Wednesday, May 31, 2006
God I hate this song, but I couldn't resist. I think a lot of us who care about these sorts of things have been looking at the impending Telio IPO and wondering what the potential damage from Vonage could be, if any.
I would argue that, despite some superficial similarities, the companies are quite different in approach and strategy. Nevertheless, companies tend to get lumped together by investors, especially if they sense that there is some sentiment-led risk involved. So, I was intrigued to see today the news that Telio is proceeding with its listing on the main Oslo Bourse (heretofore it has been an OTC share), but withdrawing the sale of new shares.
The bookbuilding process apparently could only achieve an oversubscribed offering at NOK30 per share, which was below the indicative price range set by the company of NOK31 - 37. Rather than lowering the range, taking the money and running to their new yachts, the company and founders seem to be signalling that they are in for longer term value creation - which I guess investors and potential investors should regard as a pretty significant statement. It's nice to see a company with the conviction to walk away from a difficult situation, and may do something to dispel some of the bad karma and cynicism radiating from across the pond.
Back in first grade I learned that if you mix red with yellow, you get Orange. Like I said yesterday, as a newcomer trying to come into this space, Vodafone is going to have to float like a butterfly and sting like a bee, as well as run very fast - and do some M&A. I will publicly eat my shorts if both T-Mobile and Telefonica don't hit the UK with something similar by year-end, and there are not many DSL assets in the market which could give them a reasonable shot at success. Almost needless to say, this also further complicates life for BT's mobile efforts.
Tuesday, May 30, 2006
If you have 180 minutes to kill and want to take part firsthand in the world of glamor which is financial analyst briefings, then step on over to the Vodafone 2006 financial results webcast (time-shifted). This was the much-heralded make-or-break performance which the UK weekend press expended so much newsprint on, and while I thought the financial results were decent, all things considered, the strategy event left me a bit non-plussed. Maybe my hopes were too high in expecting something sexy on the mobile payments or social web fronts, and the company's tone on M&A was decidedly less bellicose than I might have expected, given how badly it has been on the public defensive over the past six months.
Then again, maybe I wasn't the only one expecting some real fireworks - the decision to raise the dividend to a 60% payout ratio and hand back another GBP3bn later this summer (roll up, roll up, get your GBP9bn here) could be viewed, in an uncharitable interpretation, as an apology of sorts to those who wanted more fundamental reform. It worked for a time today, but the foul tone of the global markets eroded the gains of earlier in the day, taking the stock back to where it ended last Friday. It's really something to see a company producing what amounts to a combined yield of 17% (normal dividend and special distribution), and still not being able to make headway.
Maybe that's mainly down to market externalities, and maybe some of it relates to the strategic vision. I think a lot of what was said today made sense, particularly from Thomas Geitner and Fritz Joussen out of Germany. I was particularly intrigued by the newfound (if vaguely stated) enthusiasm for the possibilities around IM/presence (I have heard various rumblings of an internally-developed "secret weapon" in this area) and place-shifting (the conceptual description was very much along the lines of GoToMyPC or Slingbox). Most intriguing, and challenging, of all was Vodafone's stated ambition of developing an advertising revenue stream - intriguing because of the sheer number of eyeballs (people, actually) it brokers access to, challenging because of the obvious potential conflicts with those much more experienced and advanced than it in this area.
Still, it's desperately trying, and for a company the size of Vodafone to claim that it targets 10% of total group revenues from entirely new business initiatives within a handful of years is indeed an ambitious target. I would like to think that Vodafone (or any other legacy telco) is capable of realizing that ambition through a change in DNA, but I tend to think that it has waited too late and may not be going far enough fast enough, given how crowded some of its core markets are going to be in a year's time, when all the pieces are in place. I don't understand the initial focus on wholesale DSL as part of a bundle. I don't believe this will deliver the level of control or pricing flexibility needed to compete with some of the more innovative and disruptive offerings in the space (of which we should hear more officially tomorrow from France Telecom), and I still believe the company will have to make acquisitions to accelerate time to market and increase differentiation. Also, the WiFi aspect of the strategy was cursorily covered in today's presentation and seems to be consigned to some later stage of market development in Vodafone's mind, whereas many of us see it as being a highly relevant issue today.
Transformation is never easy in large companies, especially when there has been a sizeable time lag in recognizing and reacting to waves of change around the supertanker. Then again, I heard someone say recently that a supertanker can actually be turned around within only 30 minutes, which I think will make the market (both financial and industry) very wary of underestimating this one, despite a somewhat inauspicious start.
UPDATE: I see Disruptive Dean has been working through some of the granularity on Vodafone's mobile data numbers, and his conclusions seem feasible to me. Vodafone management were keen to point out that in the month of March 10% of group revenues were attributable to 3G devices, but if Dean is right then this is still disproportionately weighted towards laptop cards - not that there's anything wrong with laptop cards. They're totally respectable as a business model, but the flipside is that, despite significant uptake of 3G consumer services, the situation is far from being a consumer data revolution.
UPDATE 2: A Palladium Club mega-uber value reader writes in response to my mention of an IM "secret weapon," and points me to South African mobile games specialist Clockspeed, which has developed Mixt, a mobile IM platform which appears to have interoperability with MSN and ICQ, and has reportedly gained 800,000 users in 12 months of operation. Clockspeed's parent company Swist does back-end billing for Vodacom, so I guess we could argue that one possible solution is already within the Vodafone orbit.
As stated here last week, over in the Netherlands UPC has confirmed it's going to go after the Amsterdam fiber project in court. Simultaneously, it seems UPC is living through a kind of High Definition hell. Apparently, the copy protection signal transmitted with the HD media has a tendency to bork the Philips HD boxes being rolled out, so they're not being rolled out. This wouldn't be so terribly bad, if only the company hadn't apparently made a pledge last year to show the World Cup matches in HD - a claim it now appears to be back-pedalling on. Except that it's own HD promotion website still contains the text "De eerste uitzendingen in Nederland zijn de uitzendingen van het WK," which states that the first HD transmissions in the Netherlands will be of the WK, which stands for World Cup (I have screen grabs if this should change). This is a not a good example of joined up thinking between product planning, marketing, and press relations. As in the UK, cable misfires in Holland seem to inspire a special brand of disdain and venom, which is pouring forth in this user forum.
Arun Sarin today remarked that the pace of change in the industry seemed to be accelerating - a view not lost on mega-uber value readers of this humble bloglet, who have long observed that IP is a raised middle finger to any number of incumbent business models. Today brings another couple of datapoints. One of said mega-uber value readers (Titanium Class) points me to an "experimental" foray into VOD by UK retailing monolith Tesco (this could be the perfect virtuous infomercial circle). Elsewhere, a well-timed French press release in my inbox alerts me to the fact that the Neuf-Cegetel Twin dual-mode handset is now available for purchase.
I've spent most of the day tied up with Vodafone's 2006 results and strategy presentation (more of which later), so have been slow in posting a link to Telio's IPO roadshow presentation material, which might be of interest to anyone looking to compare and contrast with the Vonage story. Trading is set to start in Oslo on Friday.
Friday, May 26, 2006
I just noticed that the moderator of the Vonage forums has opened up the Vonage Stock discussion section for the world to see. No registration necessary. Tune in for some unfortunate discoveries (some Vonage customers are claiming that the IPO order site initially showed they received zero allocation, then later found they had been given 1,300 shares - some seem determined to fight this), and a lot of dismay.
Thursday, May 25, 2006
I'm certainly going to have a lot of interesting questions for the panel on 8th June. Yahoo! and eBay form a wide-ranging strategic partnership covering various key aspects of their respective businesses, including some cooperation on click-to-call. Will we see Skype finally federate with other platforms as an eventual outcome of this process?
A couple of interesting things I have stumbled across here and there recently which might be of interest:
SKMap, a Japanese project which maps Skype presence icons onto Google Maps (I can see two users in Antarctica!);
Worldmapper, an amazing project which rescales the world map to specific themes - this adds a lot of perspective to certain issues, such as the concentration of intellectual property in a few hands (look how big the UK is). A communication map is forthcoming.
Wednesday, May 24, 2006
Oh dear, what an inauspicious start for Vonage, not that I had expected anything different. My screen shows the maiden stock closing down 12.7% on the day, on volume of 26.1m shares (that's four times the volume in Verizon), with some major order imbalances late in the session (on the short side).
I have very mixed emotions about this company: I first started talking to them in late 2002, and they were incredibly gracious and open - I should acknowledge the fact that Vonage was a key stepping stone to my creating the blog you are reading now. In point of fact, if it hadn't been for my fortuitous early contacts with Vonage, Jeff Pulver (the original Vonage co-founder) and Skype, you and I wouldn't be having this monologue right now.
Then again, I can't help but think of a mega-uber value reader and friend's assessment that "it's easy to spot the pioneer, he's the one with all the arrows in his back." The innovation cycle has truncated (all the man-years Vonage invested in its offering now come in a box with a four-week market launch timetable), everyone and his uncle has a VoIP business plan, consumer and market expectations about the nature and role of voice have changed, and sadly I think Vonage has ended up way out of step with the times.
As I stated in my earlier post, I think the company waited at least a year too late to do this deal - now the momentum in the US is with cable, and globally, with new models for voice. I was also perplexed to hear from a friend on the buyside that the European roadshow team consisted of six (6) members of management, including Jeff Citron (engaging though he is, why he was even there I am not sure), who apparently literally did all the talking.
Nevertheless, we shouldn't ignore, nor disrespect, the powerful galvanizing force that this
company has been for VoIP awareness generally. It would be easy to stand here with the benefit of hindsight and poo-pooh Vonage's efforts. A little Googling will uncover some much more bullish assessments in the blogosphere from not so long ago.
One of my favorite themes running through the telecom industry is the increasingly fuzzy line between the arms merchants and their customers, a point I touched on at VON using Nokia as an example, though there are others I could have focused on. Though not strictly a comparable case, Intel's strategy in wireless nevertheless interests me tremendously. Following on from the deals with Pipex in the UK, and a handful of others, Intel has now entered into a similar arrangement with Enertel of the Netherlands (plus a separate deal with Orascom). KPN this morning announced that it is acquiring Enertel, though the deal excludes Enertel's spectrum, which will remain in the hands of this JV.
Tuesday, May 23, 2006
I think one of the many lessons for the telecom industry from the advent of Skype has been the need to redefine our understanding of user motivation. Obviously, the industry was right to be alarmed (when it would admit to being alarmed, that is) at Skype's potential to drive simple price arbitrage opportunities, but there was clearly a lot more going on than this alone. Ease-of-use, audio quality, presence, multi-chat, file transfer, etc., all came together to form a "killer cocktail" experience for the user, resulting in something not necessarily recognisable to the industry as a competing "voice service". It was/is something else, another behavior - purple minutes vs. grey minutes, as JP might say.
This view seems to be borne out by a survey just out in Japan (Japanese only, ご免ね、外人さん). Japan.Internet.com and goo Research interviewed 1,011 internet users aged 20 - 59, and found that just over 11% of them (113 people) had downloaded and installed Skype, and 42% had heard of it. Of those who hadn't used Skype, once the application was explained to them, just over 42% expressed some degree of interest in using it. What I find most interesting and relevant is that, of those who had installed Skype, only 14% said that their use of fixed line and mobile phones had declined as a result, in contrast to 74% who said that their phone usage patterns remained unchanged. This is consistent with a similar survey carried out among Skype users last year, which found that 20% said their conventional phone usage had declined, while 78% cited no change.
Monday, May 22, 2006
(For Europeans or others who were fortunate enough to grow up without having the NRA's slogan indelibly implanted on their tender young minds, this may help explain my title)
The always insightful and engaging Richard Stastny has a nice post on the IMS debate from VON last week, including a link to his entertaining presentation. Both are highly deserving of your time. Richard and Martin both point to the KPN presentation on Thursday (unfortunately I was back in London by then), citing it as an outbreak of sanity, and indeed this does seem to represent a glimmer of hope in the suspicious mind of a pessimist like me. I have to question, however, how much KPN's stance relates to its respect for the end-to-end principle, and how much is down to simple market dynamics - cable is, afterall, alive and well in the Netherlands, and capable of absorbing a lot of disgruntled customers. I wonder if the dominant players in some of Europe's less competitive markets will be as reasonable?
I am set to moderate what promises to be a fascinating panel with Skype, Yahoo!, Google and Microsoft on behalf of the Telecommunications Executive Network, in London on 8th June. However, be aware that apparently the organizers only admit Senior Executive Vice Potentates, Telecom-atollahs, or comparable titles, so check your business card before you register.
Friday, May 19, 2006
BT's results yesterday seemed to please a lot of people, and there were indeed some positive things (residential ARPU increase, margin improvement at Retail, increase in share of DSL net adds, etc.), along with some negatives (a sharp increase in residential line loss to 10.8% annualized, acceleration in wholesale line rental and CPS net additions). However, one thing I was quizzical about was the Fusion numbers. Back in early February, when the company reported Q3 results, it said that as of the week ending 3rd February, Fusion was generating over 2,000 connections per week, and had over 13,000 customers. Yesterday's release contained the sentence "BT Fusion has now attracted over 30,000 connections since the launch." I confirmed with the company that the word "now" refers to the current total, not the total at the end of the quarter to 31st March. This implies that the run-rate for new connections is now in the 1,100 - 1,200 per week range, rather than the 2,000 cited earlier. What's going wrong?
UPDATE: Last year I tried to foresee what some challenges could be here and here, and predictably a number of mega-uber value readers have chimed in with their own choice views, which include:
"It seems to me that they have made the pain (new handset - no choice, new AP, tying myself into 3 BT subscriptions - two of which are uncompetitive etc.) not worth the meagre gain (mobile-to-fixed arbitrage for a few specific outbound call types)."
"How about some of the worst, dreariest newspaper adverts since GUM's Autumn sale, Moscow 1963?"
Thursday, May 18, 2006
A Titanium Class mega-uber value reader points me to a press release from Casema (as usual, Trouw is right on the case), one of the Dutch "Holy Trinity" of cable (once owned by KPN, then by France Telecom, now by private equity - no doubt to be sold again imminently). The company has arranged to acquire Tele2/Versatel's WiMax license, and apparently plans to focus on broadband access and VoIP in rural areas, eventually expanding nationwide, though the license apparently doesn't allow roaming in its present incarnation - there is a "nomadic" license available in 2008, for which Casema would be a natural bidder. I'm curious as to why a born disruptor like Tele2 would be selling out, but perhaps it's to raise funds for the looming nuclear arms race in access.
Not long into the BT Q4 analyst meeting today, my friend and coopetitor Cyrus Mewawalla asked about BT's position on net neutrality issues. Ben Verwaayan hummed and hawed a bit in his lengthy reply, but when prompted with a more direct question about imposing charges on third party content providers, Chairman Sir Christopher (anything but) Bland responded with a one-word reply "Yes."
My slides from VON are available here, but you have to have a BitTorrent client installed to download them. Just for fun and a bit of perspective, I have also added my 2004 Spring VON Europe slides from London. Some of the content here proved to be wide of the mark, but some of it I'm quite pleased with - particularly the focus on gaming and social networking as abosorbers of consumer attention and communication behaviors (note the mention of XFire).
Wednesday, May 17, 2006
Well, it's been a whirlwind time here, and I have failed dismally in my aspirations to post more on the goings-on, partly because I couldn't find the time and partly because so much of what I saw and heard I can't repeat. This morning it was my pleasure to appear on a panel with Michael Haberler, Brough Turner and the irrepressable Bob Frankston, on the issue of access reverticalization. With no forethought or prior coordination, we all ended up talking about the need to fundamentally rethink the access model from layer zero, changing the funding model and policy priorities. The discussion was a bit too wide-ranging and complex for me to do justice here, so I will refrain.
For my money, quote of the day came from an American attendee during one of the breaks: "What's the difference between telecom and the airline industry? Answer: About four years." Priceless.
I also sat in on presentations on ENUM and voice peering which were very complex but thought provoking. I am hoping that someone better qualified than I can summarize what went on in this space - but suffice it to say that this is a dynamic area generating more and more interest.
I had a chance to spend some time with the Truphone folks, who seemed to be at the center of the buzz around the developer ecosphere which may develop around Nokia's E-Series devices. I also stopped in to see the RTC Factory people, who impressed me. So little time, so much to do.
Gotta run, my WiFi credit is about to expire.
Tuesday, May 16, 2006
Jeff Pulver, who was wearing some very kick-ass purple clogs today, has long spoken of “VON blur,” but today feels more like VON burn to me. There was some really interesting stuff taking place within the Stockholm International Fairs complex, but while we were all comfortably ensconced in it, life in the real world carried on. I’ll try to recap the highlights of both in this post.
We awoke to news of a tie-up between Nokia and GTalk in the introduction of the internet tablet device, which played nicely into a slide in my presentation, entitled "Whose side are you on anyway?" about the growing tension between device suppliers and their carrier customers.
XConnect announced that it had signed a binding agreement to acquire e164.info, which has the largest private ENUM registry going.
We also saw AOL announce AIM Phoneline, which gives AIM users a free PSTN number and free voicemail. This is particularly pointed as it comes one day after Skype launched free SkypeOut in North America, with all the concomitant damage that this and other Skype initiatives apparently inflict. For more on this, check out a recorded phone call/podcast with my friend Thomas Anglero here.
IDT sold its fledgling content unit to Liberty Media in a deal which gets Liberty out of IDT’s core business, jettisons some debt and brings in $186m in cash.
One thing that I noticed upon my arrival in Sweden was the sheer amount of outdoor and television advertising surrounding Telenor’s takeover of Vodafone Sweden (a campaign based on the concept of red changing to blue), and while I was about to go onstage and talk about the incumbent IP triple play as a club to beat one another with, TeliaSonera was announcing the latest step in this Nordic tit-for-tat, the acquisition of leading alternative Norwegian DSL player Nextgentel. This made me happy because: 1) Nextgentel was high on my list of takeover targets in Europe, and; 2) I downgraded Telenor a couple of weeks back.
Back in the VON world, I participated in a panel moderated by Howard Thaw of Iotum on the topic of the investment climate, which also included the ever-thoughtful and eloquent Martin Geddes and VC Christian Leybold from BV Capital. This was a real journey, as three people with largely common approaches and viewpoints, but totally different audiences and goals, tried to work through some of the issues facing the industry. I enjoyed it. One of the issues which the panel discussed in our preparatory meeting, but sadly didn't have time to address in the presentation, was the fact that the compression of the innovation cycle means that the potentially most disruptive developers/companies are acquired before they even become investible. This turned out to be the theme of an interesting conversation I had with someone else later, the conclusion of which was "M&A is the new HR." Translation: Skype/eBay buy Camino Networks while it is still in stealth mode, Google employs promising individuals like Sean Egan and the Carr Brothers.
Lastly, the most important aspect of the VON experience is that I get to meet up with old friends and hear new gossip, meet new people (some connected to people I already know, some not), and see and hear about new and interesting developments. One of these was something really cool from a company called Fonav, though I am bound by NDA as to the specifics. Another was a development which will truly rock some worlds if it comes to pass – but enough of that. Bring on tomorrow.
Now in the morning session of VON in Stockholm, with Niklas Zennstrom on stage. He has just given some user stats: US 6m registered users, UK 3m, Germany 5m, China 13m. He has noted the relatively low penetration levels that these represent. In contrast, he has pointed out that Finland, with 700k users, is at roughly 20% penetration of the online population. He has claimed that 1/3 of Skype users are business users. He opened with a very cool commercial from the US showing a rapper from Brooklyn collaborating with other artists around the world - the message was about communities of interest, a theme which has permeated Niklas' talk. He also related a very interesting anecdote about Oxford University shutting down access to Skype, after which Skype proactively approached the IT department there and eased their concerns over security, after which access was restored.
Monday, May 15, 2006
Apologies for the reference to a Shangri-La's hit. The past - over at Chaotica, I am ruminating on some 2004 hot stories which continue to deliver surprises. Present - I am in my hotel in Stockholm, looking forward to a night of quality shut-eye. The future - I am looking forward to VON, and am hearing that there is to be a major announcement in the voice peering space, along with whatever else might come out over the next couple of days.
Need something to do in your spare time? Looking to supplement your income? Why not become a VoIP service provider? Up in Sweden, there is someone who can help you, and I'm looking forward to meeting these folks at the VON show. Perhaps EuroTelcoblog will evolve into an actual EuroTelco over time. Apparently, RTC can get me up and running in eight weeks, with branded GIPS-powered softphones, hardphones, ATAs, auto-provisioning, NAT/firewall traversal, OSS, billing, termination in about 200 countries, credible partners - you name it.
(P.S. - For anyone interested in the fusion between search, mapping and click-to-call, check out hitta.se, one of RTC's partners. Let's say you needed to find an Apple distributor - here's what you'd see - satellite image, street-level view, click-to-call capability, pretty slick.)
Friday, May 12, 2006
I just got a press release saying that Eve Online, published by CCP Games in Iceland, is going to be integrating voice from Vivox. The quote from CCP's CEO says it all: “Players of EVE are attracted by its unique role playing and space simulation features, but when players unite to form corporations and alliances, the game’s dynamic, immersive experience really comes alive. Now users will be able to talk, strategize, plot and negotiate naturally with each other."
My slides for VON contain this view:
•This (the voice game) is ultimately not a battle for minutes of traffic (packetized or otherwise)
•It’s not even really about voice as a service
•It’s about voice as a feature, and your share of the consumer’s attention
The gaming crowd has understood this for a long time, and adding voice enhances the total experience of the game. What experience can telcos offer users to enhance the voice?
NewsCorp's got it, that's for sure. I just saw a story on Reuters in Italian saying that Sky Italia has struck a deal with Tiscali for a broadband product offering apparently to be called "Tiscali for Sky," offering speeds of 4, 8 and 12Mbps. We could see this move coming a mile away, though I had suspected the Italian strategy would involve acquisition rather than partnership - still I guess it's early in the process. If any Italian mega-uber value readers have any further insight please let me know.
Thursday, May 11, 2006
Last week, in writing to clients about the Telenor results, I included a comment to the effect that I was concerned the complicated solution proposed for the row with Alfa Group over control of Kyivstar (Ukraine) and Vimpelcom (number two in Russia) could get a lot more complicated if a financially stronger and larger player (say one which might be on the verge of being handed $45bn or so) were to emerge as a partner with Alfa. Damned if today we don't see a story about MTS (the leading player in the Russian market). Is this genuine, a typical market rumor, or a head-fake by Vodafone M&A strategists?
EuroTelcos, life sure is getting more complicated. DT said today that line loss (which I make out at 5.7% annualized) was unexpectedly high in Q1, though this is tame compared to KPN's 15.5% in consumer, Telia Sweden's 10%, or Telenor's 16%. The company cut its revenue outlook for the Broadband and Fixed division by EUR600m based on this first quarter, and it looks as though the likes of Freenet and United Internet are really starting to bite.
Meanwhile, over on the Viacom call, management said XFire's user base is growing at 8 - 10% per month, and that one million of its four million users (heavy hitters) are on the service for an average of 91 hours a month. 91 hours a month! Two years ago at VON in London I put up some usage statistics from Social Networking 1.0 poster child, Friendster, which was hot sh^t at the time, and made the point that the time spent in the site was way ahead of time spent on any other "dating site" and more than on the PSTN typically. I made the point that communities of interest could generate this level of intensity of usage, provided they were tied to a compelling experience - and this made them fertile ground for IM and VoIP. I thought it was a no-brainer, but I think some people disagreed with me, and I'm not convinced the telecom industry has yet really grasped this, but old media seems to have gotten hip very quickly.
Wednesday, May 10, 2006
I first met Neil Fairbrother when he was at Neos Networks, before it was sold to Scottish and Southern Energy. He's now running Thames Valley Pod, which is currently in beta and within a few days of going live. This is independently-produced content (video, spoken word, music) with a highly localized focus, and as a result it has had buy-in from local sponsors. There's a lot more to go into the archive ahead of launch, and I'm intrigued to see what the numbers start to look like once its live. Apparently, even in stealth mode, the site gets about 100 downloads per week.
One of my mega-uber value readers put me in touch with Richard Marshall of Rapid Mobile, and he paid a visit to my office today to give me a demonstration of the betting solution and some other projects which aren't public yet. I was blown away. Keep your eyes open for some news from this company. One thing Richard conveyed to me, which was not particularly surprising, is that the company has found the process of trying to get carriers onboard frustrating - so they've given up. The subscription betting model they have been running has processed a staggering amount of bets to date (I'm not sure if I should state the number, so I won't), and you would think that any carrier would be eager to enter into a revenue share or at least be a transaction agent for this and whatever else it might evolve into (banking, lottery, stock trading all spring to mind, just for starters). Alas, the only upside for the carriers is incremental data revenues.
Tags: missed opportunities, dumb pipe
Finland's going to get a lot colder. A Platinum Club mega-uber value reader there points me to the new pricing plans of Saunalahti's Nettipuhelin (netphone). Salient points:
Startup costs 0
Monthly fee 0
On net calls 0
PSTN minutes 1 cent per minute + 10 cent set up (international calls are highly competitive)
GSM calls 7 cents per minute + 10 cent set up
Calls to Saunalahti GSM network 5 cents per minute + 10 cent set up
Bring your own ATA or use softphone
Port your PSTN number or pick a new one in any area code
Use any Internet connection (i.e. service not limited to Saunalahti ADSL)
This is incredibly aggressive, to say the least, and as he points out you can barely get local minutes in Finland for 1 cent, let alone international. But check out the 3G tariffs:
Unlimited on-net minutes start at EUR20 per month
Unbundled minutes are 7 cents or 500 minutes for EUR18
Bundled, unlimited minutes on all GSM networks is EUR50 per month
3G data is EUR10 for 128 kbps, EUR30 for 384 kbps and EUR40 for 1 Mbps
Sign a two-year contract, get a 128kbps datacard plan for EUR10
What's the Finnish for "ouch"?
The Advertising Standards Authority in the UK has an interesting definition of the word "unlimited," as demonstrated in this complaint against Vodafone's laptop card advertising. It's apparently acceptable to use the word "unlimited" if you make it clear that this actually means 1GB, and as long as you haven't levied additional charges or churned off violators. I find several things strange here. Average usage on the datacard product is apparently "a small fraction" of the 1GB limit, but I find this hard to imagine, or maybe the average user has "your father's" internet habits - mark my words that will change. I also find it strange that the industry regards 1GB as a generous limit, because for a product so far taken up mostly by corporate road-warrior types I don't think that's very much - my slides for VON San Jose alone were 45MB, and if I were to do Skype file transfers to ten other people, I'd eat up a huge chunk of my monthly limit, risking intervention - except that it appears that not many people have crossed that line and that Vodafone apparently doesn't enforce its own rules very vigorously.
Apparently it's been really hot in Scandinavia recently, but now they're expecting snow by the weekend, just in time for my arrival in the region. I will be presenting and doing two panels (regrettably I have had to drop out of a third due to commitments at my day gig) at VON Stockholm. Bring a sweater. Some time back I half-jokingly predicted that we might soon see a perpetual VoIP conference on a cruise ship, and I had VON in mind, given its increasingly global coverage, and also the priceless opportunity to call it "VON Voyage." Now it seems that some the folks at Teleavisen, the leading industry news portal in Norway, have hit on the same idea, and the ship should be leaving the dock sometime soon for a two schmooze cruise with Norway's telecoms elite.
Tuesday, May 09, 2006
I'm happy to say that my friend and longstanding mega-uber value reader, Paul Sijben, has started a blog and has a rather downbeat assessment of telco prospects as his first post. My favorite quote:
"I like to compare the old telcos to Polar Bears, strong and all-powerful in
their domain of frozen polar wasteland. However the ice-caps are melting and
this leaves them with an ever shrinking domain while the rest of the world is
taken over by the competition. This goes on until the ice sheet has melted
completely and the bears drown."
Wish I'd written that.
Paul's message mirrors some conversations I've had with clients recently (the gist of which is generally reflected here), regarding telcos' ability to innovate and think outside the box, and the lack of confidence evident in the sectors' huge underperformance in the stock market. On every occasion, I see the ghost of Juan Villalonga sitting in the corner - okay, he was waaaay too early and maybe execution wasn't all it could have been, but maybe he was on to something. Whatever the ultimate answer is, I think what investors are looking to see is whether telcos are in fact polar bears on a shrinking sheet of ice, or Arctic Monkeys (for those unfamiliar with them, this is a group from Sheffield who have attained record-setting levels of success despite [or perhaps because of] their tendency to break every rule of conventional music business strategy).
The conference call season is in full swing again, and this morning we were treated to a decent set of numbers from KPN. As usual, from a telco disruption point of view, the fixed line KPIs hold some interesting datapoints. Consumer line loss in Q1 of 194k equates to a run-rate of 15.5% on an annualized basis, which is three times the level seen in Q1 last year, and the loss of discount PSTN call packages was also noteworthy. Against this, the company added 60k "InternetPlusBellen" (its voluntary naked DSL offering with VoIP bundled in) subs out of a total of 179k DSL net adds. Consumer EBITDA margin contracted 3.9 percentage points YoY, however, though the company's share of the retail broadband market looks to have risen again. I think it was Jack Welch who coined the phrase "destroy your business before someone else does it for you."
Monday, May 08, 2006
One week ahead of the VON kick-off, and interestingly on the same day that Vodafone announces cuts to roaming charges, along comes Truphone, which just sent me a press release laying claim to being the "world's first 4G network operator." Truphone has developed a client in Symbian which runs on Nokia E Series phones, as well as a SIP architecture built entirely from open-source components. As I understand it, the company is also working on a client for Windows smartphones. I guess this sort of thing must prompt some level of debate within Nokia, along the lines of: are we an arms merchant for telcos, or are we a technology platform which enables innovation at the expense of our legacy customers?
Sunday, May 07, 2006
Friday, May 05, 2006
I've written about Bridgeport Networks so many times it almost hurts, but now they've gone and landed a global agreement with Siemens Communications which puts their NomadicONE solution deeply into the mix - which I guess puts them pretty deeply into some cable offerings. Not to detract or distract from this important deal, but there has been an awful lot of speculation regarding the future of Siemens Com, which could take Bridgeport to a lot of other interesting places.
Thursday, May 04, 2006
I see from its Q1 results release that Golden Telecom in Russia has completed 750 of its planned 5,000 node WiFi network in central Moscow, and plans to increase that to 1,300 by the end of May. If any mega-bolshoi value readers out there (I do have a few in Moscow) have any firsthand insights or experiences to share I'd love to hear them.
Now listening to the Telenor conference call, where CEO Jon Fredrik Baksaas has just stated that 25% of Telenor's retail DSL base is on naked DSL. That's 128k at the end of Q1, or 14% of the total DSL market. However, another 254k in the market are on unbundled loops, and I would assume that a significant number of those are also without PSTN subscriptions. Traditional voice line loss (annualized) was up to 16.3% in the quarter, from 14% in Q4, and there was a sharp drop in wholesale voice lines, leading me to suspect that VoIP migration is really moving into high gear.
Tuesday, May 02, 2006
I have read that one definition of mental illness is to repeat the same steps over and over and expect a different outcome. At my panel last week at Total Telecom's World Telecommunications Congress in Geneva, one of the issues we were asked to address was how carriers can break out of their presumed death-spiral, and I raised the issue of cultural and organizational structure as impediments.
Part of this was illustrated when I did my usual schtick of asking the telco-centric audience for a show of hands about their online behavior, something I have tried to do at every event I have participated in over the past two years. "How many have used BitTorrent or eDonkey?" Two hands. (I find this particularly alarming given the amazing amount of newsflow and innovation around P2P.) Later, in passing I mentioned Flickr! and asked for a show of hands of people who had heard of it - four. Still later, in talking about out-of-the-box thinking in telco history, I mentioned the development process of i-mode as well as SK Telecom's Cyworld acquisition, but no one had ever heard of Cyworld. To be honest, I didn't even see any delegates using laptops in the venue (hardly surprising given that there was only extortionately-priced hotel WiFi available). My summary point to the audience was that I suspected there was a major disconnect between the behavior of their customers and themselves, and that this is how telcos can get bitten on the backside.
Maybe I'm being too harsh, but given all the chaos of the past two years, it's strange to be getting the same responses in mid-2006 as in early 2004, when the industry was still wasting its time laughing at Skype. Maybe my audience was not representative of the industry as a whole (yet again)? A reader within a European telco recently wrote in to say that he believes the issue is not awareness, but rather implementation, due to organizational complexity. He's probably right, and I suspect it's also related to communications flows and learning curves within different levels of management and strategy/planning functions. I also know from firsthand experience that top-notch strategy people can simply be completely ignored by management who think they know better, to their eventual detriment.
Whatever the mix of ingredients, the clock is ticking, and 7% EuroTelco underperformance relative to STOXX 600 this year puts the sector in last place by a significant margin. I interpret this as a continuing vote of no confidence from investors that EuroTelco has what it takes to change its DNA and learn to deal with/benefit from innovation at the edge.
Back from the long weekend, I see that things are accelerating in the Voice 2.0 world. First, iotum and PhoneGnome are getting some great coverage of their tie-up. I like Alec Saunders' comments in the O'Reilly article about continental drift moving faster than telco feature evolution, maybe going it alone and trying to peer with as many others as possible is indeed the best way to speed things up - at least it should get someone's attention. I also see that my good friend Thomas Anglero is starting to take the wrapping off an idea he discussed with me some time back - Nuclei Networks. Stand by for more on this interesting story.
UPDATE: I spoke with Thomas this morning and there indeed is some exciting news in the pipeline with Nuclei Networks.