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July 27, 2015

Q2 Explosion! AT&T, VZ, Telenor, China Tel, Amazon, Qualcomm, Apple: Telco 2.0 News Review

Carrier Q2s: AT&T saved by lower CAPEX and M2M volume; VZW, Telenor, China Telecom surge

Verizon Q2s are in. Wireless revenue was up 5.3% year on year, with 1.1m postpaid net-adds. Service revenue was down 2.2% as the general shift of emphasis from service pricing to device sales kicked in (device sales are up from $2.4bn to $3.9bn). 87% of wireless traffic is now on 4G.

AT&T, meanwhile, boasted of a 2m net-add quarter, “triple the 634k” recorded in Q2 2014, but on closer examination that included 1.4m M2M net-adds. The postpaid net-adds number was 410k, but this also includes 659k tablets, so the core business result was a net-loss of 249k phone subscribers. Ouch.

Prepaid was better, much better, with 331k net-adds as against a 286k net-loss a year ago, but this still suggests AT&T is losing high-value customers in mobile and replacing them with low-value bulk. That said, wireless saw almost a 9% increase in segment income because CAPEX slowed down substantially, by roughly $350m/quarter.

The problem with M2M is always making money from it. Usually, AT&T will say how many M2M SIMs they have on the network, but not how much money they make; Verizon will tell you how much money they make but not how many users they have. This week, VZW put a number on Q2 M2M - $165m in revenue - and $320m year-to-date.

Meanwhikle, the FCC cleared the AT&T-DirecTV deal on condition AT&T goes through with the FTTH build, submits to FCC oversight of interconnection, and agrees not to zero-rate its own TV from data caps. Bruce Kushnick argues it’s not enough because the FCC hasn’t said what sanctions it might use.

The video service Verizon acquired with AOL is going to launch in “late summer”, according to Fran Shammo, who also let slip that it would be about “live-type news clips, sports, and events” and would use LTE multicast - except on the iPhone, which doesn’t support it.

More solidly, Shammo also cast doubt on whether VZW would take part in the 600MHz auction, saying that the 87% of their data traffic that’s on LTE fits into 40% of their spectrum holdings. RootMetrics would tend to agree, having found that VZW was almost always the best data network at US airports. Not enormously surprisingly, Sprint finished dead last.

The FCC, meanwhile, is trying to make DISH repay the $3bn credit it obtained by bidding on AWS-3 through two “small businesses” it controls.

Last week, we wondered how if Sprint would be “financially stretched” by its latest network build, it was meant to be buying T-Mobile. This week, some interesting ideas are doing the rounds about how it might pay for a small-cell rollout of as many as 70,000 sites, beyond the $2.1bn in vendor financing it signed up back in January. One suggestion is that a towers company might co-invest.

Back at Verizon, the CWA has angrily rejected an offer from management, describing it as “retrogressive and insulting”. Management, meanwhile, has distributed an app to make it easier to report any misbehaviour by union members.

Vodafone reported that its European service revenue numbers have been rather good, which means “not plummeting”. They fell 1.5% to £6.5bn, which is surely better than 2.6% a year ago but is hardly stellar either. Over the whole company, revenue was down 0.9%, including both 3.1% of M&A and -7.3% of currency effects. The non-European businesses grew 6.1% to just shy of £3bn. And Project Spring is apparently 71% complete after 71,000 sites were upgraded to “high capacity backhaul” - but there’s no mention of how many of those are on fibre. Hmmm. Remember this chart from the Winning Strategies: Differentiated Mobile Data report?

Screenshot from 2015-07-27 13:33:06.png

Orange is planning to sell its Armenian opco, and also to buy four African opcos off Bharti Airtel. Those would be Burkina Faso, Chad, Congo Brazzaville, and Sierra Leone. However, Bharti itself denies it’s planning to get out of the ex-Zain, ex-Celtel businesses it bought back in 2010. The four networks make up 16% of their African revenues and might go for $1bn or thereabouts.

Telenor reported revenue up 17.5% in Q2. Although that comes with a shopping list of adjustments, the underlying figure of 6% revenue growth is pretty decent, driven up by a strong showing in Norway based on 4G data (mobile revenue was up 6.5%), and a stellar one in Burma, where 55% of subscribers are already using data. Guidance for 2015 is 5-7% revenue growth and 34-36% EBITDA margin.

There are 225m 4G users in China, and China Tel seems to be taking some share off China Mobile and Unicom.

Amazon Q2s smash expectations; Kubernetes 1.0; CloudRouter; AT&T, VZW CAPEX plans; Cisco hedges with new ASIC

Jeff Bezos is $7bn the richer this week, after Amazon’s Q2s showed unexpectedly strong profits. Well, $92m in a company with $23bn in quarterly revenue, but then it’s Amazon after all. The driver here is Amazon Web Services, which made $391m in operating income, up 45% from Q1. Clearly, there’s a lot of money in selling computer resources surprisingly dear, as we pointed out in the Amazon Web Services: Colossal, but Invincible? Executive Briefing.

ZDNet points out that AWS is now about the only cloud that doesn’t support Kubernetes, the deeply fashionable Google container management technology that just went into general availability this week. It’s already in anything OpenStack that keeps up with the releases, it’s in all things Google, it’s in CoreOS, and it’s in Microsoft Azure. It’s also now open source, maintained by the new Cloud-Native Computing Foundation.

However, there’s one name in containers that’s missing, the original and best, Docker, and it looks like a standards war is in prospect.

The second beta of CloudRouter has been released. CloudRouter is a containerised, open-source software router based on the Open Networking Foundation’s ONOS, OpenDaylight, and Fedora Linux, designed to be a cut-down, minimal, performant app. You get a choice of three different routing daemons.

We mentioned earlier that AT&T Mobility’s CAPEX was coming down. John Stephens provided a lot more detail, and it looks like part of this is the impact of their transition to SDN. Stephens expects their future CAPEX to be roughly flat, which implies real pain for the vendorsphere.

That said, Cisco has just announced a new hard ASIC, its Unified Access Dataplane, designed for very high capacity wireless LAN switches (up to 60Gbps), which does all the packet processing in hardware. It can be managed through OpenFlow, though, so perhaps “hybrid SDN” is coming next.

Verizon Wireless, meanwhile, is still focused on more faster broadband now, and who can blame them after the Q2 results above? Carrier aggregation between 20MHz LTE channels is the first priority, with small cells coming later. In San Francisco, promising 300Mbps with tri-band CA later this year. The GSA, meanwhile, reckons 30% of operators have deployed at least some LTE-A, and it’s always CA that goes first.

ZTE says its net profits are up 43%. Nokia-Alcatel has been cleared by the European Commission. Juniper Networks is feeling the pressure on telco CAPEX and relying on its security products for growth.

Vodafone UK edges closer to FTTH; OFCOM rethinks last 5%; VZ, AT&T wireline Q2s; Cox 1Gbps

Vodafone CEO Vittorio Colao has put at least some of his cards on the table. Colao said Vodafone would be willing to “give up some equity” in order to deploy FTTH in the UK - which could mean either the often-discussed idea of a deal with Liberty Global, the equally-often discussed idea of a joint venture with CityFibre, TalkTalk, and others, or perhaps even a joint bid to buy Openreach from BT. Colao explcitly called out the latter option:

“We would be prepared to put some equity in a vehicle that could deliver fibre at good conditions to us and also to others, whether that is an independent Openreach or another company.”

He also denounced BT’s plans to deploy G.fast as:

“yesterday’s vision and the vision of a monopolist”

and went on to say:

“I think Britain needs more fibre, not more expensive football, which is what is happening now”

Burn. It is certainly no accident that he said this the week BT wrote to its subscribers putting up the standard voice line rental by 7%. They’ve got all those footballers to look after.

Meanwhile, OFCOM director Sharon White suggests that the last 5% of households might not get “fibre” (i.e. BT DSL) but rather something wireless. Also, apparently the “superfast” target is 95% of homes but only 82% of businesses now. And further, the government is considering making the telecoms industry pay a levy, rather like the Universal Service Fund in the States, to do the rest. Interestingly, that story defines “superfast” as 25Mbps, or essentially ADSL2 plus 1Mbps, and then refers to “changing the universal service obligation from dial-up speeds to 5Mbps”.

Sky is preparing a new set-top box.

Verizon says 64% of FiOS customers are 50Mbps-plus, with 23%, the biggest group, on the 75Mbps tier. FiOS revenue was up 10% year-on-year, while wireline as a whole was up 4.5%. There were 72k FiOS net-adds, and 26k FiOS TV net-adds, so for each new fibre Internet link they sold one-third of a TV plan. Meanwhile, the enterprise segment is still shrinking.

Cox is the latest cableco to start rolling out 1Gbps FTTH, while also pulling its DOCSIS 3 speeds up to 200Mbps. AT&T is targeted again, in Louisiana.

For its part, AT&T says it’s satisfied with take rates on its own gigabroadband. However, the wider picture in wireline is a bit mixed. Revenue was up 3.7%, but the carrier net-lost 136k broadband and 22k video subscribers, showing that it’s feeling cable competition. That said, the star strategic business services segment is still crushing it, growing 13% year on year.

Qualcomm in crisis; Intel as buyer? Apple’s storming Q2; Huawei’s pretty great H1s

Qualcomm Q2s are out, and they are incredibly terrible. Sales were down 14% year-on-year, almost as bad as the 19% drop registered in the pits of the Great Financial Crisis. But this time, Qualcomm has no-one else to blame. Apple has triumphed in the high-end, Samsung has taken the S6’s CPU in-house after rejecting the latest and greatest Snapdragon at the last minute, and Mediatek is doing spectacularly well in the value segment. As a result, they’re planning to cut 4,700 jobs - the company’s head count has nearly doubled since 2010 - and review the idea of breaking it up into a chip-design and a technology licensing business. They’ve also had to give an activist investor seats on the board.

If the breakup happens, Intel might be the buyer for the chip design shop, valued at $30-40bn.

We mentioned Apple were doing well. Q2 results dropped this week, and they were strong. Revenue was up 33% year-on-year, and margins ticked up to 39.7%. The driver of all this was…basically, everything. More iPhones and Macs were sold in the quarter than ever before in a second quarter, App Store revenues were higher than ever, and there was the watch. Sales of iPhones are up 59% year-on-year.

Last week, Huawei promised more detail on their smartphone business, and here it is. The Consumer line of business turns out to have done rather well - it’s now 32% of Huawei’s revenue, compared to 24% the year before. Although Chinese smartphone shipments fell for the first time and Xiaomi had a seriously disappointing H1, Huawei more than doubled its revenues in China, not least because it succeeded in refocusing on the high-end of the market, driving up its ASP from $128 to $222.

BlackBerry, meanwhile, says that it’s going to develop 1 or 2 devices a year rather than 3 to 4, in order to put more resources into software and security solutions. That said it works for Apple, and both Samsung and Huawei look distinctly flagship-oriented these days.

Sony is trialling “Concept for Android”, a version of Android 5.1/Lollipop with an even more minimal look and feel.

And Canon’s net profits fell 16% in the second quarter as smartphones bit into the camera business.

Communications-focused Microsoft; Vodafone.it VoLTE; HEVC patent pool strikes; an actual RCS deployment

Last week, Microsoft wrote off the acquisition of Nokia Devices & Services. This week, its results hit, wearing the $7.8bn goodwill charge plus another $780m for restructuring as a result. The upshot was that MS lost money, $2.05bn of it. Ex-ing out the $8.44bn of Nokia-related charges, that implies the mainline business made $6.39bn in 2014-2015, which is disappointing in itself as the company made a $6.48bn operating profit last year.

You can see why they decided to wear the loss. Phone hardware sales were down 23% year-on-year and the division lost $104m in Q2. And the Devices & Consumer division generally was struggling, with revenue off 13% - everyone who’s going to upgrade out of Windows XP has done so, and OEM shipments of Windows 10 haven’t started to ramp up yet.

On the other hand, MS’s “commercial cloud” revenue, made up of enterprise Office 365 sales, Dynamics Online CRM, and Azure IaaS, was up 88%. Said CEO Satya Nadella:

“Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits”

Five out of those six items have at least some cloud content, and as TalkingPointz points out, MS is increasingly pushing either Lync (on premises) or Skype for Business (pure cloud) VoIP as part of Office 365 and will be providing the PSTN interconnect itself.

Watch this space for Telco 2.0 research into Microsoft’s pivot to communications and the cloud.

Vodafone Italy has launched VoLTE and Huawei would like you to know that they’re behind it and it’s cloud-based.

Here’s something ominous: a new patent pool has been created by companies who think they own a piece of HEVC, aka H.265, the latest thing in high-def video codecs. They would like to collect a revenue share from content owners - that’s going to be trouble itself, but do app developers or browser vendors who integrate it for video conferencing in WebRTC have to pay as well?

The LTE critical communications working group has only just managed to elect a chairman and the UK government wants to replace TETRA with LTE. Oh dear. More at the 3G, 4G, and 5G Wireless Blog.

And T-Mobile USA is deploying RCS!

The week they took over the connected cars

The Internet of Terrible Things. It turns out that anyone on Sprint’s network can enumerate and attack connected cars. Worse, once you exploit the cellular module, you can access the CANBus local area network…and everything in the car, including the brakes and the power steering, is accessible over the CANbus, which is one of those default-trusted networks that sounded like a good idea at the time. Does anyone think the self-driving ones are any better?

There’s some more detail here, including instructions on how to patch your car. It involves a USB stick:-) Chryslers with UConnect and the RA3 or RA4 model navigation and radio system are vulnerable and, evidently, probably shouldn’t be driven until updated. Fiat-Chrysler has since issued a recall for 1.4 million cars.

Frost & Sullivan may have picked the wrong week to release a report on how great 5G will be for connected cars.

Ars Technica has a deep review of Android Auto. Just to reassure everyone, it turns out that most versions of Android have a serious bug that lets an attacker execute malicious code via a crafted MMS message. It’s especially bad for anything older than Jellybean 4.1, but it’s pretty horrible all the same.

Microsoft has issued an emergency patch for all versions of Windows, from Vista through 7, RT, 8, 8.1, all the way to the Windows 10 Insider Preview, and Windows Server 2008 to boot. And here’s another.

Here’s an interesting story. The New York Times web site turns out to use WebRTC to identify computers behind proxies, NAT, VPNs, and the like and enumerate their real IP addresses. This turns out to be part of an effort to identify click-fraud bots.

And Google asks security experts what precautions they take. The take-away: use a password manager or write them down, and patch, patch, patch.

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July 22, 2015

The European Telecoms market in 2020, Report 2: 4 scenarios and 7 predictions

We’ve just published a new research paper ‘The European Telecoms market in 2020, Report 2: 4 scenarios and 7 predictions’. Seven predictions and four scenarios for how the industry might play out in Europe in the next 5 years: ‘Digital Renaissance’, ‘Back to the Future’, ‘Commoditised Utility’ and ‘Telco Trainwreck’. Plus what are the take-outs for other markets?

The report is part of the Executive Briefing Service and Telco 2.0 Transformation stream, and you can read an excerpt of the report here.

For more information on any of our services, please email contact@telco2.net or call +44 207 247 5003.

Extract chart from the report:

Future Europe Part 2 Cover.png

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July 20, 2015

Microsoft, Apple, Google, Huawei, Qualcomm, SKT: Telco 2.0 News Review

New STL Research: Ten forces shape the European telecoms market. Which ones will win?

Microsoft writes off Nokia but phones stay for now; pivoting to a comms-based business; Gigjam; Windows 10 updates

Microsoft bites the bullet and writes off the whole acquisition of Nokia Devices & Services. That’ll be $7.6bn, plus $800m in restructuring costs to pay off the 7,800 people who lose their jobs, so Microsoft has essentially lost every penny it put into the phones business back in 2011. Unsurprisingly, Stephen Elop has left the building. Satya Nadella, meanwhile, says:

I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention. We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.

Whatever that means (and Lucy Kellaway addresses this question at the FT). It sounds like the phones are staying, but emphasis is moving elsewhere - surely not to Windows Phone licensing, so more likely towards cross-platform apps and services.

As Steve Ranger at ZDNet says:

Microsoft’s strategy will focus on three areas: “management, security, and productivity” for business customers, “communications services” for value phone buyers, and “flagship devices” for Windows fans. It’s worth pointing out that two of those three elements don’t necessarily involve Microsoft actually building Windows Phone devices anymore.

Oddly enough, Nokia was talking vaguely about getting back into phones in some way the other week, so perhaps here’s an opportunity. Anyway, an example of the new cross-platform strategy is the leaked Cortana for Android app, described as…Cortana. For Android.

Meanwhile, Benedict Evans ruminates about a platform that would replace Office, to which STL Partners retorts that it exists, it’s successful, and it’s Office 365 with Skype for Business.

Trailer: Watch this blog for new Telco 2.0 research on Microsoft as a communications-focused business.

If that isn’t enough, Project GigJam sounds a lot like it too.

Speaking of Office 365 and cross-platform Microsoft, O365 users are getting Office 2016 for Mac first.

It’s going to be very, very difficult to skip updates to Windows 10 for home users. Hopefully this means the end of the unpatched Windows box, but we better hope they don’t ship an update that breaks networking. Also, Win10 will indeed be supported out to 2025, a point about which there was some doubt.

Apple=60% of PC margins; tool-up rumours; Hooks; Apple, AT&T, Sammy in for eSIM; Intel Q2s; alt OS news

If Microsoft is going cross-platform, it’s no wonder really. The enormous success of the iOS line has dragged Apple’s Macintosh line with it - or was it the other way around? Horace quantifies this, pointing out that 60% of operating margin in the PC market is now inside Apple.


A lot more, less quantified value exists in the software and content ecosystem - MS presumably has some ideas about how to, ahem, quantify it by selling software there. Horace also points out that the last few Apple quarters have been significantly above either market expectations or Apple’s guidance.

There are some reasons to think so. This German company manufactures machine tools for making lithium-ion batteries, and Apple (or rather its suppliers at one remove) are a major customer. The total order book for that line of business was €25m in 2014, but it’s €40m YTD, and the production run for Christmas is being guesstimated at 85-90 megagadgets.

You couldn’t say that for Apple Watch, but perhaps there’s an app for that. Hooks is an app that provides an enormous range of composable notifications on the Watch for pretty much anything you can get on an iOS device, comparable to Tasker in the early days of Android.

Here’s interesting; the GSMA’s eSIM project seems to have buy-in from Samsung, Apple, and also AT&T.

Motorola flagships drop on the 28th of July.

Intel Q2s are out and they’re strong, specifically in data centre, IoT, and memory, making up for flat PC and terrible mobile sales. 70% of profits are now coming from data centre (i.e. server), IoT, and Flash NAND chips.

Mozilla has announced new plans for Firefox OS. Starting now, they intend to keep up a cycle of 6-monthly major versions, developed in weekly sprints, port the extensions API from Firefox itself, implement more of the new W3C Mobile Web APIs, and bring back the “view source for mobile” option that existed in early versions.

Jolla’s Sailfish OS survives, just, the last legacy of pre-Elop Nokia. It’s likely to kick past whatever market share Firefox OS has: Indian OEM Intex has agreed to licence the OS.

And here’s the Marshall smartphone, as in Marshall amplifiers, not surprisingly a music-focused device.

Google Q2: margins are back as YouTube ads surge; “Buy it” ads; say no to 10x; OpenStack; AWS API Gateway

Google announced a startlingly great Q2, with net income up 17% year on year while revenues were up 11%. To put it another way, the company’s margins, which suffered in 2013-2014 (see this Telco 2.0 Executive Briefing), have improved significantly. A key factor in this was the surge in ad revenue from YouTube, where the count of advertisers has increased 40% since last year and the average spend among the top 100 60%.

Usage on mobile has grown significantly (it’s now 50% of the total), but the really interesting point is how Google has changed its ad sales practices. For a start, they have set up a measurement system with Nielsen and Comscore so that the data is comparable with TV ratings. Also, a new product, Google Preferred, offers ad placement only on the top 5% of channels in a given category. Facebook, of course, did very well by rationing the inventory, so it looks like the new thing in online advertising is serving less of it. Google also sees to have had a breakthrough in getting advertisers to take YouTube microcelebrities seriously.

Here’s a new feature in Google Ads: Purchases with Google, a “Buy it” button that appears in the ad itself, providing a (dare we say it) Amazon-like one-click route to conversion. They are also integrating this with OK Google and providing some buyer-side features like price comparison, sort by reviews, and price alerts.

Google’s “10x philosophy” considered harmful? Googlers are expected to believe that projects should always improve things by 10x. But this led to a succession of ultra-shiny pet projects while Google Ads went years without anything substantially new. Do click through to the prototype remote control for Google TV.

Anyway, if the Q2s are anything to go by, Ads is now benefiting from a sensible dose of incremental improvement, the very antithesis of 10x.

Meanwhile, Google has become a corporate sponsor of OpenStack, while Amazon Web Services has a specialised cloud service for making APIs and a test service for Android and Fire OS apps.

BT is offering the UK’s first Ultra HD TV service.

Huawei H1; 400k small cells; EU 5G groups; Ericsson Q2, 5G use cases; Sprint 2.5GHz finally flows?

Huawei announced half-year revenues up 30% year on year, with margins stable just over 18%. The company said that there was “stable growth in all three segments” of the business, but gave no details. We wonder if that’s going to be something of a pattern in Chinese companies post-stock market crash. Apparently, some more detail about the smartphone business is coming later in the week, and heavy carrier CAPEX in China is bound to do them some good.

Huawei’s president of small cells says they expect to ship 400,000 of them this year, mostly in Asia.

Here’s a list of the EU 5G research groups Huawei leads. They have to share two of those with Ericsson, METIS II and also mmMAGIC.

Ericsson, meanwhile, reported Q2 results. In reported terms they were up 11%, but in real money - i.e. after adjusting for exchange rate movements - they were down 6%. The problem is that Ericsson never did get enough North American LTE when it was rolling out and now doesn’t have enough Chinese to fill in, and its strongest markets haven’t invested heavily in 4G yet. On the good side, its strongest markets are usually also big spenders with their services division.

In case you were wondering, here are 5 use cases for 5G Ericsson thinks are important. Those would be “broadband everywhere”, “smart vehicles, transportation, and infrastructure”, “media everywhere”, “critical control of remote devices”, and “human/IoT interaction”. Interestingly, Ericsson seems to be interested in publish-subscribe multicast messaging.

Is 5G a waste of time? Maybe not if you’re an Aussie and the NBN ends up delivering ADSL2+ speeds.

Intel and SK Telecom are trialling interworking between LTE and WiGig, in what sounds more like LWA than LAA, especially in the light of SKT and KT’s existing WiFi/LTE multistream projects. Note that Intel’s Mobile Edge Computing tech is also being used.

And Sprint has started rolling out LTE carrier aggregation, incorporating 20MHz channels of its 2.5GHz spectrum, in 39 major US cities.

New STL Research: How can carriers be more agile and disruptive?

Sprin-T rumours are back; T-Mo Q2 surges into third place; wireless gigabackhaul; Comcast 2Gbps pricing

Sprint’s shares, meanwhile, have dived, triggering another round of Sprin-T speculation. The story this time is apparently that Sprint might soon be in “severe financial distress” without a deal, and in such an emergency, the government might reverse itself and accept a deal rather than seeing Sprint go bust. The obvious problem would be how a company in “severe financial distress” would finance a monster acquisition and why T-Mobile shareholders would sell when they could instead go in for the kill.

Speaking of T-Mobile, Q2 results are in. T-Mo net-added 760k postpaid phone, 248k postpaid dongles, 178k prepaid, and 919k wholesale customers, for a final score of 2.1m net adds in the quarter. One imagines they won’t weep salt tears over the 33k net loss in M2M. This beat estimates handily and left them on 58.9m subscribers total. And with that, it’s finally happened: T-Mobile is No.3, about 1.8m subs ahead of Sprint, unless Sprint pulls out a truly massive Q2.

Revenue targets have been revised up and margins down, working on the principle that a lot of shiny has been given away to get them in the door. However, interestingly, the latest (Jump On Demand) version of their quick-upgrade plan leases gadgets and requires a trade-in, rather than selling them on instalments, in a similar way to AT&T and VZW’s competing offerings. This means there might be a significant recovery rate and therefore rather less of a hit to margins.

Sprint, meanwhile, is preparing a new business-focused product, “Mobility as a Service”. This offers quick provisioning and dedicated support with reasonable pricing; a while ago there was talk of reviving the Nextel brand, but that seems a stretch.

Here’s someone suggesting Sprint could solve all its network problems by using Airspan’s LTE multipoint backhaul product. Perhaps. Wireless backhaul competing with fibre backhaul came off much the worse in Europe, and Sprint’s now been bitten by quite a few magic technical fixes.

That said, Windstream is offering Gigabit Ethernet pseudowire and MPLS over fixed wireless in Boston and some other cities where it doesn’t have access fibre. Be interesting to see how that turns out, although it may be regulatory arbitrage, as we’ll see later in this post.

As negotiations between Verizon and the CWA and IBEW trade unions continue, a strike is threatened. Meanwhile, a court has ruled that AT&T is within its rights to discipline technicians who wore “Prisoner of AT&T” T-shirts on the job during a dispute in 2009.

Teliasonera saw H1 revenue up 8.5% but it disappears after allowing for currency shifts, the acquisition of Tele2 in Norway, and the Nepalese earthquake. The end of its near monopoly in Kazakhstan meant a 23% hit to profits at Kcell.

Comcast’s 2Gbps service will be dear: $299/mo with a $1,000 one-off fee. However, for the first three years, there will be a “promotional” rate of $159/mo - surely if it’s three years it’s hardly promotional? It’s also quietly upped its 50Mbps tier to 75 and added a new 150Mbps tier.

The wholesale side of Comcast has just started providing a range of Ethernet services to cloud and managed hosting company Host.net.

Suddenlink has begun turning up a 1Gbps service.

EU vs Qualcomm; OFCOM edges towards BT breakup; duplex gap; DISH; French, Russian 4G auctions

The EU has launched a pair of anti-trust investigations against Qualcomm. One of them originates from a complaint by Icera, now part of NVIDIA, as long ago as 2010, which alleges that Qualcomm offered substantial discounts to buyers who used their basebands exclusively. The other was self-initiated by the EU Commission, and alleges dumping. The Commissioner, Margrethe Vestager, sets out a policy on competition here but it’s frankly not very illuminating.

Cesar Alierta thinks OTTs should be regulated in some fashion because of “algorithms”.

OFCOM has completed the first phase of its review of the BT-EE deal, and says that it’s seriously considering breaking up BT by forcing it to sell Openreach. It would like comments on the proposal before the 8th of October. This launches the full-dress Digital Communications Review phase.

The FCC has put off a vote on the planned 600MHz incentive auction until the 8th of August, over the issue of the “duplex gap” and whether it could be used to relocate broadcasters’ wireless microphones (remember the huge OFCOM row about those?). Harold Feld endeavours to explain.

The auction rules, meanwhile, have been changed to rule out a repeat of the DISH caper. Charlie Ergen is going to sue.

AT&T doesn’t want to give Windstream special access for its Ethernet products, and is protesting to the FCC. That’s probably why Windstream is so keen on trying to squeeze Gigabit Ethernet into a fixed-wireless product - as a bargaining chip on the regulatory issue.

T-Mobile gets fined $17.5m for a 911 outage.

French 700MHz and Russian 1800MHz auctions are go.

Hacking Team’s hacking revealed by hack; most embarrassing data leaks yet; Mozilla vs. Flash; DRIPA still illegal

Fallout from the hack of Hacking Team continues. It turns out that they organised a BGP hijack to regain control of some servers they used as bot command and control nodes after the hosting company became suspicious, shamelessly breaking the Internet.

Despite being the security company where the password was “password”, they also tried to sell drones with a WiFi attack payload. What could go wrong?

Lots of things, but most of them pale into comparison next to the great Ashley Madison data heist. The site famous for its slogan “life is short, have an affair” has been hacked with the loss of 34 million user records. The attackers have demanded that the site go off the air, or else they will start releasing data onto the Internet and keep doing so until they get what they want. They seem especially angry that the site’s infamous $19 charge for a “full delete” of your account didn’t actually delete anything.

As if that wasn’t enough, UCLA’s medical centre may have lost 4.5 million unencrypted medical records. “Was it encrypted?” is the new “Do you have backups?”

Not only are an unknown number of US federal government personnel files out there, but the attackers may have been able to write to the database.

Verizon is offering a new managed security appliance, but firewalls really aren’t the problem here.

It’s probably no surprise, then, that about 30% of consumers give entirely false details to call centres in order to protect their privacy. It’s only surprising it’s that low.

After two major Adobe Flash exploits were discovered in the Hacking Team leak, Mozilla has deactivated all versions of the plugin by default and seems determined to force Adobe to retire it. That would of course be great news for WebRTC.

Something is wrong with Skype.

The UK’s DRIPA, the surveillance law designed to replace RIPA after a court found it to be illegal, turns out to be illegal.

The fibre slasher of Northern California strikes again.

Don’t destroy the Internet, Dave! That’s the guy from California’s job.

SKT joins LoRA, plus HP, Foxconn, Schneider. Vodafone: EU is top in M2M. Verizon home IoT quietly fades out.

SK Telecom has signed up with LoRa, the French-led LPWAN alliance. This is the first time LoRa has got a foothold outside the North Atlantic. Meanwhile, they’ve also signed up Schneider Electric, Foxconn, and HP.

Vodafone reckons Europe is leading the world in M2M, or IoT, adoption. 31% of the businesses they asked have live devices, up from 21% last year, although you wonder how representative the sample is. Interestingly, German manufacturers are the fastest into the game.

No mention of the R-word, though: revenue.

Here’s an interview about Telefonica’s Thinking Things IoT developer kit.

Weightless is deploying its low-power radio tech in Copenhagen and Esbjerg.

Qualcomm has joined Thread, a standards group for IP-based consumer IoT.

Verizon seems to be winding up its home automation product.

Sheep as a service.

And how the man who didn’t invent SMS had it thrust upon him.

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July 15, 2015

The European Telecoms market in 2020: Evaluating 10 forces of change

We’ve just published a new research paper ‘The European Telecoms market in 2020, Report 1: Evaluating 10 forces of change’. In the first of two reports, STL Partners evaluates how several powerful forces, within and beyond the control of telcos, look set to change the shape of the European market and considers the options for how these might develop going forward. The forces covered are:

  1. Regulation
  2. Competition
  3. Revenue outlook (for core services)
  4. Technological changes
  5. Capital markets/investor attitudes
  6. Customer attitudes and behaviour
  7. Telco vision and aspirations
  8. Telco culture, skills, partnerships and assets
  9. M&A
  10. Absolute and relative capex and opex (compared with OTT players)

The report is part of the Telco 2.0 Transformation stream, and you can read an excerpt here.

For more information on any of our services, please email contact@telco2.net or call +44 207 247 5003.

Extract chart from the report:

Blog Thumbnail.png

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July 10, 2015

What do telcos need to do to be more agile?

Our latest research How to be Agile: Agility by Design and Information Intensity looks at how agile are telcos today, the barriers and opportunities, and what can be done to improve agility.

We found that the majority of telcos might be described as ‘moderately agile’, and critically, telcos need to move beyond wanting to be agile to taking actions in terms of how they are organised, how leaders and teams are empowered to make decisions, and the metrics they use. See more here.

The Majority of Telcos Profiled themselves as Moderately Agile
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July 6, 2015

APAC Special, NORMA, Fibre Race, no DISH, T-Drones: Telco 2.0 News Review

Chinese slowdown, but €1bn of orders for ALU; Bharti hits No.3; AWS opens in India

The Chinese market for smartphones, PCs, and tablets is expected to grow only 1.3% this year, as against 15.2% last year, according to IDC, and as we know, Apple has got its teeth into the bulk of it. Strategy Analytics concurs, arguing that Chinese smartphone penetration is rapidly converging on the same levels as in Europe and North America, and that therefore, what happens in India will determine what happens in smartphones over the next couple of years. Shipments there are expected to rise 43% this year and exceed those in the USA in 2017. That said, SA has also issued a forecast for 5G handset shipments before any 5G handsets exist, so perhaps a word of caution is in order.

In a new Telco 2.0 Dealing with Disruption report, we identify some of the most disruptive operators. Three of them are based in Asia. Get our in-depth coverage here

Xiaomi, having seen Apple storm into the Chinese home market, is increasingly looking well afield. Having made a good start on India, they announced expansion into Brazil this week in their H1 results. The results were pretty good; 34.7m smartphones and growth of 33% year-on-year.

Bharti Airtel, fittingly enough, has just become the third biggest network operator by subscribers, with 303 million, a hair ahead of China Unicom and still 100 million shy of Vodafone in second place. They have just signed a contract with Nokia Networks to deploy more of their own 3G in parts of India where they currently have to use national roaming.

Amazon Web Services is opening a new infrastructure region in India, and mobile number portability launched on Wednesday.

In China, even if the gadget count is slowing down, the fraction that uses 4G is rising very fast and the infrastructure must keep up. The Chinese government’s new broadband plan wants 100Mbps for everybody, neither China Mobile or China Unicom are going to miss out on that, and the lucky vendor is Alcatel-Lucent, which gets a €1.1bn order for all sorts of stuff ranging from GPON to both flavours of 4G radio, backbone optical, VoLTE kit, and SDN controllers.

Samsung claims a fundamental breakthrough in battery design, which I’m sure we can all welcome. Meanwhile, the S6 is selling well; it made up 55% of US Android shipments in Q2 and Samsung was briefly back on top as No.1.

Viettel, the MNO set up by the Vietnamese army, has gone live with its 2G and 3G networks in Burundi, with 600k subscribers in the first month of operations.

Orange says its African and Middle East operations are its major focus for growth in the next few years, and they’ve reorganised to create a single MEA organisation. They are targeting income growth of 5% annually for the segment, and might acquire some of Bharti Airtel’s African assets.

Digicel, famous for operating mobile networks on tropical islands, is planning to float, in part to finance a $1.5bn CAPEX program notably targeting fibre rollouts. Did you know you can get FTTH in Papua New Guinea? Well you can, and you can’t get it in London. There is much more information in the F-1 filing.

US fibre race continues; Liberty Global competes on speed; new architectures for 5G; NGMN plans

Another wave of gigabit fibre deployment hit the US this week. Google Fiber got the regulatory go-ahead to start building in San Antonio, Texas, the state’s second city and the States’ seventh. San Antonio, of course, is not just on the list for AT&T GigaPower, it’s where AT&T headquarters is located.

Not surprisingly, that escalated quickly - AT&T announced another round of GigaPower rollouts, into Miami and Fort Lauderdale, where Comcast is already building out its 2Gbps service.

They also wrote to the FCC asking for more time to complete the AT&T-DirecTV deal, and promising even more FTTH. The target is now 11.17 million homes passed, which they claim they will complete in four years from the closing date. They promise to report regularly to the FCC in order to show they aren’t using any Connect America money for the project.

In Germany, Liberty Global’s Unitymedia network is opening up the pipe, pushing the speeds it offers business cable customers to 250Mbps. Virgin Media, the equivalent in the UK, has started a major advertising campaign boasting of its DOCSIS 3.1 technology and speeds.


Niche fibre deployer Hyperoptic is now offering no-contract plans. And at last, a BDUK contract for someone other than BT - Gigaclear is going to build fibre into parts of Berkshire the existing BDUK Superfast contract won’t cover. So if you’re too far from the exchange to get “up to 76Mbps” broadband, which we learned last week is more like good old ADSL2…you might get fibre.

Meanwhile, the 5GPPP has started an initiative to design the 5G network architecture, known as NORMA for Novel Radio Multiservice Adaptive Network Architecture. The backers include DTAG, Telefonica, Orange, Nokia, ALU, NEC, and Atos Origin and apparently it’s “also about acquiring a leadership position for Europe in 5G.” This sounds worryingly like the “get rid of boring old IP” imperialism we warned against in this Telco 2.0 Executive Briefing but it’s early days.

More practically, perhaps, NGMN has announced four new projects following up on its 5G requirements document from earlier this year. These cover requirements and architecture, spectrum, IPR, and “business principles”.

UK TV ownership lower than 1972; streaming live NFL; an uplink-heavy Glastonbury

We mentioned the AT&T-DirecTV deal above; for the second time, the companies have asked for more time to make their case for final approval to the regulators.

TV ownership is actually falling in the UK. As a result, TV penetration is 93.7%, the lowest it has been since 1972.

Screenshot from 2015-07-06 14:46:27.png

Elsewhere, Yahoo! and the NFL are beginning to stream American football on the Web, marking a big step away from the classic TV model. More of it is available via DISH’s SlingTV service. This may trigger a big move away from TV, as live sport is one of its few remaining unique selling points.

PlusNet, part of BT, wants you to take all the football if you want any football at all, thus imposing a substantial price rise. A major selling point of web streaming is of course that you don’t have to go along with this sort of thing.

EE is trumpeting the fact that their subscribers at the Glastonbury Festival downloaded 8TB of data. Surely you shouldn’t be watching Netflix at Glasto? But perhaps the more interesting stat is how much they uploaded, i.e. the very opposite of TV - 3TB in total, ie 37.5% uplink traffic. That’s getting into “balanced peer” rather than “eyeball network” territory.

Whatever happened at Glasto, at least it serves to distract from the million-pound fine imposed on EE by OFCOM for their terrible customer service standards.

Telstra-owned CDN Ooyala has acquired another media network company, Nativ, which seems to be in the front-end/ingestion element of the video chain.

Sony’s PlayStation Now cloud-based gaming service is so good it works well on a Samsung Smart TV - but only as long as the Internet link is flawless.

No DISH bid for the time being; Sprint doubles-down on the price war, calls in Carphone to fix retail, pays CEO an absolute fortune

DISH’s SlingTV is shaking up its market, but what about the long-running question of whether “Satellite Cowboy” Charlie Ergen will make another effort to buy T-Mobile USA? Ergen has sobering words for us; it’s no deal, and he “feels no pressure to do anything”. His reading of the FCC conditions attached to DISH’s spectrum holdings is that the deadline by which time they must be used to provide service to at least 40% of the US population is only binding in 2020, and therefore there’s no hurry.

This all started, of course, when Softbank first bid on Sprint and tempted DISH to leap in. Over at Sprint, this week, any illusion that the price war might be abating has been swept away. Sprint’s new “All In” tariff offers a shiny gadget, plus unlimited calls, messaging, and data, for $80/mo. That’s some aggressive pricing, even if the small print states that unlimited users’ access to streaming video will be throttled to 600Kbps at all times.

Meanwhile, John Legere and Marcelo Claure had one of their increasingly tiresome spats on Twitter, while it emerged that like Dan Hesse before him, Claure is the highest paid CEO in wireless. And it’s not just him; Hesse is still collecting tens of millions of dollars from Sprint even now he’s out. The lowest-paid wireless carrier CEO? That’ll be Lowell McAdam at VZW, the most profitable carrier.

Interestingly, Sprint is turning to Carphone Warehouse for a lead on how to revive its retailing operations. CPW will be providing consulting advice and managing 20 new stores in a pilot project. If that succeeds, 500 new stores will open under CPW management and CPW will take a $32m equity stake.

Digital Single Market, done? Nearly. Sky reports BT to antitrust, BT slashes backhaul prices; more net neutrality cleanup

The European Union has come to an agreement on the new Digital Single Market package. Roaming charges end in June 2017 and will be capped at €0.05/minute until then, and a compromise net-neutrality formula is included in the text. However, the Netherlands, which already has strong neutrality, is threatening to vote against if the final text doesn’t provide strong guarantees.

In the UK, Sky used the Communications Market Review process to ask OFCOM to refer BT to the Competition & Markets Authority on the grounds that Openreach is a monopoly with exploitative pricing and terrible quality of service. Interestingly, Openreach just annouced some fairly drastic price cuts on the key Gigabit and 10 Gigabit Ethernet backhaul links that are at the centre of the UK regulatory situation. Is BT trying to make pre-emptive concessions to help with the EE deal?

Read our in-depth coverage in this Telco 2.0 Executive Briefing

In the US, AT&T and GTT have signed an interconnection agreement, joining the rush to settle outstanding peering disputes before they land in a net neutrality proceeding. Dan Rayburn adds technical detail.

A US court has granted the request from both opponents and supporters of net neutrality to consider the appeals against Title II quickly.

Commissioner Pai wants to let carriers use Universal Service Fund money to deploy broadband-only services. At the moment, there has to be some element of telephony.

And the new regulator in Mexico wants to make Telmex open up the last mile.

Republic Wireless, no.1 for satisfaction; ARIN out of IPv4; M2M service “too dear”; T-Drones

Republic Wireless, first of the MVNO-plus-WiFi minicarriers, has the best customer satisfaction rating in the US. Not surprising given its agonisingly cheap pricing, but it’s also innovating - it’s about to launch handoff from cellular back to WiFi, something not previously available although the 3GPP standards foresee it - and its customers name “in-home coverage” and “fewer dropped calls” as justification for their satisfaction.

A project in New York City aims to replace 10,000 phone booths with public gigabit WiFi access points, offering free phone calls within the city and charging stations, funded by ads.

ARIN, the North American Internet registry, has for the first time had to turn down a request for more IPv4 addresses because it has no more to give.

Here’s Zyptonite, a new peer-to-peer voice app. No details as yet.

The third release of OpenDaylight SDN is here.

Novatel Wireless’s CEO says the Internet of Things isn’t scaling because mobile service is still too dear. Network operators may be a little shocked by that as their M2M ARPUs continue to slide.

MTN has a new IoT platform for Africa, built with ZTE.

The data centre industry doesn’t consume any more power than it did in 2005 despite enormous growth, a tribute to technical progress. But how much water does it get through?

Hacking Team, an Italian company which sells Internet surveillance software, has itself been hacked and 415GB of source code, archives, e-mail, and much else released onto the Web. Among other things, all the passwords there were the same and all the passwords were “password”.

Cisco has acquired OpenDNS for some $635m.

Someone is going around California chopping up fibre-optic cables.

And T-Mobile Netherlands is using a drone to inspect infrastructure on the roof of a stadium.

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July 2, 2015

Telco-Driven Disruption: What NTT DOCOMO, KT and Globe got right

NTT Docomo earns 15% of its revenues from non-traditional sources, the largest proportion of any telco worldwide. Our latest ‘Dealing with Disruption’ stream research briefing ‘What NTT DOCOMO, KT and Globe got right’ looks at how DOCOMO did it, what did it learn, and what else can be learned from other telco attempts at disruptive innovation?

As they seek new sources of revenue, many telcos around the world are attempting to disrupt adjacent markets, such as digital commerce, IT, entertainment and financial services. While many of these moves have proved to be too little, too late, several disruptive plays have had a significant impact on both the telco’s revenues and relevance.

As well as NTT DOCOMO’s Smart Life portfolio, these include Globe Telecom’s GCash service and KT’s media business, as well as some of those we looked at in the first report in this series (which included BT Sport, SK Planet and AT&T Digital Life and others). Why do some disruptive moves by telcos succeed and others fail? More here.

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

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