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July 31, 2014

Google’s Big, Big Data Battle

We’ve just published a new research paper ‘Google’s Big, Big Data Battle ’ Facing lockout from a growing chunk of the Internet and mounting competition from the Facebook-Microsoft alliance and Amazon, Google’s core business is under intense pressure. The search giant’s response is to innovate, offering consumers proactive recommendations, as well as reactive search results. Once an interesting sideline, Google Now has become fundamental to the Mountain View company’s future. Is the suggestion service good enough to maintain Google’s position as the world’s leading big data company?

You can read an excerpt of the report here We’ll also be exploring the implications at Digital Asia (2-4 December, Bali), and are initiating coverage of a new research programme on Internet-Driven Disruption, and we’d really appreciate your input here. For more on any of these services, please email contact@telco2.net or call +44 207 247 5003

Extract chart from report:

Figure 2 Google margins are steadily falling as volumes continue to rise.jpg

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July 22, 2014

Cloud 2.0: Your Input Requested Please

If you are a strategist or decision maker engaged in implementing or evaluating Cloud services, we’d very much value your input to our new Cloud 2.0 Programme here.

Building on several years of ground-breaking Telco 2.0 research into cloud services, we are initiating a set of activities that bring together leading thinking, practice and senior practitioners from telecoms operators, technology companies, and other industry facilitators.

Its goal is to accelerate the adoption of cloud services by telecoms operators both as a means to transform and develop operational agility and to provide external enterprise cloud propositions. The programme will be lead by Bob Brace, Senior Analyst, STL Partners/Telco 2.0 (formerly Head of Cloud at Vodafone), and will comprise a stream of dedicated research reports, sessions at our executive brainstorms, and other networking and information sharing activities.

If you’d like to input to the agenda and design of the programme overall, please take 5 minutes to input to our online research here, as we are collecting feedback on our plans, or contact us directly at contact@stlpartners.com. We will also be covering cloud at Digital Asia 2014, 2-4 December, Bali, and at OnFuture brainstorms in Arabia, Europe and the Americas.

cloud programme july 2014 slide.png

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July 7, 2014

Regulators, Orange, Telefonica, EU, Verizon, Samsung: Telco 2.0 News Review

‘Digital Asia 2014’ Executive Brainstorm and Innovation Forum, run by STL Partners in collaboration with Telkom Indonesia, is designed to equip 250 specially-invited business leaders from across the region’s telecoms, enterprise and technology sectors 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.

Consolidation is go in Germany, but no in France

So while the European Commission clears the Telefonica buy of E-Plus, taking Germany down to three operators, the opposite is happening in France - Orange has walked away from the deal with Bouygues. That leaves only the options of a Free-Bouygues deal, or no deal at all.

Orange boss, Stéphane Richard, says that if Orange was to make an acquisition it would be in Spain, bargain-hunting. It’s likely that Orange would target one of Spain’s independent cable or fibre deployers, possibly Jazztel. That’s roughly what Vodafone is doing - this week, their acquisition of Ono got regulatory clearance, while they signed a joint venture with the Irish electricity grid to roll out an open-access FTTH network.

Numericable, meanwhile, bought out Virgin Mobile France.

Elsewhere in Europe, Telekom Austria has had to write off €400m from the value of its Bulgarian network. Siegfried Wolf, the chairman of Austrian state investment company OIAG, the second-biggest shareholder after Carlos Slim, says this leaves the carrier in a “precarious” position. The sudden writeoff is down to:

an increase in the cost of capital of the Bulgarian segment and changed expectations with regard to medium-term macroeconomic developments in Bulgaria, as well as related market effects which affect the valuation of Telekom Austria Group’s business plan for the Bulgarian segment

To put it another way, there was a run on the banks in Bulgaria last week, and TA is spooked.

Tele2 has a network in Norway, but no spectrum, while TeliaSonera has spectrum but needs more network. The solution was obvious and Telia bought it for €500m, a price that lets Tele2 exit Norway at a profit.

The Telco 2.0 Transformation Index’s detailed coverage on Vodafone is out now. We believe Vodafone, post-Verizon Wireless, is in urgent need of change to restore a growth story

€897m brawl on the PT/Oi board; more trouble over TIM Brasil

Here’s a good row. Portugal Telecom, of course, recently acquired Brazilian operator Oi. Now, the two Brazilian directors of the combined company have quit, after PT bought €897m of commercial paper issued by a company called Rioforte, which is owned by Portuguese bank, Espirito Santo. The bank is also a big shareholder in PT.

The Portuguese carrier seems to see this as routine treasury management - the money is lent for two weeks only - while the Brazilians see their money being siphoned into some sort of incestuous arrangement with a peripheral-Euro bank. The quitters say they only learned of the fairly substantial transaction from a press release, while - just to add complexity - one of them is due to resign anyway because he is in a conflict of interest.

Elsewhere, the chairman of Telecom Italia is very clear that he doesn’t want to sell TIM Brasil, no, nay, never. This, of course, means a head-on collision with Telefonica, which doesn’t want to sell Vivo, and the regulators. But now that the Telco consortium of TI shareholders is breaking up, will TEF go hostile?

Telefonica buys into Mediaset; Rok Mobile; Soundcloud lets UMG delete everything; competing against non-advertising

Telefonica, meanwhile, is buying into TV again. This week, the company has picked up Mediaset Spain’s 22% of Canal+ and taken an 11% stake in Mediaset’s Italian core business, which is being spun-off into a separate company. Mediaset is struggling with plunging ad rates in Italy and soaring fees for football rights; you can see why Berlusconi would want to sell but not perhaps why TEF would want to buy.

Rok Mobile’s music-focused MVNO has launched for invited customers. $50/mo gets you 20 million tracks and unlimited calls, SMS, and data over Sprint’s network; we will see how that quote-you-happy offer lasts.

After YouTube, Soundcloud has given Universal Music the keys, letting them unilaterally remove content they don’t like whether or not it might be covered by fair-use. Expect a row.

Dailymotion will be live-streaming music festivals, although the list given seems more than a bit B-list.

Horace points out that the example of digital photography shows that it is often the most effective strategy to compete against non-consumption, expanding the market rather than trying to win share off the incumbents. He thinks this applies to mobile advertising.


EE has started distributing Office 365 and a variety of other software, notably Zendesk to its small business customers.

Here’s a Twilio HOWTO on how to track, link, and organise incoming SMS messages.

Verizon’s e-commerce CDN; burstable EC2; Hadoop, above and beyond MapReduce; Apple MacEnterprise

Verizon is pushing a CDN optimised for e-commerce applications. Transact is a product EdgeCast developed immediately before Verizon bought the company, which deploys your web store to its distributed POPs around the world in order to speed up load times and reduce breakage.

Amazon Web Services is offering “burstable” EC2 instances, which offer low prices on small machines, but permit occasional peak loads. Typical use cases would be build servers, remote desktops, and Web hosting.

The AWS Blog has an interesting post on how to use their Elastic MapReduce to manage a cluster of Hadoop servers. Last week, we heard that Google has moved on from MapReduce to a new distributed big data tool. Data Center Knowledge looks around the Hadoop ecosystem and points out that the open-source clone has far outgrown the functionality of the Google original.

VMWare reckons more and more enterprises are deploying Apple Macs.

Amazon’s James Hamilton blogs about how AWS uses formally provable methods to design big systems.

EU: 5G will be awesome; Ericsson mixes demos and cold water; “legacy” WiMAX; Ericsson, Verizon deny Ericsson runs their network; Qualcomm buys 802.11ad firm

The European Union thinks 5G will be awesome. This would be less exciting if the institution had not played such an important role in both GSM and UMTS.

How badly these things can go wrong is shown by this story. Elisa has shut down its WiMAX network with effect from the 1st July, having stopped selling new connections at the end of 2012. Be honest; did you ever expect to hear the phrase “legacy WiMAX”?

Ericsson this week demonstrated “pre-standard 5G”, with theoretical speeds of 5Gbps. Those of us who remember the early days of WiMAX will be suitably sceptical (remember 70Mbps at 30km?), and CTO Ulf Ewaldsson took the trouble to advise Mobile World Live to trim their expectations.

Ericsson, meanwhile, denied managing Verizon Wireless’s network, as did Verizon. After all, they did run Sprint’s ill-starred Network Vision project.

Qualcomm has acquired Wilocity, an Israeli startup that develops 60GHz chips for the 802.11ad WLAN standard. 802.11ad is intended to complement 802.11ac (so-called WiGig) with even faster peer-to-peer or broadcast links.

Some more money for UK fixed; pub into telco; insanely complex business rates issue; more BDUK funny figures

The UK government has announced a pot of funding for so-called “local growth deals” worth £6bn in all, some of which may be available for broadband projects outside the existing Broadband Delivery UK programme. As usual with such things, it’s worth wondering how much of the money is “money” (guarantees, soft loans etc) rather than cash, and how much of it is actually new. But anything’s better than BDUK.

Brewer and pub chain Marston’s started out by deciding to run its own WiFi, both for staff and public use. This has developed into running their own WAN and VoIP and eventually getting an OFCOM licence to be a mini-telco. There’s a lot of this “enterprise-plus” stuff about these days, and it would only be sensible to expect it to extend into cellular.

Here’s a fascinating blog post on a complicated issue regarding BT and other UK ISPs, regulation, and tax. A large part of BT’s regulated costs consist of business rates, a tax set by the Valuation Office Agency. BT’s regulated prices charged to independent ISPs include part, but not all, of the rebate BT gets on this tax for having unbundled lines and therefore foregone some of the profit on them. The indies argue BT should pass it all on; BT (and the regulator) argues that most of the profit arises from BT Wholesale (which isn’t regulated), but of course this doesn’t seem to help the indies much with BTw pricing for backhaul.

Superfast Cymru, yet another BDUK project, is in trouble after a government minister boasted that it provides speeds of “61Mbps”. This doesn’t sound like any network technology we’ve heard of, and neither the government nor BT will show their working. It is alleged that the number is an average of “theoretical” tests of 100,000 lines. “Up to” with a vengeance.

Meanwhile, here’s a look at the responses to the £10m “innovations” fund that the government recently announced. KA-band satellite is being offered, rather hopefully. And RevK struggles with TalkTalk, or rather, they struggle with his correctly inline-quoted e-mail.

T-Mobile boasts more LTE, in trouble with regulator over dodgy SMS; NSA targets Linux Journal, terrorists

T-Mobile USA trumpets that it has hit its self-imposed target of 230m population coverage with LTE by the middle of 2014. John Legere took the opportunity to pick a fight with Sprint. T-Mo has just started refarming lower-band spectrum and using 700MHz, so expect more announcements.

T-Mobile has also been in trouble lately, for spamming its customers with premium SMS. Specifically, some of its wholesale SMS customers were in the habit of pushing out premium-SMS campaigns without telling the public what they cost. Now, the Federal Trade Commission isn’t happy. Neither is Legere, but it’s telling that his response is more than a bit of a non-denial:

The T-Mobile chief also pointed out that he did not want the company to have unsettled business, which has led to the recent creation of the Proactive Refund Program.

Legere said he has instructed T-Mobile’s marketing and customer care teams to “double down their outreach effort to all potentially affected customers - who believe that they were inappropriately billed and/or paid for one of these Premium SMS services that they did not want or authorise - and provide refunds”

We didn’t do it, but in case we did, we’re pro-actively calling up customers and offering refunds. Right. T-Mobile has also excluded speed-test apps from its data cap.

LightSquared’s rescue plan is final, and it leaves Philip Falcone with a reduced shareholding but still a shareholding, while offering the Satellite Cowboy Charlie Ergen a bag of money to go quietly.

Finally, readers of Linux Journal are among those targeted by the NSA for surveillance. Hit the link and that means you.

HTC Q2; Samsung forecasts; BlackBerry Passport; KNOX; Apple; end of SkypeKit

HTC announced slightly less horrible Q2 results than had been expected after it made a loss in Q1. The company is clinging to the edge of profitability; although it doubled net profits year-on-year, they’re still only $75 million. Revenue has risen 4 per cent sequentially.

Part of the problem is that Samsung has so much more money hanging about to spend on marketing and vendor financing. That said, Samsung Electronics reported its third successive decline in quarterly profits, as everyone waits to hear who will succeed the ailing patriach Lee Kun-hee. S5 sales have been good, but down-ticket ones have been wanting. Perhaps the S5 Mini will help, but there’s also a more fundamental issue in that Chinese carriers are getting more gadgets from Lenovo and Huawei.

Here’s a glowing review of a beta BlackBerry Passport. Admittedly it’s from Crackberry.com, who are by definition enthusiastic, but it’s truly glowing.

At Google I/O, it was announced that Samsung’s KNOX security extensions would be ported into the Android core, rather like SELinux. BlackBerry CEO John Chen is not happy, and is trying to diss it.

MacRumours has a rumour that Tim Cook is enthusiastic about voice messaging for the iPhone 6. Ars Technica reviews the new $1099 iMac and argues that it is only poor value. Support for Android Auto/Apple CarPlay is a mess.

Microsoft is not expecting significant shipments growth from Windows 8 and XP shutdown.

Skype has closed its SkypeKit SDK. Major Cisco security issue. Another M2M, or IoT, interop standard.

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July 4, 2014

Keep Smiling: a Telco 2.0 tribute to Keith McMahon

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We were shocked and saddened to learn this week of the early death of our colleague and friend Keith McMahon. It is a devastating blow for his family and friends, and a huge loss to us all. We understand from his family that he was diagnosed with a brain tumour last Friday 27th June, and died on Monday 30th June. He leaves a wife and two children of whom he was immensely proud, and to whom we offer our deepest condolences.

Keith started working with us in 2006, eventually closing down his Telebusillis blog to concentrate on his contribution to Telco 2.0. He had a fantastic grasp of the reality behind the numbers in almost every industry but particularly in telecoms, and a real talent for insight - the ability to find, understand, and express important issues well beyond the obvious. His analytical skills were backed by a wealth of practical experience gained in UK altnets and ISPs, in long-haul fibre builds throughout Latin America, and with Brazil’s biggest mobile operator.

He was a great and engaging presenter too - always colourful and often challenging, and a hugely enjoyable person to be with. He will be greatly missed by us all and the many clients, colleagues and friends he amassed throughout his busy and varied life.

Keith worked across our research and consulting business on many different projects, research reports and other publications. Among the many pieces that Keith either lead or contributed significantly to, in ‘BBC’s iPlayer nukes “all you can eat” ISP business model’ (2008), Keith was characteristically ahead of the curve in understanding the impact of video on broadband business models, and also showed his penchant for brutal attention-grabbing headlines, which he showed again in ‘Public Wifi: Destroying LTE/Mobile Value?’ (2011).

As well as contributing significantly to ‘Dealing with the ‘Disruptors’: Google, Apple, Facebook, Microsoft/Skype and Amazon’ (2012), he produced this gem on Amazon’s business model transformation. More recently, he was part of the team that delivered the Telco 2.0 Transformation Index.

As a person, Keith was warm, entertaining and fun to be with. He was highly intelligent, creative, and occasionally eccentric. He gave great value to clients and was a treasured colleague, even if his approach to deadlines evoked memories of the nickname he earned building telecoms networks in Latin America - ‘Il Pirata’.

Keith always signed his emails ‘Keep Smiling’. As hard as it is in the tragic circumstances of his early death, we would like to remember him with a smile, and hope this short video of Keith reflects a little of the qualities and the joy that we will remember him for.

(With thanks to Tom Davies at Keyline.tv for putting this video together.)

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July 2, 2014

Transformation: Vodafone needs a Telco 2.0 revolution

Our latest analysis shows that Vodafone, like AT&T and Verizon, needs a revolution in certain areas of its approach to transformation.

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STL Partners has today launched the most recent update to the Telco 2.0 Transformation Index, which features the addition of Vodafone to the 250+ page overall benchmarking report.

  • For a full description of the inputs and methodology behind the Transformation Index, see here
  • For the headline transformation scores broken down by domain, followed by an analysis of Vodafone’s current growth story, see here.
NB. We’ll also be discussing transformation at Digital Asia 2014 (Bali, 2-4 December) 2014.

Figure 1 below, taken from the updated benchmarking report, categorises the CSPs surveyed along two dimensions: what they can’t control (external market attractiveness, e.g. market maturity, regulation) and what they can control (execution within this context e.g. quality of service offerings, internal organisation and external partnerships).

Figure 1: Telco 2.0 Execution vs. Marketplace Attractiveness

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One of the key findings from this chart is that Vodafone, AT&T and Verizon are operating in less attractive markets than their peers and, with the exception of Ooredoo, are executing on transformation less well also.

Focusing on Vodafone, one of the areas of execution STL Partners believes it can improve upon are its Service Offerings: specifically, as discussed here, it falls short of all of its peers except Ooredoo in this regard. The logical question, therefore, is why?

Vodafone can improve its transformation execution by focusing on specific areas of its Service Offerings

Before answering this question, some terminology is needed. Figure 2 below gives STL Partners’ taxonomy for analysing each CSP’s Service Offerings:

Figure 2: Telco 2.0 Service Offerings Taxonomy

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Using this framework, STL Partners has benchmarked the transformation performance of each CSP within each of the six areas, ranging from traditional ‘core’ services to ‘near-core’ areas such as infrastructure services and embedded communications and truly ‘digital’ own-brand OTT services.

Figure 3 below provides the highest, lowest and average score for each domain, and positions Vodafone amongst these. (Note: Ooredoo is excluded from the average because, as indicated by its very low score, it is an outlier in terms of Service Offerings. Its less mature (but therefore more attractive markets) have prompted it to keep its focus primarily on Core services.)

Figure 3: Service Offerings - Vodafone relative to average, highest and lowest scores (first 5 domains out of 3.6, final domain out of 2)

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Before looking at Vodafone specifically, three general comments can be made:

  1.  In the three opportunity areas where CSPs have been operating for some time, the average scores are quite high and some CSPs are doing very well (e.g. Verizon in Core Services thanks to its aggressive LTE roll-out and strong FiOS FTTH offering)

  2. Embedded communications, however, sees slightly lower scores (2.2 average compared with 2.4-2.5) since, despite things like M2M needing strong traditional networking skills, they also require new partnerships with enterprises and technology players

  3. In the two newest areas, Third-party business enablers and OTT services, the scores are much lower. These require a new business model encompassing new skills, processes, operational models and new relationships and so are proving challenging for all CSPs.

Focusing now on Vodafone, it is clear that there are certain areas where Vodafone needs to improve relative to its peers (Vertical industry solutions, infrastructure services) whilst there are others where it leads the way (Embedded communications). There are four key points to be made:

  1. Vodafone performs well at Core services, slightly beating the average score, and its score here will improve over the coming 3-5 years as it uses the Verizon Wireless deal’s cash consideration to increase both organic and inorganic network investment. It might have received the lowest score for Own-brand OTT services, but none of the operators surveyed are doing enough here. 

  2. For Embedded communications, Vodafone scored joint-highest. M2M is a big priority for Vodafone and recent big client wins and rapid growth point to good market traction. Interestingly, Vodafone has opted against joining one of the multi-operator alliances and has instead focused on bi-lateral agreements and its own, internally-developed service delivery platform. Vodafone has also partnered effectively to begin offering solutions beyond traditional connectivity. Its broader activities in Vertical industry solutions score less well, however, since these remain M2M-centric and despite good efforts here connectivity remains king. One factor is that Vodafone lacks the SI capabilities of some of its peers.  

  3. In Infrastructure services, Vodafone also scores below average. Looking at IaaS Cloud, for example, Vodafone gained a real play here following its 2012 acquisition of Cable & Wireless Worldwide, but it remains both UK-centric and a relatively small player in an extremely competitive market. 

  4. Vodafone’s most well-known activity in Third-party business enablers is M-Pesa, the mobile payments and money transfer service. M-Pesa, with over 19m active users, is widely considered to be the most successful mobile money initiative in the world. In its major markets, Kenya and Tanzania, it has also been important in reducing churn (thus driving substantial indirect revenues). However, Vodafone has faced more challenges as it moved into new markets (e.g. India) and it earns less revenue from here directly than one might expect. 

Although each of the six CSPs surveyed have made a start in moving to a new business model, all need to accelerate the change process; NTT DoCoMo to be added next

Despite several operators, such as Vodafone in M2M, showing strength in selective areas, it remains true that none of the CSPs surveyed are doing enough both in terms of their Service Offerings and transformation efforts in general. 

It will therefore be interesting to see how NTT DoCoMo, often seen as the ‘leading light’ in terms of telco business model transformation, stacks up relative to its peers. How well is it really doing? In what areas, and where can it improve?

To find out more about the 250+ page Benchmarking Report, the accompanying 150+ page CSP Analysis Packs, or the Telco 2.0 Transformation Index in general, click here or email contact@telco2.net.

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