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European Consolidation is Here: Telco 2.0 News Review

After BT-EE, it’s O2-3UK. DTAG CapEx. Notspot deal in trouble. Missing €900m hangs over Altice-PTel

The BT-EE deal really is the starting gun for European consolidation. Canning Fok, managing director of Hutchison Whampoa, is promising more acquisitions to come in Europe, and the company has just reorganised its structure to support a big bid.

HWL, of course, bought the O2 network in Ireland not so long ago, which perhaps tips their hand towards this story - there is a rumour out that they will bid £9bn for O2 UK, left standing in the wake of BT’s merger with EE. Telefonica is, of course, so keen to get rid of O2 UK and cut its debts that Cesar Alierta hared to London before Christmas in an effort to push it on BT, so they won’t need much persuading to take a big bag of cash.

The problem of course is that this is consolidation with a vengeance. BT-EE can be defended on the grounds that it still leaves the UK with 4 MNOs, although the consequences for spectrum and for network vertical integration are serious. You can’t deny, though, that O2-3UK (O3? That’s ozone, isn’t it?) would take the UK down to 3 operators.

The really interesting question is that an O2-3UK deal leaves open the future of Virgin Media, whose Gigabit Ethernet backhaul has powered 3UK’s competitive surge forward over the last few years, and also CityFibre, which provides dark fibre to the cell for some 3UK networks. As it stands, O3 would be a beast of an operator, especially once it finished pulling the VMED or CF fibre to whichever O2 base stations it chose to keep. But Vodafone UK would then be a weak third operator a long way behind on fibre, although its pockets are very deep. It would be keen to make a bid for a broadband network, ideally Virgin Media.

And then things would get complicated. Did we mention that O3 would be in both the Cornerstone and the MBNL infrastructure alliances? In-depth coverage of the whole issue is coming in this week’s Newsletter and the Executive Briefing Service

OFCOM is edging towards more regulation of BT’s wholesale activities. The regulator is going to publish a draft regulation that would require BT to keep the price of virtual unbundled local access (VULA), the equivalent of LLU for their FTTC network, low enough that the independent ISPs can make a margin. BT, for its part, has stopped taking orders for its “fibre on demand” product, which is real FTTP. They claim this is because they want to clear a backlog of installs, which is amusing as BT also claims there is no demand for it.

It looks like the UK’s “superfast broadband” scheme is sliding right. Also, the “not-spot pact” is running into trouble in parliament, as the opposition has noticed the bit where the government sort-of promised to let the operators off some spectrum fees in exchange for doing the job for “free”. Whoops.

Meanwhile, the cablecos are restless. Liberty Global has just merged its two Dutch opcos and also folded its Irish operation into Virgin Media. Vodafone-owned Kabel Deutschland is pushes its downlink speeds up to 200Mbps. Tele Columbus, also in Germany, is pushing up to 400Mbps and planning an IPO.

Facing the cable menace, Deutsche Telekom has announced that it won’t be slowing down its CAPEX over the next five years, which will be €23.5bn, as it was for 2010-2015. The key segments will be German fixed and mobile broadband, and small cells. Vodafone, of course, is hoping to turn the CAPEX tap off after finishing up the “Project Spring” investments next year, but how likely is that in view of BTO3 and a big DTAG build-out?

In the immediate future, they’re whistling a happy tune. Vodafone UK CEO Jeroen Hoencamp says they have the strongest network, but users don’t know what 4G is, and they benefit from low-band spectrum. Hmmm.

Germany, meanwhile, is planning a massive spectrum auction in Q2, covering the 700, 900, 1500, and 1800MHz bands.

Telefonica’s Spanish fixed operator is playing the regulatory game. They’ve been asked to provide regulated wholesale access to their FTTH across Spain, with the exception of some cities where facilities-based competition exists. As a result, they’re threatening to stop the rollout.

Telekom Slovenije is up for sale next month and DTAG is a likely buyer.

Portugal Telecom’s key shareholder meeting has been postponed, and in the meantime the management is trying to convince everyone things will be much, much worse if the Altice deal doesn’t happen. So is Oi, which sounds increasingly desperate to finally get out of the deal and attend to business back in Brazil. People are arguing bitterly about the infamous €900m investment in the bankrupt Portuguese bank, and Telecom Italia’s CEO has been meeting the Brazilian minister of telecoms…

Sprint comes out for Title II, so do VZ investors; Republican pushback; Obama backs muni-fibre; OFCOM 5G consultation

So, the regulators have a full diary for the first quarter of 2015 and probably deep into the second. In a pleasant surprise for the FCC, Sprint has sent in a filing in favour of net neutrality and Title II. The document, over the CTO’s signature, points out that Sprint launched as the third national cellular operator under a “light-touch regulatory regime” that was itself based on Title II, and that it launched mobile broadband before the Martin FCC excluded it from the definition of telecoms. Further, they say:

So long as the FCC continues to allow wireless carriers to manage our networks and differentiate our products, Sprint will continue to invest in data networks regardless of whether they are regulated by Title II, Section 706, or some other light touch regulatory regime.

Meanwhile, two substantial shareholders in Verizon have put forward a motion for the carrier’s annual meeting that calls on the management to make a clear statement of support for net neutrality.

Two Republican politicians, though, are proposing legislation that would contain some sort of net neutrality language but wouldn’t involve Title II.

President Obama, meanwhile, came to Cedar Falls, which has a 1Gbps muni-fibre network, to speak in favour of community broadband projects, after the White House issued this strongly favourable report. It’s like it was 2009 all over again…

The AWS-3 auction is still crawling forward, just. The take is now up to $44.9bn, and the auction is likely to end this week or next.

And OFCOM wants to know what you think about 6GHz and higher spectrum for 5G networks.

Future of ALU Enterprise; more WebRTC CDN; Twilio training; wicked burn on VZW voice network

Here’s an interesting writeup of Alcatel-Lucent Enterprise’s strategy day after the ALU we know and love sold their unified comms business to a Chinese company. The division stays in France, although it’s questionable whether it will still be the default provider to big French corporates. It’s going to pick five key verticals, and the first one to be identified is “high-end hospitality”. Cloud is seen as being “complementary” to hardware, and they’re committed to building with OpenFlow and OpenStack.

Tsahi Levent-Levi interviews the CTO of Viblast, another startup that wants to use WebRTC as a form of peer-to-peer CDN. Their accent is on HD video streaming, and they are using Apple’s HTTP Live Streaming protocol.

A good post on scaling-out the TURN servers WebRTC relies on for NAT traversal.

Twilio is offering a training course for “contact center developers”.

Is Verizon Wireless struggling with its voice network? “Calls drop like they do on AT&T”. Ouch.

AT&T takes $10bn charge, prepares to trim copper; T-Money, more price war; $3.5bn Japanese loan for 600MHz spectrum

AT&T is going to wear a monster $10bn noncash accounting charge to profits in Q4, it announced. $7.9bn of this relates to the pension fund, but the remaining $2.1bn arises because:

the company determined that copper assets would not be necessary to support future network activity

Presumably that’s some copper assets, not all of them, but it certainly sounds like a big trim is in prospect, as we predicted in a recent Telco 2.0 Executive Briefing.

T-Mobile USA has taken a step closer to literally handing out folding money in exchange for subscribers. If you sign up for their mobile money app, and agree to receive any tax refund you get through the account, they’ll give you $20. The product, aimed at the unbanked, consists of a prepaid Visa card and a smartphone app, and lets you use ATMs, deposit cheques, and handle direct deposit payments.

They also, inevitably, offered a big price cut, slashing $10 off a group of prepaid plans, although they also scrapped the $80/mo unlimited data plan.

Meanwhile, with the 600MHz auction racing towards us, AT&T has signed up two Japanese banks to lend it $3.5bn in total.

Huawei, ZTE results; Samsung denies bid for BlackBerry; SKT sued over LTE-A; NBasementN

Elsewhere in Asia, Huawei was counting the money. CFO Meng Wanzhou expects sales for 2014 to finish 20% year on year, with margins steady at around 12%. All three operating segments did well, but the stand-out was the smartphone business in Consumer, up 32%.

ZTE, meanwhile, had started the year hoping to become a top smartphone vendor, but got squeezed by the surge at Xiaomi and Lenovo. That said, they finished with revenue up 8% and net profits up 94%, thanks mostly to their 25% share of the China Mobile 4G rollout.

Samsung has denied negotiating with BlackBerry over a bid for the company. Reuters claims Samsung actually made an offer of $13.35-15.49 a share, but both parties deny this forcefully.

KT and LG U-Plus are suing SKT over the question of who was first to launch tri-band LTE-Advanced. LG has been trialling it for some time, and it alleges that SKT’s supposed launch was really only a trial with a few hundred phones.

NBN Co is beginning to identify which apartment blocks it will serve with so-called “fibre to the basement”.

VZ wins Azure CDN; 4K is too much for the tubes; AWS’s “small” data centres; Switch’s huge data centres

Verizon has scored a goal - Microsoft Azure has thrown over its own CDN in favour of Verizon EdgeCast in licensed-CDN mode. Azure was already using third party solutions for its live streaming and content protection features, so it’s not unprecedented, but putting the main CDN for Microsoft’s cloud in Verizon’s hands is a seriously big deal for both parties.

Dan Rayburn points out that 4K video streaming will need at least 15Mbps end-to-end downlink unless the codec makers can squeeze out a 40% efficiency from HEVC vs. H.264, something which is still a long way off. As a result, content providers will be constrained from offering 4K both by the CDN bill, and by the limited market that can actually receive it even if they can serve it.

Akamai, for example, thinks the world installed base of “4K ready”, i.e. > 15Mbps, fixed lines has actually fallen by 2.8% last year.

James Hamilton at Amazon Web Services updates the famous number about adding the whole of Amazon in whatever year, every day. This time it’s 2004, when Amazon.com was a $7bn company. Hamilton provides a lot of interesting detail about AWS, but our favourite detail is that AWS keeps its data centres smallish, typically about 25-30 MW in terms of power or 50-80,000 servers. Smallish. This is partly because they find that diseconomies of scale kick in after this point, and partly to reduce the impact of any single failure.

Smallish. Compare Switch & Data’s latest SuperNAP project in Reno, 800,000 square feet for $1bn. They didn’t give a power figure, but their other SuperNAPs tend to be extremely power-dense, so it is likely enormous. They are also working on another SuperNAP as an expansion project on their existing Las Vegas site.

Meanwhile, Intel’s Data Center group saw its revenue grow 18% year on year, while the Mobile and Communications group sank 85%.

Zayo, best known for dark fibre to the cell, just spent $625m buying Latisys Group and its 8 small data centres.

Ericsson sues Apple; yet another go-round for “satellite ISP for Africa”; Google buys out Softcard; why it’s called “targeted” advertising

Ericsson is suing Apple over LTE patents. Although Ericsson makes the ones in question available on FRAND (Fair, Reasonable, And Non-Discriminatory) terms, this implies paying them some money. Should that be a percentage of the chip, or of the whole phone?

Both Qualcomm and Virgin have apparently made an “investment” in OneWeb, a company that wants to launch a lot of low-earth orbit satellites and provide Internet service to, you know, Africa. Have we heard this story before? Why don’t people who want to invest in African ISPs buy a boatload of Bharti Airtel stock? Also, nobody is saying how much either Qualcomm or Virgin has actually put in.

There’s some more detail here. OneWeb would require 646 - count ‘em - satellites, which its founder reckons would cost $350,000 each. He claims he can achieve this by mass-producing the satellites, but there is already a small satellite industry and it certainly doesn’t look much like Foxconn. Also Greg Wyler, for it is he, tried this once before when Google was bankrolling him, at O3b Networks. That didn’t go so well because the satellites didn’t work, and we apologise for the fact we were taken in ourselves.

Meanwhile, Elon Musk has had the same idea, and wants to launch 700 satellites. He’s got a better rocket, of course, and a factory, but it’s not as if the car industry has a great record when it gets involved with aerospace.

It looks like Google may buy out Softcard, ex-ISIS, the US carriers’ NFC joint venture. A price tag of $100m is mentioned, which is a big loss for the telcos but possibly quite a generous settlement given the project’s utter failure.

Now this is what we call a bug. The Linux version of the social gaming platform, Steam, seems to pass an empty string into the rm -rf * command. rm -rf * with no other arguments, of course, deletes absolutely everything in the current file system.

A nice AT&T Foundry dev project - work out if there’s a dog (or a baby) in the car and the temperature is worryingly high (or low) and warn you.

Advertising network Turn has been doing something wrong. If you delete their cookies, they just put them back. They can do this because Verizon Wireless, like quite a few other mobile operators, adds an HTTP header to your stuff containing your phone number or something similar.

Why this might be problematic: this Snowden document, a GCHQ presentation crafted with the best of the British sense of humour, explains how spies specifically target advertising cookies and requests because they’re full of useful personal data. Don’t have nightmares.

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