on? Detailed discussion at the link.


Some details about the forthcoming PlayBook OS 2.0. Crackberry’s ideas for RIM.

Sony embeds 3G connectivity in its new PlayStation mobile gadget.

How i-Mode and Flash failed. And O2 will buy your pizza and beer for 36 hours in Silicon Roundabout if you’re willing to develop an NFC app

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February 17, 2012

Cloud 2.0: winning the next phase, and why ‘PaaS’ / ‘NaaS’ are important

Cloud Services are a valuable and growing market area in which there are opportunities to grow both Telco 1.0 and Telco 2.0 business models.

Cloud PaaS growth and share chart Feb 2012.png

The chart above is from New Digital Economics Online, a free virtual event for CSPs (click here to register), and shows the potential for telcos to gain share in different parts of the Cloud market and in particular in Platform-as-a-Service (PaaS). The following videos are now available to view online in the Cloud section of the event:

  • Cloud 2.0: winning the next phase, and why ‘PaaS’ is important. Telco 2.0’s Research Director outlines key projections for the Cloud market, market views on what telcos need to do to succeed, and the importance of Platform-as-a-Service (PaaS) to Telco 2.0 business models.

  • Mobile Cloud and ‘Network-as-a-Service’ (NaaS). Ericsson’s CMO describes the convergence of mobility and the cloud, the new partnership with Akamai, and how telcos can open up their assets to provide a ‘Network-as-a-Service’ (NaaS) platform to developers and upstream customers

These themes will be explored further in our Silicon Valley and London Brainstorms, and in our ongoing Cloud 2.0 research programme.

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Facebook: what the pre-IPO S-1 filing revealed

New figures released in Facebook’s S-1 filing for its IPO stack up with Telco 2.0’s previous analysis of Facebook’s performance for our report ‘Dealing with the Disruptors’. This further strengthens our views that many mooted valuations are overblown, and that Facebook will seek new sources of value in communications - our analysis is here.

Facebook Google Vodafone EBITDA 8 years Feb 2012.png

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February 13, 2012

Vodafone’s buoyant Q3; Windows 8 to launch at MWC; Google, Verizon video plans - Telco 2.0 News Review

[Ed: Apply here to join the free, invitation only New Digital Econmics Online, available from 14th February. We’ll also be at the Mobile World Congress in Barcelona at the end of the month - see our article on Seven Good Reasons to Go to MWC. After that, the New Digital Economics Brainstorm in Silicon Valley is on the 27th-28th of March, and our spring EMEA event is in London on the 12th-13th of June. Email contact@stlpartners.com or call +44 (0) 20 7247 5003 for more on any of the above.]

It was Q3 week for Vodafone, and it was a solid set of results in a challenging context, even if the headline forecast of 1.1% service revenue growth was missed.

Vodafone’s interests in southern Europe - they’re present in Italy, Greece, Spain, and Portugal, not to mention Ireland - are right in the firing-line of the economic crisis, and they’re feeling the pain. Service revenue was off by 4.9% in Italy, and although usage held up through most of last year in Greece, it suddenly dived in the last quarter. And the company is bringing home its opcos’ cash balances every night for fear of being caught up in a bank crisis.

Overall, though, Vodafone saw strong revenues from data (which allowed it to grow revenues in the UK) and even managed to increase voice minutes of use across the board, while its enterprise business did very well indeed and it scored for subscriber growth in Turkey and India.

And the OneNet business-focused Voice 2.0 product is still going great guns. In Italy, their revenues from SMBs and enterprise customers rose almost five per cent even in the face of recession, doing as well as they did in (relatively) booming Germany. Perhaps this enterprise focus is why they admitted today in a Stock Exchange announcement that they are considering a bid for Cable & Wireless Worldwide, the half of the old C&W that provides enterprise private networks and voice services. Vodafone has until the 15th of March to make an offer or back out.

The 3G & 4G Wireless Blog, meanwhile, excerpts some charts from a Vodafone Germany presentation showing that Vodafone’s Single RAN program includes their fixed assets as just another access network - interesting in the context of OneNet.


Curiously, though, Verizon Business picked BT rather than Vodafone for its telepresence and videoconferencing interconnect in the UK. Sprint and T-Mobile USA, for their part, lobbied the FCC regarding Verizon’s AWS spectrum buy.

Road warrior SIM provider MaxRoam is now an MVNO in the UK, only the 10th MVNO to become a Vodafone customer. Unicomms specialist Six Degrees gets some funding. And where iPhones were notorious signalling hogs when it came to data, Android devices are pretty bad on VoIP.

Skype Journal covers Jonathan Christensen’s exit from Skype and the company’s problem with APIs and developers. The question is surely whether Microsoft’s “developers, developers, developers” mindset filters through. On that point, the Journal has some thoughts about what features of EBay and SilverLake’s internal cultures influenced Skype.

It seems that Microsoft will launch Windows 8 at Mobile World Congress, certainly a first and a big pointer to their priorities. At the same time, they are sketching out a much more “Apple-like” view of Windows 8, at least as it applies to Windows-on-ARM (and therefore to the mobile world). No browser plugins and no apps ported from the x86 world, and everything through the app store. Meanwhile, Apple itself turns out to have a version of Mac OS X for ARM devices up its sleeve.

Depending on the valuation Facebook eventually gets, Microsoft’s $240 million investment in 1.6% of the company may turn out to be either a good investment or a brilliant one.

Some bad news for RIM - two major customers, NOAA and Halliburton, are off, with both organisations swapping their BlackBerry fleets for iPhones. Kayak gives its BlackBerry app the Viking funeral. But the interesting bit here is that NOAA’s motivation was in part that they were planning to move their IT systems into the cloud, and specifically, into Google’s specialised Google Apps for Government.

The obvious choice would have been Android, but their IT managers didn’t like the idea of having a multi-vendor fleet of phones. But wait a moment. What’s “obvious” about that? Google Apps are meant to work in a web browser, the most cross-platform of environments. It’s…interesting that a major customer wants to run Google applications and Google servers, on Apple’s OS and hardware.

RIM and its close friend Microsoft have some other ideas. Starting this month, Microsoft Office 365 subscribers get free BlackBerry integration, and a subset of BlackBerry Enterprise Server’s device management features in the cloud, with a web-based management console for the device fleet. Wired wonders if this is a step towards a merger, but it’s also telling that integrated device-cloud products for business are an increasingly important strategic field. The Register points out that BBM has some features the social networks just don’t.

As far as the hardware goes, here’s a leak of the latest gadget, codenamed London (is that London, Ontario or the other one?). It is suggested that it may be coming in Q3 and that RIM may decide to go all-in on it as a hero device.

Here’s some news on their developer strategy, which is as always a little involved.

Meanwhile, Mobile Industry Review has an optimistic look at Microsoft’s other hardware partner, Nokia, while Wired wonders why Nokia’s bothering to launch the Lumia 800 as a $800 unsubsidised option between the (subbed) 710 and the forthcoming 900.

Google may be experimenting with a new phone. Meanwhile, Ben Evans argues that Google’s main goal with Android is to disrupt Apple and Microsoft, and that therefore fragmentation isn’t a problem for Google. (Anti-Apple virus anyone?)

Google’s Fiber project seems to be planning something with TV, as they’ve applied to the FCC to build a major satellite downlink facility near Kansas City. Typically, it’s important for FTTH deployments to get as much TV onboard before launch in order to boost the all-important take rate. At the same time, AllThingsD’s Peter Kafka notes that a rumoured big announcement about Google TV wasn’t. Big, that is.

Verizon, though, does have news - The Voice of Broadband reports on their deal with DVD rental firm RedBox to create a “virtual MSO” over-the-top video service. It’s worth noting that this fits with their parallel tie-up with DISH and also with FiOS TV - in the fibred-up zone, they already have the capacity to deliver HD video, and DISH’s satellites could beam it to customers beyond the fibre footprint. RedBox brings substantial amounts of content.

However, Streaming Media reports that their exclusive deal with NBC to stream the Superbowl didn’t go so well, with complaints of poor video quality, lag between the stream and the live broadcast, and poor execution in general.

Connected Vision has a rundown of Virgin Media’s results, which saw the company edging into profit (although a big one-off disposal skewed this) and strong numbers for on-demand and TiVo services.

Here’s a must-read interview from ReadWriteWeb with Netflix director of engineering Daniel Jacobson about APIs. He says it’s critical to understand who the audience for the API is, and usually the most important audience is you - that is to say, the biggest opportunities are very often the ones APIs give you to re-organise your own business and improve your main product. Parts One and Two are pretty essential too.

Alcatel-Lucent announced that it was back in profit, for the first time in six years, and that it was planning a big push to monetise its enormous stock of Bell Labs patents. Gentlemen, start your lawyers.

A German court this week threw out Motorola’s claim that Apple was infringing a patent embodied in the UMTS standards, quite damningly. Apple followed up by suing Samsung, again, and also filing suit in the US regarding the German case with Motorola. Apple holds that an agreement between Motorola and Qualcomm bars Moto from suing Apple, as Apple is a Qualcomm customer.

It turns out that Apple wrote to ETSI in November offering, essentially, proposed terms to settle the FRAND wars before they got started. Florian Müller explains it in some detail. Google is unwilling to get down off the ledge.

It’s been a bad privacy week. Google Wallet has a vulnerability that lets a thief wipe the account and set a new password, but then re-add the original default bank card to the account and therefore get access to the money without needing to know the password.

It turned out, further, that Path, a social network app, was scraping and collecting all its users’ address books. A furore resulted and Path was forced to stop and to destroy the database. As a result, though, it turns out that many, many popular iPhone apps do just this, and some developers have collected enormous quantities of personal data (including, in one case, mobile phone numbers for Larry Ellison, Bill Gates, and Mark Zuckerberg).

The point is well made that Android apps need to get user authorisation to read the address book, whatever else may be said about Google and personal data, but Apple lets any app at all slurp it and doesn’t provide the user with permissions control over it, although it does for many other less sensitive functions.

Elsewhere, is OAuth a privacy threat? It’s better than typing passwords into random apps, of course, but it’s argued here that it makes it too easy for app developers to just request access to your entire GMail inbox rather than minimising the risk, and too easy for users to just grant them. Fortunately, MyPermissions.org lets you manage your OAuth permissions centrally.

Iran’s great firewall is now killing all SSL-encrypted traffic outbound.

Last week’s Facebook S-1 filing drew attention to the fact almost half their monthly users are on mobile and therefore, non-revenue. Plenty Of Fish’s company blog notes that they expect to be majority-mobile very soon. So the pressure to do something to monetise the mobile users is mounting. Here’s a rumour to that effect.

Interestingly, not only is Zynga responsible for a big chunk of Facebook’s revenue, it’s also sharing ad revenue with Facebook in respect of ads on its own site.

Do we face a cloud cartel? Forrester argues that the capital requirements of big data are such that a small group of (probably) US-based companies will dominate the industry.

GigaOm argues that Amazon Web Services is pricey for applications big enough to negotiate their IP transit pricing and that face relatively steady load. The AWS Blog hits back.

Speaking of transit, Renesys’s annual carrier scoreboard is out. ip.access lands Telenor contract. Developer review of the latest Chrome version. The US Marines’ mesh network. Have we taken one-button design too far?

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February 9, 2012

Strategy 2.0: Facebook’s strategy in the ‘Great Game’

The Great Game Chart Feb 2012.png

The ‘Great Game’ is the battle between the industrial giants of the digital economy, including the telcos, Facebook, Apple, Google and Skype, and is summarised in the chart above, extracted from our report on ‘Dealing with the Disruptors’.

The chart outlines the battles by player and by strategic market, and shows where the businesses make their primary profits (Core Businesses) and where they operate ‘Synergic Businesses’ which support them.

Facebook’s core business is advertising, supported by synergic businesses in online content and payments, and we believe it will move into further into communications in an attempt to bolster its value. (See also our research articles on Facebook: moving into telco space?, Facebook: worth $30Bn max, and Facing up to Facebook.)

Further detail on the chart can be found here, and there is an explanatory presentation by Chris Barraclough, Chief Strategist, Telco 2.0, at the New Digital Economics Online Event next Tuesday 14th February (apply here for this free, invitation only event).

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February 8, 2012

M-Commerce 2.0: Operator Billing - ‘it’s the merchants, stupid’

In this guest post, Telco 2.0 partners SLA Mobile argue that operators must focus on merchants’ needs to make Direct Operator Billing (DOB) work, and unlock and monetise new assets through M-Commerce.

It’s the economy, stupid” was the mantra of Bill Clinton’s successful 1982 Presidential Campaign - this simple message cut through the fog of political rhetoric and helped Clinton win. SLA Mobile say operators must adopt a similar single-minded focus on merchants’ needs to succeed in the growing M-Commerce market, forecast by Informa to be worth US $37BN in fees by 2016.

What is ‘Direct Operator Billing’?

Direct Operator Billing (DOB) enables merchants to charge the payment for goods and services to the consumer’s mobile phone bill rather than their credit card.

It is SLA Mobile’s view that mobile operators in both developing and developed markets have a strategic opportunity to use DOB to drive digital commerce revenues and address the ever present ‘Over-The-Top’ (OTT) threat.

However for a DOB strategy to succeed, operators need to embrace the reality that making it work will be “all about the merchants”.

Some operators are already making plans to get their slice of this market, e.g. Vodafone Group CEO, Vittorio Colao, briefed analysts in the Q2 FY2011/12 earnings conference that Operator Billing is a significant opportunity. He described it as a “very intuitive and easy way of enabling digital commerce”.

It’s all about the Merchants

Consumer research suggests that consumers in developed markets preferred method of payment for goods on the mobile phone is the mobile bill, above using either their credit card and Paypal (see chart below). In emerging markets there are often no other means of payment beyond cash.

Consumer preferences for paying for goods on mobile phone
sla mobile chart Feb 2012.png
Source: Strategy Analytics Dec 2010 - US and European Research.

However to fully monetise this opportunity, operators need to take a merchant-centric view of the opportunity. This is because it is merchants who create the innovative services to drive the market not operators.

Operators also need to recognise they are competing with a well-developed financial services ecosystem in many markets.

Mobile v Financial Services Value Chains

Thumbnail image for sla mobile value chain Feb 2012.png
Source: SLA Mobile

One option is for mobile operators to choose to leave the merchant relationship to others in the value chain as they do in the Premium SMS market. However operators can build deeper relationships through engaging directly with merchants and aligning common goals of maximising growth. There are a few key success enablers:-

1) The barriers to entry for merchants must be low. Operators need to ensure that the technical effort of integration is low by providing 2.0 APIs and self-service portals. This is a far cry from the manual 1.0 world of Premium SMS (PSMS).

2) Operators should support merchants in growing the market. Operators need to work with merchants and provide them with the tools to make operator billing easy for web sites, mobile websites and apps.

3) The rewards for using operator billing must be high. Operators should use a commercial model that maximises demand for the widest range of products both digital and physical.

This means payouts to merchants that are at least 85% plus - much higher than for Premium SMS. Although operators have the challenge of the ‘cost of cash’ in running the pre-pay network where retailers get a commission on airtime top-ups, they need to get payouts much closer to those of credit cards and Paypal to be competitive.

This will create new market opportunities not just for digital but also physical goods and services. Merchants will see DOB as a fantastic business opportunity when operators make it easy to use and with attractive terms that enable them to reach new markets - for example those who do not have credit cards.

4) Ease of use and great service experience are essential. Merchants must know in real time, what’s been sold, what they get paid and when. Customer care and refund policies etc. need to be of a high standard. For consumers to use the service a lot, the purchase experience needs to be simple, secure and convenient.

Operator concerns can be addressed

There will be those internally in operators who fear the cannibalisation of PSMS and voice revenues. However PSMS is already in decline and DOB presents a growth opportunity.

Others may challenge the lower margins in a DOB M-Commerce strategy than telcos’ current core businesses. However the real strategy should be one that maximises the level of demand, builds significant revenue, and engages consumers who are more loyal.

Operators must get onto the front foot to address the OTT threat and DOB is central to that. We predict that the operators who will succeed in the long term in M-Commerce will be those who embrace a merchant focussed strategy with DOB.

SLA Mobile helps operators unlock and monetise network assets, and will be at Mobile World Congress MWC12 in Barcelona 27 Feb - 1 Mar 2012 Hall 2.1 Mobile Money Pavilion Stand 78.

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February 7, 2012

Cloud 2.0: what is it, why it matters, and what’s next

In the lead up to our free online event on 14th February where we look at Cloud strategies in the telco space (and our more detailed exploration of the opportunities in Silicon Valley and London), here’s what we think ‘Cloud’ means, why it’s important to telcos and Telco 2.0 in particular, and what we’re going to be researching on it over the next few months.

Cloud: woolly words and nebulous concepts

The word ‘Cloud’ is becoming incredibly prevalent and increasingly meaningless.

One seemingly common element of its intended meaning is that whatever it is associated with is incredibly smart and sophisticated, regardless of what it actually is. Another common element of ‘Cloudspeak’ is to make anything sound ten times more complicated than it needs to be.

As a notable counter-example of getting it right, AT&T deserves credit for this remarkably clear and jargon free bit of cloud marketing copy. [NB To view the images in this article full-size, either click on the image or follow the associated links.]

ATT Cloud explanation Feb 2012.png

Indeed, here at Telco 2.0, we think the sprawling fog of misdirection and ambiguity is one of the biggest barriers to greater customer acceptance and adoption of a lot of Cloud-y things that would probably be quite useful and get a lot more traction - if only anyone without a degree in Cloudspeak could understand them. So, in the interest of the greater good, here’s our attempt to disperse some of the, er, clouds of confusion. (Sorry, we find it quite hard to resist ‘Cloudpuns’.)

Where did the Cloud come from?

Derived from the cloud shapes decorating every whiteboard in every IT department around the globe, the cloud symbol originally meant ‘you stick this wire into the Internet, then this wire (or perhaps a bolt of lightning) comes out here’.

Hence at first the cloud (note the small c at this stage) came to mean something akin to the Internet.

The next development was ‘Virtualisation’, which is the ability to make lots of computers work together as one, giving massive computing power (in a ‘Virtual’ computer made up of lots of linked computers) at a much lower cost than building one really big computer. Huge online players like Amazon and Google were among the pioneers of this approach.

These massive virtualised computers can now run lots of applications at the same time, and are ideally suited for sharing between more than one user as there’s usually masses of available capacity. The costs are so low that, unlike ‘hosting’ where you have to reserve a specific bit of computer hardware that someone else owns, the computer’s owners can afford to let other businesses use parts of their capacity on a low-cost, pay as you go basis.

amazon data center feb 2012.jpg

Paradoxically, large parts of the Cloud now live in huge warehouses full of computers, like this Amazon data centre in Oregon.

Why might ‘Cloud’ matter to customers?

Over time, the huge increase of available, remote computing power, and the growing ubiquity of digital connectivity, has resulted in the evolution of two rather different Cloud concepts - this time with a capital C.

  • The Enterprise Cloud provides a way to make a company’s IT cheaper and more scalable. It makes it easier to do more - or less - of whatever computing is needed at any one time without permanently increasing IT costs or losing the functionality. It is provided by ‘virtualised’ computing, either across a company’s own computers, or on a third party’s computer and network, on a flexible / pay-as-you-go basis. “It’s just managed IT services with a nicer interface and more flexible options to pay” in the soothing words of a Cisco Exec at a recent event we moderated. (NB This video of an Oracle presentation at our December 2010 Brainstorm Seven Clear Cloud Examples may help put this in context.)

  • The Consumer Cloud is a safe place in the Internet in which consumers’ digital ‘stuff’ gets kept, as popularised by Apple’s iCloud service.

Why is Cloud important to telcos - and Telco 2.0?

1) Cloud services rely on communications to work, and need both internal networks to connect the many machines that make up a cloud computer, and external networks to connect these machines to the people and other, remote computers, that want to use it. As a minimum therefore, telcos have the opportunity to be an enabler of cloud computing systems using their communications networks - although an increasing number of specialised players such as Content Delivery Networks (CDNs), like Akamai, can also do this.

2) Telcos also have the opportunity to participate in providing Enterprise cloud computing services, such as storage and processing. They can do this by owning and operating cloud computing facilities, or by partnering with other parties possessing them. Enterprise Cloud Computing was a c.$25Bn market in 2011 and is forecast to grow by 25% yearly for the next two years at least, so it is a sizeable market.
Cloud 2 forcast growth sep 2011.png

To this end, for example, Verizon acquired Terremark, Qwest acquired Savvis and Equinix (speaking at the Silicon Valley Brainstorm, and Orange partnered with Cisco, VMWare virtualisation, and EMC2 storage (and spoke at the EMEA Brainstorm in May 2011).

3) From a Telco 2.0 point of view, Telcos can also participate in Consumer Cloud Services, (becoming known as the ‘Personal Cloud’) providing safe storage for both consumer identity data - see Telcos must vie for a slice of the $Multi-Billion PIE (Personal Information Economy)’ and digital entertainment services. Some think that this is essential for telcos wishing to remain relevant to consumers in the post-PSTN voice era where data-centric services will be much more important to customers. Here’s a video interview with AT&T on this.

4) The Enterprise Cloud, particularly a variant called Platform-as-a-Service (Paas), also potentially provides an important delivery strategy for Telco 2.0 ‘3rd Party enablers’, (see below) where telcos provide information such as location data in a secure and appropriate form to other businesses to help improve the design and delivery of business processes. This theme was explored by Vodafone at the EMEA Brainstorm in November 2011.

The Six Telco 2.0 Opportunity Types
6 Categories V3 Roadmap April 2011.png

Next Steps

At New Digital Economics Online, February 14th (apply here for this free, invitation only online event), we’ll discuss more on market size and share forecasts, the key challenges for telcos in the cloud, and hear Ericsson’s views on how they could be addressed.

At the Silicon Valley Brainstorm on 27-28 March, we’ll hear from Bain, Cisco, Equinix, Ericsson and Parallels in the Digital Infrastructure 2.0 session, where we’ll be exploring latest market forecasts, and how should telcos and other Cloud players: 1) address cloud services as a whole; 2) partner / enable / compete with each other; and 3) use Cloud Services as an enabler for Telco 2.0 business models. We’ll be following up on this from an EMEA perspective at the London Brainstorm in June.

We’ll also shortly publish further research in our Telco 2.0 Executive Briefing Service on the key changes ahead for telcos to unlock the cloud opportunity, including case studies from key telco practitioners and views from thought-leaders in the field.

Email us at contact@stlpartners.com or call +44 (0) 207 247 5003 for more.

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February 6, 2012

Facebook IPO round-up, Telenor’s Indian nightmare, and BT & HTC suffer - Telco 2.0 News Review

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Facebook Facebook Facebook Facebook. It’s here - they filed the S-1 this week. It turns out that their revenues were $3.1bn last year with profits of $1bn, rather less than expected in terms of revenue and a little better in terms of margin. 12% of the company’s revenue (and 40% of its profit) comes from one advertising deal, the one with Farmville games developer Zynga. Essentially all the revenue is ads, but then that didn’t stop Google, did it?

On the other hand, revenues are far more concentrated on a few big deals than Google’s, and Facebook doesn’t yet make anything from mobile although mobile devices drive a lot of traffic (and hence cost) through the web site. Also, 5% of Facebook’s mobile traffic is accounted for by client apps that randomly start up whether you want them or not (or even whether you use Facebook or not), like the one on my Android that’s irremovable without root privileges.

Unsurprisingly, Mark Zuckerberg and a small cadre of directors and top engineers stand to practically drown in stock. The point is made that there are precisely no women on the board of directors.

Advertising, especially the big-account display kind that characterises Facebook as opposed to the search-driven, highly automated, long-tail kind pioneered by Google, is a relationships business. Reuters profiles Caroline Evertsen, former chief of ad-buying for Microsoft and a top advertising exec at Viacom and Disney, who has the job of making sure the 85% of Facebook’s revenue that comes from ads keeps coming. She joined 12 months ago, since when Facebook’s revenues have grown almost $2bn, so she’s probably doing something right. Feminists would like to know why the board features neither her nor COO Sheryl Sandberg.

Peter Kafka at AllThingsD notes that we know very little about Facebook advertising except that there is a substantial traditional media-sales operation as well as an automated system.

And Ars Technica notes that deleted Facebook photos still won’t go away.

Like everyone in the world except Google, Facebook would love to get into the Chinese market, if they could get a satisfactory deal with the government and make headway against the locals. In many ways, the great firewall serves as protectionism for Chinese web companies as well as a means of censorship.

“If we could get a deal with the government”…well. Last week saw an unexpected turn in the scandal over Indian GSM licences when the courts struck down the original auction and demanded the return of 122 GSM licences out of 281 in total. The “shorter” is that because the 3G licences went for so much more, it was widely assumed that the 2G licences had been sold for a song thanks to corruption - although many people think the 3G licence fees were driven up to silly levels by a bidding war. The then minister decided to issue them on the basis of first come, first served rather than an auction, which was certainly unusual, and this is why he might end up in jail. A compendious Wikipedia article is here.

The result is to throw all the plates in Indian mobile into the air. Especially hit is Telenor, whose entire holding of 22 licences has been revoked. Telenor has written off $722 million of assets as a result, although they aren’t giving up - they intend to appeal to the Indian Supreme Court, and may bid for the spectrum when it is re-auctioned, and they also don’t intend to stop rolling out the network and creating facts on the ground. Those of us who remember the various disputes between Telenor and its Russian and Turkish joint venture partners will note that they were astonishingly stubborn back then and eventually came out of it rather well, so expect a long one.

Meanwhile, an Indian court demanded that Google, Facebook, and Twitter remove content considered to be religiously offensive (often a matter of life and death in India) or face “a crackdown like that in China”.

BT’s Q3 results were out this week, and execs were keen to emphasise sales of BT Vision IPTV although much less keen to talk about revenues from it. Overall, it was a poor quarter, with a startling decline in voice calls at BT Retail (almost 1.5bn minutes down year-on-year) which management blamed on the weather. Meanwhile, the fibre deployment targets were quietly scaled back on the somewhat odd grounds that interest rates are low (BT’s pension bill expands when rates fall). And nobody wanted to talk about the SMB line of business…

As a result, expect trouble between BT and OFCOM, as BT will be looking to raise prices where it can in order to help its margins. Right on cue, OFCOM suggested it would rather like to lower the prices BT Openreach charges other ISPs, while Computing reviews progress or rather the lack of it on the BDUK program and suggests that BT might come under pressure to widen the scope of its layer-zero access product.

BT was the launch customer for Microsoft’s Mediaroom IPTV platform, but it’s now quitting in favour of something Linux-based, although it’s not actually the YouView platform, quite.

Vodafone, meanwhile, abandoned its acquisition of Wind Hellas in the face of opposition from the European Commission. It seems that three is the minimum number of operators considered tolerably competitive, which raises the question of what happens if one goes bust.

In Austria, traditionally one of Europe’s most competitive markets (at one time there were six operators), Hutchison buys out Orange. More trouble at LightSquared, after a senator claims they offered him a call centre in exchange for support. AT&T states its conditions to the FCC - they want the same coverage requirement for DISH as for LightSquared.

Asterisk house Digium has taken a leap and launched a range of IP desk phones, optimised to work with Asterisk and featuring a JavaScript widget API. Everyone’s waiting for WP7 Skype integration. And Anonymous gets into a police conference call.

HTC’s Q1s are out, and they’re poor, with revenue being revised down drastically. The company blames preparation for a “product transition”, but it’s just as likely that the commoditiser has been commoditised, struggling in a sea of cheap Androids. Last week, we reported that HTC is planning to prune its range and concentrate on a couple of hero phones.

Forbes, meanwhile, points to the emergence of ZTE and Huawei as vendors of ultra-cheap, operator branded Androids as the reason why Sony Ericsson, LG, and now HTC are getting a beating.

Apple, meanwhile, is first in profitability and in revenues among mobile vendors, and third in volume. Interestingly, RIM is still up there with Apple and Samsung for profitability, pulling past Nokia and HTC, as the Chart of the Week shows.


Meanwhile, developer relations veep Alec Saunders distributes free PlayBooks to developers.

You’re not a top smartphone vendor until you’re involved in a vicious lawsuit with regulators. Samsung crowned its recent success by falling out with the European Commission trustbusters. It’s about those key patents in the UMTS standard that Samsung has been using to put pressure on Apple, Google, etc - back when the standard was created, ETSI tried to make the vendors pool the patents to prevent anyone monopolising the technology, as it had done with GSM. Now the EU is trying to enforce the original agreement.

Is the next Nokia Symbian smartphone the last? Why isn’t there a Windows Phone Nokia Communicator? You can port Windows 8 applications to ARM-based tablets, but but perhaps you shouldn’t.

Motorola Mobility, aka Google Hardware, makes its opening offer - 2.25% of Apple iThing sales in exchange for FRAND licensing of Moto’s 3G patents.

Meanwhile, Google hires Apple’s Senior Director of Product Integrity to work on “a secret project”, while Twitter poaches Google’s chief Asian advertiser. EFF gets Google to explain its new privacy policy.

How websites die, Tabblo edition. A Bittorrent search site goes dark for fear of the Megaupload cops. Trying to retrieve data from Megaupload.

In the cloud, Amazon Web Services S3 is up to 762 billion objects and 500,000 GETs a second. Building the DataScope. And if your requirements aren’t as big as Google’s, why not consider throwing more RAM and Flash drives at your problem?

Red Hat is officially a rival to the OpenStack project, but behind the scenes, its engineers are checking in substantial amounts of code. Note the presence of Asterisk identity Russell Bryant. A problem with MongoDB, or with NoSQL generally?

Swisscom is the latest carrier to go with Ericsson’s M2M platform. Embedding electronics into fibre. Alcatel-Lucent lands America Movil LTE contract. More detail on Nicira, the virtualised-network startup. Interestingly, Diane Greene of VMWare and now Google Enterprise is an early stage investor.

Firefox 10 is out, Ars has details. Why piracy is popular. Telefonica’s in-house startup incubator.

Racepoint PR is maintaining a list of MWC launches and announcements here. And Android users are more likely to have sex on the first date.

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