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Comcast-TWC, Title II, Google, Apple, BRICs: Telco 2.0 News Review

[Ed: We’ve just published a new report on Key Questions for The Business Case for Future Network Investment as part of our new ‘Future of the Network’ Stream. Plus if you’d like to meet us at the GSMA’s Mobile World Congress in Barcelona, March 2-5 - we are making our plans for the week now. Here is how, and here are our thoughts on why its worth going in general.]

Comcast-TWC: doomed or saved? cable lobby vs. cable lobbyist over Title II; price war

Comcast-TWC has got at least one regulator on its side, the California state PUC, but it’s not happy about the conditions. California insists that Comcast expand its Internet Essentials offering, required by the NBCUniversal merger conditions, that provides basic service to the poor, increase the speeds, provide free WiFi routers, and bring broadband to schools and libraries in underserved areas. The target dates and penetration levels have also been increased, which Comcast isn’t happy about. And they’ve got to do something about their customer service:

One provision requires improvements to customer service and would prevent Comcast from pressuring customers not to cancel subscriptions. Much of Comcast’s worst publicity has come from customers recording cancellation calls in which customer service agents practically refuse to disconnect service. Comcast employees have also changed customers’ billing account names to “asshole,” “whore,” “dummy,” and “super bitch”

Comcast can hardly complain - Michael Powell, Bush-era FCC chairman and CEO of the cable lobby NCTA, says

“Customer service right now is completely unacceptable..I think the industry needs to really—not double, triple—make a 10-year commitment to the recovery of that relationship”

Here’s a case that the Comcast-TWC deal is now doomed, on the grounds that the FCC now sees broadband as the primary telecoms service, and under the new 25Mbps definition, Comcast-TWC would have an undeniably dominant share of the market. Further, Comcast-TWC has been willing to offload TV assets in order to gain approval, clearly showing what they think is important.

NCTA, meanwhile, is planning to sue the FCC (led by its former boss Tom Wheeler) in the hope of holding up Title II reclassification. Here’s an interesting story about the Republican Party’s efforts to sell its opposition to net neutrality to the tech industry lobby - it’s not going very well. Ars Technica has a good piece on the history of anti-net neutrality lobbying. Harold Feld has chapter and verse on why Title II doesn’t imply rate regulation.

Sprint, meanwhile, reiterated its support for Title II.

Here’s a piece about “the end of subsidies in the US wireless market”, swinging off how many of T-Mobile’s subscriber base are on instalment-plan tariffs. It doesn’t mention, however, that T-Mobile’s hardware pricing is so sharp it loses money on equipment sales (see this Executive Briefing).

Screenshot from 2015-02-16 12:03:14.png

On the same theme, T-Mobile will be offering Android tablets for no money down, and Sprint will let you “lease” an iPhone 6 and an iPad Mini 3, with unlimited everything for the phone and 2GB of data for the tablet, for $100/mo. AT&T, meanwhile, has added rollover data to its Mobile Share plans.

Facebook zero-rating product launches in India, Google may respond, but does it actually raise prices?

The ultimate price war is of course just giving the product away. This week saw a burst of stories involving zero-rated data, something that is also deeply controversial from a regulatory point of view.

Facebook has reached agreement with Reliance Comms to launch its Internet.org app in India. This, of course, involves zero-rating various apps, notably Facebook, and therefore has been a bit of a hard sell to the GSM operators who remain the only option for Internet access in these parts.

Google may be doing something similar as part of its Android One program, although the story is poorly sourced.

Here’s a vigorous case that universal access will be achieved by promoting municipal and community networks and finding more spectrum for WiFi rather than playing with balloons.

And Rewheel argues that the ban on zero-rating in the Netherlands has led to a drop in end-user pricing, with the following nice chart.

Screenshot from 2015-02-16 12:22:49.png

Is Google a potential crisis club? Brin & Page sell $4.4bn of shares; SG6 news; Microsoft-Samsung settlement

Are we looking at a Google crisis? Kas Thomas argues that we might be, as Google’s spending on R&D keeps rocketing and there is little sign of compelling new products. More worryingly, Google’s spending on SG&A keeps rocketing ever higher:


Google spends six dollars on research for every dollar Apple spends on research, but it’s hard to say that this is either generating new products, or else generating new enabling technology like Bell Labs. Instead the company is just as dependent on AdSense as ever. Kas suggests that at some point, there will be a crisis in the ads business and mass layoffs will follow.

After all, does it really need to spend $1.2m leasing an enormous aircraft hangar from NASA? More to the point, does it need to spend the money leasing the private golf course that comes with it? There are some interesting comments from an ex-Googler here.

And, you know, Sergey Brin and Larry Page are cashing out $4.4bn worth of stock.

Google Helpouts, the ask-an-expert service in Hangouts, is closing. Motorola has refreshed the Moto E entry-level smartphone, a big Android seller, adding LTE and more storage.

On the topic of Android, here’s a roundup of Samsung Galaxy S6 leaks ahead of MWC. At Samsung, meanwhile, there’s a push on to sell more chips to external customers as sales of their own devices have sagged - however, they’re also flushing Qualcomm SoCs out in favour of in-house products.

And Microsoft and Samsung have settled their Android patent dispute.

Microsoft’s $75 Afriphone; MTN-Telkom, Unicom-Telecom merger talk; TEF to TEF - hurry up in Mexico

Microsoft, for its part, is planning to launch a range of $75-100 smartphones on Windows Phone in Africa. The devices are described as “an evolution” of one they trialled with Huawei two years ago, so you may be able to guess who the technology partner based in Shenzhen might be.

MTN is sounding out Telkom about the prospects for a merger, or failing that some sort of cooperation, perhaps with Telkom outsourcing its mobile network to MTN under a network-sharing agreement. Telkom is the fourth mobile operator in South Africa, although it is also the fixed-line incumbent and 40% owned by the state. At the same time, Vodacom is in talks to buy Neotel, the second-biggest fixed operator.

In China, there’s a rumour that China Unicom and China Telecom might merge, creating a stronger mobile challenger to China Mobile with its 60% market share. However, this would also create a fixed-line monopoly, while the government is trying to create more competition in the fixed space, so it doesn’t sound likely to happen.

A Chinese cableco, Topway, has signed up Ruckus Wireless to build a WiFi network around Shanghai.

Singtel’s Q3 was pretty good - 11% higher net profit, thanks - and it was strong basically everywhere, with the standouts being Airtel, up 37%, and Globe with 48%. Telstra’s H1 was more than reasonable too, and Telenor grew its revenues 5.3% for the full year and added 20 million subscribers.

America Movil said its net profit fell 78% in Q4. They’re blaming foreign exchange hedging that went wrong, but they’re also hoping that once AT&T finishes buying Iusacell and NexMex, the regulator will decide they’re not “economically dominant” any more and get off their back.

The chairman of Telefonica in Mexico & Central America has said the company needs to act fast to deal with the wave of consolidation in Latin America. He’s keen on buying a cableco, like Televisa. Where have we heard of that before?

And Rostelecom says it’s now passed 25m households with fibre.

VMED Q4s, £3bn build-out; Altice x Bouygues; BT punts football higher; Sigfox bags telco investors

In the UK, Virgin Media is going to invest £3bn in its network, in order to add another 4 million homes passed and more capacity. CAPEX will rise from between 21-23% of revenue to 25-28%. The build is expected to run over the next five years, and is going to include a new product aimed at businesses, providing managed fibre to buildings in multiple occupancy. This will amount to 60% population coverage, and they intend to trial DOCSIS 3.1 next year, so a lot of the investment will be in the distribution network to make room for gigabit access. The last-mile builds are going to be targeted on a sign-up, Google Fibre/Hyperoptic basis, through the form here.

Meanwhile, they had Q4 results, with 64k net adds and ARPU up a hair (0.7%) at £49.36/mo. 28% of the customer base are on 100Mbps+, while half are on the “entry level” 50Mbps+ speed tier (or as BT calls it, superfast).

In other cable news, Altice (i.e. Numericable) is thinking aloud about buying a mobile operator again. Specifically, they’re looking at buying Bouygues, so another go-round of the French merger waltz is in prospect. The Altice CEO reckons that the regulator is cool with going back down to 3 operators, so long as there are no job losses.

EE is planning to spend £1.5bn in three years building out more coverage. The project aims to increase population coverage to 99% and geographical coverage to 90% (thus fulfilling the notspot agreement), including 90% road coverage, while deploying LTE-A in 20 cities. EE’s 2G and 3G coverage is already close to those values, but they also want to start shutting down the 2G network in 2017. The interesting bit is that they want to use 1,500 small cells to target individual notspots.

Even though BT’s buying EE, its investment priorities are rather different. BT’s spending on football has risen 30% in the recent auction, closing in on a billion for three years’ worth, while its entry into the market has driven up prices across the board. Sky, for example, has seen its football bill increase 83%. This has taken the total price at the auction through £5bn for the first time.

At the absolute opposite end of the market, Gigaclear has announced it’s building out FTTH to 6,000 more homes, with a total investment of £6.5m.

OFCOM has given the go-ahead for TV whitespace spectrum in the UK, after the experiments with the big database of everything turned out to work after all. Most use cases are around the Internet of Things, although Neul pulled out of it on the grounds that it’s too broadband-oriented and resource-heavy.

An alternative would be one of the so-called LPWAN (Long-range, low-Power Wide Area Network) options like Sigfox. This week, Sigfox raised $115m in investments, the biggest VC round ever for a French startup. The investors are interesting - aside from a French utilities group (GDF Suez) and an industrial company (Air Liquide), there are three telcos, Telefonica, NTT DoCoMo, and SK Telecom.

Telekom Austria is offering satellite broadband to fill in its long copper runs. The service apparently offers 6Mbps uplink and 22Mbps down from Eutelsat’s Ka-band 16A.

And here’s an interesting European project - rather like Open Street Map for indoor navigation. Did you know hospitals deliberately over-buy equipment because it’s too difficult to find it when you need it?

TeleCity/Interxion deal; Cisco Q4s; new Facebook switches; Akamai Q4s, mCDN investment

TeleCity and Interxion are merging, creating the biggest datacentre provider in Europe. It will be the No.1 in the UK and the Netherlands, the 1st and 4th markets respectively, but the lead is even bigger in the rest of Europe outside the top four.


The deal is organised as a Telecity offer for Interxion, valued at €2.2bn.

Elsewhere in the data centre, Cisco had a strong Q4, with revenue up 7% and net income up 67%. The drivers behind this were cost-cutting, enterprise products, and wireless LAN, while core routing, carrier voice and video, and security were flat to falling.

Facebook has demonstrated its latest in-house hardware. The 6-pack is a modular device containing a dozen of their Wedge switches in a non-blocking topology, and Facebook uses them to interconnect the Wedge switches deployed to the top-of-rack. Each of the 12 independent switches has 1.28Tbps of capacity and the whole gadget can be managed in software. There’s much more detail on the Facebook engineering blog.


Meanwhile, will Samsung buy Freescale?

Akamai’s full-year earnings were up 24%, beating the spread in Q4. Interestingly, the strongest lines were classic CDN and acceleration rather than anything funky. They finished the year with 170,295 servers deployed.

They’re also investing in Saguna Networks, an Israeli startup that deploys cloud nodes forward in the mobile RAN. So is the VC division of SoftBank.

And here’s the company that bought the Nokia radio test chambers.

Apple CAPEX implies iFlood; Apple TV becomes more serious; iSolar, iFactory; Apple Pay @ fed.gov; ARM Q4

It looks like Apple’s CAPEX is taking one of its ominous upward jags, presaging another avalanche of shiny hurtling towards the competition.


Somebody points out in comments that Horace’s forecasts imply that about $200 of the price of an iPhone is accounted for by machinery and buildings. Apple is a manufacturer, but that doesn’t necessarily mean we believe it’s going to start manufacturing cars, as rumoured this week.

That said, the sheer mass of cash accumulating at Apple tends to fuel speculation of every kind. Faultline points out that the Apple TV is quietly becoming a success rather than a side project, with an installed base of 25 million. Will they do something dramatic in content?

Alternatively, they might do something less dramatic in their own supply chain. According to Tim Cook, who ought to know, they are spending $850m building a solar power farm not far from Cupertino. That would be enough electricity for all their activities in California. The main advantage is that the cost of the power is fixed, being the cost of capital, so we might wonder if Apple will make use of more of its abundant capital to lock down costs. They’ve also decided to recycle the failed artificial sapphire factory in Arizona as a major data centre.

The US federal government has started supporting Apple Pay, but this may not be that big a deal.

Putting the chips in Apple is a profitable line of business if you’re ARM.

£650m nicked from banks; sysadmin credentials compromised, again; Android “catches up with Windows” for viruses

Kaspersky has discovered a gang of Russian hackers who may have stolen as much as £650m from a variety of western banks over the last two years. The attack is described as very sophisticated, but the details given mention only that they managed to obtain administrator credentials by spear-phishing.

Lauren Weinstein points out not only that companies always say this when a systems administrator has been fooled into giving away a privileged log-in, but that it’s their own fault for relying on mere passwords to secure the keys to the kingdom when much better technology is available and some of it is free. He argues that executives should be prosecuted until they get the point.

Amazon’s retailing operation was down across Europe this weekend, but oddly enough AWS seems to have been OK.

Not only do Samsung TVs listen, they also put adverts into movies you paid for, presumably logging which ones you watch as they do so.

Alcatel-Lucent reckons there are 16 million virus-infected mobile devices, and Android is catching up with Windows.

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