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July 29, 2013

T-Mobile USA launches; Vodafone: Germany is the new Spain, Samsung bears answered; Telco 2.0 News Review

Telco 2.0 Top Stories

Here’s the video from last year’s Digital Arabia event. Don’t miss out: book now.

More Shiny Now: T-Mobile USA launches scramble for geek customers

Whatever Sprint’s new owners eventually do, disruption in the US mobile market is well under way thanks to T-Mobile. Having started off by getting users to pay for their devices separately from the service, they then suggested that if you were willing to pay an extra $10 a month, you could expect faster updates - in fact, as many as two new gadgets a year.

The attraction for high-spending geeks is obvious, as is the fact that pushing more gadgets at the customer is a time-honoured way of boosting share, but one that eventually costs money. This particular move isn’t quite as expensive as just turning the subsidy tap back on, but it will still cost money. Typically, the subscriber pays the unsubsidised price of the device in instalments of about 5% each month, but gets to trade the phone back in for a new one after 6 months.

Verizon Wireless was the next up, offering something similar. And of course AT&T joined in.

AT&T, for its part, announced wireless data revenues up almost 20% year-on-year, while U-verse VDSL+IPTV revenues were up 30%. On the other side of the equation, the combination of eroding voice revenues and price-cutting to move the TV service meant that the fixed-line operation’s revenues fell 0.9% and net income 15% overall, while margins in wireless fell from 45.8% to 42.4%, mostly because smartphone prices were cut to keep up with the competition.

AT&T had hoped for 500,000 net-adds in wireless, and beat that with 551,000. But this wasn’t enough to beat Verizon, which recorded 941,000 net-adds in the quarter. 94% of their customers are now on post-paid. VZW also managed to increase its average revenue per account, by 6.4% year on year, as it concentrated on the high value customers. That had consequences for CAPEX. VZW had promised to cut back expenses, but this took a back seat to deploying more LTE into the 1.7GHz band.

With things going well at VZW, it was time for another go around of Vodafone-Verizon rumours, as Vodafone chairman Gerard Kleisterlee said the company would consider proposals if they generated more shareholder value. Not much of a revelation, but there’s always a reason for a bout of VZ-VF rumour-mongering.

Vodafone: Germany is the new Spain

For the fourth successive quarter, Vodafone’s group-wide service revenue fell, by 3.5% year-on-year, in Q1. We’ve become used to bad results from Vodafone’s southern European markets, hammered by the terrible macroeconomy, but this time, it’s Germany that’s a problem - revenues were down 5.1% there, and 4.5% in the UK. It wasn’t anywhere near as bad as Italy (off a further 17.6%) or Spain (10.6%), but the direction of travel was the same, with a combination of worse macro-economic conditions and intensified pressure on prices.

Vodafone’s answer in Europe is the Vodafone Red tariff, which is intended to shift revenue towards post-paid data and establish a regular €30/mo price point. Uptake is pretty good - in Italy, the percentage of revenue coming from in-bundle usage was up 25% - but the point is, after all, to sacrifice some of the margins on out-of-bundle usage in order to create a defensible bundle. There was good news from Turkey, India, and VZW. India, in particular, saw service revenue up 13.8%, with mobile voice minutes of use rising and prices per minute actually climbing.

VF expects to close its acquisition of Kabel Deutschland in Q4, but suddenly the idea of adding more German assets doesn’t seem quite as clear cut as it used to.

Unless you’re Telefonica. Having managed to reduce their debts by €10bn this year, to a mere €48bn, they’re now looking at buying E-Plus off KPN, which would bring them some 21.3 million additional German subscribers. This would cost them €5bn in cash, plus €3bn in shares, and earn them the undying enmity of Carlos Slim, who will hardly be delighted to see KPN’s subscriber count shrink by two-thirds just before he buys it.

For his part, Slim pulled out of a KPN shareholder agreement that limited his stake to 30%, thus clearing the decks to bid before the Telefonica-KPN deal can happen. America Movil, by the way, had reasonable results in Q2, but the telling point is that although Mexico’s new regulator isn’t functioning yet, prices are already falling.

The big question is whether either the German or European authorities will accept a market the size of Germany going down to 3 operators. On that theme, it looks like a power struggle is coming in European regulation. Neelie Kroes’ draft regulation on wholesale prices, which would be highly empowering for players like Free Mobile, has been criticised by “other” EU officials and of course by operators, who are playing their theme from this year’s MWC - regulation is too pro-consumer and all about knocking down roaming rates, and it needs to be nicer to the industry. There’s obviously scope for a deal here: clearance on mergers in exchange for rate regulation.

Indian regulators are going to let spectrum-sharing go to the shop for a “long weight”. Meanwhile, towerco Bharti Infratel saw its profits hop 68%.

Orange had half-year results, which showed that revenues were down 4.5% year-on-year, or 2.2% ignoring regulatory changes (like you can). Also, the French government has a €2bn tax bill for them.

EverythingEverywhere claims to have 687,000 LTE subscribers out of its target of a million by the end of the year, but its ARPU has slipped slightly.

Virgin Media, meanwhile, is getting more and more like a “not quite a mobile operator” - it’s deploying small cells for third parties into a network it’s going to build around Birmingham. This network will support their business customers, a public WLAN deployment, some municipal customers, and also sell capacity for mobile operators to host their small cells in Virgin’s multi-radio chassis.

O2 UK has discontinued its telehealth product, after being the latest carrier to find this is actually quite difficult. TalkTalk reports that its TV subscriber base has gone up sharply, thanks to the old trick of “giving stuff away”, in this case YouView boxes. Meanwhile, Sky has introducted a casual/one-off pay TV offering that is delivered through something that looks like a white-labelled Roku.

What was that about Samsung bears again?

Samsung may be the world’s most profitable phone manufacturer, pulling ahead of Apple in Q2. It’s incredible what a holiday does for you, isn’t it? A couple of weeks ago, everyone thought the S4 was a flop and Samsung was about to go the way of HTC. Now, not so much.

A couple of months ago, nothing was more fashionable than saying that Apple was ripe for a correction. Q2s are out, and they’re pretty good too; sales of iPhones are strong, and although average selling prices are down a tad, this is probably due to running on the iPhone 4 as an entry-level product in new markets. That said, the exec responsible for mobile has been moved, in the faintly disturbing manner common at Cupertino:

Early Sunday afternoon, Bob Mansfield, Apple’s senior vice president of technologies, disappeared from the company’s Web site, his biography removed from its executive profiles page without explanation.

Overall, Q2 may have been the biggest quarter ever for smartphone shipments. Interestingly, LG seems to have recovered substantially and to have snuck back to third place by shipments behind the Big 2. The same mood has taken hold over at Horace’s, who points out that everybody has not got a smartphone and in fact, adoption rates beyond 50% US penetration are much like they were before it. So is the pattern by platform - Apple and Android share the great bulk of the gains, Windows picks up a few, and BlackBerry is shrinking.

Apple and Samsung, meanwhile, have been in talks about a global settlement of the patent disputes. And here’s an argument that disruption was the last thing Steve Jobs ever pursued.

Nokia, meanwhile, reported grim Q2s, marked by disturbing weakness in the mass-market sector and the final exit of the Symbian OS products in smartphones. That said, the Asha 501s roll out in the coming quarter, and there’s a new product - the Lumia 625 is a 4.7” tablet with LTE and some of the photo technology from the PureView demonstrator, priced at €220.

Ericsson reported flat sales, but improved margins, with more of the business coming from radio. Huawei said it expected 10% revenue growth at about 7% operating margin.

Meanwhile, Microsoft has written off $900 million worth of Windows RT-based tablets. Horace argues that the Microsoft write-off suggests that there is something seriously wrong in their software business model and Nokia is actually doing better with the Lumias. After all, PC sales are sliding.

Forkdroids rule in China; the Ubuntu vision

Here’s a piece about cheap Chinese OEM Android devices, with a handy chart showing the huge share Android has in China.


But for us, this is a story about software. We’ve long argued that Google has little control over Android once out in the wild, and that “forkdroids” would proliferate. Here they are, an army of mutant Androids that don’t necessarily use the Google apps that actually carry Google’s contractual conditions. Larry Page may boast of millions of activations per day, but he notably doesn’t say how much money this amounts to. That said, Google did increase its net profit substantially in Q2. Discussion here suggests that if the Android growth is doing anything, it’s flooding the ad market with inventory and driving down prices.

Facebook, meanwhile, claimed that 41% of its ad revenue is now mobile - but as the Google example shows, that might not be a good thing. Either way, they’re profitable to the tune of $333 million in Q2, nothing like Google but a big improvement on the negative $157 million in Q2 2012.

Google has plenty of tricks up its sleeve, though. Perhaps too many. GMail recently got a new feature, in which e-mail is displayed in a tabbed interface, automatically classified into things like “priority”, “promotional”, “social”, etc. Sounds handy! Here’s the catch: users have noticed that they’re getting new and unfamiliar adverts delivered into the “promotional” tab. But surely the advertisers will notice that their ads are basically going into a spam filter? Also, for $35 you can get a dongle that streams HDMI video from your Android to the telly.

Here’s a telling detailed post on the troubles of Facebook’s developer platform over the years.

Canonical reckons that the Ubuntu phones are six weeks from launch, with four devices being available. MTN is the latest carrier to sign up for the talking shop, although we’ll see how many actually buy some gadgets.

They also launched a crowdfunding drive to build a super-high end developer phone. The big idea here is the one they pioneered with the Ubuntu Android app - you plug the phone into a monitor and it provides a full desktop, you unplug it and it behaves like a smartphone, and in general you carry your computing environment around with you. It might resonate in a post-Snowden world. Some more discussion is here.

There’s an interview with Mark Shuttleworth here.

Microsoft passes “10 Google Units”; Amazon loses money

In Q2, Google and Microsoft spent $3.4bn on infrastructure between them. Among other things, it looks like Microsoft is now running a million servers in the cloud - if you take the size of Google at the time of The Data Centre as a Computer as the basic unit of cloud computing, one Google unit is 100,000 servers, so that’s 10 Google units.

Meanwhile, Facebook disclosed that its energy usage is up by a third in the last year. As a result, they’re trying to transfer more servers out of Silicon Valley into their new data centres which have cheaper power and better efficiency. And as a result of that, they’re renting out rack space in the Valley. Even if the Virginian data centres are more efficient, though, they’re on an electricity grid that mostly burns coal whereas Santa Clara County’s power is only 9% coal.

Equinix, for its part, is seeing a slowdown in sales as enterprises try to get their heads around this “hybrid cloud” lark.

Amazon’s Q2s are in, and the company’s notoriously tight margins are tighter than ever. In fact, they’re negative - the company lost $7m on a turnover of $15.7bn. ReadWriteWeb argues that this is OK, and if all else fails they could just sell the data. That said, McKinsey turns the volume down a bit, arguing that although “big data” is one of its five economic “game changers”, it’s nowhere near as important as roads, energy, or education.

AWS deployed CloudFront and Route 53 to India this week.

T-Mobile deployed Comarch’s “Cloud Marketplace” product in Poland. And Axiata’s Sri Lankan operation has snagged a $150m contract to provide the government’s cloud services.

Shakeup at Voxeo; BT squeezes freephone

Call-centre software specialist Aspect has acquired Voice 2.0 player Voxeo, and straight away spun off Voxeo Labs, the research group that gave us Tropo. So that’s Tropo Corporation to you now.

BT reports that its preferred revenue measure was off only 1% in the quarter. No wonder. Its interconnect rates on FreePhone numbers are about to double, but subscribers won’t complain, because FreePhone will now be free from mobiles. So MNOs and alternative voice providers get to give BT a bag of money.

OnSIP does a detailed review of Skype Connect’s interoperability and considers it “more like a legacy product”.

And Viber’s support site gets hacked by the “Syrian Electronic Army”.

Chinese Internet filter: OK. Chinese PC: Not OK.

In security news, the British prime minister is very keen on TalkTalk’s parental filtering, a service bought in from Huawei. His security advisors have banned all Lenovo products from their classified-level networks.

Karsten Nohl is always at it with the GSM exploits, and he’s going to present an attack on Java Card SIMs at Blackhat this week.

BlackBerry devices route your e-mail through the BlackBerry network even if you don’t use BlackBerry e-mail. This was originally a major selling point for BlackBerry - their network provides various compression and acceleration features and helped make web browsing work on random GPRS networks.

Brewster Kahle talks about what happens when you get a National Security Letter.

And finally, nobody’s going to try all the 10,000 four-digit PINs one after the other to unlock your stolen phone. But they might build a robot.

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July 16, 2013

5-Minute Survey Invitation: Can Telcos fight back in digital commerce?

Click here to participate and receive our complementary report

The growth of the internet giants and their associated success with appstores has resulted in many telcos being marginalised from the provision of digital services to customers. We are now conducting research to explore if recent market and technology developments could result in a shift from the native (Android, Apple) ‘app economy’ to a new mobile web experience.

Such developments include:

  • More powerful smartphones with larger screens capable of delivering a good mobile web experience

  • Faster (3G and 4G) networks that can deliver rich web-based content to mobile devices

  • Momentum building around the latest incarnation of HTML, built specifically with mobile in mind

  • Stronger web discovery capabilities on mobile devices

These developments beg the question whether mobile operators can play a bigger role in the digital commerce value chain?

As part of the research into this topic, STL Partners is conducting a survey with industry participants. It will take only 5 minutes to complete and the report resulting from this and other analysis will be sent to all participants.

Click here to participate and receive our complementary report

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July 8, 2013

India, Verizon, Cloud Exchange, RIP Engelbart: Telco 2.0 News Review

Don’t forget your Digital Arabia tickets. Here’s what it looked like last year:

India looks at 100% foreign ownership

India may soon permit foreign investors to own 100% of telecoms operators. It’s too early to get excited - the Telecoms Commission has recommended it but the Department of Industrial Policy has to take a look and then a cabinet decision will be required - but it’s certainly a big change, and it will probably weigh heavily in Telenor and Maxis’s decisions about their investments there, not to mention Vodafone, Sistema, and DoCoMo.

Spain is where the predictions in some of our recent work have been borne out unexpectedly quickly. Their regulator says that total revenues in the sector fell 7% in 2012-2013 and the trend continues. It’s worse in mobile, where revenues fell 16% and the number of subscribers actually fell, for the first time ever.

In the UK, supermarket Sainsbury’s has launched an MVNO, using Vodafone’s network.

Australia’s NBN has reached its target for premises passed, or rather, the target as revised down. Papua New Guinea, meanwhile, is planning a national broadband network and has turned to Huawei to build it.

Alcatel-Lucent claims to have demonstrated gigabit speeds on DSL in a trial with Telekom Austria, over a whole 70 metres of distance. The French government, meanwhile, is wondering whether it might be possible to merge ex-Nokia Siemens Networks and Alcatel-Lucent into a “Telecoms Airbus”. This, of course, doesn’t really make sense from Nokia’s point of view, but you bet the HQ would be in Paris.

Ripping out the copper: harder than you think

Here’s a straw in the wind for the future of voice, and of DSL. Verizon no longer wants to maintain the copper network that serves 500 homes on Fire Island, NY, and still less to rebuild it after Hurricane Sandy wrecked it. So, the carrier is planning to shut it down and transfer the subscribers to fixed-wireless for broadband, and either mobile-only or a VoLTE-based fixed terminal for voice.

The upshot is a hell of a row. While the copper is there, VZ has to guarantee a universal service, accept collect-calls, serve things like credit-card terminals, ATMs, burglar alarms, and medical devices that use voice lines, and provide wholesale access for competing ISPs. Once it goes, it doesn’t. Also, the islanders are concerned that the new service might not be as robust during power failures.

Verizon has long had the habit of dismantling the copper infrastructure when their FiOS FTTH service rolls out, for precisely these reasons, and recently they’ve stepped this up. The US RBOCs would all like to swap rural copper for fixed-wireless, getting rid of the maintenance and shrugging off the regulatory requirements.

So it’s telling that the New York Attorney General has gone in very hard:

Verizon [must] divest those portions of its New York franchise where it is no longer willing to continue providing wireline service and replace Verizon with another carrier that will provide wireline service.”

There are 13 more pages of this stuff, but it’s clear that the matter is coming to a head. Elsewhere in the US, VZ might get around this by leasing spectrum to a rural operator, but in New York, they are the local operator so that’s not an option.

In the UK, meanwhile, the National Audit Office has reviewed the government’s effort to get broadband into underserved areas, and concludes that it’s a disaster. It aimed to get at least 2Mbps to 90% of the rural population by 2015 and it’s not going to get there. It also aimed to support competition, but all the contracts ended up with BT. And it’s hard to say if this is value for money because nobody seems to be counting.

The point is made that the government bizarrely decided that BT had to offer regulated access to its ducts and poles, so-called passive infrastructure access or PIA, but not if the customer wanted to reach business premises rather than homes. This amounted, among other things, to a ban on rural ISPs providing mobile backhaul. It’s as if the whole point was to look after the incumbent, Mr. Bialystock!

OFCOM, meanwhile, is trying to extract some stronger unbundling commitments for BT’s VDSL network. Specifically, they would like to cut the fee BT Openreach charges for every change of provider from £50 to more like £15. Good luck.

In Zambia, the regulator has opened criminal proceedings against all the mobile operators on the grounds that their service sucks (we paraphrase). There’s an example for you.

And Somalia, which didn’t have a government not so long ago, is setting up a regulator. Meanwhile, Etisalat is trying to get its SIMs registered with national identity cards, in order to “prevent identity theft”.

Is the smartphone market stagnating? Is HP getting back into smartphones?

As predicted, HTC’s results are horrible, with revenue down 22% for Q2 and profits down 83%, to the point where they’re basically just breaking even. What with the (not actually bad, but disappointing) numbers from Samsung last week, there’s a degree of bearishness blowing around.

“The whole high-end smartphone industry is slowing, which is not just an HTC problem,” Barclays analyst Dale Gai told the WSJ. “It’s a saturated market.”

ReadWriteWeb makes a case that Samsung is not as tough as it looks, but rather oddly doesn’t mention all the component manufacturing, although it talks a lot about silicon. If the value is either in the chips or in the UX, then surely manufacturing the chips (like Samsung) is a valid strategy. Anyway, AndroidBeat claims they’re about to announce the 20 millionth S IV.

Samsung has also acquired Boxee, the TV streaming and set-top box company with a dedicated fanbase. The fans are worried that it will get rolled into a “smart TV” product and that Samsung might ruin the user experience; after all, the S IV comes with an “easy mode”.

HP may be making a comeback in the smartphone market. In the light of the HTC and Samsung stories, this may seem eccentric to a degree we’ve come to expect from HP. But then, consider this chart from Ericsson, via the 3G & 4G Wireless Blog:


They’re certainly still reckoning with growth in smartphones, lots of it, and it’s expected to compete away the featurephone market. Meg Whitman is on record as saying that for much of the world, the smartphone will be the first computing device they have, so perhaps they’re thinking of a cheap option.

Firefox OS gadgets are landing in Spain this week, with Telefonica. DTAG will be shipping them in Poland soon after. The first device, ZTE’s OneTouch, is priced at €39 plus €30 worth of prepaid airtime - so they’re aiming at the low-end with a vengeance. Meanwhile, Ubuntu Phone gets another member of the carrier advisory group, China Unicom.

Horace asks what a BlackBerry user is worth and whether a fall in enterprise value per-user at Apple is predictive, as it seems to have been at BlackBerry. The obvious problem here is that the stock market also does stuff for its own reasons. More interestingly, though, he argues that the implied valuation of the BlackBerry user base is zero - surely this is what BBM is for, and iTunes is the reason it’s not the case for Apple?

A technical discussion of the new Mac Pro is here, noting that it’s remarkably like a little mainframe. Is Microsoft, meanwhile, turning into a search company?

Japanese railways sell passengers’ data

So you’re a Japanese railway. Your equivalent of the Oyster card system must capture enormous amounts of data about how many passengers get on and off at which stations, when. So why not sell it? They did, and the response was customer rage, especially after that thing with the Tokyo Metro clerk who used their ticketing system to stalk women.

AT&T wants to do something similar (sell data, that is) and TechCrunch tells you where to opt out.

Facebook argues that its ads don’t generate lots of clickthroughs but that’s all right because they’re like TV advertising, generating brand awareness and general influence rather than specific sales. The main point of online advertising is of course that it generates specific, measureable, hot leads rather than general brand awareness, so this isn’t good news. Interestingly, a lot of their data mining is apparently intended to square the circle, trying to demonstrate and quantify the influence the adverts have and therefore justify spending on them.

On the other hand, pay-per-click has its problems, too. Twitter’s version of online advertising is “Promoted Tweets”, where advertisers pay to have some of their content squirted into the feed provided to people who don’t follow the advertiser. As this user discovered, the advertisers are charged whenever there is a clickthrough, a reply, a favourite, or a re-tweet - so it’s possible for a protest mob to generate a huge bill just by bombarding the advertiser with abuse.

How much traffic does Google News really send to newspapers? A German paper finds that it’s less than Wikipedia.

Is this the worst app ever - a very complicated way to download a dozen MP3s that also requires essentially every permission on your Android and a Twitter/Facebook login?

Is this the worst advertising idea ever? Sky Deutschland’s advertising partner wants to build bone-conduction speakers into the windows on trains, so people who rest their head on the window pane will hear advertising coming from a voice in their head that only they can hear.

The Daily Snowden

At the moment, it sometimes feels like there’s a niche for a blog that publishes nothing but revelations connected with Edward Snowden. And ProPublica.org has given us just that.

This week saw the whole affair shoot out tendrils in all directions. In 2003, it turns out, when Global Crossing was sold to Singapore, the NSA insisted that the company maintained a special team of security cleared US citizens to handle requests for surveillance. The officials in the US government responsible for this are unimprovably known as “Team Telecom”.

In this weekend’s Snowdendump, it emerged that the agency had agreements with US and other operators to collect traffic abroad, and that the German government’s intelligence service took traffic in Germany and shared it with the NSA.

As the Germans have been so voluble about the whole affair, this is deeply sensitive politically. Similarly, the French president demanded that the Americans knock it off…and then it turned out France was doing just the same.

The Foreign Intelligence Surveillance Act court, which is responsible for authorising all this stuff, turns out to have secretly redefined the word “relevant” as used in US law. And while the telcos are required to hand all this data over to the NSA, they are also required by the FCC to keep it private!

Amazingly, in the light of all this, major US Internet firms are lobbying Singapore to drop a law that requires government registration of anything that “reports on Singapore”. It can’t help that they’ve been at least as nosey themselves.

So, if you wanted your own PRISM, how much would it cost? Another effort is at High Scalability.

Buy cloud. Sell cloud.

The German stock exchange is launching a market in cloud resources.

The specialised cloud. Here’s a company that specialises in processing huge data sets for the oil & gas industry’s geologists, and that immerses its servers in liquid coolant.

Here’s a good technical blog post on Spanner, Google’s NewSQL distributed data store.

Should those M2M devices really be on the Internet?

An Internet-mapping experiment teaches us a hard lesson about security.

“A lot of devices and services we have seen during our research should never be connected to the public Internet at all. As a rule of thumb, if you believe that ‘nobody would connect that to the Internet, really nobody’, there are at least 1000 people who did,” says the report. “Whenever you think ‘that shouldn’t be on the Internet but will probably be found a few times’ it’s there a few hundred thousand times. Like half a million printers, or a Million Webcams, or devices that have root as a root password.”

A good point about Apple’s security products:

While Apple hasn’t said so explicitly, it’s clear that one key principle guides them when it comes to security: The more you impede a user’s ability to do something, the more likely that user is to circumvent security measures.

John Graham-Cumming suggests a way of getting people to encrypt e-mail.

A well-known encrypted IM system turns out to be drastically insecure.

MIT students built a tool to demonstrate what the enemy might do with your e-mail, but ironically it appears to have been hacked and the error message it showed us said the file “client_secrets.json” was not found.

And here’s how to Bebo, the kid-oriented social network, has been sold back to the original founders for $1m, five years after the founders exited with a $850 million sale to AOL. The new-old owner says he’s bought it because it might be fun.

Carlos Slim invests $40m in Shazam, the original mobile app startup and one whose “name that tune” app seems to be immortal.

What does Google Glass say about our society?

Syrian rebels distribute early warning of Scud missile launches by SMS.

What was it like to be Maurice Wilkes’ son in the Cambridge Computer Lab’s heyday?

And RIP, Doug Engelbart, visionary pioneer of personal computing. Yes, he invented the mouse, but as the link explains, that was the very least of his achievements. You can watch the legendary original demo from 1968 here.

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July 2, 2013

Telco 2.0 Transformation Index: Evaluating and Comparing Leading CSPs

We are preparing comprehensive, holistic and independent assessments of the transformative strategies, performance, positioning and future competitive abilities and collaborative opportunities of Telefonica, Vodafone, AT&T, Verizon, Axiata, SingTel, Etisalat and Ooredoo (formerly Qtel).

The analysis will provide telcos with comparative benchmarking, vendors with an assessment of opportunities and threats, and investors with forward-looking assessments of the companies’ potential for future value creation. It is based on proprietary and market leading research developed over seven years by the Telco 2.0 Initiative. Coverage will subsequently be extended to other CSPs.

There’s more detail on the research here, including approach and structure, and a work-in-progress example chart from our Telefonca analysis below. Alternatively, please email contact@telco2.net to register your interest.

Telco 2 0 transformation index - Market profitability and share Telefonica.png

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July 1, 2013

Can HTML5 trigger a telco comeback in digital commerce?

The growth of the internet giants and their associated success in mobile with appstores has resulted in telcos being largely shut out of consumer digital services and digital commerce.

STL Partners is conducting research with Buongiorno! to explore whether recent technological developments will result in a shift in power away from the ‘app economy’.

Such developments include:

  • More powerful smartphones with larger screens capable of delivering a good mobile web experience

  • Faster (3G and 4G) networks that can deliver web content to mobile devices

  • The latest incarnation of HTML being built specifically for the mobile

  • Stronger web search capabilities on mobile devices

If the internet on mobile begins to more closely resemble that on fixed networks and devices, it begs the question whether mobile operators can play a bigger role in the digital commerce value chain?

As part of the research into this topic, STL Partners is conducting a survey with industry participants. It will take only 5 minutes to complete and the report resulting from this and other analysis will be sent to all participants.

Click here to participate.

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BlackBerry, NSN, Free, PRISM, Skype, AltaVista: Telco 2.0 News Review

Book now for our next event, in Dubai on the 11th-13th of November.

BlackBerry Q1s; are we facing an inventory crisis?

BlackBerry’s Q1s are out, the first results with the BB10 devices. Device shipments and revenues were both up, but the company made a small loss. Although shipments were up by 800,000 units, this was less than consensus estimates. (Interestingly, the estimates were based on the expectation that BB would push more stock into the channel, so the analysts were apparently disappointed that they hadn’t exaggerated the figures as much as they hoped.)

The proportion of its sales that were accounted for by hardware, rather than BlackBerry services or software licences, was up sharply - even though Thorsten Heins was keen to talk up the enterprise, software-heavy side of the business.

The shares dived. Benedict Evans looks at how quickly the new platform is displacing the old one, and worries that it’s not so much the adoption rate as the overall scale that’s the problem.

Screen Shot 2013-06-28 at 15.50.49.png

In the light of that chart, you might not be surprised that the Playbook won’t now be getting BB10.

In Europe, Android is surging ahead. Android devices got 70% of smartphone sales in the top 5 European markets during Q2. Interestingly, BlackBerry, which did well in Europe for years, and to a lesser extent Samsung are losing out to Sony’s Xperia line. There’s more at Businessweek, which points out that in general, Apple iDevices don’t sell anywhere near as well outside the US as they do at home. Ironically, one of the reasons is that European carriers aren’t as willing to subsidise them as North American ones…how times change.

That said, Samsung can always shift its weight onto its other foot as chip maker and key supplier to Apple. Although Apple has signed a contract to get some chips from Taiwan Semiconductor, they don’t deliver until 2014 and it’s taken almost three years to get as far as signing, as Apple hasn’t been satisfied with their quality control. Interestingly, Apple also considered buying a stake in the company, but the Taiwanese were unwilling to become quite so dependent on them.

The heart of the matter may just be the macroeconomy, though. Tero Kuittinen at Forbes points out that Apple, Nokia, and Qualcomm shares have all been weak, BlackBerry’s Q1s were disappointing…and about 20% of flagship smartphone sales are in Western Europe. The European economy is still terrible, and retail sales in general are showing it. That would, of course, suggest that US-heavy Apple would come out of this rather well and the Android vendors would take the hit. (After all, you can get a clone of the Nexus 7 for $50 less now.)

Kuittinen argues that the upshot might be that vendors are left stuck with huge inventories, as in 2001 or 2008. The experience of 2008, of course, thoroughly destabilised Nokia and gutted the mid-market. If that’s so, perhaps BlackBerry was wise not to stuff the pipeline as much as Wall Street expected?

Nokia buys Siemens out of NSN; Free femtocells are free; Google’s new network protocol

Nokia, for its part, has rediscovered infrastructure as a line of business and is buying out Siemens’s stake in Nokia Siemens Networks for $2.2bn (and Siemens is vendor-financing $500m of that). Since Q2 2012, the operation has been profitable and has hacked out a good chunk of the LTE infrastructure market; buying it brings €200m-ish of quarterly EBIT and more importantly the status of indispensable supplier to numerous operators.

Saudi Mobily, for example, has just signed up for $650m of financing for equipment, split between Ericsson and NSN.

Nokia shares rose on the news; so did Siemens, oddly enough.

Qatari interests are looking at investing in Telecom Italia’s fixed-line operation once it’s spun off. The key issue is apparently how much of a stake TI needs to keep in the fixed operator.

Free subscribers who have the latest Freebox Revolution CPE device can now add a femtocell to it, by plugging a module into the spare expansion slot. New Freeboxes will ship with it, and it’s free to the existing base if they pay for the shipping. All the CPE deployed since 2010 can accept the upgrade. This may very soon make Free Mobile the world’s biggest femtocell deployment, and make a dent in the €2bn annual roaming charge they pay to Orange.

Neotel, South Africa’s second fixed-line operator, is up for sale, again. Both Vodacom and MTN are possible buyers.

Cellular Systems, a UK company which built O2’s LTE test network, has lost the Cornerstone joint venture between Vodafone and O2 as a customer, and as a result, it’s gone bust.

There’s an interesting presentation at the 3G & 4G Wireless Blog about EE’s backhaul and internal architecture for LTE.


3UK, meanwhile, have revived the idea of a bundle where the user chooses how much of each product they want. PAYG users pay 3p a minute for calls, 2p for texts, and 1p a MB for data. Also, the credit doesn’t have an expiry date.

Croatia joined the European Union this week. How noughties of them. As a result, roaming charges immediately came rattling down, with data prices going from €6 a MB to 45 cents a MB. That said, the deadline for the EU’s Alternative Roaming Provider project is fast approaching and nobody seems to be much interested - but then, if roaming rates are coming down, the potential for such a business is inevitably reduced.

T-Mobile USA has acquired some more spectrum. Australia reverted to its backup prime minister this week, and as a result, they have a new Minister of Broadband. Telstra, meanwhile, nudged up its line rental charges. I saw yer.

Google’s favourite satellite operator, O3b Networks, has launched its first group of four French-built and French-financed satellites from French Guiana, on a Russian rocket.

And having tried to revolutionise networking with SPDY, Google tries again with QUIC, a new network protocol that again aims for more speed, but also for end-to-end encryption, forward error correction rather than retransmission as a reliability mechanism, and better congestion control. Some things about it could be described as “like SCTP, over UDP” but there’s more to it than that.

Perhaps the most telling part of the design document is just how much work in it is about getting around NATs and middleboxes that try to be…”helpful”.

Not-very-mysterious German company helps spooks; AWS denies PRISM very strongly indeed; exit Dr. Fang

A cynic might say that the end-to-end encryption in QUIC will guarantee that only Google and the NSA can see your data. Edward Snowden was still stuck in the airport this week, but it didn’t prevent another wave of revelations. It turns out that the NSA is taking traffic in Germany on a large scale, with the cooperation of a company described as follows:

which is active in the US and has access to information that crisscrosses America. At the same time, this company, by virtue of its contacts, offers “unique access to other telecoms and (Internet service providers).”

The story speaks of “major Internet hubs in southern and western Germany”, which must mean the DECIX Internet exchange outside Frankfurt. We do not think it will be hard to guess which company is meant, and theorise that there’s going to be a hell of a row.

One huge US Internet player that has so far never been mentioned in any of Snowden’s leaks is Amazon Web Services. We’re not the only ones to notice this. French enterprise customers have been demanding to know more, and last week, AWS convened a meeting of major customers in Paris to deny it more thoroughly.

Adam Selipsky, an AWS VP, went so far as to promise that AWS would inform any customer who was the subject of a demand for information before taking action, in order to give them the opportunity to contest it in the courts. This is an unexpectedly strong statement.

Perhaps they have their reasons. Fang Bingxing, the president of Beijing University of Posts & Telecoms and the architect of the Great Firewall, has been forced to retire due to ill health. Public reaction was not exactly “Get well soon”.

Meanwhile, Netcraft analyses which Web browsers and servers have implemented the state of the art in SSL encryption.


“Open source genuine advantage”, anyone?

Skype: we did it for scalability

Skype principal architect Matthew Kaufman said this week that the company had already begun moving towards a more client-server architecture before the Microsoft acquisition, in order to address scalability problems rather than to respond to demands for surveillance data.

This was driven by the increasing numbers of mobile devices, often on questionable networks, constrained by power supply, and running operating systems that restrict background apps quite seriously, taking part in the Skype cloud, and the problem that the key “supernodes” were almost exclusively Windows machines, so major Microsoft patch days tended to cause trouble. It’s a fascinating insight into the problems of a really big distributed system.

Chris Kranky blogs back from WebRTC Expo, and makes the interesting point that companies like Xirsys (we’d add Crocodile) are surprisingly important, providing things like TURN support. About 40% of calls on Vonage’s mobile client need TURN to work around mobile operators’ NAT, port-blocking, and “helpful” middleboxes. Although it’s an IETF standard, until very recently when it got included in WebRTC, nobody used it, so now there’s a scramble to provide it.

Phono, Voxeo’s browser phone lib, has updated to include DTLS encryption, Opus audio, and to catch up with Firefox 22’s WebRTC support.

RevK updates his voice spam honeypot.

And unified comms in the cloud is a fast growing service, with 8x8 Comms in the lead, says Telegeography.


But Vodafone’s One Net is a unified communications product, and it’s arguably delivered from the cloud. And that has twice as many subscribers again.

Oracle & Salesforce together in the cloud

Oracle and Salesforce have signed a nine-year partnership in cloud computing. As a result, Oracle will sell Salesforce.com to its enterprise customers, while Salesforce will standardise on Oracle databases, Java, and their flavour of Linux. At the same time, you’ll be able to run Oracle in Microsoft Azure. Will Heroku keep using AWS, then?

Yelp explains how they scaled up their analytics, using Amazon’s Elastic MapReduce. This chart is rather insightful about cloud pricing:


The plot compares the cost of on-demand - i.e. what most people would identify as cloud - computing with Amazon’s reserved instances, a product that behaves like a dedicated server. As your demands increase, on-demand cloud flexibility becomes an increasingly expensive privilege.

And Cisco announces its “application-centric networking” approach to the data centre.

AltaVista is no more; RIP James Martin and Evi Nemeth

Yahoo! has carried out a Google-like product cull - the details are here, but the stand-out is that AltaVista, one of the very first Web search engines and probably the best before Google came along, simply because it was the first to take on the sheer scale of the Web.

Danny Sullivan at SearchEngineLand has a detailed eulogy, much of which rings true with our own memories of the early Web.

People who wanted search, who came to you for it, eventually went over to Google. It’s what I termed at the time to be the “Google-AltaVista X,” which looked like this:


AltaVista provided search, period, not a portal, not an ad opportunity, not a curated directory. The best summary would be to say that AltaVista was what Google decided to be. The best question is whether Google is still that.

Sometimes, Google does still come up with something deeply cool. If you’re planning an adventure, they might lend you a backpack of panoramic cameras controlled by an Android phone so your journey will appear in Google Maps.

Everyone in mobile wants to get into payments. What if the payments people got into mobile instead? Vocalink, the company that runs the UK’s bank transfer infrastructure, is having a crack. Hackers, meanwhile, are going after SMS transaction authorisations on Android devices. And one payments app lands $25m in VC funding, despite everything about it being a secret.

This may not even be the week’s worst startup investment - try this one, which could be summed up as $6m for someone’s Pinterest page. It’s a great way to remember the glory years of AltaVista.

Key UNIX pioneer Evi Nemeth is reported lost at sea. And James Martin, real-time systems pioneer, futurist, author, and IT consultant leaves us as well.

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