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May 29, 2013

Telefonica UK’s new vision and the role of Customer Data

Here’s a presentation from James Morgan, Telefonica UK’s head of information strategy for business intelligence. It’s well worth a few minutes of your time, especially if you’re interested in how to define the policies and terms of business around the re-use of customer data.

The most interesting thing, though, is Telefonica UK’s articulation of its new ‘vision’: “To be The Most Trusted Provider of Brilliant Digital Experiences”. This is very much in line with Orange Group’s proposition and a direction that most mobile operators are heading towards, as their businesses evolve.

In the presentation James says:

“We are on a Transformation journey and arguably, our customer data is as big an asset as our brand. Our biggest opportunity to grow our business is to leverage information to delight our customers, putting them at the heart of everything we do.”
Readers of Telco 2.0 will know that for the last 4 years we’ve been saying operators should be focusing on just this. So, it’s nice to see them starting to do so…

The slides are available here. Don’t worry - they’re not all like this one.

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May 28, 2013

SDN, NFV, Elastic Networks: Big Deal for Business or Just ‘Buzzword Bingo’?


There are a lot of new concepts bubbling under in the world of Digital Infrastructure, Cloud and Networks: Software Defined Networking (SDN), Network Functions Virtualisation (NFV), and Elastic Networks to name but a few. But what does it all mean at a business level?

At the EMEA Brainstorm in London, 5-6 June, Cisco’s Paolo Campoli joined peers from Telco 2.0, Amazon, Verizon, Trend Micro, Tekelec, plus representatives from other leading EMEA telcos and tech players, to explore the business benefits and opportunities that could and should be driven by the latest developments in Digital Infrastructure (email contact@telco2.net for more). This guest post by Paolo’s colleagues lays out the four key themes of Cisco’s vision of future networks.

There aren’t many people who question whether or not networks need to become more programmable. Software Defined Networks (SDN) will bring many new technologies. Cisco is actively driving the concept of SDN across broad industry efforts in forums, standards bodies and opensource communities, like Open Networking Foundation (ONF), OpenStack, Network Function Virtualization (NFV), IEEE, IETF, ITU, OpenDaylight and many others. The bigger issue however is about what people want to be able to do on programmable networks and how we make that happen.

“Saving Money” and “Making Money” are the primary motivations. As discussed at the previous events by STL Partners, “The Hunger Gap” forces SPs to streamline operations to make networks more efficient. There are many new tools and technologies that achieve just that. However, the next step is to break out of that gap. SPs are looking for capabilities that help to monetize their network services and assets in new ways that are dictated by the new digital economy. The key objective here is to “Bring the Network to Applications”. Service Providers need to harvest the intelligence in their networks, which today is untapped to a very large extent. We outlined the requirements and opportunities that the “Internet of Everything” brings to service providers networks in a recent blog by Sanjeev Mervana, Cisco’s Senior Director of Marketing for Service Provider Business “Programmable Networks Will Power the Internet of Everything)”.

The essence is that the Internet of Everything is not just built upon a single technology or domain. It is about a future that is highly interconnected where everything is intertwined and sharing data creating entirely new business opportunities, applications and services. The Cisco ONE vision looks at programmability in a very broad manner to maximize its value and impact. There are four key elements to this vision.

1. “Programmability” is more than just being able to program networks. It’s also about the ability to extract useful information from the network itself and making it available to applications to use in real-time. We call this a “dynamic feedback loop”. Applications and the network work much better when they can work together and this means being able to share information in both directions.

2. There are a number of technologies proposed in the industry that enable programmability: APIs, controllers and agents and virtualization. The Cisco ONE vision sees a tremendous value in developing and deploying all of these together in a single concerted effort to fully unleash the potential of network programmability, rather than just using one or the other. We call this the “Power of AND”.

3. A key aspect that Cisco ONE is pioneering is “multilayer programmability”. Service Provider networks, like Wide Area Networks (WAN), are very different from the network that you will find as part of the data center. Rather than being fully meshed with unlimited bandwidth, service provider networks and WANs are very complex, layered and segmented and bandwidth is the most precious resource therein. In an early blog Cisco’s CTO and Chief Architect David Ward discussed this as just one of many technical details as to why service provider networks are different from Data Centers. You can find more on this in his blog: “Software Defined Networking for Service Providers: Data Center Fabric Analogies breakdown in the WAN”.

4. The fourth objective of Cisco’s ONE vision is for programmable networks to achieve full “Cross Domain Support” across mobility, video and cloud. Today’s applications are running in the cloud, leveraging all assets. Programmable networks need to be built for this from the very start.

The CISCO ONE vision combines elements from Software Defined Networking (SDN) and increments this suite of capabilities with multi-plane programmability, analytics, orchestration, automation, platform APIs and many more to deliver a more comprehensive solution that helps service providers realize more value from their networks.

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Voda’s Euro Pain, Ethernet@40, Google Balloon: Telco 2.0 News Review

The Telco 2.0 EMEA Executive Brainstorm is only a week away. Don’t miss out. Email contact@telco2.net if you’d like to apply for one of the last few places.

Vodafone results: voice revenues crash in southern Europe

It was Vodafone results time, and the phrase “sickening thud” was required as the company’s revenues fell for the first time, ever. Net profits for the full year were down 90%, although this is affected by writedowns. The key detail, though, was that voice and messaging revenues in southern Europe are plummeting, and although Vodafone increased its groupwide data revenues by almost half a billion pounds, this wasn’t enough to compensate for the slide in messaging, let alone voice. Voice revenues in Spain were down 20.7% in the year and messaging was off 33.7%. (NB We’ve been saying that it was going to get nasty for a while, and we’re now working on a new report on Voice and Messaging 2.0 - email contact@telco2.net for more.)

The North & Central European division, which oddly includes Turkey, was OK but only just. Notably, revenues slid in the Netherlands and even Germany is suffering among the pre-paid subscribers. If it hadn’t been for a strong performance at Turkcell, NCE would have been only “less bad” rather than “better”. The same pattern came up elsewhere - the big emerging market OpCos, like South Africa, Egypt, and Ghana all did well. And the Verizon Wireless dividend saved the day. It now looks very unlikely that Vodafone will let the VZW stake out of their sight - out of their high-income markets, Southern Europe is a disaster, North & Central stagnant, and Australia is pretty bad too for its own idiosyncratic reasons. Only North America is delivering the goods.

Meanwhile, Softbank vs. DISH goes into yet another round. Softbank deployed a new website on the deal’s supposed “benefits to the US”, making heavy use of their trademark repetition, repetition, and of course, repetition.

DISH, for their part, played the China card:

“The contrast is clear: Dish does not operate infrastructure dependent on Chinese equipment; Dish does not own nearly a third of the Chinese e-commerce giant, Alibaba; Dish was not affiliated with a company that admitted bribing Chinese officials for telecommunications contracts,” said Stanton Dodge, EVP and general counsel at Dish in a statement.

In that statement, Dish also called into question the role Clearwire will have with Softbank, as the U.S. carrier does have some equipment from Chinese vendor Huawei deployed on its network.

Which is…strange, as Dish is proposing to buy Clearwire along with the rest of Sprint. Clearwire’s special committee, sans Charlie Ergen unless he hides in the wastepaper basket, have re-recommended Sprint’s bid after Sprint upped its offer.

And you can perhaps see why the North American telecoms market might be attractive; AT&T just decided to add 61 US cents a month as an “administration fee” to all its postpaid accounts. You could churn, but you better not churn to Verizon or Sprint, because they did it as well. There have been finer competitive highs in the ‘Land of the Free’, we believe.

In Spain, as you might have guessed from the hellishly awful Vodafone results, everything at Telefonica is struggling. Pulling handset subsidies last year improved their margins, but handset sales, market share, data revenue, and total service revenue are all sinking. Although they deny bringing back the subsidy, they did just cut the price of the Samsung Galaxy S4 by 15% and a range of other smartphones by similar amounts.

The winners, such as they are, seem to be low-cost MVNOs, perhaps a similar phenomenon to Free Mobile in France.

DTAG is buying in Poland and the Czech Republic, while Altimo is trying to get in on Orascom. And here’s a classic giant phone bill story from EverythingEverywhere.

And it seems Neelie Kroes wants her legacy to be a single European telecoms market - but will that be like T-Mobile Austria (€17/month) or T-Mobile Germany (€96/month for the same product)?

Verizon Wireless announces its small cells plans

We know AT&T’s got the small cells religion, with its Project Velocity scheme to deploy 15,000 of the little chaps. Now VZW has made a move - they’re buying Ericsson’s RBS 6501 devices for the 700MHz LTE network, but much as they did with the LTE network rollout, they’re also hedging and buying unspecified Alcatel-Lucent gear. After all, it worked for them.

We mentioned earlier that Charlie “Satellite Cowboy” Ergen’s wrestling bout with Masayoshi “Mr. Miyagi” Son has inevitably got even dirtier, what with the Cowboy trying to whip up the crowd against the Yellow Peril from Huawei. The story is especially weird because Clearwire is actually planning to get rid of its Huawei equipment, apparently independently of which party eventually wins. It’s not much - a few radios - but it shows that the paranoia is far from beaten.

Benoit Felten says that the carriers - he cites Verizon, Swisscom, and Belgacom - who “get” next-generation access are also the ones who haven’t given it to their innovations centres to look after.

British fibre-to-the-business startup Hyperoptic has snagged a £50m funding round, from none other than George Soros. Some more details are at ThinkBroadband.

Renesys and LACNIC look at the growth of the Internet in different Latin American countries. Interestingly, rather than just looking at subscribers, they looked at the creation of new AS numbers, a measure of the creation of new networks, companies, and organisations, and the development of the Internet ecosystem more broadly. They note that both Brazil and Argentina are accelerating away and Mexico is stagnating - probably a testament to the vast policy differences between them.

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Both Brazil and Argentina have a policy of developing public Internet exchange points in provincial cities (here’s the Brazilian NIC’s webpage on the program) and letting ISPs compete, whereas Mexico has a private monopoly.

Here’s something interesting: Sigfox is a French M2M startup using the 860MHz unlicensed band and the TDF network of telecoms towers, whose anchor business is the management network for ClearChannel’s rotating billboards around France.

And it’s happy 40th, Ethernet! Don’t listen to us - listen to its inventor, Robert Metcalfe.

Google: balloons and kites

Google is coming for us with its giant INTERNET BALLOON. Apparently the idea is to tether huge blimps over African cities as base stations for whitespace networks. They’re also trying to invent huge flying wind turbines that work like autonomous drone kites. Mrs Google, just imagine what your son could achieve if he just applied himself!

Someone’s run the numbers on the Google Glass explorers, and this is not particularly surprising:

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There’s a great fuss going on about Google’s decision to drop XMPP support from the new Hangouts messaging system. EFF, predictably, points out that it becomes much harder to chat off-the-record or to encrypt your messages. Why you might want to do that is illustrated here, as hackers discover that something is looking up URIs they sent to each other via Skype.

Dan York points out that the support is not entirely gone. Google, meanwhile, blames its retreat from openness on everyone else’s lack of openness.

The point is made that Android market share is the wrong metric.

In India, a major fight is underway between Microsoft Office 365 and Google Apps for Business. Google’s latest move is to cut prices by 45%. It’s one way to get share.

Fortunately, though, this advertisement argues that Facebook is doomed and Google isn’t. Wired attempts to work out how many ads Yahoo! needs to sell on Tumblr to make the business work. Perhaps tellingly, Yahoo!’s senior VP of user experience design just quit.

Salesforce turned in decent Q1s.

And is a PC only a PC if you can build your own?

Samsung vs. Apple II: The Supply Chain

The new frontier of competition is manufacturing and the supply chain. You’ll get no disagreement from us, although we’re far from sure of the conclusion that Samsung will start trying to poach Apple suppliers. They have the money, but may prefer to spend it building the productive base internally, being a components maker at heart.

Samsung also issued a prize for developers working on its Chord P2P technology, and invited reporters to a major product launch in London in the next couple of weeks.

Apple let slip a bit more information about the plan to bring some of its final manufacturing back to the US - the plant will be in Texas. ZDNet infers from other statements that it might be run by Foxconn, and we’d add that it might not be a million miles from the Samsung facility in Austin that fabs Apple’s chips.

Hon Hai, aka Foxconn, meanwhile said it would be producing Firefox OS gadgets.

The European Commission this week sent a questionnaire to mobile operators as a preliminary investigation into Apple’s sales practices.

Meanwhile, Apple keeps adding stores and they work. Interestingly, a typical Apple Store now employs 110 people. New openings have slowed down sharply in the US in favour of many more international ones.

Lenovo smartphones may land in the US within a year. Matt Asay thinks the top smartphones are all basically on a par.

And should Sony give up on electronics and concentrate on its surprisingly successful financial services operation?

Voice infrastructure, your way

Simwood’s new Virtual Interconnect Inbound product is essentially interconnection to the PSTN as a service, and this quote resonates with Telco 2.0:

progressive customers don’t want to feel dependent on an operator, they want to be the operator

On a similar theme, here’s a blog post on Metaswitch’s Project Clearwater, an open-source IMS implementation. The detail that sticks out - CTO Martin Taylor estimates that it costs 2 cents per user per year to run, based on Amazon Web Services pricing.

RevK, meanwhile, discusses the problems of building scalable SIP servers and especially, the fact that some of the most useful features of SIP aren’t supported by the phones.

The OpenBTS project is organising training days at the end of June.

A CRM plugin for Asterisk? Why not.

Truphone has improved its international roaming product, so now the local numbers work all the time you’re in one of its markets.

You can phone into a Google Hangout.

Microsoft Xbox One = 300,000 servers

In the cloud, Microsoft is preparing a huge platform to support the new Xbox gaming console. The idea is to handle multiplayer functions and to offload computing tasks that aren’t latency-sensitive, freeing up the device’s own processing for urgent things like snap-shooting at fast zombies. This will require 300,000 servers and new expansion phases at three MS data centres.

40 years on, meet the Cloud Ethernet Forum, a standards group including basically everyone from the Metro Ethernet Forum, dedicated to better LANs in the data centre.

Should data centres be regulated in their role as resellers of electrical power? And should your data centre have robots?

The CTO of Barack Obama’s 2012 campaign says that most people don’t have “big data”, they have “medium data” at most. In other pushback, Bruce Schneier links to Danah Boyd, discussing a survey of teenagers’ behaviour on the Internet. This is seriously interesting:

My favorite finding of Pew’s is that 58% of teens cloak their messages either through inside jokes or other obscure references, with more older teens (62%) engaging in this practice than younger teens (46%). This is the practice that I’ve seen significantly rise since I first started doing work on teens’ engagement with social media…

While adults are often anxious about shared data that might be used by government agencies, advertisers, or evil older men, teens are much more attentive to those who hold immediate power over them - parents, teachers, college admissions officers, army recruiters, etc…

Over the last few years, I’ve watched as teens have given up on controlling access to content. It’s too hard, too frustrating, and technology simply can’t fix the power issues. Instead, what they’ve been doing is focusing on controlling access to meaning. A comment might look like it means one thing, when in fact it means something quite different. By cloaking their accessible content, teens reclaim power over those who they know who are surveilling them

The full report is here.

YouTube will do it, live…

YouTube has announced a wedge of features for videographers who want to stream live events. You need to be a channel, with 1000 subscribers or more, you simply upload the highest quality video you have plus any extra angles, captions, etc, and Google does the on-the-fly transcoding in the cloud. There’s a fairly extensive API here.

In the light of that, is Smart TV being overtaken by No TV?

Dan Rayburn has a useful comparison of streaming devices. The BBC Internet Blog reports on a fascinating project at BBC Research, an automated tool that detects common problems during the filming of TV programmes and warns the director.

And finally, the UK government’s Universal Credit is the world’s biggest Agile project…and it’s turning into a disaster.

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May 24, 2013

Customer Experience: Is it Time for the Mobile CDN?


Changing consumer behaviours and the transition to 4G are likely to bring about a fresh surge of video traffic on many networks. Fortunately, mobile content delivery networks (CDNs), which should deliver both better customer experience and lower costs, are now potentially an option for carriers using a combination of technical advances and new strategic approaches to network design.

Our new research briefing Customer Experience: Is it Time for the Mobile CDN? examines why, how, and what operators should do, and includes lessons from Akamai, Level 3, Amazon, and Google. We’ll also be discussing the latest opportunities in Digital Infrastructure at our EMEA Brainstorm, June 5-6, London.

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May 20, 2013

Vodarizon, Google I/O, AWS Redshift, Yahoo! x Tumblr: Telco 2.0 News Review

Have you booked your ticket for our EMEA event yet? Here’s the video review from last year’s show.

Vodafone results: “keep VZW” team buoyed by bag of cash

Waiting for the Vodafone results shoe to drop. It’s going to be an important moment for the Vodarizon story; last week, Verizon agreed to pay a £2.1bn divvy from Verizon Wireless to Vodafone, which will no doubt help. On the other hand, it’ll strengthen the camp that argues Verizon Wireless is too good to give up, especially if the alternative is more assets in bombed-out Mediterranean economies. Even SFR doesn’t look such a good idea in the light of the horrible macroeconomy.

That said, Vodacom had good news from South Africa, with its full year profits up 23%, driven by higher data revenues. Safaricom, meanwhile, reported full-year results - and its revenue from M-PESA is actually more than data, messaging, and fixed-line services combined.

In India, the government is planning to install 3,000 new cell sites in the country’s Maoist guerrilla zones, as part of a counter-insurgency strategy. They will be shared between the operators.

Optus, in Australia, outlines its 4G rollout plan. Complicatedly, they’re planning to do both FD-LTE (can we call it “classic” yet?) and also the TD version. Interestingly, they’re borrowing a trick from Softbank here - apparently they were impressed by Softbank’s 29,000-tower TD rollout, and as we blogged, Sprint/Softbank’s spectrum plan is to use FD-LTE for coverage and voice, and TD-LTE for capacity.

Or you could just do WiFi. Benoit Felten blogs an interesting presentation and extracts the following chart. The dark blue sector is data usage over non-carrier WiFi, the purple is cellular data, the rest is carrier WiFi.

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Also, nice use of small-multiple charts, the visualisation solution today’s kids are going crazy for. In the light of the upcoming EU roaming consultation, though, perhaps this far simpler chart is more important.

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Google I/O: not much product, quite a lot to think about

It was Google I/O week, and their developer conference was light on new products but rich in significance. We’re going to be discussing this in depth in a forthcoming Executive Briefing, so we’re only going to touch on it here. There was no new Android major version, not much news about Chrome, and many people remarked on the surprisingly low profile of the Google Glass wearable system.

That said, Google consolidated all its messaging products into the Hangouts feature of Google +, which itself benefited from a new look and feel. (And in case you wondered, Google Voice incoming calls show up in G+.) Google Maps underwent radical changes, aiming to create a map for everyone and every place. Apart from a major look-and-feel review, this means that the content of the maps will now be dynamically generated based on your search history.

But we thought the point of a map was to show you things you didn’t already know? This concern with predictive, push-notification applications ran through everything. Search is meant to get more like that, for example, and Google Now is really a preview of the vision.

A lot of Google products are getting a new look and feel, and here’s an excellent interview with Matias Duarte, the Android design chief responsible for a new company-wide UX strategy. That said, the inimitable WTF Mobile Web points out that the new look leaves something to be desired, even on the flagship Google +.

Ars Technica points out that Google may not have pushed a new Android major version, but it has updated many of the in-house Google apps, and that this represents a new update strategy to deal with the fragmentation of the Android installed base.

One thing we’re tracking at the moment is the growing Silicon Valley fascination with predictive, push-notification, ambient applications, and interestingly, a groundswell of scepticism and pushback against it. Facebook Home is one case in point. Another is the distinctly muted response to Google Glass. Both tendencies are illustrated in this ReadWriteWeb piece on Salesforce.com, and by the man who gave up Facebook “likes”.

Another facet of this on show at Google I/O was Google’s increasing interest in monolithic, packaged apps rather than the open Web. A good overview is here - messaging no longer supports XMPP federation (and how long will SIP last?), calendars and groupware don’t support CalDAV any more, some elements of the mapping/visualisation toolchain only cough up geocoding for other Google products, not for generic KML, spreadsheets don’t support user-generated apps any more. And they’ll decide which of your photos are best, and change them to be better, including making automatic animated GIFs. There’s no way that could possibly go wrong.

Part of the upshot - another row, this time with Microsoft. After Larry Page was so sad about all the negativity, too.

Cloud: New Google products, but AWS is already ahead

Up in the cloud, Google announced a range of new IaaS products, complementing the PaaS App Engine. The biggest was their Cloud Datastore…but was that the new Spanner columnar database technology Google published about not so long ago? If so, it was a radical step forwards. But it wasn’t, it’s the BigTable system they’ve had for some years, which is NoSQL rather than NewSQL, and weakly consistent rather than transactional. Apparently, they’ve “yet to decide how to surface Spanner”.

Amazon, meanwhile, already has a giant-scale column store in the field. Here’s a fascinating and highly technical blog post about working with AWS Redshift. You get the feeling AWS cloud products are the latest and greatest while Google’s are a somewhat dumbed-down version.

Meanwhile, they responded to the Google announcement in the obvious Amazon way, by slashing prices on the DynamoDB product and doing a feature dump on the Elastic Transcoder video ingestion service.

High Scalability has a fascinating talk about really high scalability that argues for something like a router design with segregated control and data planes for software.

Smartphones: 95% of Android profits go to Samsung

After all the Google I/O news, a sobering note: according to Strategy Analytics, 95% of global profits from Android smartphones in Q1 ended up inside Samsung.

4 weeks after launch, 10 million Samsung Galaxy S4s have shipped. It’s impressive, but the iPhone 5 did 5 million in the first three days. And those were to end users, not just into operators’ inventory.

It looks like Apple is draining the supply chain of MacBook Airs ahead of their WWDC event, strongly implying that a new MacBook will drop at the show, especially as a new Intel CPU in that class will be launched in the meantime.

Meanwhile, AT&T is going to drop the HTC First “Facebook phone” once the existing stocks are cleared. And the Facebook Home app is riding high at 16,877 in the charts. We were sceptical.

You should be able to buy a Jolla/Sailfish neo-N9 for €399 in Europe later this year. The Jolla team are essentially all ex-Nokians, so this is Nokia’s former employees and former software versus Nokia’s existing team. Only one can win (and it’s probably the one with the manufacturing and distribution).

NEC has the world’s first liquid-cooled smartphone, which as well as being gloriously overengineered means if you drop it will bleed. And here’s a solution that helps your phone identify gestures.

Look out! Malware signed with a valid Apple developer ID.

Content: Yahoo! buys Tumblr for $1.1bn

In content news, Yahoo! is spending a billion on skinny blog host Tumblr, while DirecTV is looking at buying Hulu, again.

In the Yahoo! announcement, Marissa Mayer promised to “not to screw it up”, alluding to the fate of a lot of Y! acquisitions. Well, this is going to be a challenge, as the company had $13m in revenue last year and Yahoo! has just spent $1.1bn on it. As seems to be typical, it’s also had $125m in funding from earlier rounds, so at the moment the ratio of its total equity funding to its revenue is over 1000/1.

Horace continues his exploration of iTunes data. It seems that as the iTunes user base grows, lower-spending users are being drawn in and cheap apps are making up more of the business relative to expensive content.

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Indie record labels are delighted with streaming as a business.

Dan Rayburn’s event is coming up this week, usually a goldmine of data on CDN. We’re publishing an Executive Briefing into Mobile CDN’s later this week.

And Airbnb was struggling in 2009 until they realised they needed better photos of their upstream customers’ homes. Three points - as the post says, this was an example of “design thinking” rather than engineering. Secondly, Airbnb is a two-sided business, and going to see the upstream customers with a professional photographer is an example of looking after the upstreams, an important discipline in two-sided business models. And thirdly, how much did better cameras in post-2009 smartphones help?

Please press 1…

Here’s a nice Voice 2.0 story: a British developer has compiled an enormous archive of maps that help you make your way through major companies’ IVRs. His site is here, although you have to say it could really, really do with a click-to-call API. Readers with a reasonably long memory will recall that this was the original idea for Fonolo.

BlackBerry Messenger is officially an app for iOS and Android users. In parallel, BlackBerry announced BBM Channels, a broadcast function for the messaging network that lets you create a public stream of messages, content, etc independent of your own profile.

OnSIP tries measuring voice quality and latency on T-Mobile USA’s network. Nothing good results.

Making people dread the Rays

How do you convince people the WiFi is making them ill? A scientific experiment explains how.

Two emergency security updates for Internet Explorer.

Square’s cash register.

Zap your brain to win at computer games.

US investors “find Silicon Roundabout untidy”. Alternatively, all we need is “investors, infrastructure, community, talent, and identity”, so no pressure…

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May 16, 2013

Software Defined Networking (SDN): A Potential ‘Game Changer’


Software Defined Networking (SDN) is a technological approach to designing and managing networks that has the potential to increase operator agility, lower costs, and disrupt the vendor landscape. Its initial impact has been within leading-edge data centres, but it also has the potential to spread into many other network areas, including core public telecoms networks.

Our latest briefing analyses its potential benefits and use cases, outlines strategic scenarios and key action plans for telcos, summarises key vendor positions, and why it is so important for both the telco and vendor communities to adopt and exploit SDN capabilities now. We’ll also be discussing SDN at the EMEA Brainstorm, 5-6 June in London. Email contact@telco2.net to find out more.

Potential Telco SDN/NFV Deployment Phases
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May 13, 2013

BT Football Frenzy, Son vs. Ergen #3, Customer Data, Nokia Surprise: Telco 2.0 News Review

Summer is coming. So is our event. See the line-up of speakers here, or see what makes us different in this video:

BT does enough on results, and goes all-in on football

It’s BT results time, and they were typical. Overall, revenues were down slightly, although not enough to scare anyone, and depending how you cut the data and screwed up your eyes funny, you could argue that some versions of BT’s profits were actually up. The story is basically that the incumbent is doing just enough, squeezing its costs and quietly raising things like line rental charges and basic voice prices that most of its customers perceive as a quasi-tax. Interestingly, despite the hype about the FTTC roll-out, CAPEX was actually down 6 per cent on the year.

But then, “superfast fibre broadband” is last season. BT is all about football now.

The company has spent £1bn on three years’ worth of sports rights, including 38 Premier League matches a year, it’s moved into the old Olympic TV studio, and did we mention the FOOTBALL?

This take on the telecoms-as-media business model is obviously targeted at BSkyB, but not so much at the TV station as the DSL operator; the football will be “no extra cost” (not “free”, though) to existing BT Retail Broadband customers, which makes it sound very much like a massively expensive subscriber-retention initiative.

Also, you can pay BT £15 a month (aka their broadband ex-line rental price) for their football coverage via your Sky+ box. But if you buy your broadband from BT for a one-off activation fee of £15 you can watch their football coverage for “no extra cost”. Yes, it’s complicated and there are bags more options.

Speaking of set-top boxes, the BBC’s YouView project is starting to look as if mostly being a delivery system for BT football coverage, because the full-cream service will only be served to BT-owned YouView boxes. If you bought your own, no football for you - unless a technical fix is ready for launch in August.

So the BBC is considering doing some more set-top box development. The really sad thing is that BBC Research doesn’t deserve this - just look at this project.

Meanwhile, the British government is complaining that the EU won’t let it just give the whole Urban Broadband fund to BT. It is truly amazing how taxpayers’ money migrates towards BT. In this case, BDUK wants to give users a “voucher” they could take to any one of the numerous, competing fibre-to-the-premises providers…sorry, BT.

Perhaps that’s why the stock market wanted BT so badly.

“Cowboy” Ergen dives back into the ring…but what’s this?

If the footy won’t cut it, BT could bid for the rights to live-stream Sprint vs. Softbank, the soap opera/boxing match of the year. Or is it more like wrestling? You thought Charlie “satellite cowboy” Ergen was down and out, having been thrown through the ropes by Masayoshi “Mr. Miyagi” Son, but here he comes, smashing a chair over the referee’s head! It turns out he’s spent his week and quite a lot of his (and DISH’s) money buying up Sprint shares in the hope of getting onto the Sprint strategy committee that’s considering the offers.

And he’s wrapped in a giant Stars and Stripes flag, to boot.

“We are an American company, and the modernisation of Sprint’s network will have to be done from the US. You have to climb the towers here, and you’ll have to have US employees who speak English. Operations command control will be in America. That’s good for jobs. It doesn’t mean that the other guys are bad. It’s just that we have an advantage.”

So how will the 3G Karate Kid respond? Vaulting the ropes, he charges into the crowd and sets about a group of Wall Street bankers in the VIP box! You didn’t see that one coming, did you?

The Japanese telecom company, which owns 33 percent of Alibaba Group Holding Ltd, has told banks that their financing of Dish’s $25.5 billion rival offer for Sprint could hurt their chances of landing a role in a highly anticipated public offering of the Chinese e-commerce giant, two sources familiar with the situation said.

Not that Alibaba management accept that it’s up to him. “Leave him - he’s not worth it!”, they cried, pulling at his sleeve as the champagne bottles cracked underfoot.

A source close to Alibaba said on Friday that while SoftBank is a major investor, it does not make decisions for Alibaba’s management.

But that didn’t stop him laying into that annoying British guy in the pink shirt:

Meanwhile, Softbank has already removed Barclays from a role in financing its bid for Sprint after the British bank was revealed to be advising Dish on a rival offer, sources have said previously.

And while everyone’s attention is turned towards the VIP brawl, someone else at Sprint took the opportunity to settle a score of their own, blasting their vendors for “poor execution” on the network upgrade (that’s Samsung and Ericsson).

DTAG’s Rene Obermann caught the mood and promised that T-Mobile USA’s separate listing helped them to “attack”. AT&T, meanwhile, launched its own no-contract offering to counterattack T-Mobile.

Hutchison doesn’t expect Austria to be any less of a price-war even now it’s down to three operators. (We can remember when there were six.)

The GSMA reckons we’re up to 100 million LTE customers. Meet your new transit provider, Iran.

When customer data attacks, at EE and Bloomberg; Walking back HADOPI

EverythingEverywhere has an idea - let’s sell access to data on blocks of 50 subscribers, via polling specialists Ipsos MORI. The proposed product is very similar to the service Telefonica Digital already offers (Dynamic Insights), but unfortunately the first customer linked with it was the Metropolitan Police, leading to an unsurprising privacy snafu even though the cops then denied it. The story is here.

France is looking again at its cultural policy and how it interacts with the digital content economy. The Lescure report, interestingly, considered the idea of a general content licence or something like US economist Dean Baker’s Artistic Freedom Voucher, thought it was a good idea, but turned it down as being too disruptive and too expensive to finance through a tax on ISP subscriptions.

This is odd, as the report then turns around and suggests instead taxing devices that can connect to the Internet, arguing that this would raise far more money. The idea is of course taken from the levy on blank CDs. Anyway, they intend to use this money to subsidise French-speaking content, and also to water down the HADOPI monitoring system, which will be rolled into the Conseil Supérieur de’l Audiovisuel and will lose much of its enforcement powers. It won’t be allowed to cut off your Internet access, and the maximum fine comes down to be roughly equal to a Deezer streaming subscription.

Horace reckons that iTunes has an ARPU of $40. Interestingly, its shipments of music seem to grow linearly while those of apps are still hurtling up the curve - so much so that Apple’s payouts to developers are keeping ahead of music, despite apps being typically far cheaper.

Screen-Shot-2013-05-12-at-5-12-9.13.48-AM-620x517.png

It’s the time of year when the US TV networks set their forward advertising rates for the season. Growth seems to be slowing markedly, from 11% two years ago to a predicted 6% now, as ratings slide and online competition bites. Also in the US video market, it seems that basic-cable subscribers may be canning the service to get broadband instead.

Google wants you to know that smartphone use in-store is nothing but a Good Thing. Buy more Google Ads. Meanwhile, Google apparently considered launching a physical credit card, but cancelled it.

Bad use of customer data; Bloomberg journalists, it turns out, know if people they write about have logged into their Bloomberg terminal and if so, what data series they looked at, what instant messages they sent, if they communicated with Bloomberg customer service, etc, etc.

Consider this: some of these banks have their offices TEMPEST shielded to guarantee that no information leaks via RF, induction, or even van Eck radiation. But they happily let Bloomberg run its own air-gapped and encrypted cabling into every last office including the CEO’s.

You laugh, but you’re probably on Facebook, right? They’re apparently looking at buying Waze, the traffic-mapping app that gets its data by tracking its users.

Trapped in the Waze app, location data is anonymous and thus difficult to sell to advertisers. If integrated with Facebook, however, the same location data becomes hugely valuable, since it would be tied to Facebook identities, including demographic and social information beloved by advertisers.

No, nothing in the least bit problematic there. Meanwhile, DTAG has launched its own car-tracking M2M product for usage-based insurance companies.

And some helpful advice on browser security may not go amiss.

Voice 2.0 - why UK number portability is part of the problem

Are telcos missing an opportunity to provide much more information tied to phone numbers? It’s not the first time this has been suggested, but this post from RevK provides both a good overview of the barriers, especially in the UK, and also some proposals to get rid of them.

He’s also been hacking on SIP code. Andy Abramson, meanwhile, wonders what will happen to freephone/toll-free numbers in a WebRTC future.

Telecoms.com has a chat with Qualcomm about VoLTE.

“Voice is a smaller and smaller portion of network traffic so any kind of efficiency gains you get from new voice technologies are going to get completely lost. To make VoLTE more efficient than 2G and 3G will take a few years, by which point the proportion of data traffic will be even greater,” he says.

When it comes to enhanced service offerings Carson agrees that IMS VoLTE will bring enhancements like presence, file sharing and IM that will represent “the next wave of customer experience in communications.” But , as he points out, OTT providers have been offering comparable services for some time.

Oh, and Qualcomm has counted 17 different flavours of VoLTE technology.

Nokia: the Linux posse rides again

In devices news, here’s a bit of a surprise from Nokia. The Asha 501 low-cost smartphone has something that looks very much like the much mourned N9’s user interface, described as “Asha Platform”. A related codename, “Fastlane”, seems to refer to the UX as distinct from the operating system. So what’s up?

Nokia’s announcement says this is “based on the best features of Series 40”, but also that it originates from the 2012 acquisition of Smarterphone, a company that showed one of the first LiMo Linux devices at MWC 2009 and whose primary asset is a mobile Linux distro.

Ironically, Stephen Elop said this week that there was no alternative to Windows.

The gadget ships with a substantial line of apps and the Nokia Xpress data-compressing Web browser, and claims to provide 48 days’ standby and 17 hours’ talktime.

Access has released the fancy UI it showed at MWC 2009 as an Android app.

Foxconn is feeling the pressure from another Apple assembly contractor, Pegatron, which seems to be picking up more volume on older models like the iPhone 4.

Here’s a teardown of the Samsung Galaxy S4. US versions have a Qualcomm Snapdragon CPU, but others have Samsung’s own. Generally, and unsurprisingly, the device is full of Samsung’s own products, which helps them to achieve a selling price of $639 on an estimated bill of materials of $237.

Some Google I/O preview.

The BlackBerry Q10, reviewed, positively. It’s the phone for people who know keyboard shortcuts.

Intel will not give up on mobile x86

Intel has a major new product coming, specifically a new core for the Atom line of processors, fabbed at 22nm and codenamed “Silvermont”. These are expected to provide a dramatic improvement in power efficiency, showing a major effort at Intel to compete with ARM.

Big Switch and F5 Networks agree to use F5’s API for their network virtualisation kit, hoping to make it fit better in OpenStack. Cloudera and Splunk have an alliance.

The Open Compute Project is starting work on a specification for a top-of-rack switch.

Quortus runs its software core network on a RaspberryPi.

Mobile web apps are slow, but why?

Progress with Ubuntu Touch.

And screen-sharing is coming for WebRTC.

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May 7, 2013

Softzilla in Manhattan; New FCC; Gates vs. iPads; PhotoShop cloud-only - Telco 2.0 News Review

[Ed. Don’t delay - tickets for the EMEA Executive Brainstorm on 5th-6th June in London are going fast]

Son of Godzilla - Softbank CEO coming to Wall Street

What comes from Japan, enraged by arrogant Yankee scientists’ meddling with the ineffable forces of nature, to lumber ashore and bring its terrifying revenge to the skyline of Manhattan? Godzilla, of course. And Softbank CEO Masayoshi Son, who’s coming to town to explain personally to major Sprint shareholders just why his offer is better than the one from DISH. After his presentation last week, you might be forgiven for thinking it might be a good meeting to miss if you value your teeth. Full background is provided right here on the blog.

Meanwhile, the Clearwire rebels sent out their mailshot to the shareholders and appointed their lawyers. Does anyone else think this could get long?

Telecom Italia’s directors are split on whether to go ahead with the proposed Hutchison deal. As a result, they referred the issue to a committee. The committee is now itself split.

AIS reported net profits up 11% with strong data revenues, as their 3G rollout begins. In the Philippines, PLDT and Globe, though, both had bad news to offer - PLDT’s profits in Q1 were off 8%, although they forecast growth of 2.7% for the full year, and Globe’s were off 76%.

Telefonica’s Czech operation saw its profits in the quarter fall by 35% - taking out “one-offs”, this was reduced to a 10% hit, but that’s surely bad enough. Market share was up, but this just tells us that a price war is raging. Back in Spain, the company is looking at selling the gigantic new headquarters it built at the peak of the Spanish property boom, in a sign of desperate efforts to reduce its leverage.

New FCC chairman named; Aussie spectrum auction flops

We have a name for the new FCC chair, and it’s Tom Wheeler, the former head of CTIA. Having spoken out against the AT&T/T-Mobile deal, he represents continuity with the general Silicon Valley orientation of Julius Genachowski’s FCC even though he does come from the mobile industry.

One of his tasks will be to oversee further sales of spectrum towards President Obama’s goal of providing 500MHz of additional wireless broadband frequencies. In Australia, they just auctioned blocks of 700 and 2.5GHz spectrum, and got a disappointing result - they had hoped for A$3bn and got barely A$2bn. Ed Vaizey has company at last. Telstra bought the bulk of it.

Vaizey’s department, meanwhile, announced a consultation on changes to planning regulations that might make it easier to deploy cell sites. The opposition, for their part, picked a fight with the media and Google and BT all at once, suggesting they wanted to tighten cross-ownership restrictions, do something about broadband, and also stop “a number of the technology and telecoms players becoming “very rich and very aggressive”“. And they also want to do something about digital piracy.

More BT-O2 reintegration, NBN in dash to break ground

In broadband news, here’s more on the BT/O2 deal. BT Wholesale is building the backhaul network for O2’s LTE deployment, and it seems more and more likely that there will also be some sort of arrangement involving O2’s radio network and BT’s 4G spectrum block. 3g.co.uk points out that O2 and Vodafone UK’s radio networks are substantially integrated under the Project Cornerstone infrastructure-sharing deal, so it puts BT in a good position to win Vodafone’s backhaul business too.

This doesn’t mean RevK will be any more satisfied with BT Wholesale though.

The surprising thing here is that Virgin Media seems to think they’re providing O2’s backhaul as well: their Q1s said so. This story, however, gives a number of 1,500 base stations, which is far from the whole of O2 and further from the whole of Cornerstone.

In Brazil, mobile operators are offering 4G, or rather “4G when we get the 700MHz band, 3G until then”. According to the regulator, 40% of the customers find the 3G unsatisfactory, so what on earth will they make of the “4G”? Meanwhile, the government minister is delighted with “the first large-scale 4G test in the world”, which is almost an admission that it’s more of a test than anything else.

Vodafone-Hutchison Australia, meanwhile, is going with Cisco for its core network upgrade, specifically the ASR5500 IP router/EPC solution.

Meanwhile, the Aussie NBN Co is trying to sign contracts and break ground in as many locations as possible before the elections on the 14th of September in the hope of making it impossible to turn back.

In Lebanon, they’ve got fibre. And The Voice of Broadband says 70% of telcos are interested in VDSL2 vectoring and 50% are trialling.

In Ghana, a shake-out is in progress among dial-up ISPs. The explanation is that wireless broadband is more available than the fixed variety, and people have mobile phones, so the cybercafe business is less important as a subsidy to the ISP business. Meanwhile, Orange’s call-detail record pile is helping to optimise the bus system in Abidjan.

Here’s an Ericsson video about LTE Release 12:

And Google Fibre is heading for another market, Shawnee, Kansas.

Amazon beats Google Play to launch in China; Google shutdowns, forecast!

This must sting for Google: Amazon’s Android app store launches in China, before Google Play makes it.

Who’s behind the European regulatory complaint against Google’s insistence on bundling its services with the Android app store? Apparently, it’s mostly Nokia, which turns out to be the driving force among the 17 companies in the “FairSearch” committee, although it doesn’t own a search engine and doesn’t make Android devices.

Google may be preparing to launch YouTube subscription channels in the near future, with pricing set around $1.99 a month. The big question here is to what extent YouTube users really do follow “channels” rather than, y’know, linking to stuff.

In general, it looks like Google thinks the future is all about predictive-push rather than selective-pull modes of interaction with content. Hence the channels, and hence Google Now, the app that tries to work out what you’ll ask Google next….and usually answers “Warning - your battery is low (10%). Please connect your charger”, according to PCPro users.

This is of course a problem with anything that depends on continuous location-sensing - it needs to keep the GPS going, or else the radio in order to get network-based location, and hence kills the battery.

Blog post of the month award goes to this awe-inspiring effort to predict which Google products will get Reader’d next. The safest products are big ones, that are profitable (Sherlock Holmes might have guessed this, we think), that involve social networking in some way, and that aren’t released as open-source code. Interestingly, the model only gives Glass a 37% chance of survival.

Here’s an interview with Ray Kurzweil about precisely what he’s doing at Google. The answer reduces to “natural-language processing for search, mostly”.

Facebook, meanwhile, is trying to restructure its advertiser base from relying on big accounts with big brands that require lots of stroking from big teams of salesmen with big expense accounts to lots of small businesses that mostly self-care through the website. Or to put it another way, “like Google AdSense”. Here’s a profile of the effort and the guy in charge. Another major priority seems to be keeping anyone from ever dropping out of the monthly-active user count.

And hackers get into Google Australia’s building management system, using the default password. Which is “anyonesguess”.

Bill Gates: iPads are doomed, Samsung marketing spends 13x HTC’s budget

The tale of two Android vendors; Ben Evans points out one of the biggest differences between HTC and Samsung in the following chart.

Screen Shot 2013-05-02 at 1.23.56 PM.png

Samsung spends 13 times as much on sales and marketing. In fact, it spends several times as much on sales commission than HTC does on marketing in total.

Horace notes that the North American market has gone through majority-smartphone and the next milestone will be saturation, at which point direct competition between platforms will become crucial. So far, iOS and Android have both been able to expand by recruiting new smartphone adopters. He suggests that Apple will win.

Bill Gates agrees that platform churn is going to be an issue in the near future. He thinks it’s going to be from the iPad to Microsoft’s Surface devices:

“But a lot of those users are frustrated, they can’t type, they can’t create documents, they don’t have Office there”

Meanwhile, Foxconn is looking at diversifying beyond Apple, and has started producing TVs.

The US Department of Defense has officially said yes to Android, BlackBerry, and iOS as secure platforms. This didn’t stop BlackBerry having an outage this week.

Adobe - new Creative Suite will be cloud-only

Adobe is going to move its Creative Suite products entirely into the cloud, as a subscription-based service. Specifically, you’ll only get the latest version if you’re in the cloud; older versions will still exist as downloadable software packages.

As ReadWriteWeb points out, this means an end to the sport of getting a free (or at least cheap) copy of CS.

Amazon Web Services puts its Node.js support into general availability.

An interview with Pat Gelsinger, VMWare CEO.

And why the ultimate transaction-processing businesses, banks, don’t care about transaction consistency in the database sense of the world and therefore achieve higher availability and performance. If you can audit it later, it doesn’t matter so much, as long as there are sensible bounds on how much it can go out of kilter in the meantime.

In Voice 2.0 news, Twilio has lannounced its virtual call-centre product line this week. Details are here.

Tencent, owners of China’s giant social network QQ, have said that they won’t be charging instant-messaging customers. This comes after a government minister suggested that “over the top apps” like QQ might be made to pay telcos for all the data they use (what, an instant messaging app?). Tencent’s president retorted that their customers had already paid for their Internet service. It appears the Chinese have discovered the delights of a good solid net neutrality row, although they get points for originality in beginning with instant messaging.

Chris Kranky points out that the Web would have been very different if you needed a $500 software licence for every server, and argues that the real potential of Voice 2.0 lies beyond the servers and tools and that Google ought to support the equivalent of Apache for WebRTC.

NoJitter, meanwhile, takes a look at what that would require technically.

Alan Quayle reports back from IMS World Forum.

OFCOM starts charging for UK phone numbers, in an effort to encourage recycling of unused blocks. 9 alternatives to Skype, some obvious, some not.

And here’s a voice fail: Path sends a text to everyone in one of its users’ phonebooks. Unfortunately, somebody doesn’t seem to be aware of the idea of time zones, and they receive them at 6am. Worse, the app followed up the texts with an automated robocall, in case the recipient had managed to sleep through the alert!

In online video news, Yahoo!’s bid for DailyMotion, the French YouTube clone, has been shot down after the French government decided they had a national strategic interest in distributing cat videos and insisted that Y! take no more than 50% of the shares. France Telecom, which is a part owner of the site, denies they had anything to do with it and generally seems hopping mad.

BT, meanwhile, has what it hopes will be a trump card against Sky: the rights to broadcast the Ultimate Fighting mixed-martial-arts championship. Apparently the concept was “look for something almost as tough as Sky Sports’ Rugby League coverage”.

NTT DoCoMo has a mobile TV service, and unlike most of them, it has some users, 700,000 of them. The 3G and 4G Wireless Blog has a round-up of information from the NTT Technical Journal.

Mozilla, along with a technical partner, Otoy, has announced a 1080p video codec in pure JavaScript. This is surely going to shake up the whole ego war around browser codecs, although Mozilla can hardly insist on putting a proprietary codec into Firefox…can they?

Optimising a big video server of the special kind, and some interesting insights into Flash streaming.

And finally, demonstrators destroy a Google shuttle bus in effigy.

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May 6, 2013

Cloud, SDN: Disruptive Innovation & Supply Side Disintermediation


Cloud and Software Defined Networking (SDN - on which we’re also about to publish a new report) are increasingly important topics that will be covered at the EMEA Brainstorm, 5-6th June, London. As part of our preparations, Telco 2.0 spoke to Alex Jinivizian, Head of Enterprise Strategy, Verizon, who’s joining us to discuss some of the latest developments and opportunities in these areas. Alex told us he’d just posted a piece on disruptive innovation on the Verizon site - here’s a teaser…

“Disruption is occurring on both the supply and demand side: the value chain is shifting, and new business models are emerging resulting in value creation, and value destruction…”

Worth a read - and why not also network and explore the issues with Alex, Telco 2.0 analysts, and other senior execs at the brainstorm? (Please email contact@telco2.net for more.)

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May 2, 2013

Mobile Wallets: Time for a Rethink


The ‘Mobile/Digital Wallet’ needs to evolve to support authentication, search and discovery, as well as payments, vouchers, tickets and loyalty programmes. Moreover, consumers will want to be able to tailor the functionality of this “commerce assistant” or “commerce agent” to fit with their own interests and preferences.

This was a key finding of the Digital Commerce 2.0 Executive Brainstorm, 20 March 2013, part of the New Digital Economics Silicon Valley event - our full report and analysis can be found here. We’ll be looking further at the practical actions needed to make M-Commerce a reality at the EMEA Brainstorm in London, 5th-6th June 2013. Please email contact@telco2.net or call +44 207 247 5003 for more.

Silicon Valley 2013 Event Report Slides (FinalDraft) Figure 8 Commerce winners.png

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May 1, 2013

Softbank-Dish Round 2: Smartphone Samurai vs Satellite Cowboy

Since we published our Sprint-Softbank: how it will disrupt the US market analyst’s note, a fair few things have changed. Everything has been slower and more complicated than it seemed. The minority investors in Clearwire have been troublesome, something we pointed out as an issue. (NB We’ll be discussing Disruptive strategies further at the EMEA Brainstorm in London, June 5th-6th).

But the real surprise was the intervention of satellite TV operator, DISH Network, which as regular readers of our news review will know, has tried to muscle-in on the deal with a rival bid for the whole thing. There’s some more detail here, for background.

And the soap opera continues, with the latest gripping instalment. Softbank has issued an unusually combative response, in a presentation from CEO Masayoshi Son which describes DISH’s proposal as “inferior”, “incomplete”, “inefficient”, and “illusory”, and asserts that Softbank’s is “superior” no fewer than 7 times in 46 slides not counting front-matter. Clearly someone’s read, marked, learned, and inwardly digested the bit of their Big Book of Behavioural Marketing where it says “If you do not repeat, you won’t compete.”

Son’s presentation also goes after Charlie Ergen, DISH CEO, personally, endeavouring to scare the shareholders with the prospect of a company substantially controlled by Ergen personally (he would speak for 85% of the combined company, although he would only own 36%). Here’s the action replay:

“I just deliver the results, instead of big-mouthing about the future,” Son said. “Do you want to attach a satellite dish to your smartphone? It’s going to become much heavier. I don’t see any real meaningful value that he can offer to the smartphone customers.”….”He himself admits he’s an amateur to our mobile industry,” Son said at the Tokyo event. “He does not have any history in our industry. So he’s a newcomer — totally, totally a newcomer.”

There’s certainly a bit of needle here - Son is punching upwards at Ergen, No.100 in the Fortune 500 with $10.6bn as against Son’s No.128 with $8.6bn. Like Iron Mike in the streets of Brooklyn. Or something. Certainly, this is shaping up to be the most personal and embittered merger in telecoms since Vodafone-Mannesmann or perhaps the feud between the Ambali brothers at Reliance.

The ego wars besides, Softbank has some valid points.

A Cunning Plan?

Operationally, DISH’s strategic concept can be described as “wireless quad-play”. DISH’s satellite TV network mostly serves rural or exurban customers who can’t get decent broadband or cable thanks to long DSL copper runs and sparsity. DISH proposes to add a fixed-wireless broadband product - essentially Clearwire - to their TV product and then round it off with a mobile product, essentially Sprint mainline. And Charlie Ergen is talking about selling advertising across all three channels.

They have their reasons - subscriber growth in their satellite business has slowed to a crawl, and therefore they’re looking for an upsell that would add some juice to their ARPU and margins. Son’s presentation put it this way:

Screenshot from 2013-05-01 10:38:46.png

In the original, this appears next to Softbank’s global subscriber numbers, which isn’t really a fair comparison - why would Japanese UMTS subscriber growth tell you anything about US satellite TV? But who said this was a fair fight?

On paper, or rather slides, it makes a sort of sense - the idea of pushing TV alongside broadband is fairly standard. DISH has looked at the idea of broadcast-broadband integration before, cooperating with Verizon Wireless to develop a CPE device with a high-gain external antenna (the so-called “cantenna”) that would get its TV from satellite broadcast and everything else from VZW’s 700MHz LTE network, benefiting from the low frequency and the less demanding form-factor.

Tale of the Tape…

But this is slideware. Vendors love to tell you that LTE is the new DSL, but Sprint’s spectrum position is massively skewed towards the higher frequencies. They have some 800MHz, but this is mostly earmarked for voice, and they recently had to swap some of it for 1900MHz space. They have quite a bit of 1900, but the mainline network and the growing LTE deployment lives in there, and 1900 is high for rural anyway. And of course there’s the massive 2.5GHz Clearwire block.

sprecky.PNG

Here’s a Sprint graphic explaining their future plans for the spectrum:

Screenshot from 2013-05-01 10:05:39.png

DISH controls 45MHz of spectrum, but it’s in a satellite service band at 2GHz, which makes it precisely non-standard for anything mobile. Note that the DISH contribution fits in where they don’t really need it - up between the 1900 and the 2500, well in the “urban high-capacity” bracket, while the DISH-Sprint concept could really do with more 800MHz spectrum. Of course, you can always add more cells, but more cells mean more costs, and they also require getting permission for each one.

And although there is no such thing as a good LTE spectrum option - they all seem dreadful in subtly different ways - 2.5GHz looks more promising than 2GHz, simply because other people are using it. In our previous note, we pointed out that Sprint has suffered hugely from getting diverted off the LTE development path, and that Softbank’s spectacular performance in Japan after 2008 was very much because they were the only pure UMTS operator in town (rather than FOMA), therefore benefiting from the iPhone 3G and cheaper equipment. Sprint shareholders and managers would be very unwise to get involved in another freak deployment, especially given the epic pain it’s been closing down the old iDEN network.

Further, the whole LightSquared saga ought to be an awful warning for anyone who has the idea of trying to repurpose US satellite spectrum for cellular use.

Barclaycard? This man’s in no state to go shopping!

Sprint has always had partner-network relationships, and they were a source of endless and expensive trouble during the Nextel merger. The consolidation of Clearwire is going the same way - in the courts again this week. The main reason for putting up with all this trouble was to raise capital outside Sprint itself. So, does it really make sense to do a deal that involves borrowing quite so much money? DISH, a much smaller company, plans to finance the transaction almost entirely by leveraging up. Specifically, they’re borrowing most of the money from Barclays’ Bank.

The Bear Blows First

Another of Softbank’s objections is speed. Changing course now will mean more delay. Obviously this is self-serving, but there’s a point here.

In our note, we pointed out that one of the biggest risks to Sprint-Softbank was that T-Mobile USA might get its act together and launch the disruption first, before the deal closed. And, well, that’s happened. T-Mobile has tied up the funding from Deutsche Telekom, turned up LTE service, closed the acquisition of MetroPCS, secured a supply of iPhones, and initiated a new strategy based on no-lock-in, low-cost plans where you either bring your own phone, or else pay for a new one in instalments.

Our readers will no doubt recognise this as Softbank’s old strategy. It’s currently the cheapest way to acquire an iPhone 5 without breaking the law, so it should be no surprise that T-Mo has had customers queuing out of the doors and has registered net subscriber growth for the first time in years during Q1.

Meanwhile, although Sprint mainline added 351,000 net subscribers in Q1, and upped its service revenue to boot, it wasn’t anywhere near enough to compensate for the loss of Nextel iDEN subscribers - another 771,000 left in the quarter. The iDEN-ers are leaving at rather more than twice the rate mainline is picking up subscribers. Perhaps killing off the first voice application developer community ever wasn’t such a good idea.

Conclusions

The Softbank strategy for Sprint is simply to manage Sprint better as a pureplay mobile operator, making full use of the spectrum and the procurement efficiencies it brings with it and setting a disruptive price-point to reset the market. This basically implements the Happy Pipe option. The problem, though, is that T-Mobile USA is already in the field with this strategy.

DISH’s proposal is far more ambitious, combining a challenge to the incumbents’ carrier business with (yet another) attempt at the telecoms-as-media strategy. But it depends on pushing the limits of current LTE radio technology and working around a structurally deeply problematic spectrum position. It probably won’t work.

Whatever happens, either Softbank-Sprint or T-Mobile or both are determined to smash the US price premium. From our Softbank-Sprint note, here’s a (typically aggressive) Softbank chart that illustrates the point.

sbank3.PNG

Softbank sees this as illustrating an “increasing trend” in their ARPU. But the decrease in everyone else’s is far more dramatic. The worry for the other US operators is that Son’s strategy to win this fight may drag his opponents’ ARPUs down to SoftBank’s level.

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

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