Ring! Ring! Hot News, 20th April 2008
In Today's Issue: Online businesses crave telco capabilities (potentially...). Motorola rearranges the deckchairs. Nokia profits up 25%, but you wouldn't want to see what went into that. Is Comes With Music a lossmaker? Nobody pays for the stuff anyway. Silverlight everywhere. And Moonlight. Is Microsoft IBM in 1993? 1,788 entries in the Android dev competition, but Google can't keep a SIP server running. They can send a man to the moon... O2 users optimise radio network by whingeing. FTel+TeliaSonera=nightmare on Wall Street? Truphone gets a cash dump. UPS saves fuel with a platform. Pat Robertson, selfless crusader for your digital rights? AT&T fearmongering vs Andrew Odlyzko; there can only be one winner. Data centres in containers will eat the world. EBay finds giving away telephony is not a business. And there's the day the YouTube died.
Ed Wray, CEO of Betfair, the world's biggest betting exchange, came to last week's Telco 2.0 Executive Brainstorm and told the assembled crowd of telcosians he would be delighted to pay a telco to solve his 'digital logistics' problems. Authentication is crucial to Betfair's business, not just to prevent fraud but also to prevent Americans and the under-age from using the site, something which can lead to an executive jail problem. And telcos, he says, can provide it. At the moment, it's costing him $22 to verify the identity of each new customer; with 1.5 million active customers, you could see how that might get expensive.
"There's a tendency when building a platform business to do too much yourself - I come back to payments, I come back to authentication. People in this room can do this," he said. A couple of telco execs came up to him afterwards to double check that he really was supporting the analysis on which the event was based.
In a keynote the day before, Sally Davies, CEO of BT Wholesale, described the 2-sided business model opportunity as "exciting and compelling", but with many challenges in execution ahead. If there was a single theme of the conference, that was it; you couldn't move for people who'd independently come to similar conclusions to those in the newly released the Voice & Messaging 2.0 and 2-Sided Business Model reports. The issue, of course, is how to disseminate these ideas more widely...
Much more analysis of last week's Telco 2.0 event to come...
In the meantime, Motorola is reorganising its sick handsets division, so that in future the same manager will be responsible for both the hardware and software of a given gadget. We think it's fair to say that if you were starting afresh, you probably wouldn't have chosen to do it the other way...but Nokia has rather less to boast about than you might think.
The stock fell rather badly on the announcement of Q1 results, despite the rather good point that an increase in net profits of 25% is hardly disappointing. But the bottom line is a lot like a sausage; if you like sausages you might not want to see what goes into them. Volume was up around 10 per cent, but at the same time, the average selling price of the handsets fell by about €10 - so with an ASP last quarter of €89, the value in euros of Nokia handset shipments actually fell. Further, according to our calculations, Nokia's sales have stalled in Japan and Latin America, and took a sharp fall in North America.
No wonder the ASP is falling; the volume growth came from the Middle East, Africa, India, and China, whilst the iPhone must have had an ugly effect on the top-of-the-range gadgets. Meanwhile, Nokia Siemens Networks clung to its share of a weak market for infrastructure, making a small loss; the German press this week is full of more revelations about bribery at Siemens and specifically its telecoms division during the 80s and 90s, with Der Spiegel going so far as to accuse them of falling behind technologically and making up for it by paying kickbacks.
If there's anything in this story, you'd be forgiven for thinking they were trying the same trick with individual customers, by quite simply giving away music at a price supposedly not far off their total gross margin per handset. Well, it's one way to shift units. Or not, as the case may be.
Nokia's opening to Microsoft Silverlight doesn't seem to have secured them any differentiation, either; MS is trying to push the Flash-like technology to every other vendor in town, and there's an open-source implementation coming.
Speaking of Microsoft, here's someone who thinks their problems are as bad as those of IBM pre-Gerstner. What we don't understand is why a company whose biggest-selling product is called "Office" wants to buy a consumer-focused web advertising play like Yahoo!; they could buy Salesforce.com, you know...
Before the telco development platform finally gets here, we'll have to content ourselves with Android; Google announced they had 1,788 entries to a competition for Android applications, which begins to sound like a start. It's a pity they still haven't integrated GrandCentral on their own infrastructure; last week saw the hosted IP-PBX provider fall over in a pool of its own credibility with a seven-hour outage, which occurred while the CEO was "hiking in the mountains". (The Project Failure Blog says Gmail and Google Apps are sporky this morning as well.)
The reason given was that there had been a power failure in their colo facility; what, only one colo? No disaster recovery site? No Google Platform monster distributed operating system virtualised over thousands of home-made servers? No Amazon EC2? It's a good job only geeks use it yet.
But without geeks, where would we be? Stuck with our HSDPA service throttled down to 128Kbits/s, is where. Hilariously, people at xda-developers.com have found that their data rate on O2 UK miraculously springs up from 115-140Kbits/ to 1Mbit/s+...if they just ring up and complain enough. It's one way to manage backhaul demand, I suppose, but it's terribly Telco 1.0 (Rule 1: This is your enemy - customers!) Similarly, why on earth don't telcos offer landline numbers that can receive SMS?
They might not be able to do that, but telcos usually can cook up a really ill-advised monster merger. Think Vodafone/Mannesmann, the biggest-ever merger and one Vodafone is still taking exceptional charges for goodwill impairment on today, or Sprint-Nextel, which at the last count had successfully lost the entire value of Nextel. The latest candidates are rumoured to be France Telecom and TeliaSonera. Well, where do you start....it's unlikely that putting two huge saturated-market, ex-growth Eurotelcos together is going to give you anything else than an even bigger bureaucratic behemoth, and this deal would involve no fewer than three governments as shareholders, to say nothing of the European Commission and a slack handful of national regulators. Just think of the billing system integration; after all, there's all kinds of bizarre things like UK LLU and IPStream (and reseller PSTN) floating about in there. But it's probably a better idea for TeliaSonera than "keep trying to get some money out of your Russian partners".
No wonder Truphone had no trouble finding £16.5m in a second round of VC funding; the possible shareholder-value destruction involved in a FranceTeliaSonera deal makes punting on start-up voice & messaging firms look positively prudent.
If FTel and Telia are short of something to do, they could consider starting an alliance to create a Telco 2.0 VAS platform for Europe. Here's an example of the things you could do with one of them; UPS's new workflow system is just the beginning.
It's probably fair to say that network neutrality crusaders are not usually people who hobnob with Reverend Pat Robertson, but sometimes, you have to take your allies where you find them, especially when the "where" is an FCC hearing. Comcast and others didn't bother to show up, but AT&T did go for some truly epic Internet traffic hype. Andrew Odlyzko fisks.
Telco 2.0 has frequently drawn lessons from the history of containerisation. But this pprobably wasn't quite what we were thinking: there's a boom going in containerised data centres. It's expected to further increase the scale and industrialisation of platform infrastructure; you can't dodge infrastructure.