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April 30, 2014

Telco 2.0 Transformation Index: Vodafone needs a more convincing growth story

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Vodafone is middle-ranking on transformation, roughly at parity with Verizon, behind SingTel and Telefonica but ahead of AT&T and Ooredoo according to our latest Telco 2.0 Transformation Index research.

STL Partners has today launched the most recent update to the Telco 2.0 Transformation Index, featuring the addition of Vodafone to existing analysis on Telefonica, Verizon, AT&T, SingTel and Ooredoo. See here for more on the Vodafone report and join us at the OnFuture EMEA 2014 Brainstorm in London, 11-12 June, to discuss telco and digital transformation strategies.

Figure 1 below, taken from an updated benchmarking report to be launched in May, shows that Vodafone falls short of its European rival Telefonica but matches Verizon - albeit for very different reasons:

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Figure 1: Telco 2.0 Transformation Index Summary Scores

STL Partners hypothesises that, based on both the capabilities of and challenges facing CSPs, a score of 75 (the purple dashed line in the chart) is what they should be aspiring towards. STL Partners also recognises, however, that transformation is difficult.

It is clear, therefore, that although Vodafone (like many of its peers) has made a good start in moving to a new, sustainable business model it still has much to do. In particular, Vodafone:

  • Scores the lowest out of all CSPs in the Finance domain
  • Performs reasonably well for its Value Network but only outperforms Ooredoo in its Service Offerings
  • Scores well in Technology but comes out middle-of-the-road for its Marketplace
For a full description of the inputs and methodology behind the Transformation Index, see here.

In order to give some insight into the analysis included in the 148-page CSP Analysis Pack on Vodafone, the following extracts provide a snapshot of the story behind Vodafone’s results.

Vodafone’s Achilles’ heel: struggling headline financials

Vodafone has endured a challenging run of financial results over the last few years. Headline financials, such as revenue, EBITDA and free cash flow, have all shown worrying downward trends. Figure 2 below shows the case for its last three financial years:

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Figure 2: Vodafone’s recent headline financial results

In recognition of this, Vodafone has been working hard to define exactly what it wants to look like, and is aware that it needs a compelling and consistent growth story for investors if its share price is not to suffer. Its latest vision is called ‘Vodafone 2015’.

Vodafone 2015: is its current growth strategy enough?

Vodafone 2015 is the vision that senior management has been pitching to investors since 2012. It is, at its core, an articulation of a Happy Piper strategy (a ‘scale Data company’, a ‘strong player in enterprise’ and a ‘cost efficient organisation’) with some ‘selective’ interest in digital services.

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Figure 3: Vodafone 2015’s five key pillars (Source: Vodafone)

The following analysis looks at the first three pillars:

  • ‘A scale data company’
  • By this Vodafone means a “company that brings data at a cost-efficient level through a variety of screens and pipes” (December 2013 Investor Presentation). This has been reflected in both:

    1. Increased organic network investment:
    2. Vodafone plans to use sizable portion of the Verizon Wireless deal’s cash consideration to increase its mobile network investment levels. This, combined with investment in spectrum and the launch of its ‘Red’ post-play plans suggests that Vodafone has learned from Verizon’s successful LTE deployment in the USA: aggressive spectrum investment and network roll-outs to achieve greater coverage than competitors and, subsequently, tying customers to long-term post-pay plans.

    3. Efforts to grow in fixed:
    4. Vodafone has been pursuing wholesale (e.g. Netherlands), self-build (e.g. Portugal) and acquisitions (Cable & Wireless Worldwide, Kabel Deutschland and ONO) in an effort to grow its presence in fixed. This is part of a broader quad-play strategy which it sees as key to reversing its fortunes in Europe.

      Although sensible, it is not clear whether these activities alone will prove enough to reverse its fortunes. A key question here, for example, is whether Vodafone’s investments in fixed will generate the return on investment it expects - pay-TV, for example, is also open to OTT disintermediation (e.g. by Netflix). 

  • ‘A strong player in enterprise’
    Vodafone has stepped up its game in enterprise following the acquisition of Cable & Wireless Worldwide. Among others, it has given Vodafone a real IaaS cloud play in the UK and a large carrier business (it is now the second largest carrier of international voice worldwide). Vodafone has also worked hard to establish a leading position in the European M2M marketplace in terms of both market share (c. 25%) and big client wins (e.g. Volkswagen/Audi).

    With enterprise only representing 25% of its revenues, however, it is not clear whether its enterprise activities are capable of offsetting its struggles in consumer markets.

    To help answer this question, the following chart uses data provided in Vodafone’s September 2013 investor presentation and makes the following assumptions:

Vodafone Forecast Enterprise Revenues.png

Figure 4: Forecast Vodafone enterprise revenues

  • The model predicts a 3.1% annual growth rate for the next 4-5 years. Of particular note is that the product areas forecast to grow the fastest - Hosting & Cloud (12% YoY) and M2M (20% YoY) - are still only small lines of business and, without a step-change in investment, will remain this way in the near future.

    Furthermore, despite growing by 2.2% during its March 2011-12 financial year, Group enterprise revenues stumbled during the next financial year and shrank by 2.8%. This suggests that Vodafone still has work to do here and, ultimately, that its current enterprise activities will not be enough to compensate for continued struggles in European consumer.

  • ‘A leader in emerging markets’
  • As detailed in our recently published executive briefing comparing Vodafone and Telefonica’s market positioning, Vodafone’s activities in emerging markets have three key elements:

    1. 70% of its subscribers are from emerging markets...
    2. …but only 30% of its revenues…
      This is driven by lower disposable incomes in its emerging markets, reflected in both a considerably higher pre-pay subscriber base and lower ARPUs

    3. … and with the majority of both of these coming from its extremely competitive Indian market. 
      Taken together, these help explain Vodafone struggling headline financials: despite a concerted effort to grow its presence in its rapidly-growing emerging markets, Vodafone remains heavily exposed to the struggling European marketplace.

Vodafone: well positioned to turn its fortunes around and reach the Telco 2.0 ‘pot of gold’

The results from the Telco 2.0 Transformation Index show that Vodafone, as well as its peers, still has much work to do. Despite its recent struggles, however, Vodafone is well positioned to turn its fortunes around. It has received a substantial injection of capital following the Verizon Wireless deal, enjoys one of the strongest brands of any CSP and has made sensible steps into new opportunity areas (e.g. pay-TV, M2M, cloud) in recent years.

With a more convincing growth story and a rebalancing of its portfolio towards high-growth opportunity areas it has the potential to not only maintain its share price but also increase it by up to 50% - but only if it successfully executes the appropriate strategies.

To find out more about Vodafone’s efforts in transformation, the Telco 2.0 Transformation Index in general, or to make an enquiry, click here or email contact@telco2.net.


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April 28, 2014

All the Q1s that are fit to blog: Telco 2.0 News Review

Our next ONFuture EMEA event is coming up on the 11th and 12th of June in London. Book now!

Busy week at the FCC: net neutrality rules, lobby wars, 600MHz, 2.5GHz

The FCC is going to propose revised net neutrality rules in May, and this has unsurprisingly touched off all kinds of controversy. Chairman Wheeler blogs about it here; the big issue is that the new draft Notice of Prospective Rulemaking bases itself on the notion of being “commercially reasonable”. The key paragraph is as follows:

That ISPs may not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity.

FCC critics argue that this begs the question - if the point is whether prioritisation is commercially reasonable, doesn’t this accept the principle of an “Internet fast lane”? And what about non-affiliated entities like (for example) rival content providers?

Susan Crawford argues that the whole complex mess of regulations would be better replaced by a policy of supporting municipal fibre networks everywhere. Ars Technica points out that the FCC chairman is a lobbyist, and the lobby is chaired by a former FCC commissioner, while Verizon has been caught using strawmen to lobby in favour of an end to its commitment to build fibre across New Jersey.

AT&T, meanwhile, threatened to pull out of the 600MHz auction if the FCC insists on limiting spectrum holdings below 1GHz. Most of the long-range, high-penetration bands are held by either AT&T or Verizon Wireless, and the regulator would like to carve out at least 30MHz of the 600s for other operators, defined as those who control less than one-third of the sub-1GHz domain. Despite AT&T’s threats, Wheeler sent the draft rules to the other commissioners.

May 15th will be an important day for Sprint, as the FCC will vote on whether or not to count a large 2.5GHz block as part of Sprint’s holdings. If it gets counted in - which arguably it should do, as Sprint is now using it as an integral part of its network - Sprint will reach the one-third threshold in much of the States, and won’t be allowed to acquire more spectrum.

But if it’s regulation you want, try China: an official statement this week announced that “there can be no Internet freedom without Internet order”. Obey tremblingly! as the emperors used to say.

AT&T Q1: a strong showing in wireless, action on fibre. Verizon Q1: good all round, let down by enterprise

AT&T’s effort to menace the FCC sounds like the act of a company feeling its own strength. Q1 numbers were out this week, and they were strong: a million wireless net-adds and 7% annual growth in wireless service revenue. With OPEX up 6.6% in wireless, net income was up 8.1%. A caveat is that 40% of the gross adds were on the Next quick-upgrade plan, aka pushing hardware to fight the price war with T-Mobile.

Another, perhaps more serious, caveat was that wireline revenues were down, and expenses up, adding up to a 10.5% decline in wireline net-income at a time when the company’s CAPEX is up 34% year-on-year. As a result, despite the powerful performance in wireless, group-wide net income was down 1.3%.

Verizon’s Q1 was the next to drop in a heavy results week. VZW gained 539,000 net-adds, down 20% year-on-year and beaten distinctly by AT&T. (Although, the point here is probably more that the dynamic duo are still gaining subscribers from everyone else.) Wireless revenue, though, was up 7% year-on-year, which probably had something to do with them activating about 10 million LTE devices a quarter. 73% of their total data traffic is now on the LTE network.

Again, wireline was a very different picture. Wireline revenue was down 0.4% year-on-year - it might be more meaningful to say it was flat, as it was $9.8bn for each of the last three quarters. Within that, VZ’s consumer revenue was up 6.2%, driven by FiOS Internet customers. The FTTH network now brings in $3bn revenue a quarter, in the context of $3.8bn of consumer wireline.

The problem was enterprise; Global Enterprise’s revenues were down 4.4% year-on-year, and even “strategic services”, aka “the good bits”, only grew 1.8%. CFO Fran Shammo pointed to price pressure on the core voice and IP transit products, and cuts in public sector budgets (government is a big Verizon customer). That said, even if wireline could have been better, it was a better showing than AT&T’s.

AT&T, perhaps feeling this, had a big announcement to make in wireline: after poking a toe into FTTH in Austin, it’s making a start on a much bigger rollout, deploying to as many as 21 metropolitan areas.

If you’re interested in these issues, check out the Telco 2.0 Transformation Index in-depth coverage of AT&T and Verizon

The dynamic duo gained about a million and a half net subscribers, then. Where did they come from? We’re waiting for T-Mobile and Sprint to report this week. Credit Suisse reckons it was another big quarter for T-Mo, with a million net adds or so. If true, that could only mean another horrible one for Sprint. That said, their estimate for AT&T missed by a mile.

T-Mobile has recently given us another round of price cuts, and this week they started adding extra LTE antennas to their base stations, moving from 2x2 MIMO to 4x2 MIMO in order to improve uplink speeds.

Sprint’s numbers are due tomorrow and nobody is expecting much, except perhaps for CEO Dan Hesse, who turns out to be the industry’s best-paid executive. FierceWireless collated the proxy filings, and it turns out Hesse trousered some $49 million in 2013, much of this in shares, in exchange for signing up for another four years. (To put it in context, Sprint expects to save $100m by shutting down the WiMAX network.)

Perhaps more understandably, John Legere at T-Mobile was number 2, with $29 million, while Lowell McAdam at Verizon was positively deprived on a mere $15.8 million. How does he manage?

Time-Warner Cable has deployed Hotspot 2.0 to its 33,000 WiFi locations. Charter, meanwhile, has agreed a succession of transactions with Comcast under which it takes over about 3.9 million net subscribers and swaps another 1.6 million, thus helping Comcast squeeze under regulatory limits in the TWC deal and also pay for it, as Charter will contribute about $22bn in cash, stock, and assets.

China Mobile Q1; Pakistani 4G; Ericsson numbers; UK, French broadband; Brazilian 700MHz; future no longer Orange

China Mobile’s Q1 numbers show most of the industry’s key trends in concise, concentrated form. Subscriber growth is topping out, but the adoption of mobile broadband is surging ahead. Data traffic is growing fast. And the usage of traditional voice and messaging is falling, which they blame on over-the-top competition. All in all, revenues were up a tad but net income was down almost 10%.

In Pakistan’s spectrum auction, meanwhile, their opco Zong secured the only 4G licence. It has committed to investing $1bn in the rollout.

Ericsson, meanwhile, said that orders for 4G kit had dropped sharply in North America, Japan, and Korea, as the roll-outs were finished, but fortunately it has orders coming in from China Mobile and China Telecom. Although sales are down, net income was up 41% year-on-year, as the mix of orders included less initial roll-out work and more capacity upgrades. The company is also reorganising, creating two groups, one for radio and one for IP.

After all the excitement, Numericable tells its shareholders that revenues at its shiny new acquisition SFR are likely to fall until 2015 at least. Then, they hope, they will turn around thanks to 4G adoption and “less intense competition from Free”. Some hope on the second of those, surely. Oh, and the SFR fixed subscribers on their FTTH network are going to be moved over to Numericable, in order to save on duct access charges. Just like Xavier Niel said.

In the UK, ISPReview looks into BT’s Fibre on Demand product and why nobody seems to want it: the answer is that it’s far too expensive, even from an enterprise point of view, and it may be that way to keep it from competing with BT’s enterprise products. This will not cheer up the residents of Wheatley Road, Stanford-le-Hope, Essex, not exactly the edge of civilisation but still the UK’s joint slowest street for Internet service.

Meanwhile, BT may be going to launch its 4G service to customers “towards the back of the year”, while a wholesale product will land sometime in the summer.

America Movil Is close to winning control of Telekom Austria, under conditions set by the Austrian government that keep the company in town and engaged in central and eastern Europe.

Telecom Italia has both a board and a chairman again after six months.

Oi is trying to put off the Brazilian 700MHz auction.

The future’s bright, but it is no longer orange. After 20 years, the industry’s first iconic brand is no more in the UK, as EE decommissions the Orange name, colour, and websites.

Apple Q2 bursts the forecasts, the good way

Apple’s Q2 was better than expected, with $10.2bn in profits, a margin of 39%, and good results in iTunes and in China. However, sales of iPads were 16 per cent lower than expected. Tim Cook is talking about enterprises a lot - Siemens apparently has 30,000 iPhones and 50 internal apps.

Horace points out that Apple’s results have usually been within 1% of the top of the range they provide in their earnings guidance, but on this occasion, they blew right through it, beating their own forecast by 3.74%.

The explanation seems to be that the iPhone sold far better than expected, especially the cheaper models in China, and this was more than enough to make up for the bad iPad quarter. Apple has, of course, recently started shipping an 8GB iPhone 5c, aka a cheaper version of the cheap version.

Meanwhile, Apple has permitted a few journalists to look around their Maiden, North Carolina iDatacenter, mostly to show off the solar panels. The coverage is not what you’d call technical, with the exception that the system has enclosed hot aisles at 103 degrees F (specific!).

Amazon Q1s, Glacier technology, jobs; a new surge in data-centre scale

Amazon Q1s were delivered this week, with $19.75bn in revenue and net income of $108m. Interestingly, the bit of the company where AWS lives saw 60% revenue growth in the United States, compared with 11% in the rest of the world. It would be daring to attribute this to a Snowden effect, though, as the same line-item also includes advertising and credit cards.

A fascinating blog post, meanwhile, reverse-engineers their Glacier data archive product and concludes that the data is stored on Blu-ray disks in RAID-like cartridges.

Data Center Knowledge discusses AWS generally and provides a nice chart of how the increasing demand for engineers with AWS chops both tracks its growth, and also creates a competitive advantage for Amazon.

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Meanwhile, there seems to be evidence that data centres are taking a step upward in scale, with three new projects all above 1 million square feet of space.

All very well - until, like Samsung’s, it catches fire. Then you might wish you’d gone with something like this, an interesting alternative based on 100KW micro-colos.

Facebook’s impressive Q1s; Google’s rather tricky Q1s, exit Gundotra; Square wants out; Telefonica launches mobile ads exchange

Facebook Q1s are out, and they’re pretty good. Revenue was up 72% at $2.5bn. 82% of that is ads, and 59% of that is mobile, up from 30% a year ago. And now, they want to be a mobile-money company: they’re looking at getting an e-money licence in Ireland and they’ve signed up Azimo International as the technical partner.

It’s harder than it looks, though: Square is considering selling up, struggling to make a turn in a notoriously low-margin business.

Google Q1s, meanwhile, were mixed. Revenues were up 19 per cent, and advertising volume was up 26%, but the average selling price of an ad was down 9%, as more of them were served to mobile devices. Google’s Chief Business Officer, Nikesh Arora, says that he’s convinced that mobile ads should be worth more, but he seems to be the only person. Except, perhaps, for Facebook? Also, if he’s the Chief Business Officer, what are all the others doing?

If you’re interested in these issues, check out our Digital Commerce 2.0 Strategy Report

Horace argues, very interestingly that Google’s big problem is that its revenues basically follow Internet user base growth, and user base growth is basically over in the US and UK, where half its revenues come from. China is ruled out, so the problem is how to increase revenue from its activities outside the UK, US, or China. And there’s no evidence of this happening. Ergo, Google needs to think about emerging-market advertisers. Internet balloons won’t cut it - the user bases are growing strongly, but the revenues aren’t.

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Meanwhile, Google+ boss Vic Gundotra is quitting, and the company is apparently thinking again about its very unpopular policy of integrating all its accounts with G+.

Telefonica is launching a mobile ads exchange, based on the assets of MobClix, an ad exchange that went bust last year.

Alibaba.com is launching a new mobile search engine.

So many digital commerce plays seem to involve Bluetooth Low Energy these days. Fortunately, here’s the 3G & 4G & 5G Wireless Blog with your technical briefing.

Netflix looks into P2P, to fix its peering; Spotify gets out of P2P, into Sprint; Hulu: no VPN

Netflix is hiring, looking for an engineer with expertise in large-scale P2P streaming networks. Not surprisingly, this is being taken to mean that they would like to deliver video that way. Interestingly, their CEO has suggested that if Netflix was to become a balanced peer, with roughly equal outbound and inbound traffic, they might have a stronger case for settlement-free peering with major carriers.

On the other hand, Spotify is stripping out the P2P element from its apps, in order to rely entirely on a client-server Web architecture. In 2011, 80% of its traffic was served from the P2P cloud, making it one of the Internet’s biggest P2P networks by volume.

Sprint may be looking for a content partnership with Spotify, bundling the service with some of their plans.

Hulu, meanwhile, is blocking well-known VPN hosts’ IP ranges, having realised that a lot of non-US viewers sneak in because it’s cheap.

Microsoft Q3s, LockedOut of LinkedIn, shadow IT, Salesforce support-as-a-service

Microsoft Q3s were very reasonable, with revenue up 8%. The stand-out detail was Office 365: MS added a million net 365 Home subscribers, and its O365 and Azure cloud operations had sales up 31% year-on-year.

LinkedIn has imposed a new developer agreement that basically locks out companies it doesn’t like from its API. As a result, Zoho has walked away from integration with the site. As the official partners are Microsoft and Salesforce, though, you might think LinkedIn will take this rejection fairly well. That said, it does leave Oracle and SAP out in the cold.

Shadow IT, the stuff your developers use without telling anyone.

Here’s something interesting: everyone oohed over Amazon’s Mayday built-in tech support helpline. Now Salesforce is offering something similar for the enterprise, and any developer working with their API can integrate it. Obviously you have to arrange for someone to actually answer the calls and offer help, but it’s pretty impressive. We wonder if it’s a WebRTC application.

Better caller ID, perhaps not for the iPhone; building Truphone

Truecaller is a better caller ID app. Just look at the trouble they had to go to in order to look up phone numbers as they come in on the iPhone!

When you receive a phone call from a number you don’t recognize, you simply take a screenshot of the call

Simwood deploys its own WebRTC-based conferencing.

Here’s a good interview with James Tagg of Truphone. Interesting detail: they’re selling the service on the basis of roaming data speeds, benefiting from the absence of trombone routing.

Secret is an app that lets you comment on your friends anonymously.

EE’s voicemail was desperately insecure for quite some time.

Some fascinating projects in the Vodafone Foundation’s competition for disaster apps.

And here’s the sad story of how Telstra jumped into digital services in China.

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April 24, 2014

Telefonica leads Vodafone in more attractive markets


As part of the recently launched Telco 2.0 Transformation Index, STL Partners has been analysing the transformation efforts of major telecoms operators. We are close to completing a major analysis report on Vodafone which will complement those already completed for Telefonica, SingTel, Verizon, AT&T and Ooredoo. Vodafone’s scores will also be added to an update of the Benchmarking Report which will be released in May.

Ahead of the full analysis in May, we’ve just published a new research paper ‘Telefonica leads Vodafone in more attractive markets’, in this new report, based on Telco 2.0 Transformation Index analysis, we compare Vodafone’s competitive positioning with another European-centric multi-national, Telefonica. The results are surprising and instructive, showing that Vodafone faces substantial challenges if it is to grow in the foreseeable future.

You can read an excerpt of the report here We’ll also be exploring the telecoms strategy at the OnFuture EMEA Brainstorm, 11-12 June in London. Email contact@telco2.net or call +44 207 247 5003 to find out more.

Figure 1: Telefonica and Vodafone Market Attractiveness and Competitive Positioning - The Tale of the Tape
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April 14, 2014

Comcast/TWC, Free/Bouygues, Google Lobby: Telco 2.0 News Review

The 9th Annual ‘OnFuture EMEA’ Executive Brainstorm & Innovation Forum (formerly ‘New Digital Economics EMEA’) is designed to equip up to 200 specially-invited business leaders with new, breakthrough ideas, methods and tools on how to grow significant new revenues in the next 12-18 months leveraging Mobile, Cloud and Big Data. For the full agenda click here, to apply to participate click here.

Heartbleed: OpenSSL has a really, really bad day at the office

The Heartbleed bug, discussed in detail at Hacker News, makes it possible for an unauthenticated attacker to extract arbitrary chunks of memory from any Web server running the most recent versions of OpenSSL, the most common implementation of HTTPS, without even causing anything to be recorded in the system log. (XKCD explains it visually here.) The memory contents involved might include absolutely anything, including passwords, private keys, and SSL certificates. Affected sites need to patch the software, revoke and replace their SSL certificates, regenerate keys, and probably also make the users change their passwords.

Netcraft has observed a spike in both certificate issue and revocation, but points out that the real surge has yet to arrive, possibly because the certification authorities are overwhelmed by the demand.

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The good news is that a project to scan the top 1 million domains shows that the number of vulnerable sites has halved so far, although this only helps with the prevention of new attacks, rather than the exploitation of data already leaked. Inevitably it was alleged that the NSA knew of the bug for at least two years, and just as inevitably, denied.

One of the most heavily affected companies was Akamai, and they responded by offering a patch to OpenSSL that protects sensitive information from memory allocation bugs in general. Both Cisco and Juniper posted urgent patches for routers and other devices that are vulnerable.

And as if that wasn’t worrying enough, a nasty worm is attacking some Linksys home routers.

Comcast x TWC x regulators; 500Mbps cable is here; broadcasters vs. regulators; why Android TV?

Here’s a convincing argument that the relevant market for the Comcast-TWC deal is the subset of homes passed by AT&T, Verizon, Comcast, and TWC with broadband speeds high enough for multi-channel TV. On this basis, the deal would increase the concentration ratios high enough to trigger the Department of Justice’s antitrust procedures.

Consumerist takes a forensic look at the low-cost Internet Essentials product Comcast introduced as a condition of the NBC merger. Not enough people are getting it, and the product itself could be much better. We would add that Comcast’s lower-end double- and triple-play bundles are also pricey, while the top-dollar ones are a much better deal.

It can’t be long now before US cablecos’ next speed jump arrives. In Europe it’s already here, helped by the wider EuroDOCSIS channels. UPC in Poland is trialling 500Mbps service.

This whole story is playing out at the intersection of the Internet, traditional telecoms, and TV. Interestingly, the broadcasters are pushing back, taking an interest in spectrum policy. FCC Chairman Tom Wheeler has been trying to allay their concern - essentially that the FCC is taking their spectrum so wireless broadband providers can carry OTT video content - while easing them towards changing their business model to suit the digital era.

Speaking of wireless, the 3G, 4G, and 5G Wireless Blog has a rather good presentation from EE on their plans for LTE Broadcast.

Level(3) has a new video cloud service for content producers.

And TelecomTV wonders why, after the failure of Google TV and the (relative) success of Chromecast, Google is doing an Android TV product.

Bouygues: we’re Free’s for €8bn; US Cellular adds 1200 LTE sites, joins price war; Softbank in Europe?

The disruption of the French mobile market continues. After Altice bought SFR, Bouygues is now considering selling up…to Free. That would include the customer base, the network, and the spectrum. Bouygues wants €8bn for it, while Free is offering €5bn - clearly they could meet in the middle. In the meantime, Free is acquiring Monaco Telecom.

Another exit, in the US: tiny Cincinnati Bell is giving up on mobile and selling its spectrum to Verizon Wireless. A pity: they stood out in the Telco 2.0 Index for their superb customer satisfaction ratings and ARPU.

Another, very different, US regional carrier, US Cellular, is expanding its network significantly. An interesting detail is that they are leasing 700MHz spectrum from a group of financial investors, King Street Wireless, who are apparently among the top ten holders of spectrum in the US. They’re also plunging into the price war with both feet. T-Mobile further turned the screw by announcing that they will no longer charge a premium for tablets with cellular connectivity.

If Softbank doesn’t get its way in the US, we might see the Samurai Son in Europe, interested in datacentres or perhaps just a bid for Vodafone, using the proceeds of the Alibaba.com IPO plus a lot of Japanese bank financing.

Vodafone has bought out its local partner in India, giving it full control of the opco. This cost $1.5bn, bringing Vodafone’s investment in India to $4.7bn this year and giving the partner a 50% return in a little more than a year.

Bharti Airtel and MTN, meanwhile, have agreed to mobile money interoperability between Cote d’Ivoire and Burkina Faso.

Sawaris in for Telecom Italia, again? “Margin squeeze test” for Openreach

Naguib Sawaris is interested in buying up to $2bn worth of Telecom Italia if and when Telefonica’s stake becomes available.

OFCOM may be about to conduct a “margin squeeze test” on the UK wholesale FTTC market, targeting a price reduction of as much as £2/mo.

Unexpectedly, BT’s subsidised roll-out in Cornwall seems to contain quite a lot of FTTH.

Samsung Q1 guidance, Galaxy S5; Amazon phone; ZTE learns to say no

Samsung expects operating profits of about $8bn in Q1, down a little on the year ago, as growth in smartphone volumes slows. The big question, of course, is how well the Galaxy S5 will do when it goes generally available in Q2. Samsung has priced it around 10 per cent lower than the S4 and dialled its enormous marketing spend down a bit to look after margins.

In Korea, where the gadgets will land first, SK Telecom and KT are theoretically banned from signing up new customers for a couple of weeks as a regulatory measure, leaving LG U+ as the only carrier with the new phone. The Wall Street Journal’s reporters find that in fact, all three operators are openly offering them - the ban doesn’t cover lost or stolen devices, so there is an obvious loophole, which SKT sales staff were only too keen to explain.

On the other hand it’s very hard to find an actual, physical, kickable S5. This may be because Samsung is trying to punish SKT for jumping the gun (see this post) or perhaps because they’re less willing to stuff the pipeline with inventory.

Ars Technica has a typically detailed review, which compares the heart-rate sensor to a real medical device and discovers that it is substantially in error as much as 50% of the time. They also think the software - well, the bits of it that aren’t stock Android - has got worse.

It is alleged that Samsung could have said that the Galaxy Tab wasn’t selling in North America.

Is an Amazon phone coming in June? John Chen denies BlackBerry might exit the devices business.

ZTE has doubled its profits, to a whole $68 million, and slightly reduced its revenue. To put it another way, the infrastructure price-leader is beginning to learn to say “no” rather than always discounting more.

EU data retention struck down in the courts; FTC vs WhatsBook; Google, the lobbyist

Here’s a surprise: a European court has ruled that the EU data retention directive, which requires telecoms operators to store metadata for at least six months, is illegal, after Irish and Austrian lower courts asked it for an opinion.

A Spanish appeals court has confirmed a ruling that file-sharing software is legal, and its developers are not liable for infringements committed by users.

The Federal Trade Commission has warned Facebook that promises regarding privacy made by itself and Whatsapp are still binding post-merger.

And here’s a fascinating story about Google’s emergence as a formidable lobbying force, including a fine chart of their spending on lobbying. Google now spends more on lobbying than Verizon.

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US online ads: bigger than TV; open-source recommendation engine; Facebook pushes messaging into its own app

US advertisers have spent more on online ads than on TV for the first time ever, $42.8bn vs $40.2bn in 2013. Of that, $18.4bn was search-based ads (i.e. Google) and $7bn was mobile.

Mortar is an open-source recommendations engine, and a cloud service to back it up. This may be a key moment in digital commerce, as big recommendations are a crucial tool for players like Amazon and Netflix.

Jeff Bezos has apparently told Amazon to “go faster” on payments. It is as yet unknown in what direction they’re meant to go faster, but when Jeff says go faster…you go. Facebook is also having another go.

Google’s effort to predict flu outbreaks, perhaps the founding, iconic example of Big Data, doesn’t actually work.

Facebook is trying to strip the instant messaging functions out of its Web site and make users download the app.

British wholesale VoIP provider Simwood has a new and feature-rich mobile platform.

The USA’s National Geospatial Intelligence Agency is on Github, releasing code.

It’s becoming so easy to raise VC funding in Silicon Valley that startups are doing additional VC rounds just because the money is there.

The benefits and problems of micro-service architectures.

And an app that uses OpenStreetMap to tell you which Parisian café terrace will be in the sun.

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April 7, 2014

Strategic Regulation, EU and USA: Telco 2.0 News Review

Euroregulators: no more roaming charges, and would you like some net neutrality with that?

The European Parliament this week voted in favour of a package of measures put forward by Neelie Kroes, in the last months of her term in office at the European Commission.

The text would end intra-European retail roaming charges by the 15th of December, 2015, take measures to improve 4G and 5G spectrum management, and introduce strong net neutrality language into EU regulations. You can get the document here. Some more discussion is here. There are also more measures regarding marketing, which require operators to include “actual data speeds”, whatever those are, in contractual terms.

The next step is the council of ministers, which could accept it or send it back with or without amendments to a parliament that voted for the current version 534 to 25. The big change here was that a provision that “specialised services” could be exempt, which had been added by the parliament’s industry committee after heavy pressure from the telcos, was cut out.

Naturally, an epic storm of lobbying can be expected at the Council - as Chris Marsden’s blog points out, ETNO is threatening as much.

In the Netherlands, meanwhile, there is so little interest in mobile TV that the regulator is looking at the possibility of clawing back the spectrum and refarming it for cellular. They’re also looking at turfing the wireless microphones out of the 700s and refarming that in line with ITU recommendations.

And here’s a fascinating loophole around the UK’s new charge on E.164 number assignments.

Numericable gets SFR; Cinven makes 160% return; Sky Broadband, FTTH builder; new boss for Kinnevik

It’s a result: Numericable has acquired SFR, despite Bouygues upping the ante with more cash at the last minute and despite the intervention of sundry French politicos. €13.5bn in cash, 20% of the combined company in shares, and a possible “milestone payment”, and the company’s yours. Numericable shares rose 17% on the news, while Bouygues and Iliad saw theirs drop 5%.

Meanwhile, the cableco’s former owner, private-equity fund Cinven, said its internal rate of return on the deal was 160 per cent, and it intended to take €1.25bn in cash and keep the rest of its holding as shares in the combined holding company, Altice.

Vodafone Spain, meanwhile, says it’s going to renegotiate Ono’s debts, presumably on the grounds that a Vodafone division is dramatically more creditworthy than a not-very-profitable cableco. That will help deliver some immediate cost savings. They’re also cancelling a MVNO agreement Ono had with Telefonica.

Barron’s reckons Vodafone shares are 20% undervalued. Time to pile in, if you believe the European economy is going anywhere. Meanwhile, Vodafone UK is spending £100m on new shops and staff.

The growth of local-loop unbundled DSL has slowed down dramatically in the UK, perhaps because no-one is spending heavily promoting it at the moment, or perhaps because the market for it is saturated. BT, meanwhile, has hired the head of Sky Broadband & Voice Services to run their BT Sport division.

Sky, meanwhile, has signed up a multi-utility construction firm to deploy fibre in new building projects. In fact, Sky is offering 300Mbps broadband, plus voice and Sky+ HD telly. The question is how many new builds they will find to fibre up. Interestingly, part of the point is to have a single satelite receiver somewhere on the project and redistribute the TV via the fibre from there - like the rediffusion systems of the 1960s.

Meanwhile, SSE Telecoms has announced 30 more points of presence for its UK fibre network, mostly in London. If you can afford a multi-million pound flat there, you can certainly afford the very reasonable £70/mo gigabit service that Vision Fibre is deploying.

Community fibre builders B4RN, meanwhile, have taken a step further, by spinning off another community fibre project, B4YS, which carries on the work further west.

And Kinnevik, the Swedish investment holding company that played a historic role in the development of GSM and still owns operators worldwide, has a new CEO.

AWS-3 licences; lobbying warms up over 600MHz; more WLAN spectrum coming; understand the FCC and peering

The AWS-3 spectrum announcement is out, and it looks like the FCC took note of the lobbying from AT&T and VZW on one hand, and Sprint, T-Mobile, and the regionals on the other, and chose to split the baby. The duopolists wanted the 1.7GHz and 2.1GHz blocks in big chunks, at least 10MHz paired over large geographic sections, so-called Economic Areas. The insurgents wanted them in smaller pieces, broken up across smaller Cellular Market Areas. (An EA is roughly seven times as big as a CMA.) The FCC’s solution is to offer three 5MHz paired licences, two in EA sizes and one in CMA sizes, and one national 10MHz paired licence.

Meanwhile, AT&T claimed that the forthcoming 600MHz auction would have to raise at least $30bn to pay the TV operators to leave, and therefore the FCC would have to make AT&T happy or else it wouldn’t be able to pay all that money. (We shorten.) T-Mobile responded with a complex scheme to run the auction under successively less restrictive spectrum limits, in order to make sure T-Mobile got enough spectrum. (We also shorten.)

The FCC has changed the rules to provide for another 100MHz of 5GHz unlicensed spectrum, to the delight of WLAN vendors everywhere. A restriction to indoor use only has been removed, while in return for fewer restrictions on 802.11ac (which aggregates both 2.4 and 5GHz carriers), vendors will have to make it harder to modify their products to put out more power. Chairman Wheeler said in a statement that another 195MHz may be coming soon.

Public Knowledge criticises AT&T’s plans for PSTN transition trials. Susan Crawford argues that the US needs publicly-owned infrastructure.

And Harold Feld argues that Internet peering should be treated like any other telecoms interconnection issue, it should therefore be potentially subject to FCC regulation, and the main obstacle to this is that the FCC is poorly informed on the subject. He argues that the tactical solution is to get the anti-trust regulators to demand documents that the FCC cannot ignore.

Google Cellular? Sprint leaps into price war; BlackBerry tells T-Mo “take your trade elsewhere”

Is the Google looking at becoming a mobile operator? It has apparently been discussing the possibility of a MVNO agreement with either Verizon Wireless or Sprint, in a context that links this with the cities where Google Fibre has been deployed. That, in turn, suggests Google is thinking of owning infrastructure, either a “limited cellular” roll-out or else a re-run of its past interest in public WLAN, with in either case an MVNO overlay.

Sprint leaps head first into the price wars, offering churners as much as $650 to sign up. That consists of up to $300 trade-in credit on phones, plus up to $350 to buy out early-termination fees. The deal is only available on the “Framily” group plans.

Meanwhile, it is confirmed that the phones on their Spark LTE network (i.e. tri-band 1.9/2.1/2.5GHz) won’t do concurrent voice and data.

BlackBerry is very angry with T-Mobile for having promoted iPhone 5S gadgets to its users. This in itself is not surprising. What might well be surprising is that they also feel strong enough to tell T-Mobile to go away. T’s BlackBerry licence runs out very soon, and BlackBerry boss John Chen has said that they won’t renew it. You wouldn’t think BlackBerry was in a position to turn customers away. In the meantime, T-Mo is offering $100 credit for its customers to buy unlocked BlackBerry devices.

Here’s an interview with Sue Monahan, new CEO of the Small Cells Forum.

South Korean LTE capacity war; Sina Weibo IPO; Reliances bury the hatchet; massive Indosat BGP leak; Tigo seeks Rwandan startups

South Korea’s new operator, LG U+, has kicked off an LTE price war. This being the ROK, this is expressed in terms of huge capacity and speed - U+ offers unlimited voice, messaging, and data for €55/mo, and TV with live baseball for another €3/mo. If you use more than 2GB a day, you get shaped down…to 2Mbps. Quite a lot of us would like to get up to 2Mbps, to say nothing of having a 2GB allowance per month.

If you go to SKT, meanwhile, €52.50/mo buys you a monthly 16GB allowance. Burst that, and you get restricted to what SKT calls an “optimal speed” and 2GB/day. KT, for its part, announced unlimited LTE for €48/mo.

Sina Weibo is go for IPO, valuing the company at about $3.9bn and raising $380m. Interestingly, its great rival Tencent, of QQ and Wechat fame, saw its Hong Kong-listed shares slide.

The two Reliances - Reliance Infocomm, the mobile operator, and Reliance Communications, the fixed ISP, respectively controlled by brothers Mukesh and Ali Ambani - have a deal. This is significant, as the two men have not been on speaking terms. Reliance Infocomm has the only nationwide 4G licence, and the deal lets it use Reliance Comms’ backbone fibre for the 4G. It looks like the companies are beginning to reintegrate, as they’re also sharing towers.

Taiwanese chip maker TSMC is tooling up for something.

Indosat had a major BGP leak, accidentally announcing not just someone else’s Internet routes but the entire Internet routing table. Interestingly, the most affected network was Akamai, which saw some of its prefixes routing to Indosat in their entirety, causing substantial disruption.

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Safaricom is not going through with the acquisition of rival operator yuMobile, after the regulator imposed a condition that Safaricom must permit interoperability with M-PESA for other operators.

And Millicom has launched a startup incubator within its Tigo opco in Rwanda.

Yahoo! encrypts all the things; Snowden on tap; Turkey unblocks Twitter for three people

Yahoo! announced a sweeping set of security measures in response to Edward Snowden’s disclosures on NSA surveillance. Not only that, they have recruited Alex Stamos, a major critic of the NSA, as their chief information security officer. Stamos announced this week that all their inter-datacentre links are now encrypted, their mail servers will encrypt interdomain traffic if the other party to the communication supports it, their search engine uses HTTPS by default, and all their other websites at least support HTTPS. Yahoo! Messenger, whose video chat was famously exploited by GCHQ, is being rewritten to encrypt all its traffic.

Work is under way to encrypt the Yahoo! advertising infrastructure’s web traffic too, which is important in the light of evidence that spies are in the habit of using the surveillance already carried out by web tracking cookies. Stamos says that CEO Marissa Mayer fully supports the changes, and in fact he took the job because she is the CEO. He described the goal of the project as follows:

“The goal is all traffic to and from Yahoo users is going to be encrypted all the time by default, and invisibly. This is not going to be something you have to think about all the time,” he said. “Preventing surveillance of millions of people at a time is totally within our abilities,” Stamos said.

Meanwhile, the totality of Snowden disclosures so far is now searchable.

A special job opportunity: director of GCHQ. The candidates are profiled here, with the exception of the one whose name is an official secret.

A fascinating story: the CIA built a Cuban Twitter clone, it worked, and then they just left it.

In Turkey, a court rules that the ban on Twitter is illegal. In response, a government official suggests that it could be permitted, but only for the three people who sued.

Bruce Schneier discusses how to guarantee that ephemeral communications - Snapchat etc - are actually ephemeral. The NHS keeps releasing private medical information. The TOR project tells you how to build a security hardened Android.

In search of the perfect cloud - neither AWS nor GCE

Adrian Cockcroft sums up the points missing from both Amazon Web Services and Google Compute Engine in a handy chart:

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Meanwhile, the AWS features train rolls on. EDNS Client-Subnet support is now available to optimise CloudFront routing when an anycast DNS is in use (like, most of the time these days).

Akamai and Vubiquity have a partnership for “Content as a Service”, a cloud product that lets video content creators start up global distribution quickly.

A bug in Microsoft Hyper-V gave the impression that it was disfavouring Linux virtual machines. It isn’t; the warnings are spurious. But perhaps the spurious warnings are there to make you think….

One benchmark suggests that AWS S3 is as fast as accessing your own ZFS file system over the Internet.

Facebook’s new data centre in Altoona is making progress, and they have released a bit of information and some photos.

How will a BT-EE super-MVNO deliver voice? And is voice the next big thing?

BT is going with EE for its MVNO needs, and the telco has promised its shareholders that it will deliver “seamless” voice using its WLANs and the slice of 2.6GHz spectrum it picked up last year. But, famously, voice over LTE is difficult, and voice over LTE interworking with other networks is really difficult. So much so that SKT found it was easier to build out more LTE than to make 4G/3G handoff work.

Here’s ex-Telco 2.0er Martin Geddes arguing that voice is the next big thing, on the basis of eight major themes or trends. Interestingly, here’s a blog post arguing that audio and earpiece devices are more interesting than wearables.

A good review for 3CX’s unified comms app, and a very bad one for the implementation of its VPN tunnel app on iOS.

Load-testing your call centre with Twilio.

An amusing thread.

50% smartphone Africa: 2020

Horace takes a long view over the adoption of smartphones, argues that a third wave of disruption driven by applications providers is coming, and provides a nice chart showing when we might expect various adoption milestones in different geographies. We’ve still got three years to go before 50% adoption in Latin America and until 2020 in Africa.

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The HTC One M8 is reviewed, favourably. How Googlers working on Android responded to the iPhone.

Microsoft gives away Windows Mobile; gov.uk owns up to XP problem; Facebook as investment fund

Microsoft is going to give away Windows Phone for devices with screens smaller than 9”, and also give away a version of Windows optimised for M2M devices, which they demonstrated running on an Intel Quark module.

Next week, Windows XP support ends. With the water running out fast, we’re seeing whose pants are around their ankles - the British and Dutch governments are the latest organisations to admit they still run XP and pony up the cash to have Microsoft keep looking after it.

Felix Salmon argues that Facebook is morphing into a sort of online investment fund, a bit like Berkshire Hathaway.

We argue something similar in our Facebook + WhatsApp + Voice EB. Check it out!

Amazon’s Fire TV, their set-top box, has the interesting feature that you can delete the recordings its voice control feature makes. Yahoo! is starting a Google-like program to invest in its own TV programming. Apple has added more video ads to iAds.

10 years of GMail. 50 years of IBM S/360. And the Tesla Model S electric car runs a version of Ubuntu Linux.

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April 2, 2014

Software Defined People: How it Shapes Strategy (and us)


We’ve just published a new research paper ‘Software Defined People: How it Shapes Strategy (and us)’ Much of what we need to know, do or get, can now be delivered through software, pretty much at any place at any time via mobile. It is a key tool, and how we use it increasingly shapes our lives, businesses, work and identities. Why are telcos missing out, and what do businesses of all types need to do about it?

You can read an excerpt of the report here We’ll also be exploring the implications at the OnFuture EMEA Brainstorm, 11-12 June in London. Email contact@telco2.net or call +44 207 247 5003 to find out more.

Click the image for more details:

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

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