NokALU, Apple, Google, AT&T, Verizon, Facebook: Special Extra Telco 2.0 News Review
- Infrastructure: Nokia-ALU; OFCOM on 5G spectrum; Ericsson Q1; Chinese crackdown threatens vendors
- US Carriers: Comcast-TWC OFF; Comcast 2Gbps very much ON. AT&T suddenly wants FTTH. 10-Q watch
- Smartphone Roundup: Massive Apple Q2; iPhone 6 trounces GS6; cheap droidsi; $750m of Blackphones
- Chips: Qualcomm hurts in Q1; Imagination releases MIPS technology; "no" to Applied Materials/TE
- Cloud Computing: AWS financials; Facebook, Google Q1s; Microsoft cloud; Telstra rolls out SDN to Asia
- Voice 2.0: Google's Project Fi. Is the real story here Hutchison HUE? Facebook's dialler; UK MVNO for devs
- Europe: Weird "new entrant" in the UK; Orange aims at 100% fibre; Digital Single Market plans; EE Q1
- Internet of Things: IoT forecasts; Sigfox vs LoRa; debunking power by the hour; DMCA on tractors
[Ed: We've just published a new report on Amazon Web Services: Colossal, but Invincible? analysing Amazon's recently released results and their implications.]
Nokia-ALU; OFCOM spills 5G spectrum beans; Ericsson Q1; Chinese graft crackdown threatens vendors
Nokia and Alcatel-Lucent are getting together. The deal includes the whole of ALU except for its submarine cable operation, which may be spun off or sold in a trade sale. (Did you know they still make some parts on the Enderby Wharf site in east London where the very first Atlantic cable was manufactured in the 1840s?) Nokia was apparently originally interested in the wireless infrastructure business alone, but ALU CEO Michel Combes persuaded them to take the whole thing on the grounds that the rump business wouldn't work.
This German-language piece points out that, unusually, the French government was enthusiastically in favour of the takeover.
Nokia has undertaken to keep the remaining 6,000 jobs in France and two R&D centres, and move enough engineering jobs there to compensate for the shutdown of Alcatel's head office functions. Beyond that, the French see it as a strategic move to create a heavily French-influenced European 5G infrastructure giant.
Here's a useful rundown of their product lines, which points to the fact that Nokia may have done well to take Combes' advice - Alcatel has crept up to No.2 in the IP router market, where Nokia doesn't have any products of its own. Of course, Alcatel comes with the enormous Bell Labs patent portfolio, which might make the deal worthwhile on its own. This interesting Inside 5G post discusses the issue and the potential for a 5G patent pool like the one for GSM.
Speaking of 5G, OFCOM has put down a marker for the spectrum position, issuing a report in which it pencils in six bands as potential 5G candidates and rules out the 28GHz Ka-band to keep it for the satellite industry.
Turkey, meanwhile, is considering dropping the 4G auction it announced less than a month ago in order to go straight for 5G "within two years". Really? Well, HKT and Huawei demonstrated inter-cell carrier aggregation recently, with speeds of 440Mbps.
Ericsson announced Q1 results. Revenue was down 6%, but the company claims they were up 13% before adjusting for the devaluation of the krona against the dollar. That said, they also admit that their North American business has been rather disappointing and most of the action has been in China. This is a real problem because they tend to sell software and consulting projects in the US and hardware in China, and the first is higher-margin.
That might not be the only problem for vendors in China. President Xi Jinping's crackdown on corruption may be about to bring the 4G investment boom to a sudden stop.
And Nokia HERE may be up for sale again and all sorts of companies are being rumoured as buyers.
Comcast-TWC OFF; Comcast 2Gbps very much ON. AT&T suddenly wants FTTH. 10-Q watch: AT&T, Verizon
The Comcast-TWC deal is officially dead. Both the US Justice Department and the FCC had made it known they wanted to call in an administrative judge, and that they doubted that applying conditions to the deal would make it acceptable. In the face of this, the parties to the deal seem to have decided that it's not worth the candle any more and backed out of it. "Analysts" (them!) apparently expect Comcast will acquire another asset, like Time Warner itself for the programming. Harold Feld discusses the FCC politics of this here.
This one expects they will acquire assets, but by building out more gigabit broadband, because that's precisely what they are doing. 2Gbps Comcast is coming to 1.3 million homes in Florida, and another huge rollout is coming to 12 Californian cities including the Bay Area. As Fierce points out, Comcast has been providing fibre-optic metro-Ethernet services to businesses in these areas since 2011 by extending its distribution network.
Deploying into Florida and Northern California means parking your trenching tractor right on AT&T's lawn. With the gigabit cable menace upon it, AT&T filed papers with the FCC saying it needs to invest in FTTH, urgently. So can we please buy DirecTV now? The document doesn't actually promise any more fibre over the 2 million homes they already promised, though - and 2 million is substantially less than Comcast is doing independently. However, AT&T is planning to deploy fibre in Chicago, one of Comcast's biggest markets, evidently stung by the invasion of California. The filing comes with the following table making it clear just how bad the situation might get:
AT&T has just sold $17.5bn of bonds to finance the DirecTV deal - now, how much fibre would that buy? Well, at the end of the rollout, Verizon was spending about $700 per home passed with FiOS, so that bond sale would pay for 25 million homes. AT&T Home Solutions has about 18.5 million homes in service...
Meanwhile, out west, Centurylink is rolling out 1Gbps FTTH where it's been hit by Charter's 100Mbps cable.
Slightly weirdly, AT&T's John Stephens is touting the fact 80% of their wireline broadband subscribers are "on IP". Isn't broadband, you know, Internet service? Presumably what he means is that they've swapped out the old ATM backhaul links BellSouth put in for something more modern like gigabit Ethernet. AT&T, Verizon, and Windstream recently joined the MetroEthernet Forum, apparently because they're having trouble with interconnection.
As usual, AT&T's wireline quarter was a very mixed bag. Although they added 440k gross broadband subscribers (hurray!), they only net-added 69k as others deserted to cable. TV adds were down quite sharply, from 201k to 50k. Although U-Verse now accounts for 69% of Home Solutions revenue, it's not enough - overall wireline revenues were off 3.1%. That's got a lot to do with the fact that although strategic business services had another great quarter, up 14.8%, the rest of business solutions is suffering and the segment was down 4.4% overall.
Stand by for an Executive Briefing on AT&T and Verizon's enterprise segment
In wireless, meanwhile, AT&T's M2M business is crushing it with 945k connected-device net adds of which 684k were high-value connected cars. Elsewhere, they had a very decent 440k net adds for humans, although wholesale lost 266k reseller customers as the price war bit into the low-end. ARPU in postpaid is off 9.6% through the combination of the price war and the shift towards equipment sales revenue - as those of you who read our Executive Briefings will know, the catch here is the equipment pricing. Wireless operating-level income was off 12% year-on-year "due to the success of Mobile Share Value plans", which is a funny way to put it. We can therefore say that their service pricing is falling, and so is their equipment pricing.
Here's an interesting rundown of AT&T open-source projects.
Over at Verizon, FiOS revenue was up 10% in Q1 and wireless revenue was up 3.1%, for an overall 4% revenue gain. Even here, the price war can be felt - VZW service revenue was flat or even falling, but the instalment plan payments on devices pushed it into positive territory. Wireless had 565k net adds in Q1, plus 820k tablets, a strong showing. Fran Shammo also named a number for M2M revenue in the quarter: $150m, or $600m/year.
62% of FiOS customers are taking one of the top-speed Quantum plans, with the largest group, 20%, on the 75/75Mbps plan. VZ's challenge is now to drive adoption within the footprint, and they reported 47k migrations from copper to fibre for the quarter. (We noticed recently that New York is just crawling with Verizon installers at the moment - there seems to be a van on every street corner.) However, the bad news was in the enterprise, where revenues fell 6% as AT&T's Network on Demand, the cablecos' SMB triple play, and Level(3)'s push into SMB ganged up on them.
Massive Apple Q2; iPhone 6 trounces GS6 on gaming metrics; cheap smartphones surge in MENA; $750m worth of Blackphones
Apple's Q2 was out this week. Revenue was $58bn, up from $45.6bn year-on-year, and net profit was $13.6bn, up from $10.2bn. Gross margin was 40.8%, up from 39.6%. And this was meant to be the boring, post-Christmas slump! The key to all this was the iPhone 6, with revenue from iPhones up 55% year-on-year, and China, where revenue was up 71% year-on-year, at $16.8bn. Horace sums up the impact thus:
It's perhaps not surprising when you realise that the iPhone 6 beats the Samsung Galaxy S6 on basically all of a whole battery of performance tests even though unlike the S6, it's got to use two CPU cores rather than eight, and the Galaxy S6 Edge costs almost $50 more to manufacture.
Will the arrival of the Apple Watch cause an iPhone 6 Mini? And it looks like Apple Pay, having torpedoed ISIS/Softcard, might do in the merchants' MCX/CurrentC payments alliance too - Best Buy just defected to their side.
At the other end of the market, IDC reckons smartphone shipments to the Middle East and Africa were up 83% in 2014 as really cheap handsets arrived on the market. 20% of smartphones sold in the region are < $100, and another 33% are $100-200, the segment that grew the most. Smartphone growth is over 100% annually in Kenya, Pakistan, and Nigeria. and 57% of working-class Nigerians are on the mobile web.
A lot of that is down to Mediatek's ultra-cheap chips. Here's an interview about their effort to get into M2M and wearables.
Silent Circle, meanwhile, has shifted $750m worth of Blackphones, software, and advice since they launched the security-focused device last year. Customers apparently include "30 or 40 per cent of the Fortune 500", so does that make Blackphone the new BlackBerry?
And Nokia denies it's planning a return to the gadget business.
Qualcomm hurts in Q1; Imagination releases MIPS technology; "no" to Applied Materials/TE
So the Galaxy S6 is expensive to manufacture and despite everything, it's not outperforming the iPhone 6. This can't be good news for Qualcomm. Qualcomm had to mark down its Q1 numbers substantially, having lost the GS6 order to Samsung's in-house chipmakers and their Exynos SoC. As Telecoms.com points out, that was presumably because the Exy was better than the best Snapdragon SoC Qualcomm could offer, and we remember stories that the prototype GS6 with a Snapdragon kept overheating. If the Exynos is dramatically better than the best Snapdragon, but still far behind Apple's product, what does that say about Qualcomm's? Nothing good.
The graphics core in the Apple A-series chip is designed by Imagination Technologies, and this week they've taken the interesting step of releasing a complete chip based on the MIPS architecture as open-source hardware. MIPS is similar in some ways to the RISC systems ARM is famous for, and it sounds like Imagination is hoping to drum up more research interest in the system. Interestingly, Google is also keen.
The DoJ antitrust division has been busy this week. The proposed $30bn merger of Tokyo Electron and Applied Materials has been banned in order to prevent a monopoly of the machine tools that make chips - together, Applied Materials (the market leader essentially forever) and Tokyo Electron would have had a market share of 50%.
Interesting product: a bare-metal switch designed for Cumulus Linux. HP is emphasising SDN features in its next lot of switches.
AWS financials; Facebook, Google Q1s; Microsoft cloud; Telstra rolls out SDN to Asia
For the first time ever, Amazon Web Services financials are being published, and it turns out that they make about $5bn in revenue annually, and what is more, their operating margin is around 20 per cent, way higher than anyone expected. In fact, it turns out that without AWS, Amazon.com would usually lose money. Amazon's North American retail sales were $13.4bn in Q1, and they earned $517m in operating income from that; AWS's sales were $1.6bn, and they earned $265m in operating income, about half as much on a tenth the turnover.
Click here for our new Telco 2.0 Executive Briefing on AWS
Elsewhere, Facebook's Q1 revenue was up "only" 42%, missing expectations. This was somewhat more serious because its costs rose 83%, as R&D spending doubled and the workforce grew 48%. The good news was that the average price of an ad was up 285%, while the volume served was down 63%. That's the premium ad strategy we discussed in this Briefing, with a vengeance.
Mark Zuckerberg has had to defend Internet.org against increasing criticism in India that it's a violation of net neutrality. You can certainly see why Indian developers, content creators, and e-commerce vendors would be annoyed about mobile operators subsidising a number of big international brands (and Wikipedia) - and why it's important, as Indians buy stuff on the mobile web.
Meanwhile, Google saw its ad pricing fall 7% in Q1. CFO Patrick Pichette said that this didn't reflect any difficulty monetising mobile, but rather the fact people skipping ads on YouTube were still counted as clicks. Why that should be a good thing wasn't explained.
Ben Evans has an interesting post on Google and why just pouring more data into the machine hasn't caused it to create a second business anything like AdSense.
Microsoft, meanwhile, says its cloud revenues have doubled year-on-year, although they count a lot of software products in with the Microsoft Azure line of business so this is a slightly odd definition.
A Windows update has unintentionally let slip the details of how Microsoft plans to roll out the upgrade to Windows 10, which will involve delivering a 2GB patch to essentially all the world's PCs, sometime in July.
Telstra, having bought PacNet, is planning to deploy their SDN platform across Asia.
The French government is preparing a startlingly illiberal set of demands on web hosting companies.
Google's Project Fi. Is the real story here Hutchison HUE? Facebook's dialler; new dev-focused UK MVNO
So, Google's ad pricing is sliding again and they're spending too much money on free pizza. What to do? Well, the Google MVNO has landed. Project Fi, as it is called, gets connectivity from both Sprint and T-Mobile, only on the Nexus 6 and on an invite basis like the early days of GMail. The $20/mo basic price plan includes voice with a Google Voice-like cloud number and interface, unlimited texts, and free 2G roaming. You then pay $10/GB upfront, but any unused data is refunded at the end of the month. Given that additional data on a T-Mobile plan costs $5/GB, that's not as cheap as it sounds. Several of the features there - like the rollover data and the free 2G roaming - sound distinctly T-Mobile-inspired.
We may be heading for a wave of roaming disruption - here's Carphone Warehouse's new MVNO iD, for example. That offers you a 12-month 4G plan, with free roaming to 20 markets plus Australia and the US and a Samsung Galaxy A3 phone, for £19.50/mo. That gives you 300 minutes of voice, 5000 texts, and 1GB of data. The bundle sizes sound like 3UK, which is no accident as they're the network partner.
The explanation of all this is Hutchison's new HUE product, which seems to be a roaming- or global-SIM focused MVNO platform. This is also widely rumoured to be the roaming partner for Project Fi. Now 3UK pre-Hue offered free roaming to other Hutch markets, which doesn't include the US. The new MVNO does. It's therefore a good guess that Hutch's roaming partner for the US is T-Mobile, and after all they've been cooperating in the UK for years.
Meanwhile, Simwood, the UK VoIP specialist, is starting up a developer-focused MVNO that's also running on the 3UK radio network. So perhaps, rather than "Google MVNO", the real story is "Hutchison begins global wholesale disruption"? They also announced the deployment of VoLTE and 800MHz spectrum later this year.
Google is spending money trying to get WebRTC call setup down under VoLTE's setup times, but its enterprise strategy can't compare with the integration between Microsoft Lync and basically everything else.
Here's a US cableco, pushing hosted VoIP to its SMB customers.
Weird "new entrant" in the UK; Orange aims at 100% fibre; Digital Single Market plans; EE Q1
Who ordered this? "Angie Communications" apparently intends to build out FTTH to 3 million homes in the UK and top that off with 90% population coverage in 5G. It claims to have €300m in financing, i.e. not very much in the light of its enormous ambitions. ISP Review has been investigating. As the company doesn't have code powers to dig up the road, nor a spectrum licence, it sounds tricky! The CEO's LinkedIn page is not much more illuminating.
Perhaps more seriously, Orange is planning to build out to 100% FTTH in 9 French cities by the end of 2016. Stéphane Richard says more price cuts would be insanity, but we all know what Xavier Niel would say to that. "Here's 10% off. Wibble."
The European Commission intends to publish its Digital Single Market plan on May 6th, which will apparently "restore Europe as a world leader in information and communications technology" as well as a variety of other wonderful things. They will do this by making cross-border online shopping easier, and remove barriers to where you can keep data. Hold on, isn't everyone meant to be worrying about that these days? They're also talking vaguely about "regulating OTT".
EE's Q1 revenue and ARPU was basically flat and all the 4G subscriber growth is coming from internal contract rollovers, not net gains.
Telecom Italia will be distributing Sky content over its fibre network. Vodafone might buy Altice's old Portuguese cable network.
IoT forecasts; Sigfox vs LoRa; debunking power by the hour; DMCA on tractors
The Internet of Things is going to be worth $4.3 trillion by 2024, says a report. The idea is apparently that it will eventually subsume the entire IT industry. (Why not include the customers, too?)
IDC, meanwhile, argues that the IoT will need a 750% increase in the data centre space it uses. A lot of that will have to be located at the network edge in smaller units, although some (mostly analytics/data warehousing) will be "hyperscale".
Here's an interesting piece comparing Sigfox, LoRa, and some other LPWAN technologies.
Is all that "Rolls-Royce power by the hour" stuff really all that? Aapo Markkanen from ABI investigates and finds out that although product-service systems do seem to be somewhat more efficient, most of it goes away due to an adverse-selection problem - customers who need a lot of maintenance tend to pick the option where someone else does the maintenance, driving up the costs.
And John Deere wants to licence you a tractor, not sell it, because it's got software in.