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January 27, 2014

Telco 2.0 Transformation Index: SingTel, Telefonica lead AT&T, VZ and Ooredoo (but all need more)

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SingTel and Telefonica: Great Telco 2.0 vision and leading the charge, but still behind where they need to be

The Telco 2.0 Transformation Index, launched today, gives an overall comparative benchmark and in-depth analysis of the progress of five leading telcos (AT&T, Verizon, Telefonica, SingTel and Ooredoo) in terms of transforming their operations and building new ‘Telco 2.0’ business models. Overall, it shows that SingTel and Telefonica have made more progress than AT&T, Verizon and Ooredoo, but that all are still at a relatively early stage of maturity and have much still to do.

In the disruptive context of a $400bn ‘digital hunger gap’, and core revenues shrinking by 20-30%, the Telco 2.0 Transformation Index provides the first definitive benchmark of how well telecoms operators are equipped to survive, compete and thrive.

Figure 1 below, taken from the overall benchmarking report, shows the headline output from the Telco 2.0 Transformation Index:

Figure 1: Telco 2.0 Transformation Index Summary Scores
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The score is based on both the telcos’ capabilities and the challenges they face, and a score of 75 (the red dotted line in the chart) would show that a telco has started to deliver significant value through new business models. SingTel and Telefonica, at 60 and 57 respectively, have therefore made a good start relative to their peers but must continue to push forward with their new business models. Verizon (47), Ooredoo (44) and AT&T (39) perform less well overall but nonetheless do well in certain dimensions.

To see how this is captured by the Telco 2.0 Transformation Index, its methodology must first be understood.

The Telco 2.0 Transformation Index is an integrated and comprehensive evaluation system for CSPs covering internal and external parameters

The Telco 2.0 Transformation Index analyses five core domains covering both a CSP’s external environment and its internal structures and performance:

  1. Marketplace: the context in which the CSP operates. It consists of the regulatory environment and the alternate service offerings offered by competitors.

  2. Service Offering: what the CSP delivers to customers in particular market segments. It is defined by the CSP’s corporate and services strategy.

  3. Value Network: the way the CSP organises itself to deliver service offerings. It includes both the internal structure and processes and external partnerships.

  4. Technology: the technical architecture and functionality that a CSP uses to deliver service offerings

  5. Finance: describes the way the CSP generates a return from its investments and service offerings. It also measures the CSP’s success in generating returns.

The overall Telco 2.0 Transformation score for each CSP is based on scorings for these five domains, which are in turn built up from ‘Level 1’ and ‘Level 2’ scores. A maximum of 34 independent parameters are analysed and scored for each CSP.

This framework is summarised graphically by Figure 2 below:

Figure 2: The Telco 2.0 Transformation Index builds up from underlying data and analysis
T2TI Analytical Framework
Armed with this knowledge it is now possible to gain an initial understanding of the CSPs’ relative strengths and weaknesses. Figure 3 provides the details:
Figure 3: Breakdown of the Telco 2.0 Transformation Index Summary Scores
T2TI Summary Score Breakdown
Two key results are as follows:
  1. The Value Network is the key differentiator between CSPs: Telefonica and SingTel, having both made bold organisational changes, score highly here. However, this has not yet been reflected in the quality of their service offerings.
  2. Verizon, AT&T and Ooredoo are strong in very different domains: Verizon performs well in the Service Offering and Value Network, AT&T performs well in the Service Offering, whilst Ooredoo is strong in both the Marketplace and Technology domains.
These, however, are only the results: they can tell us the ‘what’ but not the ‘why’.

The Telco 2.0 Transformation Index also allows the reader to drill down and look at the rationale behind each score in increasing levels of detail. Headline output and analysis, contained within a 230+ slide benchmarking report is reinforced by five 140+ slide ‘deep-dive’ reports for each CSP which are each in turn accompanied by a data pack detailing every numerical input to the CSP’s score.

It therefore provides a unique opportunity for strategists within CSPs and the vendors and investors they deal with to gain both strategic, contextual knowledge of the industry and dedicated, idiosyncratic knowledge of individual CSPs.

“If you do not change direction, you may end up where you are heading.” - Lao Tzu

Traditional (‘core’) revenues continue to shrink and markets are becoming increasingly saturated with OTT competition. However, by changing direction and moving into ‘Telco 2.0’ services (e.g. cloud, digital commerce) top-line revenue growth can be assured in the long-term.

With the telecommunications landscape changing at an unprecedented rate, telcos, vendors and investors have never been under so much pressure to understand both how telcos can adapt and thrive in this new environment and how well they are doing. There are invaluable lessons to be learned from the experiences and aspirations of leading CSPs to date. These are what the Telco 2.0 Transformation Index provides: click here to find out more.

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Verizon; Patent Peace; Cable Deals; Lenovo buys IBM servers - Telco 2.0 News Review

Here’s a video that should explain why you should attend our OnFuture Americas event in Mountain View on the 20th-21st of May

Patent peace: Ericsson, Samsung, Google, Huawei, Apple settle their differences

Is peace breaking out among the industry’s intellectual property rivals? Ericsson has agreed to settle a dispute with Samsung, dropping a lawsuit it filed at the end of 2012. In exchange, Samsung will drop its counterclaim. The solution is a cross-licensing deal which, according to Ericsson, will increase their cash flow in 2014 and will run for several years. The money involved is substantial - Ericsson claims it will increase its net income by $512 million in the fourth quarter.

At the same time, Samsung and Google signed an agreement to licence each other’s patents for the next 10 years. Google and Samsung are usually on the same side on IPR issues, but the next story is more telling, as it involves a case in which Apple is involved.

Rockstar, a consortium of companies including Apple, Ericsson, BlackBerry, Sony, and Microsoft which bought a large portfolio of patents from the wreckage of Nortel Networks, has agreed to settle a lawsuit it filed against Huawei, Google, and a who’s who of Android vendors.

This does begin to look like a deliberate effort to clear the decks of outstanding issues. Does it imply that a broader peace treaty is coming that would resolve all the Android-related lawsuits?

In other IPR news, Qualcomm has acquired the rights to Palm’s old patent portfolio (bound to be some gems in there) from HP, and ARM Holdings’s chairman is stepping down.

Verizon has the pipes, and it’s going to use them; T-Mobile does mobile money; AT&T/Vodafone no deal

In the US, Verizon’s Q4 results dropped, and it was a strong showing on all fronts. Wireless had 1.65 million net-adds in the quarter, of which 1.57 million were postpaid, and 1.4 million took 4G. Smartphone penetration is at 70% and surely can’t have much further to go, while ARPA is $157.

The earnings call was, not surprisingly, a run-down of triumphs. Over the whole year, VZW added 4 million subscribers and increased its service revenue by 8%. Wireline added 600,000 more fibre subscribers and achieved revenue growth of 4.9%, when any revenue growth at all is challenging for most ex-incumbent fixed operators.

The secret seems to be pretty simple: it’s broadband. 55% of new FiOS subscribers in Q4 were on a service tier above 50Mbps, and they got 126,000 net adds in broadband in the quarter, as well as rolling over 80,000 existing broadband subscribers onto FiOS. The pattern is clear that VZ is concentrating on the fibre footprint and gradually withdrawing from the areas beyond it - total retail residential lines are falling. Similarly, we’ve already seen that the great majority of their net-adds in wireless are taking 4G. VZ invested heavily in the “happy pipe”, with FiOS and then with LTE, and they’re now reaping the benefits.

Meanwhile, Sprint has given notice of job cuts coming. Their quarterly numbers are expected on the 11th, and in the light of Verizon’s stellar performance, AT&T’s massive giveaways, and another big T-Mobile quarter, it’s hard to see how they can avoid being dreadful. Especially as AT&T’s customer-retention splurge now includes their low-cost prepay offering Aio Wireless.

The H-block auction moves on, having reached a total of $300m.

T-Mobile USA may be an “uncarrier”, but like all carriers it wants to get into mobile money somehow. The service is based on a partnership with a bank (Bancorp) and provides a prepaid debit card, an app, and various basic banking services like cheque clearing.

Here’s an interesting take on the revived net neutrality issue - Netflix’s lobbyist tells Congress that they’re not worried, because no ISP could risk being that network that doesn’t have Netflix, and anyway they account for so much traffic that throtting 90% of the traffic to speed up the other 10% doesn’t make much sense.

AT&T, meanwhile, has officially denied any intention of bidding for Vodafone in a statement to the London stock exchange. Exchange rules state that they can’t try again for six months after such a denial. Inevitably, this has only induced more speculation, as well as dropping Vodafone shares about 6%.

Vodafone buying Ono, Liberty buying Ziggo; French network sharing; Sawaris in for TIM Brasil?

Vodafone, for its part, is buying a Spanish cable operator, Ono, as it adds more fixed assets all over Europe. Buying cable makes sense, not just for the TV, but also because it offers a quick upgrade route to high speed broadband.

Another European cable deal is on the cards, as Liberty Global acquires Dutch operator Ziggo, for €10bn including the assumption of its debts. This has the consequence that Réne Obermann, the former T-Mobile International and DTAG boss, is looking for a job again, having taken the CEO’s slot at Ziggo.

In France, SFR and Bouygues are looking into a network-sharing agreement in order to cut their costs and survive the price disruption unleashed by Free Mobile.

In the UK, is the deployment of BT’s VDSL harming competition? In North-East Somerset, they won’t mind if it is - Wansdyke Telecom is a new community fibre project around there.

Manchester and Salford city councils are offering grants of up to £3,000 for small businesses to get high-speed Internet access. It would be nice to think this would serve to get some public fibre deployed, but realistically, like most of the BDUK programme, a lot of it will be a subsidy to BT VDSL.

Elsewhere in the world, Naguib Sawaris is interested in buying TIM Brasil, which might be a solution to the TI/Telefonica row.

TI’s wholesale arm, Sparkle, has turned up peering with iBasis for LTE signalling. Saudi Arabia’s first MVNO. Ericsson and Telstra test LTE in the Asia-Pacific 700MHz band.

Apple Q4; 2013 in semiconductor shipments; Samsung, LG, Nokia results

Apple’s Q4 drops this evening, 2000 GMT. While we’re waiting, figures for 2013 semiconductor sales are out. Between them, Apple and Samsung bought $52.5bn worth of chips last year, while the next eight biggest buyers together took $54.8bn worth. The three biggest PC manufacturers - HP, Lenovo, and Dell - took $27bn, showing the swing towards mobile and Macs very clearly.

Samsung, meanwhile, was the world’s second biggest producer of chips as well as being one of the biggest consumers of them. They shipped $33.5bn worth in 2013, a market share of 10.5%, second only to Intel. No bad thing, either - Samsung Mobile had a poor Q4, with its sales flat year-on-year, its operating profits down 18% sequentially.

A group of Foxconn executives have been accused of corruption by Taiwanese police. This comes at an awkward moment, when the company is looking at moving production out of China, to Indonesia and even the United States.

LG made a small net loss in Q4, about 64 billion won or €43 million. This was a big improvement year-on-year, as the corresponding quarter in 2012 was a 478 billion won loser. The key driver was far better performance in smartphones - shipments were 13.2 million, twice the corresponding quarter in 2012.

Nokia had full-year results out, and they weren’t good. That said, they could have been much worse. The company was in profit to the tune of €519m, only a return of 4% but much better than the alternative. Sales were down 17%, essentially because NSN didn’t do as well as it has been doing - as the networks business now has to carry the whole company, this is serious. Meanwhile, the phones business is now described on Nokia’s books as yet more Nokiadroid rumours.

And it’s 30 years since the Mac launched.

Lenovo buys IBM servers; exit Savvis; AWS refreshes Redshift; Microsoft Q2 is all about enterprises

Lenovo is buying IBM’s x86 server business for some $2.3bn, essentially repeating their deal with IBM for the ThinkPad PC division. Names like BladeCenter will go to Lenovo, while the power-saving ARM systems and old-school mainframes stay with IBM.

On a similar theme, another storied name is leaving us - Centurylink is retiring the Savvis name from its backbone ISP and data-centre business. They acquired the company, once one of the key Tier-1 operators, back in 2011.

Amazon Web Services refreshes its Redshift big data product, adding “Dense Compute” nodes as an option. These are configured with more CPU and less storage, so it’s actually true that the dense nodes are the smart ones.

Horace wonders why people see Google as infallible. Good point: here’s the crash inquiry into a world-wide outage on Gmail caused by a problem with their automated configuration management. Perhaps that’s why they’re buying an artificial intelligence company.

Microsoft’s Q2 is out, and the take-home message is that growth is increasingly concentrated in enterprise products. It’s always worth remembering about Microsoft that it’s a company whose biggest product is called “Office”, but the numbers are impressive. It’s not just Office, either, but also a lot of server products and cloud.

James Hamilton has a fascinating post on the importance of archiving, Facebook’s strategy, big data, and open hardware.

Verizon puts a number on surveillance requests; Neiman-Marcus credit card virus “in place for three months”

After the Snowden disclosures, ,Verizon has chosen to start publishing details of the requests for data they get from the government. Not surprisingly, their volume and scope are far greater than they were for, say, Apple. The Feds wanted information on 320,000 separate occasions. It’s worth pointing out that out of those, 85,119 were requests to locate a mobile device after a 911 call, which even Edward Snowden can hardly object to.

We now know what the malware was that got into Target’s credit card readers and stole 40 million cards. It reads the data from RAM, keeps it, and waits until everyone’s gone home for the evening to send it to a compromised PC via NetBIOS - because who monitors *that* these days? - before the command-and-control server logs in via FTP to collect the take.

Neiman-Marcus, meanwhile, have given some detail about their own POS terminal disaster. Just over a million cards were taken, of which 2,400 have been defrauded. But the worst of it is that the malware was operational from July to mid-October, and they only found out this month, after Visa noticed unusually high levels of fraud.

A small network in Wyoming was the subject of a massive denial of service attack of an unusual kind. It seems that the Great Firewall of China started routing traffic from China into it - this was originally thought to be an operator error, but then it turned out that one of the companies hosted there has a long history of providing service to Chinese dissidents. The GFW, of course, has an endless supply of traffic from China it would usually dump. So why not, instead, reroute it and use it as a weapon?

A serious vulnerability in Google Chrome means that a website that once gets granted access to the microphone can keep it after the tab closes.

VMWare acquires AirWatch, a mobile device management company for $1.54bn, the biggest buy in its history.

French carriers have started imposing a termination surcharge on calls with wrong, missing, or spoofed caller ID, in an effort to get rid of voice spam originating from North African call centres. Simwood approves, but points out that as the charge is based on the caller ID presented, this creates an exciting new attack vector - set your competitor’s caller ID, then crank up the robodialler, and they get a huge bill.

F-Secure explains why they don’t whitelist “policeware”.

Sky Broadband’s parental controls filter blocks the CDN that distributes the jQuery javascript library used by every website you’ve heard of.

One small cell per person; WiFi aggregation; green HTML; Ka-band

Bell Labs thinks we will use “billions of small cells”.

Telefonica I&D are working on a form of carrier aggregation for WiFi.

The 3G, 4G, and 5G Wireless Blog provides a rundown of progress on SRVCC.

Designing Web sites to reduce their carbon emissions.

OFCOM knocks open a chunk of the Ka-band for mobile Earth stations to use for satellite broadband.

Reverse-engineering OkCupid.

In some parts of the US, literally no girls at all take computer science in high school.

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January 20, 2014

Net neutrality, Fregulators, Indian spectrum, IBM cloud investments, Telco 2.0 News Review

Registrations are open now! for OnFuture Americas, 20th-21st May, Mountain View

US net neutrality rolled back, but FCC gets Section 706 powers; French industry minister declares war on cheaper calls conspiracy

A US federal court ruled in Verizon’s favour this week, thus essentially overturning the FCC’s Open Internet Order, the relatively weak net neutrality measure imposed by Chairman Genachowski a few years back. This red-alerted the neutrality lobby into action, not surprisingly as it comes a week after AT&T announced its “Sponsored Data” product.

Teresa “The Voice of Broadband” Mastrangelo discusses Sponsored Data in some detail here. Although AT&T is at pains to deny that the sponsored data gets any preferential quality of service treatment on the wire, you can see how it would relaunch the whole row.

That said, Verizon’s win in the courts is far from an unequivocal triumph.

The court held that the Open Internet Order amounted to the sort of powers the FCC has under the famous Title II of the 1934 Telecoms Act, which regulates anything it considers to be a common carrier. Since the Martin FCC’s Comcast decision, of course, broadband has been carved out of the notion of “telecommunications services” in the meaning of the Act, and therefore not considered a common carrier and not covered by Title II.

This leaves the FCC with the option of biting the bullet and reclassifying broadband. As the FCC is simultaneously trying to get everyone on broadband, you can make a case that it will have to if it doesn’t want to become irrelevant.

The court also gave the FCC quite a bit more wiggle-room, holding that Section 706 of TA ‘96 does give the FCC quite broad regulatory powers over the Internet even without reclassifying. For example, it could require that any “non-neutral” arrangement be “non-discriminatory” and “reasonable”, and a lot of net neutrality advocates would argue that without the ability to discriminate in a manner that might be considered unreasonable, there’s no point.

In other regulatory news, the French government wants to attach new conditions to the 700MHz auction, notably regarding jobs, investment in small towns, and the reshoring of call centres.

Rather more worrying is the rest of the story. The minister responsible for industrial recovery, Arnaud Montebourg, who has suddenly taken an interest in his colleague at telecoms Fleur Pellerin’s brief, complains that “it’s out of question that prices can be allowed to fall because billionaires are fighting on the public square”. That’s right - he’s worried that a telecoms cartel might be scheming to cut prices. He’s also concerned about fibre deployment.

He is, of course, talking about Free. You know, the first ISP in France to roll out fixed fibre to the home. Would it be too cynical to theorise that Pellerin and ARCEP saw through the incumbent lobbyists, so they’ve now taken their case to Montebourg instead, knowing that he probably knows much less about telecoms and his brief means he’s especially sensitive to threats of job losses?

Indian spectrum action; two banks in for Sprin-T; no sale of EE

On the 3rd of February, India’s re-auction of the 900 and 1800MHz bands kicks off. Vodafone and Bharti, plus Idea, Reliance, and Telenor, are all present at the start line, and 4G greenfield Reliance Jio Infocomm may also take part.

Wind Mobile, the Vimpelcom-owned Canadian MNO, has pulled out of the 700MHz auction although it needs more LTE spectrum by its own admission. Apparently the Canadian government isn’t happy about Vimpelcom taking full control of the company, and Vimpelcom is pushing back.

Sprin-T speculation is peaking, as it’s rumoured that two banks are on standby to lend Sprint the money it would need, and Deutsche Telekom has moved its stake in T-Mobile USA into a Dutch holding company. The reference is presumably to the way Vodafone managed the sale of VZW for tax purposes. That said, it’s also been estimated that the deal would increase the Herfindahl index of the US cellular market, a measure of monopoly, by more than the AT&T&T-Mobile deal would have done.

Elsewhere, super-cheap US MVNO Netzero signed a new 3G wholesale deal with Sprint.

Carlos Slim’s European tour continues, as he acquires another 3.14% of Telekom Austria, taking the stake to 26.37%.

The owners of EE have decided not to float the carrier just yet, and to wait for 4G to prove itself further. Meanwhile, EE has had a disaster with the old T-Mobile prepaid OSS, accidentally wiping out subscribers’ credit balances.

One of those hybrid MVNOs/mini-carriers has decided to sell its infrastructure and just be an MVNO, in Chile.

BT is the partner for Neul’s ultra-low power whitespace network. Telefonica has a new enterprise mobility product based on its WiFi assets.

And here’s Africa’s first LTE-Advanced, in Angola.

Vodafone and BSkyB vs. BT; iPlayer and tablets; Charter bid for TWC

Vodafone and BSkyB have been discussing how they might cooperate in the UK fixed market. The report sounds as if they’re looking at wholesaling BSkyB content (Vodafone already bundles the Sky Sports app with some LTE plans) and also cooperating on the network. Vodafone, of course, owns the substantial Cable & Wireless metro-fibre and data centre assets, even if a joint FTTH build isn’t considered, and it could also provide wholesale 4G as part of a Sky quad-play.

However, “the newspaper said the talks illustrate the extent to which the once-staid telecoms operator has gained on its competitors by betting on fibre broadband and top flight football”. They can’t mean BT surely?

Meanwhile, Connected Vision reports that BBC iPlayer usage on tablets has passed that on PCs, while the overall TV audience over Christmas actually fell. (The Christmas Day EastEnders is now down to less than a quarter of its ratings in the peak year, 1986.)

The FCC has its 2012 broadband stats out.

Charter’s bid for Time Warner Cable went official this week at $132.50 a share, and TWC immediately said this was not enough. There is much speculation going on that although the FCC is likely to give the bid the go-ahead, especially if Charter splits TWC’s footprint with Comcast, it might take the opportunity to add a net-neutrality rider and a content wholesaling requirement - after all, they did so for the Comcast acquisition of NBC Universal in 2011.

The European Commission is looking into whether territorial exclusivity for TV and movies is anti-competitive.

TiVO showed its network-based DVR product, Roamio, at CES. Virgin Media is apparently running small scale trials of it, and both Com Hem and ONO are interested.

Huawei and ZTE numbers; Chinese subscribers; Apple + China Mobile; vendors

Huawei announced sales up 8% year on year and operating profits up 20%.

The company claims to be the world’s third biggest smartphone vendor, targeting 80 million smartphone shipments for next year. That said, Huawei is still very much the big iron infrastructure shop. 75% of the Carrier division’s revenues came from the top 50 mobile operators.

Meanwhile, ZTE expects to be in profit for 2013, compared to a net loss last time out. The explanation is pretty simple - the industry’s price leader took on too many contracts it couldn’t make money on, so they reined in the sales hounds a tad.

Chinese mobile subscribers are up 0.5% at 1.23bn in December, with China Mobile delivering both the most net-adds and also the biggest gains in 3G adoption.

Not surprisingly, Tim Cook was keen to talk up the iPhone deal with China Mobile, taking part in a live teleconference with the chairman Xi Guohua.

While we’re on vendors, the top job at Nokia is up, and it’s between CFO Timo Ihamuotila and NSN CEO Rajeev Suri. Ericsson boss Hans Vestberg may be in the running for the Microsoft job. And Siemens sells its remaining telecoms R&D.

SMS revenues slide; IfByPhone gets funding; understand SDP with cows; web-voice for marketers; Spanish voicemail-to-text

Strategy Analytics reckons that worldwide SMS revenues fell for the first time in 2013 and will fall 20 per cent by 2017. The problem being all those instant message apps. Deloitte, meanwhile, estimates that the volume of IM passed that of SMS in 2012 and will reach double the volume of SMS next year.

One of our favourite Voice 2.0 startups, IfByPhone, has snagged another $9m in VC funding.

Now here’s something. One of the main arguments for WebRTC is that it lets all sorts of general-purpose web developers jump into telecoms. This is also one of the main problems - it’s not as if any of the complexities of telephony have gone away, after all. As a result, the details of the SDP payload can be a bit intimidating. Fortunately, help is at hand! Why not visualise it as a cow?


No. We got the graphic from WebRTCHacks, which has a nice tool to let you explore the SDP payload in detail and experiment with it interactively. Moooo!

Chris Kranky argues that the enduring complexity of telephony and video is a strong argument to get as much of your WebRTC in the cloud as possible, and explains why Web-voice integration is good for marketers. And here’s a good practical example, at the Twilio blog.

Sprint is looking at VoWLAN and has added Spanish to its voicemail-transcription service.

British banks’ mobile money platform; O2 Money shuts down; Zimbabwe fixes interop; ATMs’ WinXP support ends on 9th April

Five British banks have signed up to launch a joint mobile payments venture. This one is based on a software platform from Zapp, which the partners will integrate into their own apps, or perhaps just skin with their own branding. It involves NFC, or alternatively QR codes, but this is intended for in-branch use.

In parallel to this, O2 UK has closed its mobile wallet service, probably due to a lack of anyone who wanted to put money in it. (Is there a theme here?)

In Zimbabwe, where people really do use mobile money, Econet Wireless has opened up interoperability with the banks’ payments system, ZimSwitch. This had been an issue because the banks didn’t want the competitor to have access to things like the ATM network, and Econet didn’t want the banks to have access to its customers.

On the 9th of April, Microsoft will terminate its support for Windows XP, and the security patches will stop coming. This is a serious problem, because about 95% of the world’s 3 million ATMs run XP, and the phrase “unpatched XP box” still strikes fear into the hearts of security professionals everywhere. Some of them run the embedded version, for which security support continues into 2016. The owners of the rest, though, must choose whether to upgrade or to pay Microsoft for continued support.

Microsoft is keen to finally give XP the stake in the heart, clove of garlic, and coffin filled with its native soil treatment, and to this end, the pricing of extended support goes up dramatically each year in order to push the ATM owners to upgrade. The problem is that a lot of the ATMs won’t run Windows 7 and will therefore need a literal forklift upgrade. And while all this is going on, the US is meant to deploy chip-and-PIN…

Massive POS terminal hack against US retailers; in which the NSA reads our traffic; how “TDoS” attacks work

It must be time for some security news! Just why the idea of unsupported Windows XP-based ATMs should be so dreadful is well shown by the so-called “Target data breach”. “Data breach” is a misnomer here, and arguably one that serves to play down the seriousness of the incident. It’s not as if Target lost a database of people’s loyalty card points, bad as that would be.

Instead, their entire fleet of credit card merchant terminals was compromised by hackers who also did it to several other retailers. Target spilled 70 million credit cards, plus an unknown but big number at Neiman-Marcus and a variety of other companies.

As Dave Birch points out, the information is enough to run transactions or to create cloned cards that could be used anywhere magstripe readers are still in use, or where a fall-back to magstripe can be forced, but it wouldn’t be enough to defeat the current implementations of the European EMV-4 standard, aka Chip and PIN. Bring on 2015.

Meanwhile, the latest Snowden bomb goes off with the revelation that the NSA and its mates collected about 1 per cent of global SMS traffic a day, concentrating on network notifications. Why? Because the “Welcome to Telco plc international roaming. Dial 112 in emergency. Calls cost…” SMSs let you know when the user crosses an international border, of course. They also scarfed up any vCards sent as SMS, which means they certainly did read our traffic!

The EFF, meanwhile, reports on a personalised spear-phishing attack the Vietnamese secret police tried on two of their staff.

The good news: your smart fridge probably hasn’t been hacked, yet.

Here’s a good piece on the growing threat from telephony denial of service (TDOS) attacks and social engineering enabled by caller-ID spoofing. Interestingly, 3G USB modems are often used as the platform for this sort of thing, and here’s a report on how the attack tools are getting consumerised.

Don’t have nightmares. After all, Geeksphone, the people who did the first FirefoxOS gadget, are working with Silent Circle and other security specialists to build a security-optimised smartphone. But you still need a security-optimised *carrier*…

IBM: another 15 data centres, thanks; PacNet opens new DC; extreme heat fells Aussie HPC; Vodafone IPX

IBM is putting $1.2bn of investment into SoftLayer, the major managed-hosting company it acquired last year. The cash will be used to add another 15 data centres to the portfolio it owns worldwide - 13 SoftLayer and 12 IBM ones - representing a big commitment to the cloud and an effort to push the cloud endpoints closer to the network edge.

Meanwhile, Pacnet opened a $90m, Tier III high availability data centre in Singapore. We could go all serious about the cloud and Asia-Pacific and cooling options, or we could use this photo:


Only a few days ago, we read that thanks to the “polar vortex”, a US university’s high-performance computing centre had sent round an e-mail asking scientists if they had any big computing jobs they felt like bringing forward so the sysadmins could keep warm. Here’s the opposite: the Victorian Life Science Computation Initiative, a biology HPC centre in Melbourne, has had to shut down some of its machines because the water supply is over 40 degrees C and therefore outside the cooling system’s design limits.

Meanwhile, Vodafone wants to eat the IPX hub industry and get everyone on their carrier services division’s platform.

Amazon was looking at delivering packages by drone before Christmas. Now it’s patented the idea of shipping stuff you might want, before you buy it. You could say this was the logical conclusion of all the “search queries before you even ask” stuff. You could also say that it was a canny way to push some of Amazon’s inventory costs onto the transport industry.

Samsung debate; Apple Q4, huge or enormous?; Google buys Nest; no Ubuntu phones this year

Is Samsung in trouble, or cheap as chips? The analyst with the best forecasting score for Samsung stock in 2013 reckons that smartphone margins are going to be ground down further, and that means another slide in the stock, unless the chip business can make up for it. Others argue the business is fundamentally strong and the shares are now cheap.

Horace reckons that Apple’s Q4 is going to be a monster, presumably driven by the start of China Mobile sales and a good Christmas. He also provides a nice chart comparing Windows and Apple platform shipments.


He argues that Apple is well placed to hold onto this, not being beholden to a few corporate IT buyers but rather to a diffuse base of consumers. Meanwhile, Nokia pushes a major update for the Lumias with some interesting features, but it doesn’t work.

There won’t be any Ubuntu phones before 2015. An interview with Cyanogenmod. An interview with Gabe Newell of Valve.

Google buys home IoT specialist Nest Labs for some $2bn.

And Ars Technica pleads with Lenovo not to kill the classic ThinkPad keyboard, the tool with which this review is weekly crafted for your pleasure. Hear, hear.

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January 15, 2014

How Telcos can add 50% share value: lessons from Google and Unilever’s business models

Transformation can be hugely valuable for telcos if they can grow platform and product innovation revenues to add to their core services. In this post previewing some of the findings from the new Telco 2.0 Transformation Index to be published next week (w/c 20th January) we show how this could work.

[Ed. For more on the Index, please email contact@telco2.net or join us at OnFuture America 2014 in Silicon Valley, May 20-21, where we’ll be sharing some of the findings.]

‘Platform’ and ‘product innovation’ business models produce higher returns on capital

Telcos predominantly sell three undifferentiated services to downstream customers: voice, messaging and connectivity. This amounts to an infrastructure-led business model (Telco 1.0). Infrastructure businesses (e.g. Vodafone) are highly capital intensive (high EBITDA margins), and show low innovation (its few products are tied to the capital investment - the network) with relatively low returns on capital.

The operational and financial business models of both Google and Unilever, however, are very different to that of a Telco. Platform businesses (e.g. Google) require a mixture of capex (to build and maintain the platform) and opex (to run and market it), generate strong innovation, utilise a lot of brands (predominantly from other companies) and enjoy high returns on capital. Product innovation businesses (e.g. Unilever) have relatively high operating expenses (low EBITDA margins), but these operating expenses generate strong innovation and high returns on capital.

These differences are summarised in Figure 1 below.

Figure 1: Mapping the financial/operational differences between Vodafone, Google and Unilever

fig1 t2ti blog jan 2014.png

The table shows just how much higher the cash return on invested capital (CROIC) is at Google (18%) and Unilever (68%) as opposed to Vodafone (6%). This is naturally reflected in the price to book ratio: Google and Unilever have ratios 2.5 and 4 times higher than Vodafone respectively.

So if a CSP were to expand so that 15% of its operations are platform-based, that should (in theory at least) lead to a 45% increase in share price. Here’s how: suppose an infrastructure-led CSP has a book value of $85m. Figure 1 suggests a price to book ratio of 1.6, implying a total share valuation of ($85m × 1.6) = $136m.

Now suppose the CSP added a platform business to its existing infrastructure such that 15% of its revenues came from here. Its total share valuation is now ($85m × 1.6) + ($15m × 4.1) = $197.5m - 45% larger than $136m and, since the number of shares has not changed, its share price would also be 45% higher.

If a CSP were to expand so that 5% of its operations are product innovation based, this should lead to a 22% increase in share price (using the above methodology and the data on Unilever from Figure 1.)

Telcos need new approaches to generate new value

Historically, being a good CSP has involved making effective capital investment decisions and operating an efficient network. The internet has changed everything. It has fractured the integration between network and services so that voice and messaging are no longer the sole domain of the CSP. Enter the disruptors - such as Google, Apple and Facebook.

Inspired by the success of these internet giants, companies of all sizes are rethinking how they do business. They are creating and embracing diverse ecosystems, partnerships and innovation through a culture supportive of collaboration, rapid development and emerging technologies. This new approach is based on a two-sided business model (or platform model) that bridges between upstream customers (sometimes called ‘merchants’) and downstream customers (or ‘end-users’). For example, in Google’s case, the upstream customers are advertisers, and the downstream customers those that view and click on adverts.

The story does not end here, however: telcos must also learn from the ‘differentiators’. As well as adopting a two-sided business model, Telcos must also implement innovation designed for both sides of the market at the core of their infrastructure. Unilever, for example, has thousands of brands sold in over 150 countries; two billion people use Unilever’s products every day. The consumer goods market is extremely competitive, and Unilever remains ahead of the game by making product innovation supreme.

In previous research, such as A Practical Guide to Implementing Telco 2.0 and The Roadmap to New Telco 2.0 Business Models, we have described the strategies and types of products and services that could generate both types of revenue for telcos.

The skills demanded by the new and existing business models are described by Figure 2 below:

Figure 2: The skills needed to move to Telco 2.0

fig2 t2ti blog jan 2014.png

The Telco 2.0 Transformation Index benchmarks how well Telcos are managing this transformation

The Telco 2.0 Transformation Index - released next week (commencing 20th January) - is designed to support companies throughout the industry as they undertake this journey of transformation. It provides a fast, comprehensive, and high impact strategic reality-check and forward outlook to help Telcos, their partners and investors improve returns on strategic investments and activities. It assesses current market performance and positioning, new services, transformative strategies, and future competitive and collaborative abilities of key Telcos/CSPs against their potential and ‘best-in-class’ peers.

For example, Figure 3 below, which is taken from the Telco 2.0 Transformation Index benchmarking report, shows where the five Telcos included in the first tranche of deep-dive analyses - Telefonica, SingTel, AT&T, Verizon and Ooredoo - are positioned along the inverse relationship between operating costs and capital expenditure. This is directly related with the movement from an infrastructure-led business model (high capex, low opex; Telco 1.0), to a platform-based, product-innovation-driven business model (low capex, high opex; Telco 2.0).

Figure 3: The inverse relationship between capital expenditure and operating costs fig3 t2ti blog jan 2014.png
[Ed. For more on the Telco 2.0 Transformation Index, please email contact@telco2.net or join us at OnFuture America 2014 in Silicon Valley, May 20-21, where we’ll be sharing some of the findings.] To share this article easily, please click:

January 13, 2014

US price war, French LTE, CES news: Telco 2.0 News Review

Bookings are now open for our OnFuture Americas 2014 event in Mountain View on 20-21st May

Price war rages in US: T-Mobile offers to buy out contracts, Sprint huge family discount, what will VZW offer?

Reuters reports that a price war has broken out in US wireless, and it’s quite likely to crush margins across the board. T-Mobile USA lit the fuse, and although AT&T claimed for some time that they weren’t going to respond because they were just picking up the “cost conscious”, they’ve now plunged in head first. The following chart, from a forthcoming Telco 2.0 Executive Briefing, sums up the changes:


Last week, AT&T started offering up to $450 in service credit for new joiners from T-Mobile. This week, T-Mobile announced at CES that they were going to pay early termination fees for subscribers who wanted to switch to them. They’re willing to go up to $350, making a maximum signup bonus of $650 if you include the $300 trade-in.

According to a Nielsen poll, about 40% of US consumers have been dissuaded from switching carrier by the need to pay an early termination fee, so this is potentially significant, if only in a negative price-war way.

This isn’t quite the bonanza it might seem, as Ars Technica points out. T-Mobile’s strategy is very much about reshuffling the monthly bill between the service contract and the price of the phone. If you’re not going to pay for a new phone, they miss out on that part of the deal. Ars editors, perhaps the people in the world most likely to buy their own iPhones, repeatedly found that they might actually do better to pay the early termination fee out of their own pockets.

Sprint, for their part, launched a new “framily” plan, like a family plan but including your friends too. You get a $5 discount for every extra person on the plan, so if you can rope in 6 other people, your $55/mo unlimited voice/text/1GB plan comes down to $25/mo. Sprint also provides some extra detail on network plans here.

In other US carrier news, AT&T Mobility has announced a “sponsored data” product that lets upstream customers pay to have their content excluded from the data cap. It’s going to be interesting to see if this works, not least because the inevitable regulatory row is getting going. The FCC says it will “monitor” the issue, and AT&T says it won’t “favour” sponsored data over other traffic, which makes us wonder what the point of the whole exercise is.

They’re also trying out a quite substantial discount for people who volunteer to let AT&T sell their data. The subscribers in question are on AT&T’s GigaPower pilot fibre network in Austin, and they get the service for $70/mo as against $99. So, a two-sided sort of week for AT&T.

T-Mobile and VZW, meanwhile, have agreed to trade blocks of spectrum. The deal, quite complicated, involves T-Mobile buying 15 licences in the 700MHz band for some $2.36bn, while also swapping licences in higher bands in five markets for eight more 700MHz blocks. This means that T-Mobile now has 700MHz spectrum in 9 out of the top 10 US markets, and will presumably be adding LTE there in due course.

Speaking of spectrum, this had to be the oddest of bid stories. Having failed to nick Sprint from under the nose of the Samurai Son, and flirted with either carving out Clearwire or having a go at T-Mo, the Satellite Cowboy, Charlie Ergen of DISH, tried to buy LightSquared, the company that thought it could repurpose a huge block of satellite spectrum as cellular but…couldn’t, not without breaking GPS. LightSquared’s owners said upstick unoffer at $2.2bn, and the Cowboy rode out of town.

French LTE scoreboard - EE on 2 million subs - a look into the Indian 3G market

It’s the moment of truth. France’s regulator has released numbers on who’s got the LTE. Interestingly, although Bouygues has 6,655 Node Bs theoretically “enabled” for LTE, they’ve only turned up service on 714 of those, which is actually fewer than the 824 Free Mobile sites running LTE. That said, Orange has got 3,649 out of 3,820 sites live in the 2.6GHz band.

EE, meanwhile, announced its two millionth subscriber. It took them 10 months to reach the first million, but the second million have signed up since September. (No wonder, given the vast quantity of hardware they were giving out in the run-up to Christmas.) They claim that the network has reached 70% population coverage and the UK is adding LTE subscribers faster than any country but South Korea.

Elsewhere, Vodafone is building a stake in Greek fixed operator Forthnet. Telenor says it might consider more projects in Asia beyond its roll-out in Myanmar. South African incumbent Telkom is planning to cut jobs - they’ve already cut the bottled water and the long service award, so what other options remain?

The 3G & 4G & 5G Wireless Blog goes to India and notes that people seem to love big-touchscreen phones and there are a hell of a lot of cheap Chinese Androids about. Carriers would be less pleased to hear that everyone uses Whatsapp, and thanks to the crowded Indian 3G market, price-war conditions prevail with 6GB of prepaid data setting you back £10.

Somalia is famous for its proliferation of semiofficial GSM operators. The effect is to drive down prices so far that people in neighbouring Djibouti gather at the border to make calls on the next-door network, which looks like this (from here):


CES: T-Mo attention seeking - no Lenovo smartphones in the US - AT&T connected car - Samsung Q4 - gadget roundup

As we mentioned, T-Mobile USA has had a good year, adding millions of subscribers while annoying its competitors thoroughly. It’s CES time, and T-Mobile USA CEO John Legere took the opportunity to sneak into AT&T’s developer event for the party. Legere posed for photos and posted a couple of tweets, before someone at AT&T gave him the attention he so obviously wanted by having goons throw him out in the street.

It wasn’t perhaps the most exciting CES ever. Lenovo took the opportunity to inform everyone that they aren’t launching a smartphone in the US this year, which is a tad negative for headline news. Ars Technica has a roundup, and interestingly suggests that anything really interesting in our mobile-first era will appear at MWC instead.

Connected car seems to have been a theme - notably, AT&T announced its “modular connected car”, which turns out to be an Ericsson product.

Mozilla announced that they’ve got Panasonic to take Firefox OS for smart TVs, and a new line of ZTE phones. BlackBerry named a Head of Devices, which is the sort of thing you’d think they already had.

Samsung launched another round of huge-touchscreen gadgets at CES, the NotePro and TabPro. Hollywood director Michael Bay, who was meant to introduce the gadgets, flubbed his lines and corpsed. And then Samsung did the same - Q4 profits were distinctly off, partly because of the need to commemorate 20 years of their “New Management” strategy by paying out large bonuses to everybody. Now that’s what we call new management.

Toshiba showed off the first 4K laptops, while the camera and TV vendors were all about the 4K video as well. Trust Dan Rayburn to play the spoilsport - he argues that the cost of streaming video in 4K will be about four times that of HD, and very few content owners who aren’t subscription-based will be able to afford that.

Here’s a thermal imaging camera for your iPhone. Five adorable robots from CES. The washing machine that texts, and a cautionary blog of Internet-enabled fridges.

Apple and Samsung CEOs: Mr Cook, I’ve been expecting you - Apple enterprise sales - developer payouts grow faster than app volume

The CEOs of Apple and Samsung are going to meet in an effort to settle the latest patent dispute between them before it comes to court in March. The meeting, in the presence of a “mediator”, must happen before the 19th of February. So far, Apple has taken $930 million off Samsung in patent infringements.

Meanwhile, China Telecom is trying to spoil the China Mobile iPhone launch party, cutting prices and throwing in extras like an extra battery.

Forrester reckons that Apple’s enterprise market share has gone from around 1% in 2009 to 8% today, but that doesn’t count iPhones. As the Wall Street Journal points out, this is an important omission, as companies that deploy iPhones very often also take iPads and eventually start buying Macs. A case in point is Cisco Systems, which started off by letting employees bring their own iPhones, began supplying them, and now has a PC fleet that is about 25% Apple.

Horace argues that apps are sold like media, but are out-competing the other media. One piece of evidence for this contention is this chart, showing that revenues to developers on the iOS platform are growing faster than app shipments, and therefore that apps are winning spend from other media.


Smile, O2 testing VoLTE - the new VoIP frauds of Christmas 2013 - 7 non-voice use cases for WebRTC

Smile Communications, a pan-African LTE wireless ISP and a very early Telco 2.0 client, is live in the field these days, and is testing VoLTE in Uganda. They’ve also considered putting Skype traffic in a preferential quality-of-service class.

O2 Germany has tested VoLTE hand-off on their production network, bringing a serious deployment a bit closer.

UK VoIP carrier Simwood’s blog reports on a new toll-fraud attack they encountered over Christmas. Interestingly, the hackers didn’t do a high-rate brute force scan and then start pulling traffic, but rather, they reconnoitored gradually in advance and then kept the traffic on any given trunk at a low level, spreading it over numerous routes.

They’ve also started flagging calls with broken or spoofed caller ID.

Here’s an interesting point about WebRTC - it makes asymmetric communications apps much easier to develop. And it isn’t just voice, either - here are seven data channel use cases.

Another Huawei paranoia story - Ubuntu considered secure - Knox vulnerability

Three UK government departments have become deeply worried about their Huawei teleconferencing setup, fearing it’s secretly been compromised by the secret agents of a foreign power.

In fact it might have been, as this blog post using Snowden material makes clear - just not the foreign power they were thinking of.

The UK government has also given Ubuntu Linux the highest rating in a security assessment, but the problem is that a lot of people probably now think this is a trap.

What was thought to be a vulnerability in Samsung’s Knox, which provides a separate virtual machine for your personal stuff on a highly secured enterprise Android, turns out instead to be a problem with Android. Originally Samsung denied it was a problem at all, but it wouldn’t go away, and now Samsung and Google have carried out a very rare coordinated disclosure.

Those texting washing machines and Internet fridges we discussed earlier have in common that they are all potential targets for hackers. Ars makes this point, and argues that it is very unlikely that the manufacturers will be committed to supporting the software when they could instead sell more hardware. Bruce Schneier agrees strongly, pointing out that embedded devices are very often hideously vulnerable and very rarely get updates.

Orange gaming cluster; Cockcroft’s 2013; IBM struggles to sell Watson

Orange invests in the company that provides its cloud gaming platform.

Former Netflix data-centre boss, now with Battery Ventures, Adrian Cockcroft’s conclusions from 2013.

Twitter took out the biggest single lease on a data centre last year.

IBM is starting a new division to commercialise its Watson supercomputer, but as the WSJ points out, this is a problem - they’ve been struggling to sell it up against open-source Hadoop.

Alcatel may sell its enterprise division.

Facebook gives some details of its A/B testing platform. Perhaps the tests helped them kill off Sponsored Stories?

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January 9, 2014

Mobile and Data Driven Services: The Third Wave of Disruption

A new wave of highly disruptive change is starting to roll through the digital economy, centred on the mass impact of new mobile devices and the data they generate. The key changes are underway in digital and mobile marketing and commerce, how people consume many products and services, and how they will work in the future.
third wave of disruption chart jan 2014.png
Companies and individuals will need to adapt to these changes or find themselves out-competed in the digital economy. Helping them achieve this will be a major focus for our Research and Executive Brainstorm Programmes in 2014. The agenda for OnFuture America 2014, Silicon Valley, May 2014 is now available here. We will be continuing our industry and market focused agenda with OnFuture EMEA 2014, London in June, followed by Digital Arabia, Dubai in November and Digital Asia, Bali in December, please click here for further information on these events.

To enquire about participation in any of these events, please email us at contact@stlpartners.com.

So what’s new in mobile?

There has recently been much talk of the ‘battle for mobile’, meaning different things to different people and serving various agendas. It was back in 2010 when Google’s Eric Schmidt told the GSMA World Congress that everything was now ‘mobile first’, and he was far from first to talk up mobile.

But what is ‘mobile’ really all about now that smartphone penetration is becoming commonplace in many economies? Is it all tech hype and huff or just a statement of the obvious? Well, yes there’s certainly some of that, but we believe that a collection of factors is leading to mobile being a driver of huge and highly disruptive changes in the digital economy.

These change-enabling factors are:

  • Mobile Marketing and Commerce - an increasing momentum in the development of convenient and effective enablers to buying and selling via mobile devices (e.g. ISIS, Weve, iBeacon, NFC etc.);

  • Cloud and Big Data - a massive increase in data and availability of processing power and highly sophisticated analytics on demand, and major developments in approaches to regulation and legislation in the use of data;

  • Entertainment and Content - high familiarity with and use of mobile devices for media and content consumption (in younger generations in particular);

  • The Internet of Things - increasing availability of a broader range of connected devices (e.g. wearables, connected scales, health monitors, etc.);

  • Enterprise Mobility - Increasing availability of comprehensive and integrated mobile enterprise applications to improve productivity;

  • Telco 2.0 Transformation - significant strategic activation in telcos and other industries to transform and deliver new digital services.

Sum of the Parts = Disruption

We believe that these trends are collectively changing the digital economy in profound ways that that are inter-related and reach beyond any single factor. Bringing these insights to bear for strategists and decision makers in an actionable way is a core objective for our Research and Executive Brainstorm Programmes in 2014.

Our latest research Digital Commerce 2.0: New $50bn Disruptive Opportunities for Telcos, Banks and Technology Players shows that mobile marketing and commerce need to be seen in a very different way than the traditional ‘siloed’ perspectives on ‘mobile advertising’, ‘big data’ and ‘M-Commerce’. We see these as component parts of the ‘wheel of digital commerce’.

digital commerce wheel image oct 2013.png.jpg

Source: STL Partners Digital Commerce Report

We’re also delighted to be in partnership with mCordis, specialists in mobile marketing, in the design and delivery of our 2014 Brainstorms. mCordis share our vision in this area and bring both deep knowledge of mobile marketing and extensive senior level contacts within the mobile marketing elite across the digital economy.

To reflect these insights, our OnFuture America 2014 Brainstorm in Silicon Valley will bring together 250 senior strategists and decision makers from telecoms, retail, finance, tech and media to brainstorm and work together on the following agenda.


  • Best Mobile and Digital Transformation Strategies

  • Omni-channel breakthroughs: Strategies for managing customer experience

  • Reflecting What a World of Connected Devices and the Internet of Things Means To You and Your Business

  • The Telco Transformation Index - Reviewing New Benchmarks for Future Business Models

  • Content is King: Consumer Engagement Through Content & Social Media

  • Strategies for Leveraging The Value of Data and Creating a Sustainable Competitive Advantage

  • Big Data, Personal Data, Customer Data: New ways of monetisation


  • Mobile & The New Customer Journey

  • Innovation Showcase - Demo Sessions and 1-2-1 Networking Meetings of the best in Mobile Marketing

  • Deep Dive Workshops:

  • Advertising & Marketing: Through & With Mobile

  • Mobile Commerce: On device & In Store is Driving Revenue & Customer Satisfaction

  • Measuring for Success: Creating Actionable Insight from Information

  • Customer Love: Loyalty, Service Delivery & Advocacy

  • Mobile Marketing Innovation Road Mapping

For more detail on the agenda please see here, and for information on how to participate please email contact@stlpartners.com or call +44 (0) 207 247 5003.

The Aftermath of The First Two Waves of Mobile and Data Led Disruption

The first wave of mobile and data centred disruption comprised the rise of the smartphones, quickly followed by the second wave of mobile applications. Both of these waves were highly visible through the magpie-eye lens of the media with its unerring taste for beguiling sparkling images of status enhancing technology, and stories of wealth creation beyond dreams for a select few.

Following these waves have been further massive changes in human and organisational behaviours which are perhaps less visible and glamorous but potentially much more profound. As a simple and well known example, mobile phones are now used far more as devices for something else (emails, social media, reading, watching films, playing games) than talking to someone. This has brought with it massive opportunities for some (e.g. social media platforms) - and also dire threats for others (e.g. ‘traditional’ media).

The initial changes were largely adaptive - people just started doing new things because the technology enabled it. They hadn’t planned out the new stuff particularly, they just played with apps and stuck with the ones they liked, and many in industry continued in adaptive mode - “let’s try a few things out and see what happens”.

Telcos for their part were focused on the land-grab of smart phone market share and accompanying ARPU, and then the realisation that the new smartphone players (particularly Apple) suddenly wielded massive power and reach in their markets. Occupying telcos’ attention was also the seesaw of anxiety and hope over the prospects of massive data growth, which was thought to lead to either massive new costs or revenues but for the most part lead to little growth, some increased network efficiency and the explosion of WiFi.

Then services like Whatsapp provided consumers with an economic reason to do something different, providing significant savings on text costs in some markets and making it worth getting a different phone and getting the app. Unfortunately for them, not all telcos reacted swiftly and effectively to this threat, and in some markets Whatsapp and other so-called ‘Over The Top’ (OTT) Services now have very high penetration and usage.
text price vs use of whatsapp dec 2013.png
Our recent report on The Future Value of Voice and Messaging details these dynamics in depth, and also strategies and lessons in defence against similar disruptive attacks that we will also explore further at our brainstorms and in our research that are relevant not just to telcos but to all digital players.

In the meantime, major disruptive US tech giants (such as Google, Apple, Facebook, and Microsoft) have been manouvering for several years for new positions of power in the highly interlinked digital economy, and their progress and the rise and fall of other key players will also be a key feature of our analysis.

Overall though, this third wave of disruption is more complex and nuanced than what has gone before, yet in some ways less surprising. Providing, of course, you are prepared for it.

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January 6, 2014

China, AT&T fibre, New Nextel, Nvidia, when diallers attack: Telco 2.0 News Review

  • China Mobile gets iPhones; ZTE re-orgs and supplies 4G for India; when Google won’t play ball with Chinese OEMs; Embratel pours cash into Claro

    China Mobile’s iPhone deal was eventually signed just before Christmas. The terms are not disclosed. China Mobile started taking orders on the 25th and the first gadgets will ship on the 17th of January. Interestingly, this may have a useful side effect for Sprint - its current 2.5GHz allocation isn’t supported by the LTE radios in US iPhones, but the ones for China Mobile will have that band. Huawei, meanwhile, expects its revenue from LTE equipment to rise steeply this year, a fair guess if China starts filling up with iPhones.

    ZTE, meanwhile, has carried out a re-organisation, creating an autonomous business unit for devices and a new enterprise division. Their idea of “enterprise” is rather different from, say, Huawei’s, as it includes cloud, big data, but also the Internet of Things and smart city projects.

    Meanwhile, Aircel has begun rolling out LTE using ZTE’s equipment. To begin with, they’re covering Chennai, Tamil Nadu, and a few “business critical” areas, presumably major urban cores or similar.

    One of last year’s developments was Google’s shift of emphasis from Android itself to the suite of Google apps that ships with it. Having realised they don’t have anything like “control” over Android, Google concentrated on using their own apps as a lever to influence both vendors and carriers. Very interestingly, the vast Chinese OEM industry is complaining that Google doesn’t care about them and won’t arrange for them to take the tests that grant you access to the G-suite apps. Inevitably, a black market has arisen in “cracked” copies of the software. As these vendors collectively ship hundreds of millions of devices, this is an important issue and worth watching.

    Richard Li’s Hong Kong Telecom, meanwhile, is buying out rival Hong Kong operator CSL. Telstra owns 76% of the carrier, and they’re selling for $2.4bn. This would be a big change in the Hong Kong market, as CSL is the market leader and HKT is the fifth placed mobile operator.

    The South Korean government is investing the equivalent of $478m in research on future mobile networks, so-called 5G, with the objective of having a test network operating by 2020.

    In Brazil, meanwhile, it was reported that Telefonica is in the process of setting up a financial solution that would let it break up TIM Brasil, thus clearing the way for a takeover of Telecom Italia. Today, Telefonica denied any such deal and said that it had not discussed it with the Brazilian regulator.

    That said, Claro, Carlos Slim’s Brazilian MNO, is getting a major investment from his Brazilian fixed operator, Embratel. This is officially part of a strategy to integrate the fixed and mobile investments into a converged operator. If Slim took part in a sale or breakup of TIM Brasil, though, Claro would presumably need to raise funds, and one way to do that would be from his fixed operator.

    And in Indonesia, here’s an example of getting mobile coverage into the real wilds through radically cheap equipment and community self-management.

    100 years of AT&T; Stephenson U-turns on fibre, or perhaps not; vectoring DSL isn’t vectoring; will Sprint bring back Nextel?

    The 19th of December marked 100 years since the Kingsbury Commitment essentially founded the Bell System and therefore AT&T, and really everything we associate with classical telecoms for good or ill. It’s therefore remarkable that AT&T’s Randall Stephenson has thrown a U-turn over fibre to the home. Or has he? Here’s the quote:

    “The cost dynamics of deploying fiber have radically changed. The interfaces. the home wiring requirements, how you get a drop to a pole and splice it, it’s just totally changed.”

    As Dave Burstein points out, this implies his estimate of cost-to-pass and cost-to-connect are now below the rule of thumb values of $700 and $600 respectively established by his arch rivals at Verizon. It also suggests that AT&T might melt its backhoes out of their block of carbonite and deploy some fibre. Back in 2004-2005, Stephenson found that what was then SBC was planning a major FTTH build, and killed it because nobody needed more than 24Mbps. As a result, AT&T conceded the lead in broadband to Verizon and Comcast, concentrating on wireless and TV. The problem with TV, of course, is that you have to give about 25% of ARPU straight to Hollywood for content rights…

    That said, don’t get excited just yet - Stephenson is still talking up “advanced DSL” and hasn’t offered any additional CAPEX. The argument goes like this: Deutsche Telekom reckons that they can get fibre to “within 500-1000 metres” of all of Germany for a cost to pass of $400, and with vectoring, bonding, etc, you can get the downlink to 100Mbps. So what’s not to love?

    Well, DTAG won’t be turning the vectoring on for another six months, for the simple reason that it doesn’t work, and they and their vendors (Alcatel and Adtran) have taken to reporting “vectoring-ready lines” rather than “vectoring lines”.

    Part of the problem is that non-vectored lines interfere with the vectored ones, but really this is more like a specific case of the general problem with all “DSL/wireless that’s almost like fibre” products - they only work if you’re really, really close to the exchange, on brand-new copper, in a perfectly clean RF environment.

    While we’re talking fixed, will the cable half of Rogers switch to FTTH? They’re certainly sticking a toe in the water by doing a trial deployment.

    Meanwhile, AT&T’s commitment to fixed can be measured by the fact they just sold their whole network in Connecticut to Frontier Communications for $2bn. That brings Frontier some 900,000 additional lines, of which 415,000 are broadband and 180,000 take IPTV.

    In wireless, though, it’s a different story. AT&T Mobility has started the year with an aggressive counter-attack on T-Mobile USA, whose “uncarrier” strategy was surely the surprise package of 2013. AT&T’s new idea is simple: if you’re a T-Mobile subscriber who churns to them and trades-in your old smartphone, they’ll give you as much as $450 in service credit. To get the full whack, you have to sign on for the AT&T Next quick-upgrade plan. As the obvious thing to do with $450 of AT&T credit once you’ve signed up for service is to get a new phone, this is handset subsidy and then some.

    As the US price war gets under way, perhaps the next stop will be literally handing new subscribers a wedge of cash?

    We started the year expecting great things from Softbank’s ownership of Sprint, but in the event, it was T-Mobile that delivered. Now, the latest rumour is that the Samurai Son is looking at buying T-Mobile USA and talking to his bankers, who would have to front him about $40bn. The big question is of course whether the FCC likes the idea of going down to 3 national operators any more than it did when it said no to AT&T-Mobile.

    Meanwhile, Sprint’s new owners may be tidying up its assortment of prepaid brands into one “Sprint Freedom” line. This is harder than it sounds, as some of them (Boost and Virgin Mobile USA) are MVNOs rather than just Sprint-owned branding entities and therefore have owners who presumably have ideas of their own.

    The real surprise, though, is that they’re supposedly thinking about bringing back the Nextel name, only months after the network was shut down. Apparently the idea would be a “premium” or “business-class” product, using the infrastructure of Clearwire but running LTE rather than WiMAX.

    Despite all the drama of Satellite Cowboy Charlie Ergen’s struggle to tempt Sprint away from the Samurai Son, Sprint and DISH are cooperating these days. DISH wants to offer broadband to its rural satellite TV customers, and Sprint would like to sell them both broadband and voice. So the idea is that DISH’s satellite installers could also put in fixed-wireless antennas.

    DukeNet is demonstrating SDN with OpenStack across its wide-area network.

    Free’s rivals complain to regulator, wholesale to MVNO that’s even cheaper; GSMA says yes to over-the-air SIM updates

    We’ve had Free Mobile’s no-premium LTE, and its smartphone leasing plan. Now, the French government’s telecoms minister is promising to give ARCEP more power to enforce “quality”, which is read to mean “do something about Free”.

    But the cat is out of the bag. Coriolis, an MVNO running on SFR’s network, will offering you unlimited voice and SMS, plus 100MB of data, for the equivalent of €9.50/mo. If you want a GB of data with that - i.e. a Vodafone £29/mo bundle - you’ll pay €14.50/mo. This is price disruption with a vengeance, and Dave Burstein argues that it’s evidence that most mobile operators have all the capacity they need.

    For all the regulatory whining, the French carriers are clearly willing to sell capacity wholesale at these rock-bottom rates, and to anyone who pays, not just via Free’s special national roaming arrangement - otherwise they wouldn’t do it.

    Just before the holiday, the GSMA surprised everyone by issuing a specification for over-the-air provisioning of SIMs. Carriers and the GSMA have always hated the idea, on the grounds that it makes it far too easy for a vendor to become their own MVNO and far too hard for users to choose a carrier, but M2M types would really like to be able to update their devices and change operator without having to visit each and every gadget.

    In the UK, EE will be providing inbound roaming for AT&T’s LTE subscribers, in one of the world’s first LTE roaming agreements.

    OFCOM, meanwhile, has told BT that its Openreach infrastructure division will have to improve its customer service. Unless 80% of new installations get an appointment within 12 working days, and 80% of faults are fixed within 2, Openreach faces a fine.

    UK TV networks are not happy with the planned whitespace trial, and their umbrella group (Digital UK) has said so in its submission to OFCOM.

    The European Commission has started a 90-day review of the Telefonica acquisition of E-Plus. They’re concerned about Germany going down to three operators, and especially about the future of MVNOs. A report must be provided by the 12th of May.

    KPN, meanwhile, has discontinued its network sharing project with Vodafone.

    Vimpelcom wants out of Wind Italia, which is about $14bn in debt. 3 Italia is a potential buyer.

    Nvidia puts desktop GPUs into mobile chips; why the Valley doesn’t get Qualcomm; BlackBerry partners with Foxconn

    Nvidia launched a new version of its Tegra chips this week, which puts the same GPU architecture they use in desktop systems into mobile devices. For context, the new chip will have similar GPU performance to a cheap dedicated GPU from last year. It also supports the whole OpenGL 4.4 API, which should make porting apps from the desktop or console space easier. The first ones should ship in H1. This implies bigger, faster, shinier mobile gaming, and probably fairly dreadful battery life.

    In other chip news, here’s a good piece about Qualcomm and why Silicon Valley doesn’t understand what they do. The graphic is nice, too, and sums up a lot of what Telco 2.0 is about.


    It looks like Samsung has a couple of new devices for CES tomorrow, and incredibly enough they’re big touchscreen tablets/phablets.

    BlackBerry confessed to another horrible quarter, with a $4.4bn loss. They also had some positive news - they’ve signed up with Foxconn to manufacture a BB10-based, 3G device for developing markets, and reorganised to create separate divisions for the QNX operating system, messaging, enterprise, and gadgets. The new device is expected to launch in Indonesia first.

    Meanwhile, HTC reported a quarter just marginally in profit, by $10m. Nokia has pulled the HERE Maps app from the Apple app store.

    Here’s a review of the new Mac Pro.

    When alternative diallers pinch your phone number; will IMS get close to $4bn a year? O2’s new video-sharing app

    More and more Voice 2.0 apps take over control of diallers and messaging. Sometimes this can be a good thing - Google’s Hangouts app, for example, is a truly excellent way to use SMS - but sometimes it goes too far. TelecomTV takes issue with an ABI Research forecast showing IMS spending rising to $4bn a year by 2017, making the good point that whatever IMS features operators actually need might well be provided as virtualised software, or even hosted in the cloud, much cheaper.

    Dean Bubley agrees, harder. Meanwhile, Alianza’s Kevin Mitchell rounds up major news in cloud voice last year - Genband bought Fring so as to have a voice platform, Level(3) deployed Alianza, and several new hosted voice options for telcos appeared in the US. He also argues that voice as a feature means that only the cloud can keep costs down far enough.

    O2 UK has a beta app, Clip It!, that lets you send anyone 63 seconds of video, instantly, whether or not you’re an O2 subscriber. The app was developed through Telefonica Digital’s Wayra innovations initiative.

    Sqwiggle, meanwhile, takes photos of you at intervals and shares them with a group of your friends/colleagues/whoever.

    The difference between “best phone camera” and “best camera” is like the difference between “best camera” and “best camera from 2007”

    All the video, photos, and AR content whizzing around starts with a camera, so it’s no surprise that this is a crucial theatre of competition these days. DPReview has a fascinating deep-dive review of the Nokia Lumia 1020, Apple iPhone 5S, a high-end film camera, and a range of digital SLRs from the last 10 years. They conclude that the Nokia is behind the best digital SLR, at about a $2,000 price point, by about as much as the best digital SLR of 6 years ago is. In other words, 6 years’ technical progress is enough to beat the physical advantages of the DSLR’s lens and form factor. They also have a nice chart using the DXOmark benchmark - note that the series aren’t directly comparable, but check out how fast the smartphones are improving:


    Snappycam is a very popular iOS app that takes over the camera and lets you do burst photography and 4x lossless digital zoom, and now Apple has acquired the developer’s company.

    YouTube and Netflix, meanwhile, are both planning to show 4K video content at CES. You can get a 4K-capable video camera for $399; how long before it’s in a smartphone?

    We all remember Robert Scoble’s gushing enthusiasm for Google Glass last year. He seems to have calmed down.

    A detailed look at the arguments about who controls content rights for TV apps.

    And here’s a billboard that uses a face recognition system to only show the advert to women.

    Snowden: how the NSA hacked all your equipment; VZ, AT&T come clean about data requests; don’t click on Yahoo! ads; Vodafone Egypt accused of broadcasting secret messages in puppet advert

    Edward Snowden offered us all a Christmas present in his own inimitable way - by telling us that the NSA’s Tailored Access Operations team possessed backdoor access to all sorts of equipment, notably Cisco and Huawei routers, HP ProLiant servers, and various GSM base stations. A full list of the documents is available here.

    Both Verizon and AT&T have now agreed to publish regular reports on their cooperation with government requests for data.

    Yahoo! confesses that some of its ads contain malware.

    And where do we start with this one? So Vodafone Egypt published an advert using the Egyptian equivalent of the Muppets. And Egyptian state security officials decided that one of the puppets is signalling secret messages to Islamist terrorists, after a tip off from a pro-army activist known as “Ahmed Spider” (this is not a joke).

    The muppets in the ad clearly aren’t the only ones.

    IBM Research claims to have found a way to do analytics on data without decrypting it; here’s a deep investigation into how Netflix tags movies; Linksys brings back the WRT routers, with the alternative Linux distro; AllThingsD shuts down.

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