Happy holidays, farewell noughties, and onward and upward in 2010

Well, as Santa packs his sleigh, one thing is painfully clear: I have been a bad blogger and will only be receiving lumps of coal this year. My New Year's resolution is to post and Tweet more frequently in 2010. It promises to be an interesting, if challenging, new decade, and I look forward to being involved in new projects and adventures.

Given that the past two years have brought me little besides serial frustrations and disappointments on both personal and professional fronts, I can't say that I am sad to see the end of this first decade of the millennium. However, that would be to overlook all the wondrous developments in our beloved telecom which make the world in December 2009 look almost unrecognisable to the time traveller from ten years ago: the inexorable global rise of mobile; ubiquitous WiFi; grid computing; Linux in the consumer sphere; the proliferation of consumer broadband; peer-to-peer architectures; social media, user-generated content, and mash-ups; online gaming and immersive worlds; access-independent voice; the iPhone and apps; the iPlayer/Hulu; YouTube; the Cloud phenomenon; Google Earth; search and recommendation engines which actually work...

I could go on, and no doubt I'm missing many and overselling others. However, those of you who remember 2000 will, if you're honest, recognize that this list represents some genuinely huge changes to the world we inhabited when we celebrated the Millennium, and also that many of them were unexpected, or have happened either faster or on a broader scale than many could have anticipated at the time. Yet, what underlies their development is the technical, regulatory, and commercial framework which allowed these developments to take shape. In other words, the investment in development, policy, infrastructure and business models which enabled the fairly humble and primitive platform quaintly called "The Information Superhighway" in 1999 was critical to engendering all of the innovation we have seen in the decade since.

Only the most visionary at the time could have had a genuinely clear idea of how things would look in 2009, but the steps were taken nevertheless, possibly in some cases as a blind stab in the dark at some sort of nebulous opportunity which might develop as a result. We now find ourselves at the threshold of a new decade and a new range of unforeseen possibilities to be facilitated through further investment, and my guess is that the degree of transformation we will acknowledge at this time in 2019 may make the past decade look tame by comparison. If you find this line of thinking interesting, and also find yourself overdosing on family togetherness over the holidays, you might like to sneak away into a quiet corner and have a read of this recently-published paper which I co-wrote with my man Taylor Reynolds of the OECD. I look forward to your feedback, and hopefully to discussing and debating in the new year. Meanwhile, I am off to the States to see family and friends and (gulp) play a live show...

Until then, thanks for reading, and I'd like to wish you all the best during the holidays and a fulfilling and prosperous new year.

Of sausage and budgets

There's an old saying to the effect that there are two things you never want to see being made: UK budgets and Vienna sausage. Yesterday, most eyes in the UK were on the renaming of the City of London as Darlingrad, a brave new world wherein the conventional laws of mathematics don't apply, e.g., a 50% tax on an estimated GBP6bn bonus pool raises only GBP500m.

Meanwhile, another debacle was occurring somewhat further east, as Telekom Austria yesterday issued a tersely-worded recalibration of market expectations for 2010, wherein, despite revenue outlook being in line with consensus, EBITDA was forecast to be 11% below consensus, capex 14% higher, and as a result, operating free cash flow 25% lower. No additional color was offered by way of explanation for the variance, and the market understandably did a 14% tap dance on the share price.

Some friends of mine on the sell-side had a few hours before unfortunately published a buy note on the company. It is common practice for analysts to run their forecasts and note past a company prior to publication, just to ensure there are no factual errors or misrepresentations. Whether that occurred in this case or not, I don't know, but I assume it did, and if so, the fact that the company was on the verge of publishing material information and said nothing is not the sort of thing which endears companies to analysts.

In fact, in this case, the analysts in question, rather than trying to explain things away and goose their numbers to fit their recommendation, have done the right thing, and terminated coverage. They write:

"We spoke with TA after its profit warning yesterday. In sum we understand the following: A few months ago it was quite clear that the four year budget drawn in late 2008 would have to be revised down. But TA goes through the detailed process of drawing up a four year budget only once every 12 months (at the end of each calendar year) - yesterday's announcement follows the conclusion of this process for 2009.

From this we deduce that until this detailed process is completed, TA is largely unable to correct/reset consensus expectations even if trading conditions look set to be very different from the assumptions behind the last communicated business plan (in this case, the one drawn up in late 2008).

We apologise unreservedly for not thinking that this was at all possible. Because clearly it is possible, we believe that we cannot research TA's investment case with any reasonable degree of confidence. We therefore terminate coverage."

This is hard stuff to have to write when you're in their position, and if anything, I think they're being overly polite. I am of the humble opinion that if companies become aware of a material change to outlook over the coming 12 months (I consider EBITDA variation of 11% to be material), there is every incentive (and indeed, in some markets, a regulatory requirement) to issue a formal statement and get the pain over with in a way which preserves some degree of trust and respect from the analyst and investor base. Such a move would also avoid having to surface revelations such as the fact that the four year budget is reviewed once a year, three weeks before Christmas. Investors don't want nasty short-term shocks, but they also don't want persistent nagging suspicions that there is a culture of complacency in such a rapidly changing industry landscape, or more frankly, that visibility is too poor to make credible four-year budgets.

Walk like an Egyptian

A little over a month ago, I had an interesting discussion with someone involved in the subordinated debt of WIND Hellas. This is a situation I have followed very closely all year, though I was only interested in the senior parts of the capital structure, for reasons which are now obvious, principally because I have always expected the outcome we have recently seen.

As I explained to them, my thesis was pretty straightforward. The company's capital structure was over-leveraged, and the EBITDA multiple of the company through the senior debt alone was in some cases at a premium to European incumbents, despite having a critical liquidity crisis, compromised competitive position, and Greek macro risk. The implication was that the subordinated debt had little if any value, and Mr. Sawiris' original EUR500m equity check was lying at the bottom of the Aegean. The only way to salvage any equity value would be to align interests with the senior lenders and push out the guys in the middle - the subordinated debt holders. No room for concessions or niceties.

Their response was that they couldn't understand why Mr. Sawiris would risk his reputation and access to capital markets through a UK pre-pack insolvency which would wipe out EUR960m and $275m of subordinated debt. Surely he wouldn't be able to come back to the markets any time soon. I told them I wasn't convinced that he need be too worried about either reputation or access - a lot of cash is waiting on the sidelines, and the market has a chronically short memory.

Sure enough, less than a month since the filing, a sister entity from the Weather complex, Wind Acquisition Holdings Finance SA, comes to market with a EUR500m bond offering. Not only is it serious money, it is also reportedly structured as a PIK note for the first four years. We haven't seen any PIK issues since things started to go south in 2007, and many of the outstanding PIK deals from the Good Old Days have been treated like red-headed stepchildren over the past year. So, having just crushed a boatload of subordinated debt in November, we're now looking at a large, deeply subordinated debt issue which is effectively free money for the first four years. Far from being locked out of the markets, Mr. Sawiris will defiantly get this one away, and I am now prepared to officially elevate him to rock legend status. You may not agree with his tactics, but he certainly gets an A+ for audacity.

Surely investors angered by the WIND Hellas outcome would be inclined to boycott, but I hear price talk of a 12% coupon, and the market is so relentlessly thirsty for yield that I'm pretty confident that when the books close it will either be significantly up-sized or very oversubscribed. I don't know the Egyptian gesture equating to the two-fingered salute, but this will probably do nicely.

Happy Thanksgiving

A very happy holiday to all the turkey gobblers across the pond. Here in Britain we are thankful for our universal right to untrammelled internet access, er, d'oh!

A little more conversation...

I find it equally amusing and depressing when I hear telcos speak, as they frequently do, about the secret to value creation being in their content strategy. For shareholders, perhaps that's true (I'm deeply skeptical), but for customers and society at large, clearly the greatest value created in communications is in enabling interactions and transactions, or as my friends at Telco 2.0 frame it, "removing friction."

So here's some friction. This morning I took my daughters to school, to find the headmaster and several other members of staff standing at the school gates holding hastily printed signs which read, "Unfortunately, we have to cancel school for all of year 1 and class 9 due to health and safety reasons." From what we could gather, there was a flood overnight, affecting classrooms in one section of the building.

Luckily, (or unluckily, they might say) neither of my daughters was in the affected groups. However, there are around 100 kids who were, and the first notice their parents received of this less-than-minor inconvenience was when they arrived at the school shortly before 9:00. Some of these kids don't live all that close to the school, so their families will have made unnecessary car or bike journeys, while others will have had contend with no childcare backup and unsympathetic employers. The employers, sympathetic or not, will have lost productivity. Overall, this one incident affecting nominally 100 children also affected at least 100 adults and probably nearly as many businesses.

Now, I'm guessing that the school caretaker or some other members of staff were aware of the problem at least an hour or two before the parents and children arrived, but it would have been impossible to phone every affected household to let them know they needed to make alternative arrangements - or so I'm sure the defensive administration would respond. However, phoning every household is a very 1980s sort of solution, and totally unnecessary in 2009.

It's safe to assume that every parent in the school has a mobile phone, so either the local education authority should have an SMS alerting service for this sort of situation, or the school, which seems to pride itself on its level of IT literacy, should set up a Twitter account and encourage parents to follow and/or activate SMS tweets. Some effort would be required, and inevitably this strategy won't cover everyone, but it's a start, and surely it's better than disrupting something like 300 lives and imposing a cost on people/businesses who are just trying to get on with earning a living. And for those delivering the bad news, surely it's a more pleasant alternative to having to stand in the rain with a limp sign encountering withering looks from outraged parents. We have the tools, so why don't we use them?

Tweeting selectively from the Citi credit conference

www.twitter.com/jimiinc #Citi

The best scam email of all time

That's a bold statement to make, but you have to admire the genius of a scam "cleverly" disguised as a compensation program for scam victims. What was the old saying about "Fool me once..."? I particularly like the professional-sounding "We shall feed with you more modalities..." phrase, as well as the fact that the email address for correspondence is in, of course, the yahoo.com.hk domain. Keep trying guys, at least the entertainment value is continually rising.

<><><><><><><><><><><><><><><><><><><><><><>

ECOBANK NIGERIA PLC
SCAM COMPENSATION OFFICE DEPARTMENT
ECOWAS NATIONS STATE/UNITED NATIONS
2009 SCAM VICTIMS COMPENSATIONS PAYMENTS.

YOUR REF/PAYMENTS CODE: ECB/06654 FOR $500,000 USD ONLY.

This is to bring to your notice that our bank (ECOBANK INTL. PLC) is
delegated by the ECOWAS/UNITED NATIONS in Central Bank to pay victims of scam
$500,000 (Five Hundred Thousand Dollars Only). You are listed/approved for
this payment as one of the scammed victims to be paid this amount.

On this faithful recommendations, want you to alert you that during the last
U.N. meetings held at ABUJA (WEST AFRICA), it was accessed/accumulated of
reported cases of fraud that the money lost by variousindividuals to Africans
scam artists operating in syndicates all over the world today is over $239
Million United States Dollars in year 2007 to fraud in USA alone.

http://www.techspot.com/news/29644-US-Citizens-lost-239-million-from-Internet-
fraud-in-2007.html

In other to compensate victims, the ECOWAS/UNITED NATIONS is now paying
victims of such scam $500,000 (Five Hundred Thousand Dollars Only Each ).in
accordance with the UNITED NATIONS recommendations.

The payments are to be remitted by ECOBANK PLC NIGERIA as corresponding
paying bank under funding assistance by CENTRAL BANK OF NIGERIA. Benefactor
of this compensation award will have to be first cleared by ECOBANK and
confirmed as a victim from Africa Scam before scam payment can be effected.

We shall feed you with further modalities as soon as we get response from you
on how you can receive your compensation payment award.

Send a copy of your response via email or call your remittance officer
quoting your PAYMENT CODE NUMBER(ECB/06654).


NAME: MR.KEN OSAZUWA
SCAMMED VICTIM/REF/PAYMENTS CODE:
ECB/06654 $500,000 USD.
TEL : +234 7025669085

Email: scamvictimstransfer@yahoo.com.hk


Yours Faithfully,
Mrs. FRANCA OSARO
PUBLIC RELATIONS OFFICER

Another incumbent buys open access fiber

Private-equity owned companies are frequently the subject of ridicule, due to a perception that they're purely run for cash, by shareholders who are always looking for the exit, and who, in some cases are clueless. That point of view is often justified, and there are other situations where very bright and talented people who are genuinely committed to the business end up in untenable situations, but there are also some comparatively rare situations where the PE sponsors genuinely seem to understand how to build value and innovate in ways which public companies struggle to match.

Take TDC, whose shareholders were not only bold enough to basically pay the record industry to shut up, but are now following KPN into open access fiber, purchasing c.60% of the network assets (apart from those involved in monitoring the grid) of the unfortunately named DONG Energy, for DKK325m cash plus an additional DKK100m in earn-out structured as a revenue share. The key difference here is that DONG has built out much more extensively than Reggefiber has. Two summers ago, when on vacation in North Zealand, I remember driving through small villages, remote by Danish standards, where fiber was being rolled.

By allowing DONG to take the capex and commercial risk in deploying the network, TDC avoided having to listen to lenders complaining and fretting, until the asset was mature enough to buy in. (It always fascinates me that investors prefer M&A to capex.) From DONG's perspective, it seems as though the company struggled to build a customer base in the absence of third party carrier relationships, which of course TDC has in abundance, so it probably was an inescapable outcome that DONG would sell out and leave the telco-ing to the telco.

Britain's Embarrassing Travesty?

If you're planning to make an inspirational video about fiber which makes the viewer contemplate suicide within the first three minutes, I think I have a template for you to follow. "Patience is a virtue of the past." Indeed. In fact, it looks like patience in some quarters was exhausted some considerable time ago. Note the call to action towards the end:

If Ofcom will not lay down the law on this one, or at least issue some guidelines or a Code of Practice about NGA marketing to stop this in its tracks, I will personally pay a bunch of very cheap workers to spend as long as it takes out on the Internet making sure that as many websites as possible have either a forum post, blog comment, banner ad or similar on it saying something along the lines of "BT's BET is NOT next generation broadband. Complain now. Boycott BT."

Funny how these things can spread virally and unpredictably, which is something I thought marketing departments were supposed to understand by now. I notice that there currently seems to be no Facebook group with a title such as "BET = Britain's Embarrassing Travesty." Not that I'm advocating that someone start one. But if they did, I would join it.

My big fat Greek restructuring

Well, looks like the third party interlopers in the WIND Hellas situation waited a bit too long to show their hand. However, the investment from Weather only delivers EUR50m in additional liquidity to the company, with the remaining EUR75m going to consent fees and transaction costs. Once the subordinated debt holders have been crushed (the FRNs are quoted 3 - 5, and the PIK notes are looking extremely hot at 1/16 - 9/16), the company should save c.EUR95m in interest costs before taking into account the margin increases for the senior lenders. In short, the company should be stabilized by this deal, but things are going to be tight for a long time, and the market still needs to consolidate, so let's call it Chapter One.

A question for European equipment vendors

Q: How do you compete with a privately held national champion with a $30bn credit line?

A: Maybe you don't.

(P.S., Starent is in the process of being acquired by Cisco, so you'll probably be seeing them around a bit more too.)

Tuesday morning drive-by

Still trying to recover from eComm last week in Amsterdam, and get caught up on other things. I would love to do a lengthy post on eComm, but I don't have the time, unfortunately. Stated simply, I think it is the finest event of its type on the planet. Lots of short and punchy presentations, many of them challenging and provocative, covering a wide range of aspects around communications (note my omission of the prefix "tele"), with a low tolerance level for bullshit, and good representation from people who are actually doing innovative things. Not many carriers were present (I counted four), but then why would carriers be interested in new developments in communications? And no IMS, HADOPI, or any other toxic and delusional acronym-based strategies were to be found - heaven! I gave a 15-minute talk on day one, and moderated a panel on day two. Wish I could have stayed for day three, which sounds like it was very interesting indeed. Take my advice - bookmark the next event and just go. You won't regret it.

Speaking of interesting events - tomorrow I'll be moderating a panel at Telco 2.0 in London, which has apparently seen a huge level of interest and registrations. I'm looking forward to the event and the Thames River cruise which follows. Hope to see you there!

I've come to the conclusion that my "social media brand" strategy is inevitably doomed to be one of fragmentation. Sometimes I have something to say or point to which is suitable for this blog, but which I just don't have time to write a proper blog post on. If you're interested in capturing any of that stuff, you may wish to follow me on Twitter. I know it is probably over-hyped as a medium, but it is imminently suitable to certain types of expression, such as "31bn? That's 3x BT's market cap, or one national FTTH network. What's that burning smell?" Alternatively, you may just wish to friend me - I already consider my mega-uber value readers to be friends I haven't met, so why don't we formalize things?

So, on to the industry/market:

Data centers - You have to love data centers, well I do anyway. The unsung heroes of the web services revolution, they work away in quiet anonymity and throw off disgusting amounts of cash if run properly - and we don't have nearly enough of them. We tried like hell to get a Greater London project funded while at Merrill Lynch, but timing and the parlous state of the firm's balance sheet thwarted us, sadly. Judging from Telecity's statement from yesterday, our investment case still stands.

Ride that high yield bubble - Virgin Media, which is a company I have a lot of time for, despite my frequent mocking posts about open street cabinets, continues to demonstrate that continuity issues in the CFO's office need not be an impediment to sound financial management. Following last week's acceptance of its senior facilities amendment, the company is wasting no time in lining up refinancing options for the lower parts of the capital structure, which is exactly what it should be doing given the opportunity which the market's thirst for yield has created. What looked to be a very steep mountain to climb at the start of the year, has been handled masterfully in my view, and the second lien debt, which is something we loved at the beginning of the year at 50, is now quoted 93.5. I don't often think of congratulating company treasurers, but here's to a job well done.

Greek consolidation - This is a topic we did an awful lot of work on at Merrill Lynch, and the ongoing WIND Hellas saga has been very much on our mind since the beginning of the year. Now a "wild card" bid has reportedly emerged from what most would regard as an unlikely source. However, I have previously worked closely with some of the people involved behind the scenes here, so I, for one, am not surprised, and I think things are going to get very interesting from here.

Waving from afar

Folks, a very altruistic Palladium Class mega-uber value reader has commented on my previous post to let us know that he has a surfeit of Google Wave invites, and that if you ping him and ask nicely, he'll pass them on to you. Thanks Peter!

Calling all Bulgarians!

If you're Bulgarian and have any views on broadband, my friend and fibrous co-conspirator Benoit Felten needs your help in completing a survey for the good of the country, so get yourself over to the site and take part, faster than you can say Ivo Papazov.

Waving goodbye

Okay good people, I have two major problems. Firstly, a number of people have posted requests with no email address. Google Wave makes you more productive, apparently, but not psychic. Secondly, and more importantly, something seems to have gone terribly wrong. Wave crashed earlier and prompted me to refresh, and when I did my remaining invites were gone. I had dished out five and still had three left. I've retained the details of those requests I wasn't able to honor, and if I get more invites, or my remaining ones are restored, your requests will be honored. For those I was able to fulfill, be advised that it may take some time, as it seems there are some scaling issues.

Waving, not drowning

Still trying to recover from the eComm experience and catch up on other things, so drowning is not far from the truth, but meanwhile, I have eight [8] Googlewave invitations for first-comers.

My slides from eComm

Scribd doesn't maintain the animations, so you may prefer to download it here.

Like I said a few hours ago...

Data centers are the new steel mills, and every bit as hot. Just a few minutes ago, Equinix announced the acquisition of Switch & Data, at what I work out to be around 10x LTM EBITDA (10.5x if you use numbers up to Q2, and 9.5x using my Q3 guesstimate). I'm sure this is dramatic news for S&D shareholders, but it's really pretty unsurprising if you've been watching what's been happening in the space over the past three years or so, as I have. This is just the opening salvo in what I expect will be a new phase of consolidation, and I would expect European assets to be pretty high on the agenda.

I'm too sexy for my picks and shovels

An adviser to Goldilocks has apparently been channeling the spirit of Horatio Alger, Jr., and unsurprisingly receiving some unsympathetic coverage in the process. Still, for good or evil, inequality is an inescapable fact of life, particularly in business. So setting aside investment banks, which other brazen, rapacious industry is shamelessly enjoying demand for its product outstripping supply three-to-one, with pricing up 15% this year, in the midst of the deepest recession in living memory? All hail the humble data center.

Don't shrug at ATLAS 2009

Thanks to @kerryritz for the pointer on this very interesting presentation on the ATLAS Internet Observatory 2009 findings from the NANOG conference. The most interesting findings from my point of view are: 1) the rapid concentration of content sources (only 150 ASNs account for 50% of internet traffic, with CDNs accounting for 10% and Google alone for 6%); and, 2) the apparent decline of P2P in favor of streaming and direct download, although I find it notable that the authors point out that data is distorted by random port selection and the fact that 40% of P2P is encrypted.

Call for input

I'm in the process of putting together my slides for eComm next week in Amsterdam, and I wanted to ask for your input, gentle reader. If you would be so kind as to send me the three most critical issues which the communications (notice I did not say telecom) industry faces in future, I would be very interested to see them. By critical issues, I mean opportunities and/or challenges, both endogenous and exogenous. I'm just curious to see how your ideas line up against my own.

Cognitive Dissonance

Is it just me, or are the terms "2016 maturity" and "terrestrial broadcaster" not mutually exclusive?

Christmas come early

I have two tickets to eComm Amsterdam, 28 - 30 October, up for grabs. One is *F*R*E*E* and the other entitles you to a 50% discount. First come, first served, but please only ask if you are absolutely sure you are actually going to go. Holler at me.

UPDATE: Well, that didn't take long. The free ticket is now gone, which leaves the 50% discount ticket. Don't be shy.

That was the week that was

I think I may have confused or annoyed a number of mega-uber value readers with my post on the arrival of the Memphibian blog. Make no mistake, it is not supplanting this humble bloglet, but during the first couple of weeks I had to ensure I had seeded enough content there to give it a life of its own. As in everything, I will strive for balance going forward.

So, among the things I noted but failed to comment on last week, here are the ones I found most interesting:

The Skype and European Directories (a MacQuarie LBO) tie-up looks interesting, and I would expect some of the other directories players to follow suit, if they know what's good for them (the jury is out on that one). However, for me the bigger message in this deal is of how the previous owners of both assets squandered their potential. In the case of Skype, it's ironic that only as the business is sold by eBay does it begin to fulfill some of the potential used as rationale for doing the transaction four years ago. And on the directories side, this deal shows the obvious potential of tying together customer data, advertising, and sponsored telephony - something the telcos didn't seem to contemplate when they owned these directory assets. Now whatever value might be generated with this formula once again accrues to someone else...

A couple of big validations for fiber in the week, with BT capitulating on brownfield FTTP, probably in recognition of the threat posed by Virgin's DOCSIS 3.0 marketing, and Telefonica trumping Vivendi's one-month old bid for Global Village Telecom at a 14% premium, with in-market synergies that Vivendi can't get anywhere near.

The profound and ridiculous ends of the iPhone App spectrum were on display on Friday, with Herman pointing us towards the ludicrous (but entertaining) Gym Babes app, while the HealthMap project's iPhone app has generated 1,000 reports since launch a month ago. As the project team says, "This form of participatory epidemiology may alert the public to valuable disease information before it is reported by the media or public health officials," which is bound to have an inestimable value. All this is fascinating, though if Gartner is right in predicting that Android will eclipse the iPhone juggernaut by 2012 due to its open-source framework and multi-vendor backing, then presumably app developers are going to have to start hedging by developing for both platforms. This despite the fact that I am told repeatedly that investors currently have no time or appetite for anything non-iPhone in nature, and Kleiner Perkins Caulfield have taken a highly directional bet on iPhone hegemony.

From the "Yeah, whatever" department

I think one of the first rules of marketing is that merely repeating an assertion ad nauseum doesn't make it true, particularly if the direct experience of your existing users shows it to be false. Yahoo! seems to be doing its best to pull the outdoor advertising marketing out of its deep recession with this campaign splashed all over London. Meanwhile, I have a colleague who uses Yahoo! mail, and for the past two months, he would say that the internet has been under the control of a Diabolical Denial of Service attack. I don't know if this is an isolated problem, or relates to his being a Mac user (as if that should really make any difference), but seeing his suffering, I am now programmed to ignore or laugh at billboards like this. Also, in case no one at Yahoo! corporate had clocked it, hooded figures like this in the UK are associated with muggings and other pointless acts of antisocial behavior, so my guess is that drivers passing this billboard will immediately assume it is yet another government fear appeal message and pay no attention.

Your lucky day

One of my colleagues received this message today, which, apart from being risibly written and fundamentally ludicrous, points out just how mainstream Skype has become, if 419 scammers are invoking its name, particularly alongside that of Microsoft.



Date: Fri, 9 Oct 2009 19:03:24 +0800
> Subject: Congratulations!! *You Have Won 850,000.00 GBP
> From: dzplum@yahoo.com
>
>
>
>
>
> World Annual Skype/ Microsoft Internet Users Award
> 102, Denton Manchester Lancashire M34 3GE
> Annual Random Charity International
> United Kingdom
>
> Dear, Lucky Winners
>
> We happily announce to you the draw of 2009 World Annual Skype/ Microsoft
> Internet Users Award International Program held annually, in United
> Kingdom. Your e-mail address attached to ticket number: 500-744-3465-A42
> with serial number: 652-112 and draw lucky number: 7202013-05 which
> subsequently won you lottery in the 1st category of files number:
> FA1345U-ID.
>
> Batch Number.0152k Reference Number.02-QH-05 you have therefore been
> approved to claim a total sum of 850,000.00GBP (Eight Hundred and Fifty
> Thousand, Great Britain Pound Sterlings) in Cheque,
>
> All participants in this lottery program were selected annual randomly
> through a computer ballot system, drawn from 100.000.000 individuals email
> addresses from all search engines. Your e-mail address was picked by the
> automated computer ballot system, which has been programmed for this
> random selection. This has eventually qualified you to won our lottery
> prize.
>
> This promotional program held annually, and was promoted and sponsored by,
> Microsoft Inc, and Skype Internet Companies to encourage the use of
> Internet globally together with enhancing improves the lives of citizenry.
> Please note that your lucky winning number falls within our Europe
> representative's booklet in United Kingdom , as indicated in your file
> number: FA1345U-ID. In view of this, your 850,000.00GBP Cheque have be
> released and forwarded to our United Kingdom regional headquarter in
> Manchester, you are hereby informed to contact Manchester on this
> information, for the immediate commence of your Cheque
>
> Mobile Number: +447024064610
> +447024087960
> E-Mail: worldannualskype@yahoo.com.hk
>
> Fill the following details below to enable the speedy evaluation and
> processing of your won prize. 1 Name, 2 Home address, 3 Telephone number,
> 4 Age and occupation, 5 Ticket number, 6 Serial numbers, 7 File number, 8
> Draw number
>
> For security purposes and clarity we advice that you keep your winning
> information confidential, and not to be disclosed to anyone until your
> claim have been fully processed and your winning Cheque delivered to you.
> BE WARNED!
>
> National Coordinator
> Skype/ Microsoft
> Mr Amoosa Amoosa
>

Benign neglect

It's quite probable that this will be of absolutely no interest to the vast majority of my mega-uber value readers out there, but on the off-chance that you are curious as to where I've been recently, I've been working on a purely personal side project, partly because it makes me happy, and partly because I feel I need to. It doesn't help that the past couple of weeks in telecom have left me feeling distinctly uninspired - is it just me?

Questions to ponder over lunch

Is Huawei the Countrywide of vendor finance?

How can a perfect digital copy be considered a "forgery"?

Doesn't "360" also mean turning around to find yourself exactly where you started?

Pimp my panel

Folks, eComm Europe is coming up fast, October 28 - 30 in Amsterdam, and you'll hate yourself if you miss it. I honestly think the speaker list is unparalleled anywhere, and the format ensures a rich flow of sharp and challenging talks on a wide range of topics of critical interest to those of us linked in the communications value chain. So look into my eyes, look deep into my eyes, and now go and register. I will be giving a talk on day one, and also moderating a panel on day two. The panel format is still being tweaked, but I have submitted the following summary, and I'd be interested to hear your feedback and input in the interest of making it as representative as possible:

Investing in the Telecom Value Chain for a Post-Meltdown World

The world has been through huge financial stress in the past two years, and despite the repeated sightings of "green shoots" by the more optimistic factions on Wall Street, many respected forecasters predict even more dire developments to come: the death of the dollar as a reserve currency, persistent high unemployment and social displacement, drastic cuts in public sector spending, runaway inflation, social unrest, the death of capitalism. While many of these outcomes represent worst case scenarios, we must accept that the "recovery," whenever it arrives, is not going to be a "reversion to business as usual," as the term is commonly defined. Consumers will behave differently and have different definitions of value, businesses will transact differently, entire industries will emerge smaller if indeed they survive at all. Add to this the increasing pressures of urbanization, migration, aging society, and climate change, and the picture becomes even more challenging. What influence will the telecom value chain exert in this new world? What opportunities do the challenges of The New Normal offer investors, and how should they position themselves?

Supersize my toast

I've seen a lot of stuff recently that I don't understand, but if we needed any evidence that this credit market rally may be getting a bit silly, I think I may have found a compelling shred. A couple of days ago, Blockbuster announced an offering of "up to" $340m in senior secured notes, but LCDNews has just reported that this offering has been up-sized to an unfathomable $675m. Most of the deals I've come across recently have been up-sized, but not doubled. The coupon may be huge, I don't know yet, but what else could make this so compelling that demand could lead to a supersizing like this, especially with incineration such a strong possibility?

Lunchtime drive-by, 16 September

Europe is grindingly dull today compared with events elsewhere:

Australia - Life gets more interesting with each passing day for Telstra and its shareholders, as it deals with both the implications of structural separation and yet another catastrophic network outage.

New Zealand - The government tells Telecom and Vodafone to take a flying leap with their proposals, in favor of a highly-localized procurement process for open-access fiber.

Taiwan - Taiwan Mobile buys MSO Kbro for 10.0x LTM EBITDA, a great exit for Carlyle into a much more interesting asset. Surely a company with ubiquitous mobile coverage will also desire a more extensive fixed footprint, particularly if it is only 1.2x levered and can afford to do more - i.e., further consolidation seems inevitable.

Adobe/Omniture - I think I understand what is happening here, or at least I understand the rhetoric around it, but Hank Williams' recent post highlights failings which make me wonder just how well the company will engage with the more demanding customer base it will carry as a result of this deal.

Head-scratching time

Whatever its shortcomings as an industry, one can always count on telecom to deliver unusual and inexplicable M&A activity. Down in Greece, ON Telecoms and Vivodi, two companies I studied in great detail once upon a time in a previous incarnation, have decided to get together, in a somewhat unusual deal. Having presumably already burned a lot of cash on their own company, I'm puzzled as to why the vendors would pony-up for the entire capital increase required to get the deal done, especially when the Greek regulator seems to be giving incumbent OTE more room for maneuver on marketing of bundles. Perhaps there's some trade-off in terms of footprint complementarity, but I would be amazed if that could account for the valuation implied by the deal, EUR250m, i.e., the same as Forthnet's market cap, though Forthnet has more subscribers and also a monopoly position in satellite pay-TV.


UPDATE: Okay, I think I was probably a bit too kind here. I think this is about saving face on both sides. Greece is a pretty unique market, in that one can capture c.85% of ITC spend in just two conurbations - Attica (Athens and environs), and Thessaloniki. There's not much scope for regional niche market approaches, it's pretty much head-to-head in the big two urban centers, and there are already four big players (OTE, Forthnet, Hellas Online, and Wind Hellas) present, which history suggests is typically about the number a single market can viably support. Yes, I know that ON has Fastweb's "secret sauce" to a certain extent, but I'm not convinced that makes much difference against a more nimble OTE, Hellas Online in league with Vodafone, Forthnet, and (eventually) a restructured Wind Hellas. The latter two I do think would make an interesting asset combined, but I don't think this particular deal really moves the needle for anyone.

Battling latency and packet loss

Many years ago, I worked with a German fellow, whose name happened to be Herman, which unfortunately led to him frequently being referred to as "Herman the German," of course mainly when he was out of earshot. Anyway, Herman was a very bright guy, and possessed very good English, though he seemed to be somewhat lacking when it came to colloquial language, so he had a tendency to substitute business language in everyday situations. For example, instead of saying that someone was chatting up a woman in a bar, he would say something along the lines of, "He's performing due diligence on a possible joint venture." Maybe it was just his peculiar sense of humor.

Anyway, it can't have escaped your attention, dear reader, that I have been remiss in posting of late, and I will borrow from Herman's argot to explain that several critical functional areas of my life have been undergoing fundamental restructuring in recent weeks, inflicting high levels of packet loss and latency on my neural network. My NOC has now resolved the problem, and normal service should resume shortly. In the meantime, please enjoy this, perhaps the funniest telco story in recent history, unless of course you are a Telkom S.A. employee...

I'm too sexy for my product

Yesterday I was emailed out of the blue by someone from an agency working with Virgin Media on its "Powerful Stuff" campaign, and asking for feedback on the commercial embedded below. I personally think that with reviews it always pays to be careful what you wish for. As a piece of creative it's fine - nicely shot, etc., but it's an elaborately staged yet unimaginative pun (50 Megs, get it? Get it?). Cute, but pointless, and it does nothing to convey the sort of message this company should be telling regarding its competitive strengths.

Despite telcos' repeated attempts to make it something other than an enabling utility, ultimately broadband should be as sexy and thrilling as electricity, water or a tin of Ronseal. The benchmark of success is that it is available and reliable when people need it, and hopefully reasonably priced yet profitable as a business. You turn it on, and it works. And that's certainly something customers should be thankful for, but not excited about. It's a pretty sad comment on broadband development to date that, much like the British rail transport system, people express excitement on the rare occasion when it actually works as intended.

Null points!

Back on the block

Yet another Virgin cabinet - is this what we mean by open network?
Originally uploaded by jimiinc

I was away in the country last week and spent as little time online as possible. Back now, and with a lot of catching up to do. It's comforting to see that some things back in South London never change. This is Forest Hill Road near Mundania Road, in SE22.

The tracks of my tears

Azeem has an awesome post on VC fund returns, which I highly recommend, and hats off to CalPERS for keeping everyone honest. Our merry band is generally interested in more mature businesses which are under stress, usually due to inappropriate capital structures dating from the most aggressive vintage of the LBO contagion.

When looking at opportunities in this space, it's always helpful to try to get some insight into the states of mind and motivations of the relevant private equity sponsors, though this is often difficult given the veil of secrecy surrounding the industry. So after reading Azeem's post, I was interested to also discover in CalPERS' site a similar table of private equity fund performance, which like the VC table, is not all-encompassing, but is pretty damned comprehensive, especially when one considers that typically these numbers would not be seen outside the relatively small group of insiders/investors.

There are some stunningly bad IRR numbers to be found here, and I only count 34 funds from the 2005 - 2008 time frame in positive territory, and among those who are down, they are often waaaaay down. Conversely, there is only a handful of funds from the pre-2004 vintages in negative territory. It would be nice to think that the critical issue for the 2005 - 2008 vintage funds is time and a turn in the economic cycle (to break out of the trough in the J-curve), but I'm far from convinced. I would be interested to see a comparison of leverage in pre- and post-2004 deals (no doubt a good academic research project for someone with the time and resources), because my suspicion is that the use of leverage in the '05 - '07 period was, as in the broader economy, freakishly supersized - a last gasp of excess before the lights went out - and that this will preclude many of these deals from ever generating a return. And God only knows what happens to some of these deals if LIBOR/EURIBOR are markedly higher in two to three years' time, which I suspect may be the case.

Looking for a datacenter?

Just got a notification that these guys are following my Twitter feed, so I went to their site, Data Center Map, which is very cool, so check it out.

More depressing data points for old media

At the risk of piling on the agony, Le Monde has a nice piece today on the decline of print media within household budgets in France (Google translation here), including this chart showing huge declines for newspapers and books - but keep in mind the last data point is 2005, arguably when the real pain was just beginning. Elsewhere, a colleague noticed a good example of a relatively "uncool" industry seemingly getting the structural shift - UK housebuilder TaylorWimpey's results presentation yesterday (see slide 15) contained a pledge to cut classified ad spending in half (to slightly less than 1/3 of total marketing spend, in favor of online.

Virtual coffee break - 6th August 2009

OFCOM's latest update on the UK market is out, and no doubt it will prove an interesting read, when I get a moment. Among the headline points, it seems clear that survey respondents would rather lose a limb than cut back on telecom spending, a somewhat unsurprising conclusion, and one which I tried to stress repeatedly during my Telco 2.0 series last year/early this year. A couple of other headline-grabbers are that 21% of internet users have had some experience with VoIP (a 50% increase YoY), and that apparently half of UK internet users (that's 19m people) are on Facebook.

This latter point contains an interesting sub-plot, which is that the proportion of respondents 15 - 24 who claimed to have a profile on a social networking site actually fell from 55% to 50%. Maybe they're shifting to anti-social networking, from Bebo to ASBO, as it were. Or maybe they see the herd of more mature users invading their space and fear being bombarded by ads for laser corrective surgery or invitations to become fans of hip replacement surgery. Churn, baby, churn.

The release of these findings today is ironic to me, coming on the same day as I received a Facebook friend request from a relative in Texas in her mid-60's, and also as ITV, the embarrassing uncle in mid-life crisis desperately in search of a way to remain relevant, gave up the ghost on Friends Reunited. But only after paying a £55m earn-out earlier this year - ouch.

So, who's the online video daddy?

Yep, you got it. Nice timing to boot.

Into Africa

This post to the NANOG list struck a chord, as it seems to demonstrate, in near real-time, the dramatic effects that better and cheaper connectivity can have on a market, in this case Kenya. I will look forward to following the responses from the list.

Things I thought I'd never live to see, part 1

An IPO, in the US of all places, for The Pirate Bay? What next, a strategic investment by Universal Music, Time Warner and NewsCorp?

Ferrari, Ford, or Trabant?

It's front page news in the Financial Times today. Ed Richards of OFCOM droned on about it somniferously on Radio Four this morning, while interviewer Sarah Montague sounded very irritated with him. OFCOM's latest update on broadband speeds is going to be picked apart by the media ad nauseum, and I couldn't be happier about it.

Repetition is a good thing where consumer education is concerned. For years I've been hoping that Clive Sixpack would take a look at the parlous state of UK broadband versus its neighbors and get annoyed, because annoyance is frequently followed in this country by quiet muttering, and in some cases by a demand for action, or even a good punch-up. Hopefully the Daily Mail will take hold of the story and run with it, without attributing the problem to illegal immigrants, as it seems to do with most issues.

I'm joking here, but my point is serious - this is a golden opportunity to make broadband a genuine populist issue to demand change. One of my colleagues came up with the idea for a campaign to encourage subscribers receiving only 40% of their nominal line rate to submit only 40% of their nominal tariff every month, which I quite like.

I don't think there's anything here that people who follow the industry haven't at least suspected, if not known outright, and the spectrum of operator suckiness is almost precisely what I expected when the previous SamKnows report was issued. Still, it's nice to see the worst offenders named and shamed publicly, though I suspect their customers are well aware of their failings already.

The big winner here is Virgin Media - clearly acknowledged as superior, the BBC Radio Four news story intro this morning even highlighted that the study found "broadband by cable is better than by phone line," which is the sort of PR you can't typically buy, let alone get for free. I suppose Lord Carter must also be feeling pretty good. If the average speed delivered in the UK is 4.1Mbps, then Digital Britain's "vision" of 2Mbps for all is virtually in the bag, three full years ahead of schedule. Job done, time to move on!

It's a sad irony that, just as we reach a point where the flames of public discontent can be fanned effectively, the government will have the luxury of shrugging and pointing to empty coffers, while just up the road, construction continues on an Ozymandian project, the cost of which equates roughly to one-third the total bill for FTTH to every home in the country. Never mind, we're building a legacy here, just ask the Athenians. And when things go wrong with the subprime self-cert mortgage which is our future, we can pile into the broadband Trabant we've bought and seek opportunity elsewhere, at 4Mbps per second.

Mega rebUKe

From the "Duh of the Day" category, 84% of respondents to the ISPreview survey in the UK think 2Mbps universal service is not enough. Frankly, I'm surprised it's only 84%, and I'm really astonished that only 9.5% view upload as a key factor.

Misadventures

Busy, busy, busy. Just enough time to give some attention to three car crashes of interest:

1) Spinning out of control - By the way, from now on all my blogposts will actually be written by a 20-year old woman in Dhaka.

2) Blykety-split - We used to be in the same building as this company, and they had fanstastic office furniture, hopefully on flexible leasing terms.

3) That smarts - Haven't seen any coverage of this in the English media, and I'm not sure I fully understand the background here, but it looks to me like a small French smart meter/energy management vendor is actually going to be forced to refund to EDF the equivalent of what consumers have saved by using its product, which is apparently equal to 70 - 80% of its annual revenues. That's rough justice.

Fiber a la casa

CMT has just published a study on fiber in Spain, which I will try to read through later today. Seems to contain a number of detailed scenarios.

My small contribution towards VMED shareholder value

I know Virgin Media is on a bit of a roll with a well-timed refinancing and a couple of positive releases on broadband and video differentiation versus the DSL brigade. As a customer, I wish them well, and so I have resolved to help them in the quest for shareholder value creation, which I guess at some level involves keeping the outdoor plant secure. So once again, here is a cabinet in my local area in need of some attention. I know it's a blurry image, but it was raining heavily at the time - I stopped nevertheless, because I care. The cabinet is on Upland Road near the intersection with Barry Road in SE22.

eComm Europe 2009, an unsubtle reminder

Folks, I know times are tough and budgets constrained, but if you are trying to be more selective about which conferences to attend, I don't think you could do better than eComm. I know for a fact there is some very special stuff in store, and as an example of past quality, here's my main man Malcolm Matson's speech from the last event, which I think on its own would justify the cost of admission. The Super Early Bird offer expires next week, and if you book now using the code "Enck" you'll get a 20% discount on top of that. (Disclaimer, I am an advisor, but have no economic interest.)

It's the '90's Jim, but not as we knew it

More retro telco oddities

Honestly, when I see footage like this, I feel truly amazed that we ever achieved analogue telephony in the first place, such was the almost insane level of labor/capital intensity required. Yet it is also equally hard to imagine quite where we would be today without that investment, however strange it may appear in retrospect. Methinks there may be a lesson of relevance to the NGA issue here, but it's getting late, so just enjoy the images of industrial big iron at work on tasks which a Skype client can quite happily handle today.

(Face)Book of the Dead

When I wrote this piece last week, some of what was in my mind was the potential lack of control and access to data which can arise in the event of the demise of a site or service. In the admittedly unlikely event that Facebook were to shut down, what recourse would users have to gain access to the data or archive the communications and content shared?

However, there is another gloomier aspect to the issue, which I have been discussing a lot with colleagues recently, and that is what happens to digital assets upon the death of the user/creator? If my laptop and I go down in flames in a plane crash, my JungleDisk back-ups of family photos and videos are of little use to my family if there is no mechanism for gaining access to the account. Ditto for everything I have put on Flickr, if they're unable to execute a renewal of my paid-for "Pro" account, which is currently tied to my credit card.

As our reliance on web services grows, there inevitably will come a time when these digital orphaned assets become a real source of pain or loss (and probably litigation) for many people. Lillian Edwards, whom I sat next to at a dinner a few weeks back, is featured in an interesting video on the work she has been doing around these issues. As she stresses, this is something which most people aren't thinking about - yet. She highlights Legacy Locker as one interesting potential solution, and I agree it looks promising.

I also wonder if this isn't the sort of issue which could really help the OpenID movement sell its proposition. I'm not a lawyer, but presumably if you have a legally recognized digital form of ID (check out Turkcell's offering here, particularly under the "Public" heading), then this is something that family members can claim power of attorney over in the event of death or incapacity, or that individuals can bequeath access to via a will.

How not to create a market, 1976-style

Can't figure out why this never became a mass market device - hell, it was color-coordinated and everything! The USP is certainly exhaustively conveyed by a terrifying woman in Karen Carpenter-esque garb. And it allowed you to store 12 whole numbers, not 10, not 11, but 12 - perfect for anyone with a Messiah complex. I can't ever recall seeing one - can you?

Shock horror newsflash: the consumer is changing!

I admire the resourcefulness of the Morgan Stanley media team in London for outsourcing some of their work to a "digital yoof" who's already on the payroll, and I'm sure the note makes an interesting read, though I haven't seen it yet. What I find fascinating in all of this is not what the hoopla surrounding this report says about the media consumption of kids, but rather what it says about the media consumption of adults in the financial markets.

Anyone who has spent any time at all observing or speaking to real kids, or even just doing a little light Googling on these issues over the past five years should find the conclusions utterly unsurprising. I also seem to recall writing on the very same themes five years ago, and I know I wasn't alone even then. So the fact that the report has generated such intense interest shows just how poorly engaged the market still is with the kids. It's even more shocking to think that some of these same high flyers will be betting on a recovery in traditional media and advertising revenue streams which these consumers of the future have already opted out of entirely.

Upstream, without a paddle

A Palladium Club uber-mega-value reader alerts me to yet another good real-world illustration of what a dearth of acceptable upload capacity in the UK (or any other) market means for the economy. In this desperate post to the ThinkBroadband forum, a man with a lot of data is willing to pay a healthy hourly rate to be able to upload it to the CDN his business uses. D'oh, wrong country. But perhaps a diversification opportunity for the likes of Kinkos/FedEx.

Does Facebook cause brain damage?

Over dinner with a friend last night, the conversation inevitably turned to Facebook. We both found that we were experiencing the same quizzical phenomenon. When people that we have communicated with over the years quite happily via email/SMS/IM suddenly turn up on Facebook, they seem to frequently adopt this as their communications platform of choice, in many cases forsaking others. What's even more quizzical is that, when I answer a Facebook message (which forwards to my email) from my email account, substituting the sender's real-world email, they often revert to Facebook once again to reply. Not only are people happy to have their communication siloed in a Facebook cloud, they seem downright determined to keep it there.

Virtual coffee break - 7 July

Much to do, so here's another collection of semi-random shards.

I should post pictures of distressed street cabinets more often. The response has been good judging from traffic, and one equipment vendor's branch office in Germany seems to have ground to a halt for ten minutes or so this morning. The Flickr photo is up to 79 views and counting...

A few minutes ago I happened to catch the end of the BBC World Service's Digital Planet show, coming from Japan. In addition to an interesting segment on home-made game software, there was a (thankfully audio-only) demonstration of Daiwa House's intelligent toilet technology (what it is about companies with Daiwa in the name?). If Graceland had only been equipped with one of these, we might not be King-less today. Joking aside, I think this illustrates pretty well that the range and number of networkable devices is probably a lot greater than most people think, and should not be poo-pooed.

I recall a couple of years ago, James Murdoch made a speech in which he said something along the lines that if OFCOM were efficient in its mission, its offices would eventually be empty. Seems now that the Conservatives want to help in the packing to speed things along. I guess industry consultants may have to move directly into industry in future without the intermediate tenure with a river view. (Okay, I know a fair number of OFCOM folks and respect the job they're doing, but I couldn't resist.)

The British Chamber of Commerce reckons the worst may be over, but note the five key words: "Talk of recovery is premature." Equity market cheerleaders should listen. Meanwhile, Ireland is apparently (Experian, why are your press releases not linkable?) seeing a net contraction in numbers of businesses, with companies going into receivership nearly quadrupling over H1 2008 levels.

Random thought of the morning. I really like what SamKnows is up to in broadband performance monitoring, but I wonder if it's also possible to achieve some of the same objectives at a more macro level via the massively distributed nodes of existing P2P systems such as BitTorrent or, better yet, Skype?

Lastly, and most importantly, I have a value proposition for you. I am honored to have been asked to be on the advisory board for eComm Europe 2009. (Disclosure: I have no economic interest in eComm or any associated entity, nor am I receiving remuneration of any sort. My advisory role is largely one of kicking around ideas, suggesting speakers and making a few introductions.) I think it's shaping up to be yet another great event. The organizers have kindly extended a 20% discount to EuroTelcoblog readers - the promo code is "Enck" (without the quotation marks, obviously). The Super Early Bird offer expires this month, so book now to avoid disappointment.

It's always the unlikely posts...

My earlier post of the photo of a forlorn Virgin Media street cabinet in East Dulwich has generated a surprising level of traffic, and also an email from someone at Virgin asking where it was. I have responded thus:

"Okay then, as a loyal Virgin Media customer, I am expecting a big discount for helping you to take inventory of your network in the way that your own field technicians can't seem to manage. The box is on what I would call Forest Hill Road, but which may in fact be Peckham Rye Road (no signs - probably stolen by the locals), across from Peckham Rye, near the intersection with Barry Road."

Anyone with access to Google maps should be able to find this - just look for the open cabinet with leaves from last autumn trapped in some dense spider webs. Perhaps the reason they haven't noticed it is that there only seemed to be three or four homes connected (whose addresses I could read clearly on the bright yellow tags attached to the coax).

Let me make clear that I am a loyal and happy Virgin Media customer, but when I see things like this I wonder what the hell is going on. If I ran a highly leveraged company whose only differentiating factor was the quality of its access network versus the crippled, neolithic copper pair of the incumbent, I would be outraged to find a local node a) so exposed to vandalism (which miraculously, the local vandals seem to have been too stupid to commit) and b) so under-booked.

On the positive side, I have posted photos of this nature before and received no response at all from Virgin Media. So maybe this is a positive development. Then again, the node in question is half a mile from my home, so why should I care? What's in it for me? Will the company give me three months free service for my civic-mindedness? I doubt it, but I am open to being surprised. So much for "crowd-sourcing."

Similarly, I suspect that the person who contacted me is probably an underpaid Virgin Media employee with a good heart, who actually deserves to be promoted for caring enough to have eyes open in the first place. Sadly, I suspect that being a conscientious employee at Virgin Media may be an experience similar to being a conscientious employee pretty much anywhere else in cultures (the UK being one) which don't value customer service. Like peeing yourself in a brown suit - it gives you a warm feeling, but no one notices.

The most dilapidated Virgin Media box ever

My talk from Manchester last week

Please excuse my appalling Freudian slip, placing Sand Hill Road erroneously in Mountain View rather than Menlo Park. I had Google on the brain. There are a couple of other mindless misstatements here, but on the whole I was pretty pleased with this one (slides are here). Also check out Dirk van der Woude and Benoit Felten - hell, just watch them all!

James Enck @ NextGen09 from MDDA on Vimeo.

Wednesday omnibus

So much to do, so little time. Here is a semi-random selection of bloggables.

Yesterday, I listened in to my friend Benoit Felten's excellent Yankee Group webinar "Fiber to the Home: Making that Business Model Work." Benoit and his colleagues built a high-level, generic model in order to flex the key assumptions (passive connection cost per home, customer uptake, cash margin per customer, ARPU) of the business case and test the impacts on payback periods. Consistent with other business cases I have seen, they found that the greatest sensitivities around payback period were initial passive connection cost and customer uptake levels.

They were up front about the fact that each project will inevitably have unique variables (soil quality/terrain, population density, ratio of MDUs, consumer purchasing power, etc.) which would influence each of the inputs, and consequently payback periods. Which is an obvious and essential point to stress. It's annoying to see sweeping generalizations in the media about the "huge cost" of fiber deployment, because each city, each street, each building, will present its own unique set of challenges and opportunities. In some situations it will make for a robust business case, in others payback will be a long time coming. Them's the breaks - it's physical infrastructure, like it or lump it.

Anyway, it was a good webinar, and I particularly like Benoit's emphasis on wholesale access to third parties. If you're an altnet trying to generate a return on a fiber deployment, and you can only achieve 30% initial uptake on your own retail services, why not open up to third parties? You generate additional revenue and margins in the early days, and if your customer satisfaction levels are superior, you will attract churning customers from the third parties in the long run. Let your wholesale customers do the hard work of converting and educating more risk-averse customers, and then win in the end through being better at customer service. I think it's an idea worthy of investigation, but we haven't seen any examples thus far.

At the more granular end of fiber network planning, my friend Kai Seim in Germany, who can tell you in a heartbeat how the cost per meter to trench fiber can change from one soil type to another (it's infrastructure - the physical world really matters), has published a great study on fiber activities in the German market, which you can purchase here for the nominal fee of €49.90. I have read it, and it's worth every eurocent.

And if you're feeling really gluttonous for market data, check out the OPTA analyst meeting presentation from Monday.

Elsewhere, France Telecom has been busy, joining the refinancing rush, conserving cash through a voluntary partial scrip dividend (I think dividend yields are generally overhyped - if you have genuine conviction on the company's strategy, you should be happy to add more equity exposure rather than suck out more cash during constrained times), and stamping its feet over ARCEP's ruling of last week. I shrug Gallically. Also check out this new presentation from FT on LTE - which once again underlines the backhaul timebomb.

The refinancing stampede continues unabated, with the market more than happy to take part. Word on the street is that Wind's €2.7bn issue is heavily oversubscribed, and SES Global's €650m deal was 5.8x oversubscribed. So much for cash sitting on the sidelines.

Long overdue consolidation in Germany seems to finally be materializing. United Internet/Freenet has been passed by the Cartel Office, the Hansenet auction seems to be moving toward conclusion, and today the FTD reports KDG is interested in another chunk of Orion.

Lastly, and on a down note, I checked out last week's report from Transparency International on corporate anti-corruption practices, and sadly telecom doesn't rank very highly.

Returning from the new Digital City State

I'm on a train returning to London from Manchester, where I was very kindly invited by the Manchester Digital Development Agency to give the opening presentation at the NextGen event. For those who didn't catch the live stream yesterday, I think there is going to be a replay, or perhaps an edited highlights version, or both, available after the conference closes today (I hope so, because all the presentations were of a very high caliber). I will post my presentation slides, once I'm on something better than a temperamental HSPA connection. (UPDATE: The slides are now up.)

Without getting too self-indulgent (now apparently my hallmark) or boring anyone, here were the main points I sought to address:

• The current crisis is a very deep hole, from which we will need a lot of time to extract ourselves.

• Ironically, this gives us greater license to consider strategies which might have been dismissed previously, in the interest of gaining some control over the direction of our future.

• However, history has proven that the future is hard to predict, particularly when pundits have attempted to dismiss new ideas or to predict that certain innovations have no application. Some of my examples are found here. In almost every example I cited, the pundit in question was a genuinely respected and successful leader in his field - but dead wrong about where things were headed.
  

• More frustratingly, some innovations end up being used in a dramatically different way than was originally intended (Warfarin, nitroglycerine, SMS, email), with profound consequences.
  

• Other innovations arise prematurely, only to die (or be killed in this instance) and be revived later.
  

• Expedient, commonsense decisions can often be completely wrong, and sometimes historical revenue models which should be obvious for new businesses (in this case sender-pays data, which commercial broadcasting had used for 60+ years) are initially missed.
  

• So we must be very careful when today we hear that there are no visible applications which could really put 100Mbps symmetrical connections through their paces. Beyond being short-sighted, the Ford vs. Ferrari comparison in the UK is a canard for the ordinary consumer. Your choices are a blue Ford (various shades available, fifth gear often disabled), a red Ford, or staying home.
  

• The process of electrification in the US poses some interesting questions. Here I reproduced a chart from a 1980s study (Tim - this has proven to be the gift which keeps on giving, thanks!) which shows average electricity consumption doubling between 1950 and 1960, and again between 1960 and 1970, though what's really interesting to me in the chart is that sub-categories of consumption increase dramatically over that period. What this really reflects is that entirely new categories of appliance were being created, each with its own parts supply chain, assembly infrastructure, sales, distribution, maintenance, insurance and finance functions - in short, a proliferation of ancillary functions and jobs which made these appliances affordable and mainstream. There is no doubt in my mind that the original architects of universal electrification didn't envisage this happening, nor could they imagine what came after 1970 (set-top boxes, VCRs, DVD players, PCs, portable media players, cellular phones, broadband modems, WiFi routers, game consoles, ad nauseum). We're lucky that they didn't try to plan for the impossible, and I don't seem to be alone in thinking so. Certainly, it would be hard to find many in the industrialized world who would argue that we should have planned our grids not to scale beyond the consumption patterns of 1950.
  

• Thus, the option value of fiber will only be demonstrated definitively after it is in place. Prior to its arrival, it's easy to dismiss its contribution and utility, because it doesn't exist. As any dealer of exclusively red and blue Fords will tell you, no one ever comes in the dealership asking for a Ferrari.
  

• However, I would stop well short of characterizing fiber as a "faith-based initiative" - connectivity policy alone is not enough, as has been demonstrated in more advanced markets (see the postscript [in red] to this post).
  

This final point is what intrigues me about what is happening in Manchester and a number of other northern English cities/regions, representatives of many of which were in attendance at the conference. It is clear that superior connectivity is a key issue in attracting and retaining new economic activity and creating sustainable employment, but it is far from the only one. Public transport, amenities, law & order, educational strategy, tax policy, culture, regulation and the built environment are also important factors which would be among any business' decision criteria. It also helps if there are positive externalities to add to the momentum, in this case the relocation of BBC functions to nearby Salford.

I think the people involved in these cities genuinely "get it," but once again the range of factors at work here is infinitely more complex than the range of issues a telco is interested/experienced in, and the potential benefits to be captured are also well beyond its scope. Which calls for a different framework and approach, and probably leads to misunderstanding and conflict in the short term. Afterall, what we've really got developing here is the new Devolved Digital City States, competing aggressively for new skilled residents, businesses, and an enhanced tax base. Broadband can't be the sole ingredient of the answer, but it will be a significant one. In the Q&A I cited a case study I saw several years ago dealing with St. Louis and Chicago, and the fact that the former was hostile to railway development in order to protect the vested interests in river transport, while the latter became the focus of investment and subsequently reaped the rewards. I like both cities, but there is no comparison between them today. We underestimate and underinvest in the option value of infrastructure at our peril.