Title II, Sprint, Spectrum, BT-EE, Lebara, Overly Smart TVs: Telco 2.0 News Review
- Regulation: Title II reclassification is here - the document, the detail, the reaction
- US Carriers: DISH, small business; Sprint may sell 2.5GHz waves, gagging for cash; VZ sells $10.5bn of wireline
- Europe: BTEE finalised; VF results; UK infrastructure, the game of chess begins; Free.fr keeps disrupting; KPN Q4s
- Global Carriers: Orange shopping for more African networks; Lebara Mobile flips to "digital hub"; Aussie NBN
- Vendors: Android OEMs aren't making money; Lenovo isn't making money; Qualcomm pays $1bn fine; ALU Q4s
- Security & Privacy: Samsung: don't talk about anything private around one of our smart TVs, they tell tales
[Ed: We've just published a new report on whether telcos' digital ambitions are unrealistic as part of our new 'Telco 2.0 Transformation ' 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.]
Title II reclassification is here - the document, the detail, the reaction
Title II reclassification is here. The FCC has issued a fact sheet detailing its intentions, and they include "no blocking, no throttling, and no paid prioritisation". They also state that Title II reclassification includes wholesale service, making it possible to bring interconnection disputes to the regulator. On the other hand, the regulator "forebears" to impose Universal Service Fund charges on broadband, to regulate prices, or to require last-mile unbundling. However, broadband providers will be required to offer special access, i.e. access to their poles, ducts, and conduits, and we can see Google Fiber among others getting right into that.
It looks like wireless is very much included, although "reasonable network management" is explicitly allowed. Public Knowledge, as is its job, thinks it's not quite enough. Benoit Felten argues that competition between ISPs hasn't been enough to ensure net neutrality, that paid-prioritisation has been a disappointment when tried, and that European (usually E-5) operators are mostly still lobbying for it because it would look weak to back down after all this fuss. Dan Rayburn points out that the interconnect language doesn't create any rules, just states that the FCC can accept complaints.
FCC chief Tom Wheeler has put his case in a Wired op-ed.
Elsewhere, the agency has kicked off the complex process of the so-called incentive auction for the 600MHz band. It looks like the blowout AWS-3 auction has driven up spectrum prices generally, as the opening bids are much higher than expected, by a factor of five in the case of Chicago.
And the Comcast-TWC deal is still hanging fire, a year after it was announced. It begins to look as if the moment has passed, what with the FCC's swing to populist (in both senses) self-assertion.
DISH, small business; Sprint may sell 2.5GHz waves, gagging for cash; VZ sells $10.5bn of wireline; price war goes on
In the AWS-3 auction, one of the big winners was DISH, which spent $10bn and came away with a great deal of spectrum, almost entirely downlink. Bizarrely, it managed to get a "small business credit", letting it off $3bn of the cost of the spectrum, because it used two shell companies as straw-bidders. Not that AT&T or Verizon Wireless have been averse to doing just that, as it turns out. However, as Harold Feld points out, this is a side issue - the real one being that AT&T and VZW managed to carve up the great bulk of the AWS-3 bands between themselves, again.
Here's a surprise - Sprint's recovery story has always been about the huge chunk of 2.5GHz spectrum it bought back in the day, that will one day be brought fully on line. This is especially true since Softbank bought it, as Softbank's Japanese operation is mostly 2.5GHz, and this offers useful synergies in buying devices and network equipment. Now, Masayoshi Son is talking about selling some of it. If you revalue the spectrum based on the prices paid during AWS-3, as Bloomberg Businessweek points out, you come to somewhere between $86-116bn depending on your assumptions. And Sprint's enterprise value is $48bn, so the spectrum is worth about two Sprints, at least so long as the spectrum price surge persists.
What Sprint is short of is cash. In Q4, the carrier managed to get its postpaid net-loss of subscribers down to 19k from 272k in the prior quarter, but like all US operators, this comes at a price. They lost $2.5bn in the quarter, and the good news is that $2.1bn of that was an accounting writeoff on the value of the Sprint name. Churn is running at a terrifyingly high 2.3% in postpaid (VZW's was 1.14% in Q4). Like everyone else, it's also been selling smartphones on instalment, which means piling up receivables from customers while paying up front for the piles o'shiny. Their "cost of products" line item, tracking the smartphone bonanza, has risen steadily through 2014 while the "cost of services" item fell, and the company burned $2.9bn in net cash in the first 9 months of its 2014 financial year. It now has about half the cash on hand it had in Q2 2013. They're now trying to sell the pile of customer receivables and draw down all available credit lines, so you can see why selling spectrum might be attractive.
This didn't stop them picking up 1,500 old Radio Shack stores, though.
AT&T, meanwhile, has spent $18.5bn on spectrum at the same time it's picked up two Mexican mobile networks. As a result, it's getting rid of some data centres, for $2bn. But it's Verizon that's really going for a big network trim - it's selling $10.5bn worth of wireline assets, in California, Texas, and Florida, to Frontier Communications. That includes some FiOS fibre builds, for a total of 3.7m primary voice lines (of which 2.2m take "high-speed" data, including 1.6m FiOS Internet customers, and 1.2m FiOS TV customers). It also sold $5bn worth of towers and leased them back.
Meanwhile, the price war goes on. Two weeks after saying it wouldn't "chase low-value users", VZW slashes between $5 and $10/mo off its data bundles.
And stop blaming the operators, or NBC, for the Super Bowl video stream, says Dan Rayburn.
BTEE finalised; VF results; UK infrastructure, the game of chess begins; Free.fr keeps disrupting; KPN Q4s
BT and EE have signed off the terms of their merger. DTAG gets 12% of the combined company and a director, Orange 4% and more cash, and the minority shareholdings are locked up for the next three years except for transactions between them.
The consequences, though, are only beginning. Vodafone CEO Vittorio Colao has come out and called on 3UK to end its infrastructure-sharing alliance with EE. If the 3UK-O2 deal goes ahead, 3UK will be in both the MBNL joint venture with EE, and the Cornerstone agreement with Vodafone.
Colao wants 3UK to rely exclusively on the O2 element of Cornerstone, and therefore on Vodafone-C&WW backhaul, but we can't see 3UK agreeing as it has 90+% fibre-to-the-cell coverage and probably won't give that advantage up. If they didn't, there would either be a Swedish situation with overlapping alliances, or else Vodafone would lose the cost benefits of sharing hard infrastructure.
EE management points out that MBNL doesn't cover 4G, "just" 3G, so the EE and 3UK 4G networks are (more) independent. And Colao also thinks BT Openreach should be spun off.
Well, of course. It looks like Vodafone is going to announce a fixed ISP and also a TV product, so last-mile issues are suddenly very important to them. TalkTalk has succeeded in getting to 11% of the SIM-only market, which is actually more than Vodafone - ironic, as Vodafone is the MVNO supplier. Are they going to launch a WiFi-based "MVNO plus"? Dixons Carphone is going to be an MVNO, running on 3UK, as well as a reseller for all networks.
Revenue was down 2.7% in Europe, but up 5.9% in Africa, the Middle East, and Asia-Pacific - the overall upshot was "organic" revenue growth of 0.7%. Within Europe, revenue was actually growing (0.9%) in the UK, but down 7.4% in Italy, 8.9% in Spain, and 1% in Germany. VF now claims 65% 4G coverage in Europe. Although Project Spring is officially 50% complete and 50,000 cell sites have received "high capacity" backhaul, it looks like only 25% of them have fibre, and the target for the end of Spring (in fact, the beginning of next spring) is 30%. That's already been revised down from 36% promised in H2 2013, as you'd know if you read this Exec Briefing.
The impact of Free Mobile continues to shake the French market. ARCEP data shows that the proportion of subscribers on short contracts has gone from 9.5% to 51% in three years, while penetration continues to grow, with an additional 3.1m SIMs in circulation during 2014. In Q4, market-wide gross adds were 846k, of which 324k were M2M, and prepaid saw a net-loss of 507k, leaving the market up 663k on a net basis.
And KPN saw a small rise in revenue in Q4, 2.1%, narrowing its net loss to €37m. On the agenda: bigger data bundles, more TV, 1800MHz carrier aggregation.
Orange shopping for more African networks; Lebara Mobile flips to "digital hub"; Aussie NBN satellite runs out of space
When Orange gets paid for the BT-EE deal, it's going shopping. There's the Jazztel deal in Spain of course, but there's also this - Orange is apparently looking at a bid for Bharti Airtel's African networks and perhaps even some Millicom (i.e. Tigo) assets too, which would be folded into a new entity called something like "Orange Africa". Apparently it's "less interested" in Bharti's networks in English-speaking countries, which is most of them.
International-calls MVNO Lebara is pivoting towards a new business model as a "digital hub for migrant workers". This involves a money-transfer service that goes live this year (well, beyond the UK where it's been trialling), a VoIP application, and a community platform described as follows:
"If they want to buy services then they can but this is about helping each other as migrants. Who are the good lawyers? Which are the good schools? We manage a trusted brand with the migrant community," he says.
The point is to get away from free calls, which are increasingly well served by Skype, Facebook, Whatsapp, and a thousand imitators. It's a sight more ambitious than most telcos - as our new Executive Briefing makes clear.
The Aussie NBN, meanwhile, has been telling ISPs using its wholesale satellite broadband service to withdraw their bundles above 20GB/mo. The problem is that the service isn't ready yet, and only an "interim" service is being provided by reselling commercial satellite service, and too many users have shown up.
Android OEMs aren't making money; Lenovo isn't making money; Qualcomm pays $1bn fine; ALU Q4s
Last week we had the shock of Android shipments actually falling; now it's the turn of profitability. Charles Arthur teases out per-phone profitability, and it seems that the Android OEMs are struggling to generate much margin at all.
He argues that this is because unlike Apple they "don't control the software", but it's worth noting that a lot of Apple's value-add is that it controls the hardware to a great extent, via its own-design chips and general influence over the supply chain. As a result, the Samsung number should probably be adjusted to reflect the profits other Samsung divisions make on components that go into their phones.
Lenovo bears out the point. The company boasted that it's the third biggest vendor and the credible alternative to Samsung and Apple, threatened via the Motorola COO that Samsung would lose its No.1 status, announced that its shipments were up 118%...and made a $89m pre-tax loss. HTC, meanwhile, said its expected its sales to grow in Q1 and it might make a profit.
Nothing daunted, Alibaba is buying into Chinese smartphone manufacturing, making a $590m investment in Meizu.
Qualcomm, meanwhile, is preparing to settle its dispute with the Chinese government. The price is likely to be a billion-dollar fine, plus a 30% cut in their royalty rates in the PRC. When you realise Qualcomm made literally half its revenues in China last year, you can see why it would be worth it.
The other half of the Motorola we once knew, Motorola Solutions, is up for sale. Here's a reasonable set of Alcatel-Lucent results - not only is it profitable, but it generated cash for the first time in ages in Q4, €264m of it. That said, all the revenue numbers are "excluding managed services", presumably not because managed services is doing so well.
A visit to Waterloo, Ontario after BlackBerry's crisis. 66% of Nigerian OpenSignal users are dual-SIM, and they're mostly Samsungs. Blackberrist and Telco 2.0 ally Alec Saunders, meanwhile, has joined Microsoft Ventures.
Avaya has a tie-up with VMWare similar to that between VMWare's vCloud Air service and Google Compute Engine. Here's a new WLAN router that automatically forms mesh networks. The Internet of Useless Things.
IBM's Watson AI project has gained an API with some interesting services, notably speech-to-text.
Samsung: don't talk about anything private around one of our smart TVs, they tell tales
Speech to text, eh? Great idea. Until this happens. It turns out that the EULA for Samsung smart-TVs includes a warning not to discuss anything private near the telly in case it might be listening, especially as its "Siri-like" voice command functionality sends your voice to a service in the cloud for analysis.
To provide you the Voice Recognition feature, some voice commands may be transmitted (along with information about your device, including device identifiers) to a third-party service that converts speech to text or to the extent necessary to provide the Voice Recognition features to you. In addition, Samsung may collect and your device may capture voice commands and associated texts so that we can provide you with Voice Recognition features and evaluate and improve the features. Please be aware that if your spoken words include personal or other sensitive information, that information will be among the data captured and transmitted to a third party through your use of Voice Recognition.
US health insurer Anthem boasts that it either covers, or used to cover, 80 million Americans, a quarter of the population. Unfortunately, a wide variety of personally identifying information about all of them has now leaked onto the Internet.
The EU's ENISA security thinktank reports on the security aspects of the smart home. The French government, meanwhile, took powers to censor "terrorist" websites by decree and within hours Free.fr had changed their DNS to return 127.0.0.1 for thepiratebay.se. Because home taping is killing music, and that's like terrorism, presumably. And the creator of GPG said he couldn't afford to keep going. Now he's trying to work out what to do with all the money people sent.