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September 30, 2013

AT&T-VZW-Sprint-T-Mobile, BT, NBN, Qualcomm - Telco 2.0 News Review

Here’s Andrew Collinson on what Telco 2.0 can do for you. Interested? Come to our next event in Dubai on the 12th and 13th of November.

AT&T hopes 4G will push its margins closer to VZW; VZW says “no” to unlimited; Sprint & T-Mobile say “yes”; everyone but T-Mobile says “no” to consolidation

AT&T CEO Randall Stephenson hopes that LTE deployment will push up margins in their wireless business by 5 percentage points, catching up with Verizon Wireless, now that the company has finished buying small operators for their spectrum for the time being. He also thinks the AT&T/T-Mo decision has closed the book on further consolidation for at least another three years.

Lowell McAdam at Verizon, meanwhile, thinks that Sprint and T-Mobile’s aspirations for disruption are just that, and they will eventually be forced to stop offering unlimited data plans by spectrum constraints. He agrees with his colleague that it’s unlikely that another national-level merger will be permitted.

Both companies are seriously looking at LTE Broadcast, the video-streaming technology we used to know as the 3GPP Multicast-Broadcast Multimedia Subsystem. (Why did they have to change the name?) VZW made an announcement around the time of this year’s MWC, and now AT&T is dipping a toe in the water. Specifically, AT&T now owns the 700MHz block Qualcomm used for their failed MediaFLO broadcast network.

VZW, meanwhile, has started offering an LTE-based Wi-Fi router that provides a standard jack for a landline phone, strongly suggesting they still mean it about withdrawing some of their copper network. The gadget is made by Novatel Wireless, manufacturers of hordes of MiFis. Pricing is $30/mo for voice and 2GB of data on a 2-year contract with a $30 payment for the device. Interestingly, there are multiple cellular radios in there - the voice service is provided on the 1xEV-DO CDMA network and the data service on the LTE.

Sprint’s CFO, meanwhile claims that they have more than enough spectrum to support their unlimited data packages, with LTE deployment in the 1900MHz band going on until the middle of next year and 2.5GHz starting this autumn. That said, they’re also doing extensive managed WLAN offload in order to conserve spectrum.

“Wi-Fi or off-load has been something that we’ve been working on for a while and it will continue to be an integral part of the deployment of the network,” Euteneuer said. “The more traffic we can push on Wi-Fi, the more efficient our network becomes”

It might remind you of our Mobile, Fixed, and Wholesale Broadband Business Models strategy report. They’re also likely to bid for more 1900MHz in the so-called H-blocks, where our old friend the Satellite Cowboy’s DISH Network is also likely to be bidding. Save the date.

Another interesting point about Sprint is that, despite all the LTE, the shutdown of iDEN is still causing customers to leak out of the company. Apparently, more people than they expected had an iDEN product for some sort of specialised application and a mainline Sprint CDMA device for everything else. Unsurprisingly, when Sprint pulled the rug on their iDEN app, they didn’t stick with Sprint for their other telecoms needs.

T-Mobile’s CMO, meanwhile, didn’t promise to keep the unlimited offer but did claim he was specifically targeting AT&T because they had “the most unsatisfied customers”. Also, he claimed that T-Mo is porting in 2 AT&T or Sprint customers for each churner leaving.

Their CFO, though, suggested that there still might be another merger - perhaps a Sprint-T-Mo alliance, or perhaps an external actor buying a regional carrier. The options for that are getting a bit thin with the consolidations of Leap and MetroPCS - it really leaves US Cellular.

The US is often considered to be the pioneer LTE market, but there are actually some countries further ahead: Japan, South Korea, and (only just) Australia, as this chart from Juniper and the GSA shows.


Interestingly, both VZW and AT&T are interested in Ericsson’s new “Radio Dot System”, which provides a very small small cell (it fits in your hand) for in-building applications and is apparently a hybrid between a distributed-antenna system and a small cell. Competitor SpiderCloud’s CMO is unimpressed and perhaps a little confused:

“If it walks like a pig, eats like a pig (capacity), then it is a pig. With lipstick,” he said.

Finally, former Qwest CEO Joe Nacchio is out of jail, and he reports that it’s done his fitness a world of good. It will be interesting to see if he says anything about the Edward Snowden case, as it is still widely suggested that his conviction for insider trading was something to do with Qwest’s refusal to participate in warrantless surveillance.

BT’s line rental hike “has nothing to do with BT Sport”; BDUK fiasco; Vodafone building Gulf cable; it was a dark and stormy night when FLAG went off line

BT announced a round of price rises this week - specifically, the line-rental charge is going up by 3.5%. This of course affects people who get their Internet service from other DSL providers. At the same time, voice pricing is going up as much as 6.5% on “plans BT no longer offers”. Rates to 0870 nongeographic numbers are up, the flag-fall charge to set up a call (remember that?) is going up, and BT Privacy, a nuisance call filter, is no longer free.

BT claims that this has nothing to do with the cost of buying football rights for BT Sport, but it’s telling that people who take BT Sport are exempt. Meanwhile, the parliamentary public accounts committee issued a highly critical report on the BDUK rural access programme. Somehow, all 26 projects have landed with the incumbent, all the other participants have pulled out, BT has contributed £203m less than expected, and the taxpayer has put in £236m more. And the roll-out won’t even get to the last 10 per cent of population coverage.

The community broadband community is furious because BT won’t say which areas it’s going to miss, and therefore they can’t make any plan to cover them. The mobile operators, especially Vodafone and EE, are furious because they were excluded from bidding.

TalkTalk’s commercial director and UK ISP industry figure, David Goldie, has resigned.

In less depressing news, Alcatel-Lucent has given some details of its win with China Mobile. 11% of the Phase 1 LTE rollout goes to ALU. Elsewhere, Nokia is apparently thinking about a merger with ALU, spending some of the money from Microsoft and going all-in on a strategic shift to infrastructure.

Telecom Italia might try to raise more capital through a rights issue rather than sell more assets, it seems, after the news that the Brazilian regulator won’t have Telefonica’s scheme to break up TIM Brasil. Telefonica, meanwhile, walked out of the Czech 4G auction because they insist on keeping some spectrum for a new entrant. The likely new entrant has also dropped out of the bidding.

IDC reckons six million people are likely to become smartphone users in Burma in the next four years, and operators Telenor and Ooredoo are “frantically” handing out SIMs. MTN, meanwhile, is Africa’s top brand.

Vodafone has become a major investor in fixed-line, submarine cable, and data centre assets over the years - we occasionally call it “the other Vodafone” - and they’re joining a consortium to light up a 1,300 kilometre fibre network around the Gulf from Fujairah to Kuwait, as well as trying to buy Tata’s Neotel metro-fibre network in South Africa.

The Economic Times of India reports on the cable ship Niwa’s voyage to repair a failed repeater on FLAG Europe-Asia’s branch to Fujairah. The wind was over 35 knots and the swell was between 20 and 35 feet, and the cable was 4,000 metres below the surface. And while the repeater was being replaced, the branch cable parted and the main line vanished back into the deep. In all, the job took 40 days.

NBN builds on, costs improve; Qualcomm “HTTP for M2M”: Telenor’s classified ads for Asia

Australia’s new government, having promised to get rid of the NBN, or at least turn it back into a frog (or Telstra), is now having some second thoughts. Communications Minister Malcolm Turnbull has directed NBN Co to keep building as fast as possible while the advertised 60 days of strategic review are carried out, finishing 300,000 premises currently in progress and perhaps also cracking on with another 900,000 jobs on order.

Interestingly, a leaked internal document suggests that the cost-to-connect has about halved since the production roll-out began, going from A$7,400 to A$2,200-2,500 depending on how much drilling and traffic control is required. This really shouldn’t have surprised anyone, as this has happened on literally every FTTH rollout we’ve heard of.

Here’s a new gigabit fibre project in Norway. Note the *brave* pricing for businesses.

Dimitris Mavrakis blogs about carrier WLAN deployments, and notes that iOS 7 and recent Samsung Androids support the Hotspot 2.0 and Passpoint standards, providing some scale (at last). Also, Hotspot 2.0 has a production deployment, in Chicago O’Hare airport.

Qualcomm says it wants its AllJoyn M2M discovery technology to become an open standard and possibly open-source.

Telenor has acquired a range of classified advertising businesses in Asia and Latin America, and will fold its existing CellBazaar business in Bangladesh into it. Sounds like a big new e-commerce platform.

Orange is adding LTE signalling to the services it provides through its IPX roaming hub.

The 3G & 4G Wireless Blog points us to Alan Quayle’s “independent review of telecom APIs”.

Amsterdam’s AMS-IX is helping develop a major French IXP, something that rather surprisingly doesn’t exist yet.

BlackBerry and the telcos, a crash inquiry; Windows Phone surge in Europe; iPhone 5S teardown

Here’s a detailed crash investigation into BlackBerry, whose news last week was as bad as you might expect, before they were acquired by a Canadian private equity fund for $4.7bn.

A telling and interesting point from the investigation is the role of RIM’s interactions with telcos. RIM’s half-CEO Mike Lazaridis apparently pulled an iPhone apart to see how it worked, and rather than being suitably impressed, he was worried that letting the user have a proper Web browser would cause all sorts of trouble for the network. Later, Verizon Wireless commissioned RIM to develop an all-touchscreen “iPhone killer”, which became the BlackBerry Storm. When that didn’t work out, VZW turned to Motorola and the Android ecosystem.

Later still, VZW informed the vendors that it was planning to make its LTE investment the centrepiece of its Christmas 2010 marketing campaign. RIM tried to persuade them that 3G would do, the 4G-capable BB10 not being ready, and lost much of their marketing spending and retail space.

Elsewhere, here’s an argument that Microsoft should have bought RIM.

Instead, of course, they bought Nokia. After last week’s revelations about Stephen Elop’s vast rewards for his brief tenure at Nokia, the Finnish prime minister asked him to renounce at least some of the money, but he said he needed it to pay for his divorce. Meanwhile, the chairman of Nokia was caught out telling the papers that Elop was hired on identical terms to Olli-Pekkua Kallasvuo, when he hadn’t. Specifically, Elop had a change-of-control clause while OPK didn’t.

Kantar Worldpanel estimates that Windows Phone, or for practical purposes, Nokia is regaining share in Europe, around 9.2% across the continent, 12% in the UK, and nearly level with Apple in Germany. The Lumia 520 and 620 are the key drivers of growth.

Waiting for the first hard numbers about the new iPhones, the usual game of hanging around Apple Stores and scrutinising ad-serving data has started. It’s suggested here that three iPhone 5S are being sold in the US for each iPhone 5C, which if true is nothing but good news for Apple, as their gross margin on the hardware is estimated at $631 for the poshest 64GB option. As usual, Apple makes a fortune on reselling Flash storage - an additional $20 worth of storage sets you back $200.

Similar anecdata from Japan confirms the 5S/5C breakdown and also that Apple is generally selling very well there.

Apparently, the new look and feel of iOS 7 makes some people seasick. And HTC is exiting Beats by Dr. Dre, the hip-hop legend’s high-end headphone company, just as Carlyle Group buys into it in a deal that values the firm at $1bn. How long before it’s worth more than HTC?

OpenRMC, another “carrier backend for WebRTC”

More and more people want to provide the telco-like back-end for your WebRTC app. Here’s OpenRMC, which wants to:

simplify the in-browser communication interfaces, and run carrier-class call processing back-end systems which hide the complexities of setup, signaling and termination of voice, video and multimedia interactions

Meanwhile, here’s an argument that the technology of Voice 2.0 is basically done, and it’s time for more innovation in applications. We’re not going to disagree with that. He also points out that we could do with better microphones and other inputs, especially as mobile devices are pulling ahead of PCs.

And Twilio is putting on its conference in the UK.

Google vs Death - so we’ll need a bigger data centre; Roku refresh; smartphone laser attachment

Google is starting up a start-up dedicated to health, Larry Page’s G+ page reveals. Not like Google Health, though. Wired makes the excellent point that Google could do with more focus, that Larry Page promised to put “more wood behind fewer arrows” in future, and that inventing a self-driving car and defeating death itself are both rather large projects even if you take them one at a time.

More practically, Google is adding $600 million worth of extra data centre capacity in The Dalles, Oregon, bringing its investment in the site to $1.2bn since 2005. They also bought a 1.4 million square foot abandoned Gatorade factory in Oklahoma and the whole output of a wind farm nearby, so you can probably guess what they’re planning there.

After Google’s Chromecast device launched earlier this year, streaming-gadget maker Roku has refreshed its product lineup, with an iPhone 5C (or Nokia N9) look and a gaggle of incremental improvements. Pricing is still much higher than Chromecast.

Here’s Valve’s latest hardware project, a games controller with a touchscreen that can be programmed to provide different interactions through the API.

A laser rangefinder for your smartphone.

King, a British mobile gaming startup, is looking at an IPO in the US.

And here’s a thoughtful piece from Renesys about the development of the Iranian Internet and where it’s going if Iran is reconciled with the international community.

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September 23, 2013

BlackBerry crisis; Apple triumph; AT&T sells towers and opens APIs - Telco 2.0 News Review

Our Digital Arabia event is now only weeks away…

BlackBerry: $1bn Q2 loss, Z30 launches, weird app crisis

The bomb explodes at BlackBerry: a $950m loss in Q2 and job cuts of 40%. The stockpile of Z10s has been written down by a billion dollars. About the only good news was that installations of the BlackBerry Enterprise Server were up.

The company has announced that it’s concentrating on the enterprise, what with those BES servers. Reuters reports on several large corporate customers who are de-emphasising BlackBerry fleets and reducing their orders, although this is still a question of degree. The big problem here is whether Apple will have a crack at the enterprise, or perhaps a business like Lenovo - focused on enterprise and just testing the water in the smartphone market.

The question is increasingly whether the company will be sold as a unit, or broken up. There’s at least one potential buyer. Mike Lazaridis, who used to be half BlackBerry’s CEO, is looking at the possibility of a private-equity bid to buy the company.

If BlackBerry is to continue as an enterprise-focused vendor, it’s got to sell hardware to enterprises integrated with its services. So does it really make sense to launch a software application, to consumers, so they can use the services without buying the hardware?

The Android app version of BlackBerry Messenger was meant to launch this week, but then, something went wrong - a fake version of it appeared on the app store, demanding that users must give it a five-star rating before it would work. The Guardian reporters asked the developer what they were up to:

“Our purpose isn’t bad, we are tying to make some money. Yes, this is illegal, so Google will delete this app 4-6 hours later.

And they did. But not before over a million users were taken in. And this post on the official BB blog suggests that the dodgy app was based on a leak.

And, of course, the BlackBerry Z30 phablet was launched. It looks impressive, but the problem is surely that nobody is going to commit to a device and more importantly an operating system if they don’t believe the manufacturer will be around in a year’s time.

If BlackBerry’s past management are looking at the possibility of buying the company, BlackBerry’s current management, on the other hand, did more than look at the possibility of buying a new jet: in the middle of July, during their disastrous Q2, they took delivery of a spanking new $20m Bombardier Global Express. BlackBerry is now selling all its aircraft.

Elop returns to Microsoft, up $31m; the power behind the iPhone 5S; Sailfish for ‘Droids coming?

With the Microsoft acquisition, Stephen Elop leaves Nokia and rejoins Microsoft, and a change of control clause pays him a $25 million bonus, of which 30 per cent is paid by Nokia. He already trousered $6 million as a golden handshake when he joined. Back at Microsoft, he becomes EVP of Devices and Services, which puts him in charge of…Nokia.

Apple’s new iPhones were meant to be a disappointment. But more of them shipped on the first weekend than ever before, 9 million of them, enough to drain the stocks. 200 million devices, meanwhile, upgraded to iOS 7, supposedly the biggest and fastest software upgrade ever. And 11 million users tried the new iTunes Radio in iOS 7.

You get the impression Apple knows what it’s doing. Apple’s A7 chip, the one in the new iPhones, turns out to have some interesting features. Notably, it deploys the new ARM v8 instruction set, permitting it to operate at a lower headline clock speed than its rivals and therefore a lower voltage. As a result of v8, it’s actually faster in practice even though the clock speed isn’t as blinding, and the upshot is that it also lets the battery last longer. Further, Apple have stayed with a dual-core processor, probably reasoning that not many tasks on the iPhone are both compute-intensive and parallel, which lets them get rid of some overhead.

Here’s a comparison of the iPhone 5S and the iPhone 5.

An Android-iOS switcher speaks. From our point of view, it’s interesting that she mentions Google Voice as an app that’s becoming increasingly buggy.

The most popular alternative Android ROM, CyanogenMod, scores $7m in funding.

And Jolla’s Sailfish OS, salvaged from the wreck of the Nokia N9, has been running on Android hardware. It’s also now able to run Android apps, via Myriad Group’s version of the Dalvik virtual machine.

Cracking iPhone biometrics, with the hacks of 2004; Google knows the password; Brits vs. Belgacom

One of the most talked-about features of the new iPhones was the fingerprint reader. Was it a major improvement in security, or a creepy intrusion into privacy? The Chaos Computer Club simply recalled that they’d demonstrated how you could fool fingerprint readers, as long ago as 2004, dug out the tools, and had a go at the iPhone. And it worked.

Meanwhile, Android’s “back up your settings” option means that Google knows the password to all the WLANs you’ve logged into. For all the Android devices that have this option set. As it is set on by default, that’s nearly all of them. And if Google can read them, the US government can compel Google to share. And Google can read them, because it can remind you of the password if you lose your device.

The statutes involved admit of a very permissive reading indeed.

But then, meet Operation Socialist, GCHQ’s project to hack the routers at Belgacom, specifically its BICS carrier services division. BICS is a major provider of roaming hub and interprovider settlement services, so this suggests they were intensely interested in mobile and specifically in roaming.

AT&T selling towers; T-Mobile USA wants 600MHz, bad; MVNO-plus assault on the US market

Ian Livingston, BT CEO, is leaving to become a government minister. He won’t be paid for the new job, but that’s all right, as BT is sending him on his way with 2.6 million shares. They’re shares in BT, but then you can’t have everything. Critical comment is here.

In the UK, amazingly, the mobile operators have managed to cooperate and save on their infrastructure footprint, via MBNL, EverythingEverywhere, and the Project Cornerstone joint venture between Vodafone and O2. Outside the UK, it seems to be easier to condense the mobile industry’s footprint of towers if the carriers sell them first. India, for example, is a market where carriers predominantly share physical infrastructure owned by separate towercos, either joint ventures or financial investors. The US is going that way. AT&T, for example, is studying the idea of selling between 10,000 and 15,000 sites for about $5bn. Those would come with about $320 million a year in lease payments, plus however much more you could pull in from adding more tenants.

T-Mobile USA got rid of 7,200 towers to Crown Castle, after all, and they’re in the frame this time as well. T-Mobile USA’s CTO, Neville Ray, gave a keynote at the CCA’s event last week in which he started a lobbying drive to influence the auction process for the 600MHz band.

Ray, and other smaller operators, would like to restrict how much more spectrum below 1GHz the dynamic duopolists, AT&T and Verizon, can control. Further, he wants to reserve at least 70MHz for FDD paired operations, i.e. western-type LTE. Like Verizon Wireless’s LTE for Rural America program, T-Mobile is also willing to lend rural carriers spectrum in exchange for roaming agreements and commitments to build out infrastructure. Ray, who evidently believes that a good presentation should be dense with information, also said that he hopes to have migrated all the former MetroPCS CDMA subscribers onto HSPA by 2015 so as to make more 1900MHz spectrum available for data services.

Republic Wireless, the MVNO-plus that offers “unlimited everything for $19/mo”, is adding more phones and plans. If you’re willing to pay $299 for a Moto X, you can get the “unlimited everything” on 4G for $40 a month, but it’s advisable to get in there as they’re going to review the plans in November.

MVNO-plus business models seem to be emerging as a pattern for price disruption in the US. TextNow plunges in from Canada at the same price point Republic launched at. Like Republic, its app takes over the dialler and converts it into a VoIP app that uses WLAN whenever possible. Like Republic at the beginning, it’s reliant on shipping some quite dated devices (Galaxy S IIs).

At the moment, they’re all running the MVNO element of the deal on Sprint. On T-Mobile or AT&T, you’d be able to swap the SIM into a decent phone and download the app. The real shock will come when one of the carriers tries this at serious scale.

Elsewhere, no wonder it’s tough selling VDSL2 in the States. Comcast has just announced speeds of 105Mbps up, 505 down on its super-premium tariff. This is only available in a few areas, and seems to be fibre to the home rather than cable - in other words, they’re hooking these subscribers up to Comcast Business’s substantial Ethernet network. We recently noted that the cable industry looks like it’s about to take another step up in performance, with 600Mbps modems becoming available soon and gigabit ones sampling. Probably, Comcast is testing the market to see how soon it will be worth upgrading.

French cableco Numericable is planning to float between 20 and 40% of itself on the stock market.

Telecom Italia’s shareholders turned down an offer of €800 million from Telefonica. This may lead to some pressure being applied, as the Italian government is apparently keen to have a European owner rather than AT&T, Naguib Sawaris, Hutchison, or others.

Zen Internet re-opens unlimited broadband in the UK, for those customers it can serve over FTTC.

Orange Business will be offering Ericsson’s M2M platform.

SpiderCloud, a manufacturer of in-building and campus radio access networks, signs up Vodafone Netherlands as a customer for its small cell technology.

In Australia, after the election, NBN Co’s entire board of directors resigned. The government is considering splitting the organisation into two, one responsible for construction, one for operations. The notion of giving up and going back to copper, or handing out 3G dongles, has gone quiet for the time being. A “strategic review” will report within 60 days.

In New Zealand, Benoit Felten blogs on the regulatory changes that make unbundled copper suddenly cheap, part way through the fibre rollout.

AT&T opens more APIs; 2600Hz, the MVNO for Voice 2.0; better call centres with WebRTC; hacking FaceTime

AT&T wants to open up a lot more network APIs, mostly for its enterprise customers. AT&T is faced with a major challenge in the next couple of years, trying to keep its huge base of business customers as they transition off traditional telco products and onto new ones, its so-called “strategic business services”. They’ve already become the biggest partner deployment of Tropo for their Call Management API, and now here’s some more Telco 2.0 activity. We’re covering this in detail in the Telco 2.0 Transformation Index.

Also in the US, the open-source telephony framework, 2600Hz, has become an MVNO running on Sprint, letting it provide the following Sprint resources through its own API:

Provisioning Systems, Voice Billing Feeds, Data Billing Feeds, Voice Services, SMS Services, Data Services, Porting Systems, Tier 2 Support Services, Core Switching Network, Cellular Tower and Network Status Information

Here’s an example of Voice 2.0 in the call centre, from Twilio. LiveOps’ 500-seat call centre for restaurants now has a purely browser-based agent dashboard that works with WebRTC and doesn’t need hard desk phones, although it does need Firefox or Chrome.

Mozilla, meanwhile, has just added WebRTC support to Firefox for Android. The number of potential voice channels on your device just increased. Again.

PleasePress1, the Web site that helps you fight British call centres, has published its Rage Index of the worst. The pits is HM Revenue & Customs, followed by PC World, and then BT, which is worrying given that BT operates a lot of call centres for clients.

And here’s something interesting - Apple FaceTime internals. FaceTime turns out to be SIP on the wire, or rather, the wireless, but it’s not SIP as we know it - Apple’s version of the protocol packs all the interaction into one network port, like WebRTC, in order to work around network address translation and specifically, so-called “carrier grade NAT”. It also does a lot of work to minimise protocol overhead. You might almost wonder if they’re thinking about a browser version in the long run. Of course, it also rules out interoperating with anything else, which Apple considers a good thing, and creates the possibility of deploying more video or voice features whenever it suits them.

Taxing the cloud; DE-CIX to NYC; Kenyan data centres; don’t install that VMWare update!

Is France considering how to tax businesses that operate from outside the country? In the UK, of course, our version of this is the trick of shipping e-commerce orders from the Channel Islands to dodge VAT, or doing all your online service sales right up to the very last moment of closing in the UK but taking the money in Dublin to dodge both VAT and corporation tax. LooseBolts points out that this is very, very important for cloud computing providers.

A couple of weeks ago, we noted that the LINX is setting up a new member-owned Internet exchange in the US. It’s getting to be a trend. DE-CIX, its rival from Frankfurt, is also planning to start a major exchange in New York City. BT, meanwhile, adds more private interconnection to its US operations.

Kenya just gained a serious data centre, as Liquid Telecom, a subsidiary of Econet Wireless, opened a carrier-neutral, high-security hosting facility in Nairobi. At 500 square metres, it’s no behemoth, but it’s a milestone for East Africa.

VMWare warns its customers to stop installing their software, as a critical bug is discovered in vSphere 5.5, the latest version. Horror of horrors, the bug affects the program that is responsible for replicating data into backups.

Amazon deploys new software every 16 seconds, although that might count software deployed by their clients. Amazon Web Services claims to have 24 times the capacity of its key competitors.

And finally, a look back at a very early conference on the Web.

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September 18, 2013

Operator Opportunites in the “New Mobile Web”

We’ve just published a new research report showing that the emergence of the New Mobile Web will challenge native ecosystems as the primary format for delivering content and apps to mobile devices. This shift will create new opportunities for operators seeking to re(enter) the digital marketplace.

STL Partners define the “New Mobile Web” as the culmination of technological advances that have transformed the level of functionality of the mobile Web, creating a user experience that now rivals PC browsing and native applications.

Register and download the full report free from our research portal here.

The Mobile Web’s coming of Age

The ‘old’ mobile web was only as strong as its weakest link; often websites were not optimised for mobile devices and network connectivity was slow (not to mention expensive), leading to a poor user experience. This tarnished and diminished the use of mobile browsing and hence native apps have come to dominate - they provided more intuitive and engaging ways to access mobile content and services.

However, we are now coming to the stage where market and technical developments are creating a more consistent and widespread mobile experience that rivals PC browsing and native apps.

  • The HTML5 standard is maturing and being further refined and improved (the W3C plans to finalize the HTML5 standard by July 2014 ). It now offers improved functionality within web-apps, including the ability to access and harness the resource capabilities of devices as well as working offline.

  • Network connectivity has improved significantly - the launch of 4G networks provides users with ultra-fast, reliable connectivity.

  • Better mobile devices - devices are now more powerful and are better optimised to display web content.

  • Improved browsers - the majority of mobile browsers now support the HTML5 feature set.

It is not just the improvements in a single technology that is causing this transformation in mobile, but rather the culmination of these technologies that is strengthening the ‘chinks in the armour’ of the mobile web. STL Partners define this culmination of technologies and enhanced user experience as the “New Mobile Web.”

A bumpy transition to the New Mobile Web

One obvious question to ask is, ‘even if the New Mobile Web can deliver a similar user experience to native apps, why will a transition occur?’ Native apps already deliver a great user experience and are a popular and established format for users and enterprises.

Indeed, STL’s recent research in this area (Figure 1) highlights the importance of this question. The app ecosystems are ingrained in the mind-sets and processes of mobile users. Furthermore the key players in the app economy are keen to preserve the status quo - they have built and now benefit from a marketplace that provides discovery and distribution of apps and content. They will not relinquish this easily.

Figure 1 - Barriers to the Success of HTML5 HTML5 barriers sep 2013.png
Source: STL Partners research interviews June 2013

Despite this inertia, the transition to the New Mobile Web will occur. The New Mobile Web is disruptive - it will prove to be the cheaper and more-efficient solution for delivering content and apps to mobile devices.

Gaining access to Apple and Android’s ‘walled ecosystems’ requires a major cost and investment by app developers and enterprises - the fragmentation of the ecosystems also forces enterprises to develop a number of apps in order to provide functionality across the different platforms and devices, which can be costly. Furthermore, these native ecosystems can produce significant delays in getting to market as the apps may have to go through rigorous checks before they are approved. HTML5 web-apps only need to be developed once for all operating systems and devices and can be rolled out directly to market. This is a much cheaper and easier long-run solution for enterprises.

Indeed the issue may be even more fundamental; the pure Web and standalone apps are inherently different beasts. The sheer scope of the Web means that it can represent and deliver much more content than apps. Business and organisations that provide information and engage customers/users over the web often find it hard to justify the investment in producing and maintaining an app; it may not be suitable for their business or organisation and it may be relatively costly. They will however still maintain an active presence on the web and with the rise of the smart phone, engagement is now even more important for mobile. Therefore they embrace a single service that allows users to effectively access their content on mobile devices as well as PCs. The New Mobile Web offers this.

This trend towards the ‘mobilificaiton’ of web content will drive users towards the New Mobile Web, helping to break the app-first mind-set and lead to a shift in the balance of power away from the native app ecosystems.

A word of caution, STL does not believe that this shift will destroy the app world. It will simply rebalance the marketplace so that it more fully reflects the key strengths of both delivery formats. Apps will still play a significant role; their continued advantage is that they are able to offer greater cutting-edge functionality - this is particularly useful for games and other sophisticated software.

How can operators capitalise on this transition?

As previously stated, the pieces of the puzzle are now coming together. The technology has now evolved to a stage where mobile web functionality is approaching that of apps and PC browsing. STL believes that it is not a question of ‘if this transition will happen’ but a question of ‘when and by how much’.

This transition will create opportunities for innovative players. STL’s research has indicated that the main opportunities in the New Mobile Web are around Monetisation, Discovery, Distribution and Loyalty .

Telecom operators should look to capitalise on this rebalancing and the opportunities it presents. Many operators are looking to digital for growth (and many have struggled due to the dominance of the native ecosystems). This shift presents a new arena for them to compete in. Operators are placed to succeed here - they have the requisite assets and capabilities (e.g. experience in billing, loyalty, customer data, device and network management etc.) and the desire to (re)build their presence in digital.

STL have recently published a free research report outlining the opportunities for operators in the New Mobile Web and the different strategies they could implement in order to succeed (which can be found here). The emergence of the New Mobile Web is going to create opportunities for innovative players. Operators should therefore look to ride this wave of digital disruption rather than again remaining marginalised in another power shift.

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September 17, 2013

MEF Launches Annual Meffy’s Awards in Silicon Valley: Deadline 23rd Sept

MEF, the Global Community for Mobile Content and Commerce, have launched their 10th annual Meffy’s awards in San Francisco.This year there are 14 award categories recognizing the best in mobile content & commerce with four Innovation categories that focus on the innovation of the product or service, rather than proven success in the market.


Winners will be announced at a gala dinner on 14th November 2013 at the InterContinental San Francisco. The celebrations are just one of the highlights of the two-day event connecting global mobile leaders. Confirmed speakers include senior executives from Shazam, Evernote, Silicon Valley Bank, Visa, Mozilla plus many more.

Get $400 off MEF Global Forum tickets with the early bird discount until 23rd September. The MEF is an official Event Partner of Digital Arabia 2013.

More details can be found at www.meffys.com and www.mefglobalforum.org.

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September 16, 2013

Vodagreece; islanders demand and get FiOS; iChina; HP out of DJIA - Telco 2.0 News Review

Vodarizon cash begins to flow - into Greece; Verizon gives up Fire Island fight, breaks out the fibre

The upshot from the Vodafone-Verizon deal is beginning to flow. Vodafone’s acquisition of Kabel Deutschland has got the required 75% of the shareholders to agree, and therefore it’s a deal, subject to regulatory approval.

Meanwhile, Vivendi is planning to spin off SFR, which was 44% owned by Vodafone until 2011. The markets immediately begin to speculate that Vodafone might be interested in buying it.

Elsewhere, Vittorio Colao says that Vodafone will speed up its rollout of LTE using the Verizon money, notably in Greece and Italy, those well-known high-growth markets.

And Vodafone UK’s boss, Guy Laurence, is leaving the company to take up a post as president and CEO of Rogers Wireless. He is succeeded by Jeroen Hoencamp, Vodafone’s head of UK enterprise.

Back at Verizon, the first step in their drive to trim the legacy copper network has gone very, very wrong. Recap: Hurricane Sandy wrecked, among other things, Verizon’s network serving about 500 subscribers on Fire Island, NY. Not surprisingly, they weren’t exactly keen to rebuild an out-of-the-ark network for a few low-dollar customers. So, they proposed to fix the mobile network and offer something called “Voice Link”, a fixed-wireless device.

VZW has been experimenting for some time with fixed-wireless on its LTE network, as a potential solution for places where the FiOS fibre is unlikely to reach that both gets rid of the copper OPEX and provides data rates competitive with decent DSL systems. It also permits them to shrug off some irksome regulatory requirements. Among other things, they developed a device called “Home Fusion” that provides voice and Internet service over the LTE link and TV via satellite broadcast. They even planned to lease spectrum to rural carriers who might deploy additional LTE as part of a partnership agreement. So you might have thought this was a pretty good deal.

As it turned out, though, Voice Link was no Home Fusion. It provides telephony, full stop. In fact, it provides rather less than traditional telephony - it doesn’t support credit-card terminals, burglar alarms, medical monitoring devices, or that obscure value-added service, “the Internet”. Being part of the mobile network, it also escapes the various regulatory requirements on the PSTN - so no wholesale, no special access, no universal service, and no Bellcore requirement for weeks of backup power at the exchange.

Fairly clearly, VZ was hoping that its Fire Island customers could be upsold a wireless data package on top of their existing service. They were furious, and both the Feds and the NY State regulator were activated. And as a result, VZ has eaten humble pie. Far from withdrawing the fixed service, or restoring the copper, they’re now going to pull fibre to everyone who wants it. It’s a huge win for, among other people, long-time broadband activist Harold Feld. A precedent has been set, and future campaigners will be emboldened.

And it puts down a marker for the US telecoms industry: the savings from eliminating the long copper runs are not going to be easy. AT&T, for example, plans to deploy U-Verse to 85% of its footprint, and probably to trim the rest. You can’t be anywhere near as certain of that money this week as you could last week. It’s also quite possible that the RBOCs will consider selling these networks to someone who loves them - like Windstream - rather than invest in them.

The FCC, meanwhile, is lining up the first big auction of spectrum for some time, tapping 65MHz from the so-called H block. The idea of somehow linking a national emergency service network with spectrum auctions, an old favourite, is back - some of the takings will be earmarked for the NTIA’s Firstnet project.

In the UK, the Ministry of Defence is going to hand over 200MHz of spectrum to OFCOM for an auction in 2015/2016. It includes 40MHz of 2.3GHz - which might be handy as the Americans are using some of the 2.3s for LTE - and 150MHz at 3.4 and above.

Meanwhile, the national smart metering project that will run on O2 UK’s network has taken a step forward - the contract for the meters themselves has been signed. The 3G & 4G Wireless Blog has an interesting Ericsson whitepaper on LTE for the smart grid, including this table of latency requirements for different electricity grid functions as defined by their standardisation body, the IEC. Ericsson reckons it can be done on the public LTE net, but it involves a lot of optimisation of different service classes.


European roaming must die, by 2016!

The European Commission has made its mind up - they do want to get rid of roaming charges. Specifically, charges for incoming calls have to go by July 2014, and by 2016, operators are expected to choose whether to get rid of their roaming rates, or let their customers opt for an alternative roaming provider while they’re abroad. This provision further requires that the temporary provider change happens without a change of SIM.

Clearly, Neelie Kroes is hoping that the threat of alternative roaming will induce the operators to get rid of roaming charges voluntarily. The only problem here is that so far, nobody has shown any interest in becoming an alternative roaming provider, and the OSS-BSS requirements for such a beast (especially if it’s got to use OTA updates to existing operators’ SIMs) are quite complicated.

Elsewhere in Europe,Telecom Italia has lost a member of the board, who resigned after being accused of insider trading.

KPN will have to eat a writedown of €3.7bn after the sale of E-Plus.

MTS is deploying LTE in north-western Russia, with 3,000 eNode-Bs from Samsung for some $55m.

And in Austria, Telekom Austria is involved in a wide-ranging inquiry into political corruption. Four people have been convicted, and the extreme-right BZO party must repay the company a million euros it received in illegal donations. The former deputy CEO, Rudolf Fischer, was acquitted in this case but convicted in another case of illegally financing another political party.

That said, it’s nice work if you can get it. The €960,000 TA spent with a fake ad agency actually controlled by the party bought them a concession on universal access to freephone numbers that saved them about €10 million - and now they’ve even got their money back.

New iPhone certified for China Mobile; our LTE band hell

In all the excitement, hardly anyone noticed that the Chinese Ministry of the Information Industry has certified the new iPhones for use on China Mobile’s network. Specifically, the document refers to two variants Apple hasn’t announced yet - therefore, these must be the ones with TD-LTE radios.

That would be two more variants - as explained here, there are already 5 variants of both the iPhone 5C and 5S, to cope with the horribly nonstandard LTE band plans.

Famously, Apple won’t let the devices use LTE unless the operator’s network passes a set of tests they define, which are a closely guarded secret. Only five people in each operator are allowed to know what they are and all of them must separately sign a personal non-disclosure agreement. O2 UK seems to be in an awkward position:

While O2 has denied failing any of Apple’s network approval tests, a spokesman confirmed that the tests have not yet been passed.

A nice distinction, as they say.

Morgan Stanley analysts reckon the GPU in the new iPhones is from Imagination Technologies.

Google, meanwhile, says its Texas factory is producing 100,000 Moto X phones a week, at about $4 more per phone than Asian manufacturing.

It’s not good at HTC, again - they’ve just announced 20% job cuts in the United States. Nokia, meanwhile, experimented with running Android on a Lumia phone, which shouldn’t be all that hard as they are Qualcomm Snapdragons at heart.

Why aren’t Windows Phones selling? At least, why aren’t they selling more? (Telco 2.0 is currently changing operator. The final customer contact suddenly perked up, noting that “you’ve been on this contract since 2008…and you paid every bill on time.” We waited for a knockout retention offer. “Would you like a Lumia 520?”)

That said, daily app sales have passed 9 million, 270 million a month and Microsoft has started paying out developer revenue share after 30 days rather than waiting up to 120 days for the carriers to reverse-bill. The telling quote is this one:

As per Microsoft, developers are earning three times more revenue per active user, on an average, per active user in markets where carrier billing is offered, and six times more revenue on average in emerging markets where credit card usage is more limited.

Surely supporting this must be a no-brainer for telcos?

Rostelecom gets a major operator CDN; cloud gaming, a new challenge

Rostelecom has deployed a terabit of CDN capacity, with nodes located in 30 Russian cities. The technology comes from Ericsson.

Here’s a good piece on the hosting requirements of online gaming, at Data Centre Knowledge. Latency starts to hurt at 100ms for first-person games, and any lower will be noticeably better. All other things being equal, if you’re > 100ms, the zombies get you - if you’re < 100ms, you’re safe. For now. A useful paper looks at how much localisation you can achieve with existing cloud systems.

The definition of cloud only gets more fluffy, diffuse, and generally cloud-like. You can now run Amazon Web Services’ DynamoDB on your own desktop machine, a feature most of use to developers who will then deploy their work to the cloud. Of course, it’s also quite common to develop in the cloud and then deploy to private cloud or dedicated hosting for production.

Amazon US-EAST 1 had a major outage on Friday. This one brought down the code-hosting service Github and the managed cloud platform, Heroku, causing tragedy to thousands of whimsical web applications and obscure device driver projects.

HP drops out of the Dow; Twitter financials stay secret for now; Google splits up with MySQL

Hewlett-Packard, the original Silicon Valley startup, has dropped out of the Dow Jones index for the first time in 16 years, because the Dow committee thinks the shares are too cheap. Maybe so, but it’s been a great stock to own during the last year:


Meanwhile, it’s been a quiet year for tech companies floating on the stock market, after the relative flop of Facebook’s IPO, and so, Twitter’s is eagerly awaited. Part of the slowdown is explained by a legal provision that allows companies to explore the prospect of an IPO without going public until later in the process, and Twitter is making use of this. As a result, it’s hard to say what a reasonable valuation might be, as they don’t have to publish the S-1 financial statement until T minus three weeks.

And without a credible valuation, it’s obviously tough to build a book ahead of the IPO.

Google is flushing its MySQL databases in favour of MariaDB, a fork of the popular open-source database. MySQL is one of those open-source projects that may be open-source, but is closely tied to one particular company, often an awkward situation. And in this case, the company is Oracle, which acquired the keys to the MySQL kingdom along with Sun Microsystems. Google and other big MySQL users have been complaining that the (ex-Sun) engineers who maintain MySQL don’t accept much of the code they contribute to the project…and of course, Google and Oracle have been suing each other for what seems like years over Android’s Java virtual machine.

Here’s an app that digs into your inbox and pulls out advertising for products you might want to buy. You might think they’ve re-invented the spam filter, but here’s the USP: rather than throwing it away, it shows them to you. Awesome.

And a messaging library wins TechCrunch’s Disrupt.

Monitoring the cloud at Twitter-scale; consumer radio planning exists!

How does Twitter monitor its machines? A great blog post explains. The monitoring system does 500 million database writes a minute, just measuring how the production systems are doing! And all for 140 characters of LOL.

Chris Kranky argues that contacts management will be a key problem in an age defined by vast numbers of WebRTC “cockroach apps”, and thinks that the XMPP messaging standard might be part of the solution. In comments, it turns out that the XMPP Standards Foundation is having a special interest group on improving the Jingle voice protocol.

Couchbase, the popular document-oriented NoSQL database, is offering a new version of its software for use as a local data store on mobile devices. They suggest that, for example, a medical system could keep much more data locally and keep it organised, being able to function without continuous connectivity. At the same time, they’re also offering Couchbase as a cloud service, living in Amazon EC2.

Here’s a good High Scalability post on the fundamentals of database performance.

RevK reviews Ubiquiti’s high-end WLAN access points and controller, and notes that the software that ships with them includes a “floor plan tool” - or in other words, a radio-planning application. Consumer radio-planning apps? We’re living in the future.

Screen Shot 2013-09-14 at 10.55.31.png

Look how much data we’ve got on you!

Acxiom is a data broker that collects up to 1500 data points on 700 million people. In an effort to reassure the public, they’re launching a website that lets you look up the information they have on you - well, some of it, because they obviously don’t show the inferences they make from it and sell to their customers.

The US government’s National Institute of Standards and Technology is warning the public to avoid using a cryptographic standard it developed itself, after the last lot of Snowden revelations confirmed that it was deliberately rendered insecure by the National Security Agency. So, government department 1 builds a standard, lets department 2 compromise it, and then recommends that you shouldn’t use it.

The UK government would like ISPs to provide some sort of filter. For the children. You know. But without changing the law or paying for it. It looks like MVNO GiffGaff interprets this to include killing VPN connections, in case the children use them to bypass the filter.

We do seem to be getting all censorious these days. Nominet has a consultation out on whether or not to ban swear-words in UK domain names.

And finally, in July, 1960 the Bell System Technical Journal published a paper on how the buttons on the new push-button phones should be laid out. 17 options were considered, and panels of users were asked to dial numbers on them while the time taken and error counts were recorded. And you thought A/B testing shades of blue on the home page was new!


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September 10, 2013

Verizon vs. Vodafone: who’s best off after the $130bn ‘amicable’ VZW split?

Breaking up is always hard to do, but there are some things that make it easier. In this case, the partners’ interests have drifted apart, there are no kids, and the financial settlement looks like a reasonably good deal for everyone. Vodafone wants the funds for a mixture of transformation and diversification in Europe and other markets; Verizon wants to consolidate using the control and cash flow of Verizon Wireless (VZW), and is betting big on the continued growth of mobile in the US market. But will they both be better off after the split?

[NB. We will soon be publishing further in-depth analysis of both Vodafone and Verizon in the Telco 2.0 Transformation Index, the first benchmark of future telecoms business models. Also covered are Telefonica, AT&T, Singtel, Etisalat, Ooredoo (formerly Qtel), and Axiata. Email contact@telco2.net to find out more, and join us at our Executive Brainstorms in Arabia, Asia, Silicon Valley, and Europe.]

Selling Verizon Wireless: a big deal

In the third largest corporate transaction in history, it was announced on Monday 2nd September 2013 that Vodafone has sold its 45% stake in Verizon Wireless to Verizon Communications for $130bn.

This has been a long time coming. In 2004, there was the AT&T affair, when Verizon almost succeeded in buying out Vodafone’s stake in Verizon Wireless. Vodafone had agreed to sell VZW should it win a bid for AT&T Wireless, but this (and therefore the original deal) fell through. Autumn 2012 saw talk of marriage - discussions of a full-blown merger, but Verizon got cold feet over Europe’s prospects. In April of this year Verizon was contemplating a $100bn bid, but Vodafone’s advisers said this was an undervaluation - with the true value closer to $120bn. It was not until this summer’s anticipated interest rate hikes and a falling stock price that Verizon “finally got serious about paying a full price”, as Vittorio Colao (CEO of Vodafone) put it.

The $130bn settlement, expected to complete in Q1 2014, can be broken down as follows.

Figure 1: The deal broken down, $ Billions

Of particular note is the sheer level of debt Verizon has agreed to take on: it has raised $61bn via a bridge loan, which is split roughly 50/50 between bank and public bonds - making it the largest bridge loan in history. So Verizon certainly cannot be accused of a lack of commitment to gaining ownership of VZW given the level of debt it is prepared to take on to remove Vodafone’s name from the register. As part of the sort-out of the couple’s record collection, Verizon has also returned its 23% stake in Vodafone Italy.

Vodafone has announced that it will return all of the shares and $23.9bn in cash directly to shareholders, which equates to an overall $84.1bn or 65% of the total consideration. This should make its shareholders happy in the near term at least. Indeed in many ways, Voda’s shareholders are the biggest clear winners, benefiting from a better valuation than the stock market had placed on the VZW stake, including some in cash and some in Verizon shares so that they can carry on their relationships with Verizon if they want to.

This may be a key lesson for CSPs holding minority strategic stakes in quoted groups: sell out when you can get the best valuation, and above all keep the shareholders happy.

Although impressive in its scale, this must not overshadow a more basic question: what does this all mean for Verizon and Vodafone?

Verizon: betting big on continued growth of the US wireless market

In its presentation to investors, Verizon identified two key strategic benefits of the deal: access to all of Verizon Wireless’ cash flows and the US wireless marketplace being in a growth phase. These tell an interesting story of the rationale behind (and prospects for) the deal.

Verizon Wireless is the ‘superstar’ operating segment of Verizon. It has enjoyed year-on-year revenue growth since 2010 at an annualised rate of 9.4%, whilst its other operating segment, Wireline, has contracted year-on-year at an annualised rate of 1.8%. Unsurprisingly, Verizon would have had access to an additional $5.3bn in free cash flow in 2012 - had it owned all of Verizon Wireless.

Although cash-augmenting in the long run, Verizon has leveraged itself heavily in the short run. Its borrowing of over $60bn to fund the deal will lead to a large increase in interest payments which, for the near future, will crowd out funds available for capital expenditure. Verizon will also need to allocate most of this cash to paying down the debt in the short term should it wish to return to a more normal debt level. Its step-change in leverage is demonstrated by STL Partners’ analysis of Net Debt/EBITDA before and after the deal.

Figure 2: Net Debt/EBITDA pre- and post-deal

This will have the worrisome effect of leaving Verizon more vulnerable to shifts in the US wireless landscape. With such a stretched balance sheet it is not preparing for strategic investment should the need arise.

Risks include disruption from Sprint Mobile after its merger with SoftBank, intensifying competition from OTT players in voice and messaging, and a slowing of US wireless growth. Indeed, the IMF, for example, recently revised downwards its growth forecast for the US economy. Any of these or other disruptive events might leave Verizon needing to spend without the means.

Verizon has therefore made a $130bn bet on status quo in the US wireless industry. It has made itself larger but also less manoeuvrable. In one sense this is conservative, since it is ‘sticking to its knitting’ and has not invested in non-core revenue sources, but the sustainability of growth in core services - and therefore the ability of these to make the deal self-financing - is uncertain, and the highly leveraged bet is not without risk.

Vodafone: funding transformation to regain lost momentum

Although Vodafone remains either the largest or second-largest operator in eight of its nine Western European markets, its prospects have soured in recent years. Service revenue might have grown 0.3% during FY2011/12, but it then fell 4.5% during FY2012/13, and this has been compounded further by a quarterly fall of 3.5% in their most recent release. It is also facing increasing competition from cable companies offering bundled packages in many of their core markets.

It is therefore of little surprise that Vodafone has chosen now to sell its stake in Verizon Wireless. With a ‘war chest’ to both pay down much of its debt and expand its offerings in core services, Vodafone hopes to reverse - or at least stop - this turning tide. By contrast with Verizon, therefore, the deal makes Vodafone financially more manoeuvrable. Colao told reporters that the deal will “enable the company to be very robust and take opportunities if they arise.” He might be “super committed” to the next chapter in Vodafone’s development, but how will this chapter read?

One clue lies in Vodafone’s announcement of ‘Project Spring’, a $9.4bn organic investment programme over the next three years to build out and modernise their core services - particularly 4G LTE and fibre. This is significant: FY2012/13 saw capital expenditure of $9.8bn. So, assuming that ‘base’ capital expenditure remains unchanged and that Project Spring is spread equally over the next three years, it represents a yearly increase in capex of 32%. Ironically, by separating itself from Verizon it is now able to adopt an aggressive network-expansion programme reminiscent of Verizon’s own during the last few years.

The following is a breakdown taken from its investor presentation.

Figure 3: Vodafone’s ‘Project Spring’ broken down

Though substantial, the question remains whether Project Spring is sufficient to change Vodafone’s fortunes. In the long run, Vodafone will also have less in the way of interest expenses which should enable it to look beyond organic investment: it intends to use some of Verizon’s cash to help pay for its takeover of Kabel Deutschland and, once this deal has completed, expects to have reduced net debt to approximately 1.0× EBITDA. Vodafone could look to pursue further in-market inorganic investment or even expand its footprint in emerging markets. Given the discouraging prospects for much of Europe - the IMF has also revised downwards its growth forecast for the Euro Area - investment in non-core services or emerging markets appears increasingly necessary.

There is of course the question of the value that Vodafone is now choosing to give up: the significant growth it has received from VZW. We imagine that Vodafone’s internal views of growth prospects in the US wireless market are not as positive as Verizon’s. But since the days of the pin-stripe suited and red-braced Chris ‘City’ Gent, Vodafone has long had a reputation as a shrewd financial operator, and given the valuation they have extracted from Verizon, we doubt they let this colour the negotiations.

Indeed, a difference of opinion over such matters, however much it was communicated during negotiations, is likely to have been a driver of the timing of the decision. When shareholders start to hold diverging views of this nature it can often be a good sign that the time is coming to part ways, as it is difficult to operate together effectively strategically and commercially with such differences.

So in summary, we think Vodafone has struck a good deal, although despite the clear benefits of the injection of funds it will receive, Vodafone’s prospects after the deal are also not without risk. It has given itself the opportunity to expand and diversify its offerings in both core and non-core services and markets, but the question of how it chooses to use this opportunity remains.

As with Verizon and the USA, the prospects of Europe and the emerging markets will play a substantial role in determining the return on Vodafone’s investment - and whether it was right to return its stake in Verizon Wireless. However, Vodafone has more of its destiny in its own hands than Verizon, as it has new money to invest, and neither its existing nor potential new assets are tied to the prospects of just one marketplace.

The cynical old joke runs as follows: “Why is divorce so expensive? Because it’s worth it.” For Vodafone and Verizon, the ultimate worth of this split will depend on what they do, and what else happens next. As with the aftermath of any split, we’ll be watching with interest to see who is back in the market first.

For more on the strategies of Vodafone and Verizon, please see the Telco 2.0 Transformation Index, and join us at our Executive Brainstorms in Arabia, Asia, Silicon Valley, and Europe.

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September 9, 2013

Microkia; Euro-regulators; US wireless glut; AWS+Redis - Telco 2.0 News Review

Five weeks to Digital Arabia 2013

No more Nokias; HTC even worse than thought; Apple launch

Microsoft has acquired the Devices & Services unit of Nokia - that’s the bit that makes the mobile phones - for $4.5bn, plus a commitment to take Nokia’s HERE location services under licence and to use the brand under similar terms. With that, Nokia exits mobile phones. Quite the sentence.

Ben Evans points out that Nokia needed cash to keep going at its current levels of shipments, and Microsoft needed scale to make Windows Phone make sense. Either MS is planning to burn cash in mobile devices until it gets the scale, which Nokia couldn’t afford to do, or else it’s hoping to push the transition to Windows Phone into the Asha product line. Perhaps Nokia didn’t do that because they were still trying to keep open a non-WP option?

We’ve often had our differences with The Register’s Andrew Orlowski, but this is an excellent piece on the company that sold 40% of the world’s mobile phones in the year Telco 2.0 launched, that invented basically everything in the devices side of the business, and that probably shipped more hardware to more people than any other company, ever. Horace has another data point for his thesis that a loss-making handset vendor is unrecoverable, with the following neat chart.


Our take, from the spring of 2010, is here.

IDC points out that if the challenge is scale, it’s unlikely that Microsoft can get it in a head-on frontal assault on the iPhone in North America. That implies concentrating on the Ashas, and the economics of that imply that MS can’t load a Windows licence fee on the phones.

In Orlowski’s Nokia obituary, there’s a nice story about a man in California who “loved Japanese technology, like Sony and Nokia”. Since the N8 and before last week’s bombshell, the one Nokia product everyone loved was their smartphone camera, where they’ve developed a real speciality and drawn out a lead over everyone else. Sony is now having a crack at their record, with the new Xperia Z1’s 20MP camera, designed by the Sony cameras team.

They also named the day for the launch of the PlayStation 4, which will confront that legendary name in gaming hardware…Microsoft. Things have changed a lot, haven’t they?

Meanwhile, HTC is doing even worse than it looks - not only is revenue tanking, the damage seems to be concentrated in flagship smartphones. And the arrest of three key product designers last week is also even worse than it looks - they weren’t just stealing, they may have been sharing with the Chinese, something which is bound to get everyone’s attention in Taiwan.

We knew BlackBerry was in trouble, but not how much. They’ve now gone from thinking about selling, to thinking about selling by November.

The current buzzword in devices is smartwatches, and The Verge is very impressed with Samsung’s contribution to the genre, the Galaxy Gear. It looks nearly identical to the one they released in 2009, which basically nobody noticed. The chipset within, though, could hardly be more different - a decent camera, an 800MHz CPU, but no cellular radio except for the Bluetooth link to your Android phone. In 2009 there was no camera, much less power, but a full GSM/GPRS stack. And today’s version is drastically cheaper.

Huawei has agreed to licence ARM’s v8 chips.

It was Apple’s autumn product launch this week. Ars Technica has a video review of the two new gadgets:

Does that new, cheaper iPhone look somehow vaguely Nokia-y? More seriously, the Wall Street Journal reckons, the iPhone 5C might be C for China. Working conditions at the assembly plant already are.

Highlights in the specifications include a new system-on-a-chip for the top dollar iPhone 5S (the A7 processor, which makes it the first 64-bit iPhone), a special chip and API for accelerometer and sensor events, and a somewhat worrying fingerprint reader. And you can indeed get it in gold. The cheaper of the two, meanwhile, still gets a Retina display and most of the hardware from the iPhone 5.

The pricing structure is much as before, and the iPhone 4 will be withdrawn, leaving the 4S as the “old 3GS cheap option”, the 5S as the flagship, and the 5C as “the one you buy when you drop the 5S”.

European regulatory countdown; Vodafone CAPEX; US “wireless glut” causes PAYG wave

The clock is ticking down to Wednesday’s big regulatory announcement from Neelie Kroes, and the spin war is underway. Last week, it was leaked that the European Commissioner was thinking of dropping her plan to as good as eliminate data roaming fees. Her staff leaked back, suggesting that data roaming might be set at a flat rate fee (aka “like Vodafone Passport” - someone’s been planning for this).

More leaks signalled that the Commissioner has dropped the idea of a single European telecoms regulator or single EU spectrum licences, although the idea of a “single authorisation” that would be administered nationally remains. There’s fudge for you, and it’s even official fudge as the Commission press office confirmed the substance of the leak.

Telecom Italia’s CEO, Franco Bernabé, meanwhile, told a conference where Neelie Kroes also spoke that suddenly, the European mobile industry doesn’t look so good now Vodafone has sold out of the US and Nokia isn’t making phones any more. Even if the commissioner allegedly slept through part of Bernabé’s presentation, she had some quite sharp things to say about European LTE:

“We need to look ahead to investing in 5G,” she urged. “We missed 4G, we were the leader in 3G, now let’s take over 5G.”

Le Monde’s business blog notes that at least there’s Gemalto, the SIM company, still growing and growing.

Vodafone, meanwhile, said it plans to spend £3bn of the VZW money on additional LTE deployment, followed by about a billion on fixed, £600 million on enterprise, and another £600 million or so on retail. Quite a bit of that might go into deploying M-PESA in India and Egypt.

By contrast, 71 per cent of the sale price, £55 billion, is going straight to making the shareholders very happy.

They might need some of the money to sweeten the acquisition of Kabel Deutschland, which is looking shaky ahead of an important regulatory deadline.

Verizon, meanwhile, has been suing the FCC for some time over the Open Internet Order, and this week the case comes up in court, while AT&T has the tentative go-ahead to pour $9.5bn of preferred shares into its pension fund.

It’s recently been suggested by Dave Burstein that US carriers are facing a glut of capacity, with new spectrum resources becoming available, LTE and LTE Advanced providing a major boost to spectral efficiency, and small cells adding to cell subdivision. One indicator of this would be an effort to fill it via wholesale, perhaps to low-cost prepay operators. Aio Wireless is AT&T’s in-house low-cost prepay operator, now going national.

Telefonica buys 5k LTE sites; AT&T trims the copper; will Aussie NBN survive?

LTE is coming to Telefonica in Spain, and they’ve signed a contract with Alcatel-Lucent for 5,000 base stations.

In the US, American Tower is on an acquisition spree. Last month they bought the Nextel (Latin American version) towers, 4,000 of them. This week they bought Global Tower Holdings, adding another 5,000.

Verizon is keen to get rid of some of its old copper assets and go fixed-wireless. CEO Lowell McAdam suggested that more upstate New York DSL networks might be sold recently, as they had no plans to build fibre into those areas. If the Fire Island experience is at all typical, this may be very difficult from a political/regulatory point of view.

AT&T, for their part, are looking at pulling out of as much as 25 per cent of their fixed-line footprint by subscribers and relying on their LTE network in those areas - when it’s built, of course, as they’re well behind VZW. Expect a huge regulatory row.

Australia has a new government, and we’re going to find out if they really mean it about keeping all the copper and dropping the fibre build.

Details of the UK whitespace spectrum are out, and London gets most of it, basically because the Crystal Palace TV mast is relatively central.

There’s something to be said for overhead cabling if it can deliver FTTH in Phnom Penh. That said, there’s also something to be said for secure cabinets.

NSA “not even the biggest snooper”

The Snowden disclosures simply keep coming. This time, it turns out that the conspiracy theorists were right and the NSA has been trying to influence security standardisation to make it less secure. They named it Project Bullrun after the first battle of the US Civil War, and GCHQ named their bit Edgehill after…the first battle of the English Civil War.

Another document dump reveals that they were tapping Brazil’s national oil company Petrobras, Google, the French foreign ministry, and the SWIFT financial transactions network.

And if you think the spooks are intrusive, wait ‘til you meet the drug cops, who turn out to have an even huger database of AT&T call-detail records that isn’t even subject to the FISC’s jurisdiction. They’ve been at it for 26 years.

Not surprisingly, IETF’s next meeting is going to be all about security. Bruce Schneier discusses what cryptanalytical weirdness may have emerged and updates his own encryption keys.

AWS adds Redis power to its cache; Oracle G-cloud; cheap Windows with virtual desktops

In the cloud, Amazon Web Services has some major product updates. AWS ElastiCache, their in-memory caching product, now provides the well-known Redis key-value store, making it possible to move a lot of program logic into the fast caching layer.

They’ve also added their OpsWorks management tools to their Virtual Private Cloud product, and given DynamoDB a set of extensions for geospatial queries, turning it into a GIS platform.

Oracle, meanwhile, has started pushing a version of its cloud products for government applications, although there’s not much in it yet and what there is isn’t very “cloudy”. In China, public sector IT buyers are using virtualisation and the cloud in order to avoid spending big on hardware and therefore falling foul of “the political environment”.

Here’s something weird: Microsoft doesn’t like you using Windows to provide virtual desktops. You’ve got to have a licence for each user, a server for each VM, and so forth. But if you get Windows Server instead, you’re off to the races and this may actually be the cheapest way to provide Windows per-seat.

Intel, meanwhile, has a new Atom chip optimised for cloud applications that don’t need much computing power but do need to save energy. An example is this Penguin Computing microserver, based on Facebook’s Open Compute designs.

Another interesting Google paper.

Disrupting Twilio? Truphone and BT call archiving; new Tropo features

Amazon, Chris Kranky points out, might be lining up a price disruption against the Voice 2.0 companies, the traditional bulk SMS providers, and mobile operators to boot, when you look at their pricing for the Simple Notification Service. As usual with Amazon, it’s dirt cheap, at least at the beginning.

He reckons Twilio is in the target area. In the meantime, they’re encouraging you to make a better IVR.

Truphone and BT are getting together to provide something useful - as well as the local numbers, cheap roaming, and HD VoIP when you’re in the WiFI, you can opt to have BT record and archive your calls for Dodd-Frank compliance.

Tropo has added a variety of new features, including automatic answerphone detection on outgoing calls, simple format standardisation for phone numbers, and better prompts in conferencing. We’ve also heard that another major carrier has signed up with them.

Adblock seeks funding to buy ads; Facebook firehose for social TV; the man who invented the search engine

Google and the developers of Adblock Plus have a very special relationship. ABP is the well-known browser plugin that gets rid of tiresome advertising. Google is, well, Google. In March, they banned the Chrome version of ABP from their app store. By July, though, Google was on ABP’s list of “unobtrusive” advertisers. It is rumoured that Google paid for this - something called “PageFair” reckons that they lose $887 million a year due to ad filtering, so they can afford to buy some developers beers.

A different adblocker, meanwhile, has started crowdfunding in order to buy…ads.

Facebook CEO Mark Zuckerberg was at their recent acquisition, Parse, for their developer conference, where he spent his keynote buttering up the devs.

Facebook has also offered two APIs providing a stream of “current conversations” within Facebook, analogous to Twitter hashtags and the firehose. These are restricted, for the time being, to a group of TV networks that might want to use them to find out what people say about their programmes.

This, of course, reminds us of Zeebox, and we’re interested to note that a social-TV hackathon is happening in London in October. And here’s a BBC Research radio that picks content depending on what it perceives around it.

Making the case for APIs in the enterprise.

Y Combinator is going to start funding non-profit organisations.

And finally, in 1993, Yorkshireman Jonathon Fletcher invented the web-crawling search engine, but Stirling University wouldn’t pay for the disk space so he got a job as a sysadmin.

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September 2, 2013

Vodarizon, Free, HTC, RIM, Skype - Telco 2.0 News Review

Registration is open now for Digital Arabia 2013. Here’s a video showing something of the Telco 2.0 experience

Vodafone/Verizon: it’s a deal (almost)

No doubt about the lead today: Vodarizon may be a done deal as soon as tomorrow or even this afternoon. Verizon is supposedly offering $60bn in cash, another $60bn in stock, plus some make-weight assets in exchange for the 45% stake in Verizon Wireless.

They might be sitting on a pile of money, but they won’t have the source of half their profits, probably the world’s premier LTE deployment, any more. The rumour-mill is already pushing a variety of potential things Vodafone could spend it on.

Reuters points out that re-allocating capital from US wireless into Spanish and Italian fixed doesn’t exactly sound like the deal of the century, especially if the target (like Jazztel) is a DSL operator dependent on Telefonica wholesale lines. They might also buy one or more cable operators. Other ideas include Hutchison Europe - obviously! - or buying T-Mobile USA off DTAG. If DTAG wants to sell, of course. But if the US market is good enough that DTAG wouldn’t sell, why not just keep VZW?

It’s suggested here that Vodafone may have reasoned that price disruption will eventually come to the US. A key issue will be whether Vodafone gets to dump debt on VZW. A full announcement will be out once the markets close and the board votes tomorrow.

Hugo Dixon has a more positive view on the whole thing. The BBC reckons very little tax will be paid and about £17bn will be distributed to UK shareholders.

Free Mobile pushes on to 10% market share

Free has its H1 results out, and they are good. Free Mobile net-added another 1.6 million subscribers, taking it to 10% market share by subscribers and therefore overtaking our own predictions (9.1% for end-Q2). They also net-added 154,000 fixed subscribers. Overall, with the launch costs of the mobile network dropping out, net profits have gone from €78 million to €142 million year on year, on an EBITDA of €586 million at a margin of 32%. The mobile operation is now making money at the EBITDA level, too. The group was also cash positive again (€48 million, compared to a net outflow of €130 million). The fixed operation threw off €291 million, up 27%.

As we expected, margins improved noticeably when 900MHz spectrum became available, increasing their own coverage. The numbers are here. (Previous STL coverage is here and here.)

A new draft EU regulation makes no mention of the proposed caps on mobile roaming rates, after the E5 operators’ (Orange, DTAG, Telefonica, Vodafone, and Telecom Italia) recent lobbying blitz. That said, Neelie Kroes’s spokesman still insists that roaming fees must end. One of them is right, presumably. The proposal must be finalised by the 10th.

3UK has announced the end of roaming fees between its own networks, if only on calls back to the UK, which sounds more impressive if you didn’t know that they already offered this as long ago as 2007 when I first became a customer.

Level(3) is cutting 700 jobs, 60 in the UK because “the company failed to hit its targets in Europe and the UK and customer satisfaction with Level 3 was at an all-time low.”

Renesys has a look at the problems of running an Syrian ISP and notes that Tata Communications has ended service to Syria within the last week.

Kenya Airways is the Pride of Africa, they say, so it’s almost a surprise you couldn’t already buy a ticket through M-PESA. Now you can, so long as you’re an MTN Uganda subscriber. Meanwhile, Econet Wireless has extended its remittances to include South Africa-Zimbabwe transfers.

HTC designers nicked; Q10 flop; the magic spell that kills iPhones

You’re nicked! Did you think things were bad at HTC? You probably weren’t expecting this - three executives, specifically the VP of product design, the director of R&D, and the senior manager of design and innovations, have been arrested on charges of stealing the company’s intellectual property and also of claiming fraudulent commissions. Apparently they planned to start a new business selling…something…invented at HTC to Chinese ODMs.

The Wall Street Journal reports on sales of the BlackBerry Q10, and they’re horrible.

“I think we’d all say that the Q10, the one we all thought was going to be the savior, just hit the ground and died,” an executive at a Canadian carrier said. “It didn’t drive the numbers that anybody expected.”

Apparently, employees have been offered as many as 10 Z10s each at $100 a go. Bert Nordberg, who’s just joined the board, is not willing to give up and says they can survive as a niche manufacturer.

Meanwhile, Apple’s trade-in program begins, and for once Cupertino has a good disaster. Just displaying a specific sequence of unicode characters - specifically, some Arabic letters - crashes anything that uses the CoreText rendering library in iOS 6, including Safari, Messages, and the WLAN driver. So, anyone who can change the SSID on a wireless access point (or an Android phone) can create an Apple-denial forcefield.

With the right software setup, you could also jam 64 GSM calls a second, even if you don’t want to spend big money on one of these.

Samsung’s smartwatch is here and it’s got a rather big screen.

Here Auto is Nokia’s connected-car platform, while Windows Phone is sneaking up over 8% of the smartphone market in Europe.

And which of the “other” mobile OSs do people search the Web for? Jolla/Sailfish, it seems.

10 years of Skype; why use Opus?; great V2 use case; billing the spammers

It’s been 10 years that we’ve had Skype, VoIP app to everyone and their dog. Dan York argues that although it’s been hugely disruptive - notably to international voice pricing - it’s no longer very interesting. Stuart Henshall agrees and argues that it’s just become a feature - or has it? When Microsoft acquired Skype, we thought the first priority would be to create an API that would let it integrate into every application at MS, from Excel to PowerPoint to Dynamics to Visual Studio. More worrying for Skype is surely that it’s not just a feature, but rather, a silo.

Ars Technica has a report that since Apple lost a patent lawsuit, it’s had to route FaceTime traffic through relay servers living in Akamai and is running up complaints over quality. The source, though, is of doubtful quality itself.

Tsahi Levent-Levi discusses why people care about the Opus HD-voice codec, with a nice chart:


Some interesting VoLTE internals.

Here’s a nice example of what you can do with Voice 2.0 - a web service for natural-language apps, built on Tropo.

RevK discusses UK mobile number assignment, and it turns out that the letter of the law permits using a mobile number for a mobile-VoIP connection but not for call forwarding.

Sadly, the letter of the law is also against this clever man, who got so tired of cold-callers that he bought a premium rate number and handed that out to businesses that asked him for a phone number. Now, every time they call him, he makes money. Of course, any of them who sold or leaked their customer list will also have leaked the premium rate number into the spammer market. Meanwhile, he only hands out the real number to people he actually wants to talk to. The number paid for itself in two months, before the cold calls suddenly stopped coming…it’s only a pity that the regulator may get shirty about this, because they may not have been informed of the rate.

That said, surely it would be the work of a moment to arrange a Twilio or whatever script that informs them?

LINX comes to America

The London Internet Exchange (LINX) is coming to America, planning to set up a carrier-neutral, membership-based IX like the ones Europeans are familiar with in northern Virginia. They’re supported in this by OpenIX, a new group that’s trying to spread IXen in north America. The social column notes the presence of networking legend Martin Hannigan, currently at Akamai, and Netflix’s David Temkin on the board.

High Scalability has an excellent piece on the 20 biggest barriers to scalability, edited from ACM Queue.

And goodbye, Ken Brill, data-centre expert and Uptime Institute founder.

Post-Ballmer Microsoft; Google websites that demand specific browser versions

AllThingsD discusses post-Ballmer Microsoft, and notes that ValueAct, a fund manager, has succeeded in pushing itself onto the board although it only speaks for $2.2bn of the stock, or 0.79%. The piece is too involved to summarise, but it gives the strong impression that there might be a lot of change coming up.

Google has been making some distinctly “2005-y” design decisions in mobile websites, which is having an influence on its row with Microsoft over the YouTube app.

Polling Yahoo! users about the new logo.

Viki is a global TV streaming site with crowdsourced subtitles and it’s just been acquired by Japanese retailer Rakuten. And some operators are better at giving away YouView boxes than others.

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