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Q1s, 5G, Regulation, UK News, Content, Cloud: Telco 2.0 News Review

Q1s: Verizon, Ericsson, Qualcomm, Intel, Microsoft, Google, China Mobile, and more

It was Q1 week around the world. Verizon’s quarter was pretty mixed - revenue was up, but only barely, although net income was a little better. Wireline was the usual picture, with FiOS making up for the struggling enterprise operation, but the worrying bit was that wireless revenues actually fell even though device sales were up 17%.

As far as market share goes, VZW scored 640k net-adds in the key retail postpaid segment and lost 177k in the prepay segment it barely bothers with. Internet of Things revenue was $195m in the quarter, up 25%, with still some way to go to make it to a billion for the year. Meanwhile, the strike goes on with no news of any progress.

Ericsson’s were similarly uninspiring. Revenue is basically flat with the exception of Support Solutions, profitability was a bit better basically due to cost-cutting, which fell roughly equally on SG&A and research. As a result, the company is reorganising into five business units - one each for products and services in each of network and cloud, plus a separate media unit - and a new thing called the Customer Group, Industry and Society, which seems to be an IoT sales channel.

Qualcomm saw net profits up 11%, although both shipments and licensing revenue fell. Logically, that implies it is squeezing out costs too as smartphone shipments slow down and it loses share to in-house chipsets at Samsung and Apple. Guidance for Q3 is rather wide - a range of $800m - reflecting the uncertainty about smartphone volume in the future.

Intel joined in the doom and gloom by announcing 12,000 job losses, 11 per cent of the workforce. Although their revenues beat the consensus forecast, it’s not hard to spot the problem - Client Computing, the PC division, was down 14% sequentially and up only 2% year-over-year. Intel now expects PC shipments to decline at a “high single-figure” rate.

Microsoft’s PC division saw revenue up 1% in Q1, below expectations and tending to confirm that if the Intel Skylake laptops are going to relaunch PC sales, they’ve not done it yet. Lumia shipments were down 73% year-on-year, while the feature phone business was also shrinking fast. It’s a pretty bleak picture, with the exception of cloud, which is growing fast, although its profitability isn’t quite keeping up. The upshot? Revenue off 5.5% and net profits off 25%.

Interestingly, one of the biggest hits to revenue was patent licensing. Many Android OEMs have accepted paying license fees to Microsoft, a substantial source of revenue. This has dropped off sharply, but it turns out there’s a reason for that - MS is discounting or waiving them in exchange for shipping their apps.

Estimates of Xiaomi’s Q1 shipments are out, and show absolutely no growth over the last 12 months. 

Zain’s subscribers, revenues, and net income were all down slightly. You could say the same about Telia, which has also decided to drop the Sonera bit of its name. Tele2’s results were pretty horrible, in part because Kazakhstan has devalued the tenge. So now you know the currency of Kazakhstan, at least.

Talks about MTN’s huge Nigerian fine are at a standstill because it is now the subject of a parliamentary inquiry. It makes operating in Iran look relatively easy, and MTN now wants to become a fixed-line ISP there.

Oi is urgently trying to renegotiate the terms of its debt, Reuters reports. The carrier owes $15.4bn gross, half of which falls due in the next 18 months. 75% of that is denominated in something other than Brazilian currency, so the devaluation of the real has increased the interest bill by 16%, while the macro-economy is terrible. Whatever happens might well re-open the whole Brazilian consolidation story.

So did anyone have good news? Well, at least there’s Google. Alphabet’s revenues for Q1 were up 17%, basically all of which came from Google itself. Even though the train-set businesses, Other Bets, lost $802m, compared to $633m a year before, there was still enough Google Cash coming in for net income to hit $4.2bn, compared to $3.5bn a year ago.

Other Bets does actually have some revenue, and it was up 108% largely because more Google Fiber networks went on line. $280m of the loss was accounted for by the CAPEX cost of building them. And Sundar Pichai says that as many as 50% of Google users in some countries are coming from Android devices, and are hence usually logged in.

That suggests Google mobile search might be getting more valuable, but there’s a simpler way to achieve that - just stuff in more ads before you get to a search result. Ironically, it’s the opposite of the way Facebook finally managed to get revenue out of mobile advertising.

China Unicom’s revenues, meanwhile, were down 5.2% year-on-year, mostly because “non-service” revenue, i.e. device sales, fell sharply while better 4G takeup caused service revenue to nudge up. You can see why Xiaomi’s quarter might have been sticky. Unicom, though, has managed to start adding subscribers again, over six million of ‘em.

China Mobile, for its part, added 64m 4G users in Q1, bringing the total to 377m and 30 per cent of the global 4G user base. The great majority of them are upgrading from 3G, rather than churning from other operators. As a result, data usage per user was up 24% to half a gig, ARPU was up 20%, service revenue 4.9%, and total revenue 8.7%. But net profit was up only 0.5%. It’s the old, old story.

Meanwhile, China Broadcasting Network has been given a mobile network licence.

5G plans at VZW, AT&T; 3GPP RAN in Busan; first Facebook TIP projects; Loon down!

After its lacklustre Q1, it’s no surprise VZW wants to move on to 5G as quickly as possible. Fran Shammo gave some details of the tests and their plans during the earnings call. The test campaign with Nokia in Dallas turns out to have concentrated on a fixed-wireless product, and in-building coverage in particular, although there was also a “latency use case”. He promised a pilot deployment of fixed-wireless 5G in 2017, and interestingly said that 5G was “not a replacement technology”. The VP of networks said “eight or nine” of the tests were 1Gbps+, and the operator was “fully committed to the standards process”, but just wanted it to go “faster”.

AT&T, meanwhile, will also be testing fixed-wireless 5G this summer, starting with 15GHz. Interestingly, as many as one in five US households is now getting their Internet service exclusively from mobile.

On the standards track, 3GPP RAN 1 met in Busan, South Korea to formally begin drafting the 5G radio air interface spec, with Samsung Networks acting as host. There are some 1,306 proposals to work through, but Inside 5G has picked out a few choice items.

Facebook has released the first two products under its Telecom Infra Project into open source. They are Project ARIES, a massive-MIMO antenna for 5G base stations, and Terragraph, an advanced mesh network using WiGig links optimised for backhaul, with routing in the radio layer.

One of Google’s Project Loon 4G balloons has crashed in a field in Chile.

Here’s an interesting paper on proactive caching and mobile edge computing.

Zayo’s coverage with fibre-to-the-tower is now up to 8,000 cell sites in the US, and an analyst reckons they are a strong buy due to the backhaul demands of 5G.

It’s a good job we’ve got this stuff. Websites are progressively getting heavier - from 1.95MB a year ago, the average HTTP request has now reached 2.3MB, of which 1.46MB is images and only 66 kB is HTML.

3UK/O2 looks doomed; Euregulators say Android is anti-competitive; US cable STB unbundling

The European Commission is going to block 3UK/O2 “within weeks”. Hutchison has already said that it’s not willing to make any more concessions. The regulators have apparently said the only acceptable concession would be to immediately sell one of 3UK or O2, which makes the whole exercise pretty pointless. So that’s no deal, then, and you wouldn’t bet on getting the parallel 3 Italia/Wind merger away either.

Telefonica is therefore looking for an alternative. It would dearly love to get rid of some of its $56.7bn debt, and the $14.5bn sale of O2 UK would have taken 26% off that in one blow. Potential options include perennial rumour staple Liberty Global, leverage-loving French cableco Altice (which promised it wouldn’t do another deal, but hey), Vivendi (which is mostly getting out of telecoms) and even Orange and/or DTAG if they for some reason wanted to re-create EE.

The Euregulators, meanwhile, have concluded that Google’s agreements with OEMs are indeed anti-competitive. They’re specifically concerned about the Google Apps package, and its related requirement to install Chrome and set Google as the default search engine, as well as discouraging forkdroid vendors (presumably by refusing them Google Apps), and offering financial incentives to ship with Google as default search.

Reaction is here - will Google shift emphasis to Chrome? - and here from Benoit Felten.

In the US, the FCC is moving towards a rulemaking that would force cablecos to un-bundle their set-top boxes. Harold Feld’s invaluable blog discusses their response, Comcast’s concession of letting Roku stream their stuff, and the legalities. The case, as they say, continues.

T-Mobile, Sprint, and US Cellular have supported the Verizon-Incompas deal over special access in a filing to the FCC, on the grounds it will help get more dark fibre out to cell sites.

Ericsson is hoping that the 600MHz auction will kick off a wave of similar low-band spectrum releaes around the world.

And Vodafone UK may get fined by OFCOM over inaccurate bills.

Typical Brits experience 53% 4G coverage; EE rolls out more (with help); a check-in with Sky/TalkTalk FTTH

A study by OpenSignal for Which? says that the UK has what you might call effective 4G coverage of 53%, that is to say, a typical user gets 4G 53% of the time. This compares with 39 countries that achieve 60% plus.

EE says it’s going to deploy more 4G, targeting 95% geographical coverage and 99.8% population coverage, compared with about 60% at the moment. Partly, this is about their new role replacing the Airwave emergency services network, and indeed the Home Office is going to pay for quite a bit of it. EE reckons this will require 750 more eNode-Bs. Not surprisingly, they want something in return, probably that the government hurries up with changing the Electronic Communications Code to make it easier to get planning permission.

Remember the joint Sky/TalkTalk/CityFibre FTTH rollout in York? ISPReview checks up two years after the announcement and finds that although the project is behind schedule, Phase 1 is close to being finished, and a commercial launch might not be far off. However, it looks like Sky is losing interest post-Openreach review, and most of the installs are being left for TalkTalk users.

CityFibre, for its part, is deploying into Leeds and Bradford with local ISP partners.

Two-thirds of broadband subscribers think BT’s wholesale service is FTTH.

And the BBC is undertaking a major review of its online news strategy, focused on mobile.

VZ buys another content firm; T-Mo flirts with content; cablecos, Netflix agree; great HTC camera; adblocker explosion

As well as 5G, Verizon is trying to diversify into content. The AOL acquisition is done, the bid for Yahoo! is in the works, and now we have Complex Media. This is a “network of sites focused on American popular culture for the millennial male”, including “entertainment, sports, and hip-hop”, and Verizon is buying 50% of it, with Hearst taking the other half.  Complex has apparently been profitable since 2010, which suggests it might be a bit less soufflé-light than it sounds.

T-Mobile’s John Legere mocked VZ on Twitter for having a “mid-life crisis” over this. Well, if you buy a company called Awesomeness TV you should probably be prepared for a bit of banter, but we can’t help but feel Legere should have a look at himself on that score. Much more seriously, T-Mo has waded into a regulatory dispute about the terms on which pay-TV companies sell content to other platforms. This strongly suggests that they are interested in getting into the business themselves.

The US cablecos have come to an agreement with Netflix, under which Netflix’s content would appear in their programming guides and they would share the revenue.

Comcast wants to zero-rate its HTML5 streaming app. Row coming in 1, 2…

TWC has introduced its first “skinny bundle”, a $10/mo upsell for people taking its broadband. However, it’s a pukka cable TV service rather than a streaming app.

Creating content rather than distributing it; the new HTC phone turns out to be an outrageously good camera.

A different kind of content; Orange just bought 65% of a bank, and wants to launch a mobile-only banking product in France next year. Meanwhile, Vodafone says there are now 25 million M-PESA accounts and the number is growing 27% annually.

Ad blockers are spreading at a 60 million user/year clip.

Adblocking_growth_according_to_pagefair.svg.pngAnd this is a brilliant bad business model. Amazon shares revenue from Kindle Unlimited with self-publishers, based on how far into the book the users read. This is measured on the basis of the last synced page, so as not to snoop on exactly what the users are reading. As a result, you can stuff thousands of pages of random numbers, old phone books, or whatever into the front of the book, put a link to the beginning of the content on page one, and coin it.

Google builds out 12 new data centres; Apple CDN 75% in-house; Ericsson CDN clients; Intel cloud strategy

Google is planning a major cloud expansion, even after a quarter in which they spent $2bn in CAPEX. This will include a mix of their own facilities and leased space, for a total of 12 new locations. The justification is that enterprise sales are beginning to pick up, plus some stuff about machine learning. Dan Rayburn points out that the Google Cloud CDN has gone into public-beta, with some 50 locations worldwide and free SSL support.

Meanwhile, it looks like Apple’s in-house CDN is up to 75% of its traffic, and interestingly, more enterprise customers are going the same way. A CDN is essentially a kind of distributed cloud, so you wonder whether this might be a straw in the wind. It’s certainly not doing Akamai any good.

One of the reasons for this might just be price. Amazon and Google’s rock-bottom storage prices are matched by their rather pricey bandwidth, so it might well make sense to either move your data into the CDN you use to serve it, or else make your own arrangements.

Ericsson announces a lot of new clients for its CDN, notably in China.

Intel reckons the percentage of IT investment going into “scale computing”, the kind of technology (if not necessarily the size) you find in Open Compute Project or the Google infrastructure, will rise from 40% today to 80% by 2025. Also, its server chipsets are beginning to include the FPGA tech they acquired with Altera.

Their old rival, AMD, has what might be a transforming deal, a partnership with a Chinese company to sell server chips there.

Marc Thiele leaves Switch, builder of some of the biggest data centres in the world, for a new job as chief strategy officer at Apcera, an enterprise cloud startup.

The winners of an AT&T-backed SDN hackathon get funded.

Coca-Cola is selling its Atlanta data centre, having moved the apps there into the cloud.

Microsoft is giving up on containers in its data centres - the 40’ long steel sort, not the virtualisation sort.

How Twitter hosts vast numbers of images.

Apple wanted a partnership with Daimler, BMW to build a car!

Apple, BMW, and Daimler-Benz were in talks about cooperating on a car project, but the talks fell apart over the question of who would control the data. Not coincidentally, Apple also recently hired Tesla Motors’ VP of Vehicle Engineering, the former Chief Engineer at Aston Martin, Chris Porrit.

Philips has decided to IPO, rather than just sell, its lighting business, now famous for software updates that impose a vendor lock-in on light bulbs.

Microsoft’s Azure IoT Suite is going to be integrated with the service solution for Rolls-Royce aero-engines. It’s a huge deal, as maintenance and leasing are a crucial part of R-R’s business model, and the engines throw off enormous amounts of data.

Rivalling that, GE’s Predix IoT system will be integrated with Oracle’s cloud.

That’s all been fairly serious IoT news. When you next see a silly IoT startup, though, you probably want to refer to this instant-classic blog post on the structural crisis of the VC sector. (This is related, but funnier).

Group calls in Facebook Messenger; VP9; Skype SDK development; bots aren’t the future

Facebook Messenger just grew high-definition audio conferencing, apparently using WebRTC and the Opus audio codec. They also added a Snapchat-like feature that lets you add someone as a contact by scanning a graphical code (similar to a QR code but prettier).

Why you should care about VP9 support - it makes multipoint video much more scalable.

Skype has sacrificed interoperability for features, but at least it’s actively improving, unlike Google Hangouts.

A roundup of how the various videoconferencing vendors are adapting to WebRTC.

Why the bot craze is harmful.

An interesting financial WebRTC app.

Simwood Mobile battles strange regulatory issues.

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