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December 16, 2013

Down to three carriers? Sprin-T; cablecos; Aussie NBN; Google; Chinese 4G - Telco 2.0 News Review

US mobile “two-thirds more expensive” than UK; iPhone saturation in 2015; Sprintbank Samurai after T-Mobile; Malone and Charter after TWC

The United States is still a pricey cellular market. OFCOM estimates that a phone with 200 minutes, 50 SMS, and 200MB of data costs £14/mo in the UK and £57/mo in the US on average. Not surprisingly, the price gap is attracting disruptors into the field, and the new unlocking policy that the top five carriers have agreed to will only facilitate the process.

So will the saturation of the market with smartphones. Horace’s diffusion model reckons we passed peak growth in October 2012 and will arrive at the end of the mass market adoption phase in October 2015. And Apple will probably win most of the remaining growth by adoption. The classic Bass diffusion curve is nice, but this chart explains the point about Apple, still marching along a linear growth path:


A lot of people, ourselves included, thought the acquisition of Sprint by the Softbank Samurai, Masayoshi Son, would fire the starting gun for disruption. Instead, it all took so much longer, Sprint’s shutdown of iDEN was so much more damaging, and T-Mobile USA beat them to the punch. Also, the decision to rebuild the Clearwire WiMAX network as an LTE network while also moving Sprint mainline from CDMA to LTE led to what CEO Dan Hesse calls “dust issues”. Note he also admits to losing 60% of the business accounts that took an iDEN service.

So, what now for the Samurai? A bid for T-Mobile, naturally. The big question will be whether the FCC is happier about Sprin-T than it was about AT&T&T. The point is made that T-Mobile is a GSM operator and Sprint isn’t, but this is probably much less of an issue than it would have been five years ago, as both of them are now focused on deploying LTE. More to the point might be the very different customer bases - geeks and bargain hunters at T-Mobile, southern small businesses at Sprint.

One of the points that emerged from our work on North American carriers for the new Telco 2.0 Transformation Index is that the US cable operators have become increasingly impressive broadband ISPs, connectivity-focused players who give the historic Bell operators a very hard time. Among them, there’s a deal afoot, as Charter tries to buy Time-Warner Cable. Liberty Global and its owner, John Malone, recently bought 27% of Charter, and it seems to be their idea. At the same time, Time-Warner is looking at a merger of the cable operator with the market leader, Comcast. Malone and Charter presumably fear getting stuck with an 800lb gorilla competitor, and don’t want to rely on anti-trust regulation.

And is Orange going to move into Canada, perhaps as an MVNO?

There’s also an interesting Canadian net neutrality row going on. Is leaving your own mobile TV service out of the data cap against the rules?

Obermann: more consolidation, and less spying; shock Telecom Italia raid flops; Greek carriers up rates 15%; Aussie NBN replaced by “50Mbps cable by 2019”

The Sprint offer for T-Mobile immediately caused Deutsche Telekom shares to leap. CEO Réne Obermann is leaving soon, to take on the job of running Dutch cableco Ziggo, and he’s been speaking out quite a bit. Among other things, he says DTAG is still too small to be a global competitor, despite being the second biggest European telco, and Europe could do with more consolidation.

He also has something to say about the Snowden affair:

“This spying has shaken the confidence in two pillars of our society, free communications and privacy…I do not understand the pussyfooting [around the Americans],” said Obermann. “It is negligent that so little has happened.”

No doubt the hack of Angela Merkel’s phone has stimulated German opinion, but It wasn’t that long ago that DTAG was caught secretly providing CDRs on journalists, trade unionists, and competitors to a network of German corporate security chiefs. You remember - it was in the Telco 2.0 news review! Fortunately for Obermann, who had just taken over when the story broke, most of the blame landed on his predecessor, Kai-Uwe Ricke.

In Italy, a coup de theatre occurs in the Telecom Italia story - US investor BlackRock turns out to have quietly been buying up stock, taking its stake to 10 per cent of the company. They didn’t, however, tell the Italian stock exchange, and now they face a fine and the possibility of having to sit out critical votes.

TeliaSonera, meanwhile, is clearing up after the scandal and the exit from the former Soviet Union. The Eurasian business unit gets a new boss, and the company promises a new business model based on customer focus.

If the FCC is sceptical about going down to three carriers, or the European Commission disagrees with Réne Obermann, you might not need to look further than the next story for the reasons. In economically bombed-out Greece, all three wireless carriers have raised their prices between October and December, by as much as 15 per cent. Rewheel estimates that the marginal price of a GB of mobile data in Greece is now €16, while it can be as low as €0.2 in Denmark and Finland.

It’s enough to make you burst a blood vessel. Like the man who’s been ordered by his doctor to drop his complaint against Telstra because it’s endangering his health. The Aussie NBN installers, still building until someone tells them to stop, have passed his home with fibre but Telstra is dragging its feet about activating the link, and practising what the Germans used to call “strategic incompetence” when DTAG did it to unbundlers.

You might query whether having yourself photographed for the front page of the newspaper waving a phone bill is an ideal way to relax, but he’s got a point. The NBN strategic review is back, and it foresees a drastic cutback in the NBN rollout. They will now not be building fibre out where there’s an existing cable network, and users in these areas are promised “50Mbps downlink by 2019”. But any half-way competent cableco should be able to deliver 50Mbps downlink yesterday. If you can’t, you obviously haven’t deployed DOCSIS 3 yet.

Elsewhere, the plan is now “fibre to the cabinet”, leaving the copper in place. The strategic review team have, incredibly, not taken a view on the copper quality or the line runs. So users still get to pay for the whole thing, while being promised nothing they shouldn’t already get, but only after waiting another six years, or they might get nothing if they happen to be on a long DSL run. You’re probably well advised to get the NBN fibre hooked up if you possibly can.

Bill Morrow, of Vodafone, VHA, and (ahem) Clearwire fame, gets the poisoned chalice of managing NBN Co.

While the politicians wrangle, both the installers and the regulators push on. The agreements under which NBN Co provides wholesale service have been published.

In Uganda, a new operator is preparing to launch, but it doesn’t have a name yet and the public are invited to suggest one. The investor behind it is, of all companies, Afghanistan’s Roshan. The public might be forgiven for asking if they really need a seventh GSM core network, rather than more coverage, and also if Roshan should really be exporting capital out of Afghanistan, the poorest country on earth.

MTN, meanwhile, is buying into AIH. This is an interesting company, essentially somewhere between an investment trust, a start-up incubator, and a mini-conglomerate, that invests in African online and e-commerce businesses. It was originally set up in 2012 by another telco, Millicom International Cellular, and the Berlin-based VC fund, Rocket Internet. MTN is taking a 33% stake, which will divide the company’s capital equally among the three backers. (In an additional twist, Kinnevik, the owners of Millicom, also own a chunk of Rocket directly.)

Rocket is best known for a string of web startups that basically cloned better-known ones from the US in internationalised versions. This might not work so badly in this context, but it would be exciting if they could do the opposite too.

A&A ISP, back in the UK, is relaunching its national roaming MVNO.

China Mobile 4G and the supply chain; new Qualcomm CEO; free upgrades to BES10; Android Asha?

Here’s a deep look into Chinese 4G and its impact on the phone supply chain. Terry Yu of Display Search expects that China Mobile will subsidise Apple iPhone 5s/5c devices, not least because of the significant unofficial fleet of old iPhones running on their 2G network. These early adopters are likely to be an easy upsell to a new iPhone with a 4G contract. At the same time, CM has relaxed its requirement that all devices support 5 baseband modes, so devices that support only GSM, TD-SCDMA, and TD-LTE are acceptable. The point is to make it easier to support 4G in $200-ish Androids - and perhaps also to make it harder to churn to the competition, as the opposition have FD-LTE, WCDMA, and CDMA2000.

Samsung, meanwhile, is already shipping G4s and Notes to China Mobile, and can be expected to pour marketing spend into China.

So far, though, the supply chain is still waiting for demand to ramp up - Imagination Technologies revised down its forecasts for demand substantially.

Qualcomm has a new CEO, Steve Mollenkopf, with Paul Jacobs becoming chairman.

It’s almost traditional to decry labour practices at Apple’s suppliers. There is no particular reason to think Samsung’s (or anyone else’s) outsourcers are any better, and China Labour Watch’s investigation into one Samsung supplier sounds like they might well be worse.

Elsewhere, HTC has appointed its CFO as head of sales.

There’s a steady drip, drip of stories about major enterprise customers dropping their BlackBerry fleets, usually in favour of Apple or just letting the users bring their own, which means the same. The Australian Government is one, and Goldman Sachs is another.

BlackBerry is beginning to respond. Anyone with an existing support contract for the Enterprise Server 5 gets a free upgrade to BES 10, which actually looks quite impressive - it can provide a segregated, encrypted, virtualised container for enterprise apps and data on any smartphone, managed from the BES admin console, and it supports up to 100,000 users per server. The app even looks reasonably iOS-y.

Over at Nokia, the idea of an Android-based Nokia is knocking about again. Apparently there’s an Asha codenamed “Normandy” that might yet see the light of day. Hold on, didn’t Nokia just buy a Linux-based OS for the Ashas not so long ago?

M2M impacts on the network; Orange/Renault in unsurprising connected car partnership; new search engine for online sensors

The 3G, 4G, and 5G Wireless Blog has an interesting presentation from EE about the impacts of M2M devices on their network. It’s more complicated than you might think, and it’s probably not realistic to expect that “low bandwidth” will make it easy.


In other M2M news, Telkomsel is joining the quite substantial list of carriers who support Jasper Wireless. Orange, meanwhile, has started a research project with Renault to decide what use to make of the SIMs Orange Business Services supply to the car maker.

Usman Haque, Pachube founder and Telco 2.0 event speaker, has a new company, Thingful. This is basically a search engine for sensors that are connected to the Internet, “like Google for the Internet of Things”.

And is big data “flocking to London”?

Google flirts with ARM servers; offers and then removes Android privacy controls; eats bulk e-mail companies; builds giant robots

Google may be considering using ARM chips in its vast fleet of servers, and may even design its own chips, like it already does servers. Because their servers are deliberately minimal in design, this would involve less work porting the software than it might for general use. An alternative reading is that Google is just trying to get a bigger discount on Intel x86 chips.

The big motivation for using ARM’s technology, beyond just putting the squeeze on Intel, would be saving power. There’s more detail, notably about what kind of chip they might consider, here. Note that Google bought a small chip design firm a couple of years back. There’s some more here.

Elsewhere in the cloud, Alcatel-Lucent’s CTO and president of Bell Labs expects much more of his product line to be cloud-based (i.e. NFV or SDN), and regrets losing 40 engineers from the Labs to Google, who apparently took with them much of their expertise on cloud security.

Google’s latest version of Android provides quite impressively rich control over third party apps’ demands for personal data and system resources. Using a new API, you can view and manage precisely what all your apps can get up to, rather than just having to either turn down or accept everything they offer at install time.

Oh. Now it doesn’t. The next Android release took the feature away again, although users of the alternative ROMs can still get it. Google says it was an accident and they’re worried that it might break some apps.

Sometimes Google breaks apps, but sometimes it breaks whole business models. Starting now, GMail will cache any images included in HTML e-mail, serving them to users out of the Google CDN, transcoding them down to sensible sizes for mobile devices, and presumably de-duplicating them. This will probably improve the user experience noticeably.

It will also mean that bulk e-mail marketers will no longer get meaningful information about whether their image-laden mailshot was opened. One of the main reasons a lot of e-mail clients filter images is that when the image loads, the sender gets to read the recipient’s browser context, as well as knowing if and when the recipient viewed the message. Now, all the sender will learn from GMail addresses will be that the Googlebot downloaded the image.

It’s a fine line between “opt-in e-mail that we track to optimise the user experience” and “spam that spies on you to boot” - although probably about 99% of those affected are spammers or close to spammers, you do have to worry about Google the advertising company killing off a lot of its competitors.

In an effort to reassure us all, Google then bought a company that makes giant military robots.

PayPal chief’s savage burn on NFC; Vodafone Wallet launches, with NFC; Kindle Fire HDX on instalments; Facebook’s latest feature, autoplaying video ads

An interesting suggestion - is Patrick Gelsinger, VMWare CEO, a potential boss of Microsoft?

David Marcus of PayPal likes Bitcoin and very much dislikes NFC:

“It’s technology for the sake of technology or for the sake of pushing the agenda of the companies supporting it, versus solving real people’s problems,” Marcus said of NFC.

“Instead swiping or using a PIN pad, they’re tapping. How is that really better? How is that changing your life? People don’t want that. Today a merchant has Internet connectivity at the point-of-sale terminal. All the consumers have phones with wireless networks. Why do you need to be at a place in a store to make a payment? [NFC is] too little too late.”

Ouch. Vodafone this week launched Vodafone Wallet across Europe, a mobile payments service based on Corfire’s technology. It uses NFC, but don’t worry - if you don’t have an NFC phone, you can get an NFC sticker!

Amazon will now sell you a Kindle Fire HDX on monthly instalments. They claim that the financing terms are 0% interest, and they might be - after all, Amazon likes to roll its cashflow into investments. The reason is of course that Kindle users spend hundreds of dollars more on Amazon products than others.

Facebook has an update for its iOS app. The new feature is that any video in the newsfeed (which includes ads) will autoplay, silently unless you tap the screen. It’s free, although quite a few people would want to be paid to put up with autoplaying video ads and some of us actually use software to prevent that kind of thing.

Come build an app with the BBC’s news archive.

And what does your TV tell the Internet?

NSA may make Snowden an offer, hacks A5/1; curious lawsuit; how much do the police pay telcos for data?

The NSA is considering offering Edward Snowden a deal, the BBC reports. This may be because they now think he’s got even more files squirreled away than they suspected, and anything is better than the revelations just going on, and on, and on. That said, the quality might be a bit patchy - it should be no surprise to anyone that the obsolete A5/1 cellular encryption standard is now very vulnerable, not just to the NSA but to reasonably effective individual hackers.

Here’s a rather tangled piece of Snowden fallout. A pension fund is suing IBM, claiming that they supported a surveillance law (CISPA) that actually never passed through the US Congress, and because of this, their sales in China have fallen, and therefore they should get some money.

Bruce Schneier, security expert, cryptographer, and vocal surveillance sceptic, has resigned from BT, which acquired him along with his consulting shop Counterpane back in 2006. BT denies it has anything to do with the Snowden affair.

US operators were paid $26 million last year in exchange for data that the police wanted. AT&T got $10.2m, Verizon Wireless just under $5m, and T-Mobile was the unexpected champ in this unusual form of two-sided market, clearing $11m. Perhaps the low, low prices are attracting the wrong sort of crowd. Sprint wouldn’t tell.

France has nearly passed a very swingeing authorisation for surveillance indeed.

And Microsoft has joined a standards group that hopes to replace passwords.

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December 11, 2013

$172bn Telecoms revenue threat: disruptive defence strategies and growth opportunities

Our latest report The Future of Voice and Messaging shows that telcos could lose up to $172bn from core revenues in five years, but also how they could make dramatic improvements to their voice and messaging strategies worth as much as $80bn.

Whether you work for a telco or a business that serves telcos, we believe there are three fundamental ways in which the insights in the report can add value to your business:

  • Optimise your strategy - there’s $80bn to play for
  • Base your business on more realistic forecasts and deeper insights
  • Learn how to compete with disruption

Covering each in turn, the key points are as follows.

1 Optimise your strategy - there’s $80bn to play for

All is not yet lost, and there are very few areas in which telcos can make a difference to the scale of $80bn, much of which is highly profitable, marginal revenue. Whether you are a telco or a key partner, investing in benchmarking your plans against the best in the market could produce major returns.
slide on ott app vs text prices dec 2013.png

The report shows how telcos can fight to reduce this loss by $80Bn through intelligent optimisation of prices and bundles, service enablement, exploiting new standards such as WebRTC and VoLTE, creative approaches to own brand OTT services, and a greater focus on enterprise communications.

2 Base your business on more realistic forecasts and deeper insights.

Our forecasts have been the most prescient, aggressive, and sadly the most accurate, in the market. Even if you don’t particularly like what we are saying, how much better would your strategy and investment decisions be if your plans were based on an independent, expert view of the market?
germany market profile slide dec 2013.png

The report contains an in-depth analysis of the changing needs of both consumer and enterprise markets, and detailed mobile and fixed voice and messaging forecasts for US, Canada, Singapore, Taiwan, UK, Germany, France, Italy, and Spain.

3 Learn how to compete with disruption

Invaluable lessons in how to compete with disruptive competition can be found in our analysis of the successes and failures of telcos to deal with the incursion of such services into their heartland revenues. The report contains ‘OTT’ case studies on e.g. Whatsapp, KakaoTalk, and ‘Telco OTT’ plays such as TuGo.

The report comprises a concise executive summary, and totals 260 pages and 163 figures. Further details here.

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December 9, 2013

BRICs, Free Mobile, 600MHz, Gaming as Content, Smart Meters “Dead” - Telco 2.0 News Review

Focus on BRICs: adding $17bn of revenue through “more coverage”; regulators vs. Telefonica; TIM/Telebras fibre swap; tower-sharing coming, Chinese 4G licences

How can Brazilian operators add $17bn of new revenue? Apparently, increasing their coverage footprint and capacity, according to a survey of Brazilian subscribers. 56% of them reported being out of coverage at least three times in the last month, and 40% would pay at least R$5 a month extra for better basic service. The regulator, Anatel, is probably the most effective in Latin America, but John Strand of Strand Consult fame thinks it’s their fault for “blaming the operators”.

The bigger question, though, is “what’s going to happen to TIM Brasil?”

Telecom Italia is selling more of its own shares to Telefonica, in an effort to pay down its debts without parting with the valuable Brazilian operation. Telefonica is already present in Brazil as Vivo, so the Brazilians see this as an effort to merge the two operators without admitting it. Rather than Anatel, the relevant regulator is Cade, the anti-trust agency. This week, it fined Telefonica $6m and demanded that they either relinquish the stake in TI or find a strategic partner for Vivo.

A solution has been suggested - break up TIM Brasil and sell the bits to the three existing players. But Anatel may not wear this, as it means going down from four to three operators. As an additional complication, a substantial shareholder in Telecom Italia, Marco Fossati, is threatening to launch a boardroom coup if TIM Brasil is sold.

TIM Brasil, meanwhile, swapped 2,200 kilometres of fibre with the state-owned backbone operator, Telebras, as part of the national broadband plan. TIM Brasil is also planning to invest $4.7bn in more fibre over the next 2 years.

Oi, meanwhile, has sold off 2,000 towers to a US investor. The average occupancy of the towers is currently 1.6, so expect a major effort to increase tower-sharing.

In other emerging markets news, the Chinese 4G rollout gets closer still, as the TD-LTE licenses are distributed. China Telecom and China Unicom get 40MHz of spectrum each, while China Mobile gets 130MHz, split across the 1.9, 2.3, and 2.6GHz bands.

Last week we heard about BlackBerry’s new strategy based on emerging markets and software, so here’s Businessweek’s oral history of the company.

In Russia, meanwhile, Vimpelcom has signed up a deal with WhatsApp to ship the app on their phones. This comes after last week’s announcement with the Nokia Asha 501.

French carriers taunt Free Mobile over LTE - guess what happened next; Republic Wireless reviewed; Ultra slashes US international prices; SCF Release 2

France’s incument carriers have been boasting about their LTE networks and how long it’s taking for Free Mobile to deploy 4G. This may have been a mistake, because the obvious has now happened. Free announced that LTE is now available on their standard €19.99/mo tariff, with a 20GB (!) data allowance. That’s €10 a month cheaper than Bouygues’ cheapest, which comes with one-seventh the data.

The kicker is that Orange was hoping to increase its prices on 4G by as much as €10/mo. They’re putting a brave face on it, claiming that Free doesn’t have the coverage - presumably because that worked so well last time. There’s a small mystery here: ARCEP counts Free as having 700 base stations “capable of 4G”, and SFR as having 718, while Orange has 3,500 and Bouygues a mammoth 4,665.

You wonder if two different things are being counted here. The whole of Free Mobile’s macro network, after all, consists of Nokia base stations that are sold as being software-upgradeable to 4G, so are Free and SFR counting the sites where they’ve turned on the service, while the others count every site that could potentially be upgraded?

The Android Police review Republic Wireless and the Moto X smartphone, and come away well pleased. Republic is another of the wave of MVNO-plus-WiFi players emerging in the US - in this case you pay $299 for the phone, which is sharp pricing in itself, and $5/month for their VoIP service over WiFi, plus between $5 and $35/mo for additional mobile voice and data they wholesale from Sprint. A key issue with these products is the integration of the alternative dialler with the phone - the Android Police were pleasantly surprised, and pleased that the cellular-WiFi handoff worked.

Republic has also made a major innovation in the art of bundling - they’ve defined “unlimited” to mean “5GB”. Not that $35/mo for 5GB of LTE isn’t fairly keen pricing by US standards, but it is sort of limited isn’t it?

More threats to US pricing are lining up. This time, it’s international they’re after, with Ultra Mobile offering 1,000 minutes of international voice for $19/mo. They’re an MVNO running on T-Mobile USA.

Like WLAN, small cells are an important enabling technology for disruptive carriers. The Small Cells Forum has published its Release 2, concentrating on enterprise deployments. Alcatel-Lucent, meanwhile, wants to host multiple operators’ small cells and is actively signing up businesses who own potential sites, while fending off demands from the French government to bring more of its manufacturing back to France.

Meet CUSAX, aka RFC 7081, or Concurrent Use of SIP and XMPP, an Internet standard that aims to combine everyone’s favourite VoIP standards and use XMPP for messaging and metadata and SIP for voice and video.

Verizon Wireless, meanwhile, has quietly admitted that VoLTE won’t be launching this year.

Verizon, T-Mo crack open more spectrum; action on 600MHz; Wheeler promises “net neutrality” and “two-sided markets”

The VoLTE may be sliding right, but Verizon has acquired CDN Edgecast for some $350 million. That brings them some special software and 6,000 clients, including Twitter and Pinterest among other social media majors.

As we point out in the new Telco 2.0 Transformation Index, Verizon has a distinct lead over its rivals in the core disciplines of fixed and mobile broadband. This week, they began using the 2.3GHz AWS spectrum for LTE in most of their markets east of the Missisippi. So far, only a few of their smartphones can make use of it, but those include the iPhone 5c and 5s, the Samsung Galaxy S4, and the top-of-the-range Motorolas. Software updates are planned for the others.

T-Mobile USA has started to align its own LTE spectrum with the bands it acquired with MetroPCS. This makes substantially more capacity available.

The FCC, meanwhile, gave some more details of the planned 600MHz auction. The process will start with a reverse auction in which the TV stations using the band at the moment will be offered progressively more money to give it up, and the spectrum gained will then be auctioned to the mobile operators. Not surprising, perhaps, that this rather complex plan is taking a while to come together and D-day won’t be until the middle of 2015.

The new FCC Director, Tom Wheeler, has confused everyone by declaring his support for net neutrality and then immediately saying that there should be a “two-sided market” in which content providers could pay for priority delivery. Reactions were predictably prickly. After all, here’s a compendium of customer complaints about US ISPs.

After T-Mobile introduced a pay-for-your-phone plan, AT&T followed suit.

In Canada, meanwhile, four bidders have given up on the 700MHz auction. They’re essentially financial bidders, so that leaves a line-up of Canadian national and regional telcos. It’s cold up there, as this photo shows:


3UK goes for consolidation with 4G; O2 won’t play ball on stolen phones; a whole £10m for “innovative” rural broadband

3UK is adopting a very different strategy with LTE to the other operators. It’s not quite Free Mobile-style disruption, but it’s certainly different. Whereas Vodafone and O2 have treated it as an upsell, and EE as a battering ram for market share, 3UK is concentrating on its existing subscriber base. Upgraders will get LTE for no additional cost. As a result, they’re not spending money on extra handset subsidy (anyone who’s been into a Carphone Warehouse lately will be aware that EE is handing out a lot of hardware). They’re also ending roaming charges for customers going to the US.

All the UK’s mobile operators have agreed to a credit-card style excess on customers’ liability for fraudulent usage. From now on, if your phone disappears, you’ll only be liable for the first £50. Unless you’re a customer of O2 UK - they refused to sign.

Over in fixed, the UK market suddenly seems to be all about content. Having bought a ton of football, BT is now trying to outbid BSkyB for the rights to a previously untried electric car racing series. Good luck with that.

The British government is putting up a whole £10m for “innovative solutions” to rural broadband, after the near total failure of its policy so far.

In Australia, Minister of Broadband Malcolm Turnbull is asking the carriers if there’s anything they want for Christmas, as part of a “Regulation Repeal Day”. Meanwhile, Telecom NZ sold off AAPT, its Australian regional fibre arm.

EE and O2 go after gamers; Amazon Kindle Fire HD is a gaming hit; is music streaming economically dead?

Last week, we noted that the Softbank Samurai was investing in gaming companies because he thinks it’s the most lucrative form of mobile content. This week, both EE and O2 UK are pushing it - EE has signed up WildTangent to ship all their games with the phones, funded by adverts and sponsored in-game goods, while O2 has a new tariff that gets you an Xbox Live, a Kinect, and a Nokia Lumia 1020, 12 months’ worth of Xbox Live Gold, a copy of FIFA 14, and a whole 1GB of data, all for £100 up front and £52/mo.

This is a bit of a surprise: the Amazon Kindle Fire HD is the second-most popular mobile gaming platform, according to a survey, not too far behind the iPad.

ReadWriteWeb argues that streaming music is a disaster, littered by failures, that may just be a business model that doesn’t work in the long run. Spotify doesn’t make money, Rhapsody is cutting jobs, Turntable.fm is shutting down, and Pandora is trying to renegotiate its royalty terms to pay less. Artists are furious at how little they pay as it is.

The main reason to stay in the game is that music will get distributed, and there is no reason to think the traditional channels will reassert themselves, so the players have a chance of being the last man standing.

In the meantime, Spotify is trying to fix its rotten image with musicians, by promising much more money as the company grows and offering a new website to help promote their work, as well as partnerships to sell tickets and merchandise. The real problem is that however much Spotify grows is beside the point - it’s how many of its free users it can convert into paying users, and failing that, what kind of cost-per-click it can gain from advertising.

Ad spending to soar, or plunge; exit Demand Media; signs of a surge in m-commerce; the fight for Japanese payments acceptance

ZenithOptimedia, the data-crunching bit of enormous French ad agency Publicis, thinks mobile advertising is going to push up spending on advertising generally, helping it grow at 5.8% a year by 2016. On the other hand, GroupM, which does the same sort of thing at WPP, has revised down its own forecast for the next two years.

A really steep recovery in a couple of years’ time would reconcile the two. But then ,Deutsche Telekom is exiting the ads business, selling its classified ads operation Scout24. They’re keeping a minority stake.

Demand Media is the company behind all those websites full of low-grade “tips” that make up the Google Top 10 for every query you can think of. Or at least it was. This quote is special:

Early on, Demand used eNom’s 1 million generic domain names (such as “3d-blurayplayers-com”) to serve up relevant ads to people searching for specific topics. These “domain parking” pages were immensely profitable, generating north of $100,000 per day, according to a former Demand exec who requested anonymity. “That’s $35 million-$40 million per year without doing any work,” the exec said.

But the tactic was fundamentally a bait-and-switch. Users landed on the pages expecting to find information on a subject and instead found an ad. To try to drive up traffic, Demand shifted its strategy, populating the sites with thematically related content. Counterintuitively, though, that decreased ad click-through, since people were reading the articles instead of the ads, according to the former executive.

Google tweaked the PageRank algorithm to filter them out of the results, and suddenly the “content farm” business wasn’t what it used to be. Traffic is now down 56% this year and the company doesn’t look long for this world. Is it significant that their biggest website, Livestrong, is dedicated to a man who was exposed as a spectacular cheat during the same period?

Even if it’s hard to mourn Demand Media’s ad-ridden domain parking pages, vacuous “help”, and poverty rates, there’s something vaguely worrying about the way Google just turned off the oxygen. Similarly, here’s Jeff Bezos telling bookshops that “complaining is not a strategy”. So that’s what the drones are for.

The big pre-Christmas shopping days tend to come under intense scrutiny for what they show about our use of technology. Horace points out that one data series in particular, prepared by IBM, seems to suggest that people increasingly prefer to shop from mobile devices as opposed to PCs, and that phones rather than tablets are the key issue. This chart makes the point:


That said, Flurry reckons that usage of shopping apps on the big retail days actually fell back from the levels it reached in 2012, but that may just mean it’s a noisy data series.

It’s also getting practically traditional that analysts draw huge conclusions from really odd data (mobile ad serving!) at this time of year, so take care. After all, the IBM data doesn’t include Amazon.com or the iTunes Store.

Apple’s iBeacon indoor positioning/advertising system has gone live in the US.

In Japan, Square and the Softbank Samurai have started a price war for credit card acceptance. Softbank is the Japanese partner for PayPal’s smartphone card reader. Japanese credit card usage is remarkably low, probably because it’s remarkably expensive for both consumers and merchants.

If you’re interested in this, try our Digital Commerce briefing and then buy the Strategy Report

Is the UK’s smart metering deployment, and associated M2M super-contract, dead?

Will energy prices kill Bitcoin? Interestingly, it looks like the only way to mine Bitcoins profitably is if you don’t have to pay for the electricity - probably good news, or surely Amazon Web Services would own them all by now. It’s been suggested that in the future, the criminal gangs who illegally tap electricity to light and heat indoor cannabis farms will fill their attics with servers instead.

Fascinatingly, Canadian utility BC Hydro told a conference that they were mostly deploying smart meters in order to catch people stealing power for just this purpose.

Smart metering is perhaps everyone’s favourite M2M application - it’s green, it’s on a giant scale, and it might even be jolly. But we’d like to call your attention to Nick Hunn’s Creative Connectivity M2M blog, which argues that the UK smart metering deployment is going to go badly wrong.

As well as smart metering, we often hear about projects that use the electricity network to run telecoms cabling in the same right of way. Here’s a rare example of the opposite - Croatian telco T-HT is going to start supplying electricity. Hopefully it’s not coming down the phone line.

Intel’s NFV chip platform; how profitable is Amazon Web Services? Cloud Horror - it’s Screaming as a Service

Highland Forest is Intel’s new platform for network equipment, especially SDN and NFV applications. The announcement lays some stress on the special API for hardware acceleration of cryptographic calculations - you can tell the Snowden relevations are preoccupying quite a few people.

The Register does a nice introduction to NFV in the light of the Intel announcement here. They quote Don Clarke of BT as saying that the telco had decided to implement “a well-understood network function” with an HP server and Wind River’s embedded Linux as an experiment. This would be more impressive if it wasn’t for a whole string of similar BT projects we remember hearing about back as far as 2007.

Interestingly, the cable world’s CableLabs standards organisation has joined the NFV group within ETSI. A couple of other points worth noting from that story - NSN wants to include a configurable blade server in its base stations, and they compare the structure of the voice network with a distributed CDN.

Here’s an effort at estimating the financials of Amazon Web Services. They may be turning a profit at the EBITDA level.

This looks amusing: The Cloud Horror Archive, a collection of disasters with cloud services. It’s fear as a service, or FaaS - you fill in the web form and specify just how scared you want to be…

ReadWriteWeb explains why so many major Web sites are using Joyent’s node.js hosting - which you can get from Telefonica Digital, we recall.

Snowden: they’re in World of Warcraft

The latest Snowden revelation is CO-TRAVELER, a major project to mine mobile network location data and find out who travels with who. You’ll recall that the biggest single data source in the “Boundless Informant” slides is usually marked “PCS”, and they seem to have a special interest in multinational mobile carriers and GRX providers.

It also turns out that the FBI have a trojan that activates webcams. And the NSA is infiltrating World of Warcraft.

The trustee of New York State’s retirement fund, who speaks for a large quantity of AT&T shares, is trying to use them to make the company disclose details of the surveillance. AT&T is appealing to the regulators. He’s also written to the locals at Verizon, but so far they’ve only said they’re “evaluating” it.

On the other hand, a line-up of Silicon Valley firms have signed an open letter demanding reforms that would restrict the surveillance to “specific, known users for lawful purposes”.

The difference between the telcos (and cablecos, although we’ve not heard much about them) and the Valley is shown up in this post from the EFF.

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December 2, 2013

Focus on voice and digital commerce: Telco 2.0 News Review

Focus on voice & messaging: BBM gets aboard emerging market Androids, Whatsapp on Asha 501, South Korean spooks blast voters with 24 million tweets

BlackBerry Messenger is going to ship with emerging-market Android devices from OEMs Be, Brightstar, Celkon, Evercoss, Imo, Micromax, Mito, Snexian, Spice, Tecno, TiPhone and Zen. The version of the client app they get is slightly cut down, but still offers a lot of features, including voice notes and file/photo/calendar sharing with groups of up to 30 users. As AllThingsD points out, this is a play for the emerging markets’ future messaging and possibly also voice needs.

A new feature that rolled out to mature markets last week, BBM Channels, suggests that they’re also interested in a richer social media experience based on a publish-subscribe model, closer to blogging than tweeting. The big question is surely whether it’s a clone of Twitter, a vehicle for adverts, or a productivity tool.

Meanwhile, three more executives (the CMO, COO, and CFO) have been replaced and a non-executive director has resigned. New CEO John Chen has picked an internal candidate, the VP of financial controls, for CFO, but the other two jobs are open.

Nokia, meanwhile, is also getting interested in voice and messaging for the emerging markets - the recent software update for the Asha 501 adds a WhatsApp client and a new API for voice-over-IP apps. Emerging market carriers might face disruption sooner than they think.

Elsewhere, as we make clear in the new Voice and Messaging strategy report, The Future Value of Voice & Messaging, just being a VoIP provider doesn’t exempt you from the huge changes afoot in voice. Telefonica Digital is shutting down Jajah, the first-wave VoIP startup it acquired.

Optus is testing VoLTE and deploying HD voice. China Mobile and Huawei demonstrate interworking between a TDD and an FDD VoLTE network, for a video call too.

Du greeted the beginning of UAE number portability with an ad campaign encouraging the public to text them to find out more, and Etisalat decided to block the number. The regulator is not happy.

Twitter’s user base is young, and even younger if you look at mobile users. There’s also a “Facebook bulge” in the 25-34 bracket, presumably the original user base.


Speaking of Twitter, here’s a story about the power of messaging. An investigation in South Korea has revealed that the National Intelligence Service and the Defence Ministry’s Cyberwarfare Command sent out some 24.2 million tweets in order to help the president win the last elections.

Here’s a voice transcription and recording startup, Voxsmart, which essentially bugs the mobile phone it’s installed on and logs all communication as well as recording calls. Fortunately, it’s marketed at financial traders. There’s a bonus comparison of different transcription solutions.

iBat Pro is an iOS app for managing your Asterisk servers.

Chris Kranky argues that there is no business case for WebRTC, in the same way as there wasn’t one for Verizon FiOS or indeed the iPhone. Sometimes you need to make a strategic decision to shape the future, rather than one based on observing the recent past.

Good ideas from the XMPP world are getting ported into WebRTC. This one allows service discovery information to be passed incrementally, rather than batched, and therefore permits faster session establishment. XMPP has had it since 2009.

Interested? Read the blog, then buy the new strategy report. You know it makes sense

Focus on digital commerce: surging traffic and site performance, M-PESA, Amazon Reindeer, less 4G showrooming than you think

Akamai reports that Internet traffic to retail sites hit a historic peak on Thanksgiving evening. Traffic from tablets was especially heavy. Some interesting data points arise - when page load times went over 6 seconds, the abandonment rate rocketed from 12% to over 20%. Also, if you want snappy performance, you need to rethink all the AJAX gadgetry, share buttons, third-party recommendations, and the like - on average, the slowest 10 websites called 60 distinct hosts during load, while the fastest 10 called 12.


Akamai also acquired security specialist Prolexic this week.

Meanwhile, ISIS has launched nationally and this Twitter user is not impressed:

ISIS launches nationwide. All 17 users rejoice in finally having a third-rate mobile wallet

What about the first-rate mobile wallet, then? Tigo, Millicom’s Tanzanian operator, reports that 42% of its subscribers, 2.6 million of them, are M-PESA users.

Amazon would like you to know it’s been playing with model aircraft:

This has drawn the kind of flyin’ killer robot geek excitement you might expect. We will just point out that if it has to make deliveries within 30 minutes of the order, it’s going to need both a very substantial radius of action and high speed if Amazon won’t need to build a lot of extra warehouses. Bezos says it’s designed to operate within 10 miles of a fulfilment centre. In fact, the only aero-engine technology that fits the bill is whatever drives Santa’s reindeer.

Interested? Read the Disrupting the Californian Giants briefing and then buy the Digital Commerce strategy report

Here’s some data about 4G users with Orange in the UK, Spain, and France. Games are a big draw - 30% of UK 4G users downloaded games - which suggests the Softbank Samurai might have a point. And about 12% of subscribers said they had “showroomed”, i.e. looking up prices on goods they were browsing in a shop. Is that a lot or a little? We think it’s a little.

AWS hammers IaaS competitors; Sibelius - Verizon Terremark, you’re fired!, like 6000 T-Systems staff; Hamilton - data centre power draw no higher than in 2005

Whatever Amazon’s up to with the model helicopters, up in the cloud AWS is flying victory rolls over the competition. In Q3, Synergy Research reckons, AWS sold $700m of IaaS and PaaS cloud computing, compared to $600m for Microsoft, IBM, Salesforce, and Google added together. The overall market is growing 46%, but AWS is doing 55% and therefore still adding share. Canalys, however, reckons that the prices are so low no-one’s making money.

Is this possibly the worst thing that could happen to a cloud provider? When the US federal government had to build a really big, complicated web site for health insurance registration, who else did they turn to for the managed hosting than Verizon’s Terremark division? After all, they promised carrier-grade, enterprise-class reliability. But, as we all know, the launch of Healthcare.gov was an epic turkey.

And now, Terremark has been sacked as the hosting provider for the highest-profile Web project in the United States, after being publicly blamed for the mess by Kathleen Sibelius, secretary of health. Ouch. The contract now goes to Hewlett-Packard, who will take over in the summer. Does that make hc.gov the biggest test for OpenStack ever, or will they use good old HP-UX?

DTAG, meanwhile, is cutting 6,000 jobs at its T-Systems cloud-and-IT operation.

AWS data centre guru James Hamilton criticised the industry last week for being too keen to put solar cells on the roof and call it “green”. This week, his blog looks at success in green computing. He points out that forecasts of energy consumption from data centres have repeatedly been terrifyingly high, but the industry has repeatedly surprised everyone with its performance in practice. Despite the enormous expansion of the sector, data centres use about as much power as they did in 2005, an inspiring engineering achievement.

Hamilton argues that it is unlikely that on-site generation will be efficient, and makes the point that data centres have succeeded in IT because of economies of scale, so why bet against scale in energy? He points to Facebook’s investment in wind farms as a better idea than either on-site solar or fuelcells.

Spotify valued at $4bn, not bad for a lossmaker; Comcast squirts ads into series binges; YouTube trolls defy Google; NSA watches jihadis watching porn

Spotify has closed a $250 million round of funding that values the company at $4bn, pretty neat for a company whose losses doubled last year directly in line with its user growth.

More and more people like to sit down and “binge watch” a whole TV series in a sitting, which annoys advertisers. In so far as they do it via physical box sets or YouTube, there’s not much can be done. But if they get the content from a cloud-based PVR or similar, Comcast has a solution that pulls the same ads that were broadcast with the program and reinjects them to the show as it streams. Which will be fun in 10 years’ time if they’re still available.

The Sony PlayStation 4 is here and so is the BBC iPlayer app for it.

YouTube is the daddy of video streaming sites. But its comments have long been the definition of idiotic web nonsense, so much so that the StupidFilter project wanted to use them as a corpus of stupidity in order to filter it out of other comments communities.

Google thought it had the answer: force YouTube users to sign up with a Google+ user name. Thanks to the controversial G+ real name policy, they hoped, this would hold the trolls responsible, and therefore stop the stupidity. Further, they introduced a recommendations process, in the hope that users who posted something useful would gain recommendations and be filtered to the top of the thread, while the trolls would be downvoted, ignored, and would eventually get bored and move on.

They reckoned without the creativity of the average troll, and especially the fact (obvious in hindsight) that the trolls would recommend each other. Because the trolls recommend each other, this encourages even more outrageous and disruptive behaviour. The latest example is obscene ASCII art.

Google developers, never shy of trying to code their way around human nature, are now trying to design a Bayesian filter to screen it out.

In other filtering news, having badgered UK ISPs towards a default-on porn filter, will the UK government want to add “extremist” websites to the list?

China Mobile 4G ready on the 18th; US military pull out of AWS-3 band; cablecos could give you 1Gbps, but won’t when telcos won’t give you 40Mbps

China Mobile names the day - 4G switch-on is planned for the 18th of December, under the brand name “He”. That will surely help LTE on its way to 1 billion connections, which the GSMA expects by 2017.

The US government has agreed among itself about cracking open more 1700MHz spectrum, the so-called AWS 3 band. FCC and NTIA had promised this to the mobile carriers, but the big problem was getting the Defense Department off the frequency. The 1755-1780 band will therefore be paired with 2155-2180 and auctioned as a 50MHz block.

Price competition is getting more and more intense in the US. Here we have a case in which T-Mobile’s CEO comes up on Twitter to argue over a customer with AT&T Mobility. Goldman Sachs apparently thinks the same thing about Australia, after VHA starts offering “double data” now their network works.

Mexico’s new regulator is looking at the idea of a publicly-owned wholesale LTE operator, using the power grid’s dark fibre assets and a 90MHz block of 700MHz spectrum.

Turkcell has revived its sensational lawsuit against MTN, in which it alleged that the South African operator helped Iran’s nuclear programme in exchange for a GSM licence. It cannot be coincidence that they did this right after the US-Iran nuclear agreement. Also, Telkom says its trials of 100Mbps FTTH are going well and a commercial launch is coming in H1 2014.

Teliasonera’s inquiry into corruption during its adventures in the ex-Soviet Union continues, and four executives are sacked.

Vivendi is demerging SFR and it’s for real, but Telecom Italia denies that it’s selling TIM Brasil.

Niger’s regulator has cut off a third of the country’s phone numbers after their users refused to identify themselves.

Bengt Nordstrom reckons the days of the global MNO are numbered, and operators will sell off towers and concentrate on “agility”.

At the same time, Informitv reckons we can expect more consolidation among cable operators in order to bargain more strongly with Hollywood. But is content really the point for the cablecos any more? Arguably, their real competitive strength is raw bandwidth. Ars Technica points out that Comcast and their vendors demonstrated gigabit speeds on DOCSIS cable two and a half years ago, but you still can’t buy it. Why?

Because 20/100 is still easily enough to trump anything a typical copper or FTTC telco can offer, so there’s no reason to upgrade yet. Consider the good people of the Cotswolds, home to the British prime minister. BT doesn’t provide broadband there. The government scheme that was meant to fund community broadband initiatives like theirs is being wound up early, returning £10 million of European Union money to Brussels. The prime minister, though, has a leased line paid for by the government.

SE Asia goes 50% smartphone shipments; Firefox OS in 13 markets; Jolla launches; Cyanogen installer canned

New device shipments in South-East Asia are now over 50% smartphones, essentially Android (72% overall, over 90% in some markets). Indonesia has added 15 million smartphones this year to date.

Horace discusses the vast grey market in cheap Android tablets in the same part of the world. Is it a revolution, or is it more like the Video CD business in Asia, basically anomalous and likely to go away once something better takes over its niche?

LG denies that it’s pulling out of smartphones in favour of smart TVs.

Telenor has deployed Firefox OS in its central and eastern European markets, which brings the count of Firefox OS markets to 13.

Jolla phones have launched with DNA in Finland.

Cyanogenmod, the most popular alternative Android, recently invented an installer app to replace the rather painful process of pressing arrow keys arbitrary numbers of times and looking for hidden boot screens. Google has now killed it from the Play Store for fear that “users might invalidate their warranty”. If you do install it, you can switch on access-control notifications and watch Facebook try to look up the e-mail addresses in every message you send.

There’s a row going on about the winner of Salesforce’s $1m hackathon.

And is a company without APIs like a computer without the Internet?

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