Goodbye summer

I'll be offline for two weeks - back in service on 5th September. Based on what my various contacts are telling me today, I fully expect some explosive EuroTelco news to break while I am away. Oh well, when it happens, I guess you'll know what I was talking about.

Where have all the minutes gone?

There's been a lot of coverage lately of the real state and size of Skype's user base, but assuming we won't ever get any audited figures until the IPO prospectus is filed [;-)], I think it might be more instructive to look at usage patterns. Sad though it may sound, I happen to have been tracking Skype minutes of use for nearly a year now (a task helped dramatically by the statistics RSS feeds created by Skype), taking observations somewhat sporadically at 8:00 AM GMT (or as near as I can to it), and typing them into a spreadsheet. My methodology (perhaps too lofty a word) has been to take the number of minutes recorded since the previous observation, and divide by the number of intervening days. Since the start of the year, here's what I have observed, for what it's worth (I don't claim that these are precise figures, just my observations of what Skype has reported, subject to caveats regarding unequal distribution of datapoints, etc.):

Average minutes of use per day

Jan - 28,954,133
Feb - 37,533,906
Mar - 41,745,885
Apr - 41,732,959
May - 39,451,552
Jun - 38,479,729
Jul - 35,754,556
Week of 12 - 19 Aug - 36,601,232

It's interesting to note that downloads of Skype are up 61% since the end of March, and the active user base reported by the company has nearly doubled, yet looking at the concurrent user stats, we seem to be stuck at a high point of just over 3m on any given day, and average minutes of use in the most recent week (again based on my calculations) appear to be down a little more than 12% from March levels. I'm at a loss to explain why such strong growth in the user base should not translate into heavier usage figures, unless the IM functionality of Skype is acting to dilute voice. One Platinum Circle reader pinged me yesterday with a timely observation:

"My kids spend hours a day using Skype IM, but never use the voice features."

Portrait of obscurity

Those clever and passionate guys over at VoIPUser have been posing the question - whatever happened to Microsoft's Portrait, which on the surface seems like a natural contender in the video VoIP field. It talks SIP and interfaces with MSN Messenger, runs on a variety of devices, and claims to adjust image quality and frame rate to bandwidth conditions. If anyone (particularly anyone from MSN) can share any insight into where this is heading (or not, as the case may be), give us a shout.

Mind-bloggling

If you live in the UK, or perhaps if you are a foreign guest looking forward to being marooned in one of our many outstanding airports on Friday, 9th September, you could do worse than to head up to Cambridge for this promising-looking symposium on blogging. Only GBP100 (Euan Semple alone is worth that, but look at who else is appearing), with lunch and free parking thrown in - who could resist? I unfortunately have a pre-existing work commitment, but if I am successful in cloning myself by then, one of us will certainly turn up.

Googles of cash

I've always expected that Niklas and Janus had Sergey and Larry in their future, though there are many who have argued with me on this. Om speculates on what network investments Google might make and why. Whatever they're up to, I'd say it looks like pretty serious stuff - today the company has filed a shelf registration to sell up to 14.8m shares, which at the current price implies $4.2bn proceeds. That's a major chunk of change, to be used for "general corporate purposes, including working capital and capital expenditures. In addition, we may use proceeds of this offering for acquisitions of complementary businesses, technologies or other assets. We have no current agreements or commitments with respect to any material acquisitions." Watch this space.

UPDATE: A Diamond Cluster mega-value reader kindly calls my attention to a stealth acquisition reported here yesterday, which adds some new ingredients to ponder. His take on the end-game:

"I'm thinking presence here. Search (and advertising) is the main perspective I'm sure, but the implications of a convergence later with a VoIP/presence product is intriguing."

Think you got problems?

A North American Platinum Circle value reader takes up the gauntlet thrown down here last week with regards to run rate line loss for incumbents, and replies, "You ain't seen nothin' yet." Certainly, it would seem that 4 - 5% annualized line loss is fairly trivial when compared to the following tales of woe out of North America in the Q2 earnings season (annualized run rate = Q2 sequential loss x 4):

Overall lines lost

Bell Canada -5% vs. -2.68%
Telus -4.33% vs. -1.8%
SBC -6.36% vs. -4.92%
Verizon -6.52% vs. -4.96%
Bellsouth -7.32% vs. -4.76%

Residential lines lost

Bell Canada -7.44% vs. -4.32%
Telus -5.28% vs. -3.00%
SBC -9.08% vs. -5.72%
Verizon -9.32% vs. -5.8%
Bellsouth -10.12% vs. -6.32%

...and it gets worse on a state-by-state level

Verizon
Rhode Island residential -16.16%
N.Y. residential -13.68%
N.J. residential -9.64%
Wash. D.C. residential -9.52%

SBC
Michigan overall -11.8%
Ohio overall -10%
Texas overall -8.2%

More fun with numbers

Dean over at VoIP User has embarked on an ambitious project to track VoIP-to-PSTN traffic from as many service providers as he can rope in, and is in the preliminary stages of collating and analyzing some of the data collected so far. Check out this interesting thread, in particular the statistics he reproduces (for Europe only, so far). I can't wait to see the finished product, which will undoubtedly serve as a nice complement to some of the other impressive efforts elsewhere to document this fast-evolving space.

To everything churn, churn, churn

The smart folks over at Back Channel have wasted no time in sinking their teeth into today's acquisition of Energis by Cable & Wireless, using their Zero Sum solution. If their analysis is indicative of the true state of play at Energis, then it is understandable why C&W pushed the button sooner rather than later, and left no room for negotiation.

What's in a number?

German broadband contender United Internet today reported Q2 results, and while we still have no VoIP subscriber numbers, the company now claims to be invoicing 100m minutes per month. Actually, the long form of the report states that 90m minutes were generated in June, so this marks a pretty strong volume growth rate. This is pure back-of-the-envelope stuff, but assuming that usage per sub is in line with PSTN voice usage in Europe (let's say 8 minutes per day), I think this 100m minute figure could imply a user base of around 420k.

Liberty and VoIP for all

Liberty Global (previously known as UnitedGlobalCom, or for the really old people in the house, UIH) reported Q2 numbers today, and states that it is now doing 7 - 8,000 VoIP connections a week combined across its territories in the Netherlands, Hungary, and from this quarter, France.

Another day, another 4000 lines...

This results season is leaving me with a profound sense that we are reaching some sort of tipping point when it comes to PSTN abandonment. Just to recap, on Monday, we observed that KPN's rate of voice line loss in Q2, at an annualized run rate, had risen to 5.3%, more than double the rate of a year ago. Similarly, the run rate line loss for Swisscom yesterday was 4.2%, also more than double the level of a year ago. Today, in Deutsche Telekom's numbers, we witnessed the same pattern - 400k lines in Q2, that's 4.4% run rate annualized line loss, double the level of a year ago. And none of these cases seem to be seasonal blips either - in every case the rate increased in Q2 over Q1. Scaaaaaary.

SkyPO

The Godfather of Broadband, Om Malik, is unconvinced by reports of Skype's plans to go public. He cites the BusinessWeek article as an irritant, which has vague similarities to the Independent coverage from last week. I'm wondering if we're starting to see the same thin leads being regurgitated in a daisy chain (the Independent piece was a fairly transparent rehash of the Cringely blog post on NewsCorp, though it ended up sounding like he was an interviewee of the Independent - and now they expect you to pay one pound to read it!). The Independent and BusinessWeek pieces also share an odd tendency to namecheck Howard Hartenbaum (hello, Howard - you rock!) as though he's somehow separate from Draper Fisher Jurvetson - which also makes me a bit suspicious. What I am hearing is that a number of investment banks are pestering Skype to go public, but not at the company's invitation (this is a key area of expertise of investment banks - pressuring companies to go public when they're not really interested/ready). A cynic might say that with MSN licensing GIPS wideband codecs and Yahoo! clearly out for blood, there's no time like the present. I, like the Ominator, am unconvinced.

The return of Cybertelly

Just got an email alerting me to the existence of (BEWARE - THIS CONTAINS A PORN-RELATED POP-UP) OnlineTVRecorder, a P2P based virtual PVR from the man Guido Ciburski.

More Q2 signs of strain

Today Swisscom reported, and as with KPN yesterday, there's some intriguing stuff going on under the hood. As with KPN, PSTN line loss accelerated in the quarter, to 3.4% YoY, up from 2.9% in Q1. Moreover, the annualized run rate loss (i.e., the sequential quarter-on-quarter loss, multiplied times four) was 4.2%, more than double the rate of a year ago. So, what has changed in the intervening year? Cablecom has launched VoIP, that's what, and by May of this year had seen uptake of 130k users. That doesn't sound like a huge number, but in the context of the Swiss market, we're talking about 5% of the voice access market. I can easily see this number doubling over the next year. Swisscom's not suffering as much as it could be, however, because of the absence of ULL (there's a will, but no way at this point), which enabled it to generate enough DSL wholesale revenue this quarter to offset half of the traditional revenue loss in calls and access, while racking up 76% of the net additions in the retail DSL space.

What's in the packet?

There's no sign of it in their website at this writing, but the folks at CacheLogic have recently conducted an updated study of what sort of content is moving on P2P networks. They found the following:

The mix of P2P traffic by volume, across the 4 major P2P networks:

• Audio: 11.34%
• Video: 61.44%
• Other: 27.22%

Microsoft video formats represent 46% of aggregate worldwide P2P traffic

65% of all audio files by volume of traffic are still traded in the MP3 format, but fully 12.3% are in the open-source OGG file format (almost all exclusively traded on the BitTorrent network, particularly in Asia)

BitTorrent is increasingly being used for the distribution of legitimate content

eDonkey is now the network of choice for video file trading

I'm supposed to be having lunch with the company next week, and will report back.

UPDATE: In the event, I had to cancel the lunch unfortunately due to other commitments, but the data can be viewed here.

From the Q2 results front

Spent all of today working through the rather good results from KPN, which surprised everyone (yours truly included) with some subscriber mix improvements and better margins in the mobile division. However, looking at it from the disruptive angle there was a lot of fairly negative stuff to get excited about too. I've got a negative rating on KPN, for many reasons which I've documented exhaustively here in the past. But stepping back from the situation, it certainly is an interesting case study of the pressures facing telecom.

On the one hand, we have here a company which is well on its way to returning over EUR2bn cash to shareholders in the space of a year - that's roughly 12% of its current market value, and it seems to feel confident that it has the headroom to take on bolt-on acquisitions, such as Telfort (a sizeable one) or the 60k DSL subs bought from Tiscali.

On the other hand, we have a management team which seems to have no qualms about speaking frankly on issues of market turmoil and lack of visibility. One great question from the audience today to CEO Ad Scheepbouwer: "Do you think your voice lines could go down by 6 or 8% next year?" "Yes, quite possibly, no one knows." (I'm paraphrasing here.) Another classic question was, "Do you expect the fixed line margin to continue to decline?" "Maybe, but not in huge increments. However, if we begin mass-market migration to VoIP, then we would see a profound effect." Here is a man who is publicly embracing the fact that many of the key value drivers of his core business may have huge swing factors in them, even over the next 12 months. It's an unenviable position to be in, but I like his style.

Looking under the hood, there are some true signs of strain. This quarter KPN began reporting its fixed line results in three segments: Consumer, Business and Wholesale. This affords us a lot more clarity on what's happening in the various segments - and it ain't that pretty. The line loss in the Consumer segment in the quarter, annualized (i.e., multiplied by four), was 5.3%, which is a real step-change from the 2.4% seen a year ago. Also, because we now have the line bases broken out clearly, we can see that the rate in Q1 was 5.1%, and moreover, that there has been a steady acceleration in line loss over the past year. We knew it was happening, but we couldn't see it in such clarity before. The other interesting shift here this quarter was that previously, some of this line loss could have been passed off as ISDN-to-DSL migration; however, this quarter ISDN lines were flat and all the pain came from people ditching their PSTN lines, plain and simple. Business line loss is not as linear as Consumer, but this quarter was sufficiently ugly at 4.3% annualized, and the ARPU number I calculate was down 7% YoY. One other disturbing trend was that the uptake of discount calling packages, both in Consumer and Business, hit a wall this quarter. This is one of the key defensive weapons of the legacy telco, and it's worrying to see previously very strong growth grind to a halt so suddenly before penetration has even hit 30%.

So here we come to the dilemma for everyone who cares about our beloved sector: how long does the cash thrown off by the business continue to allow the kind of payouts seen so far to compensate investors for risk, how quickly does the situation deteriorate from here, and at what point do things really start to go wrong? We can play with spreadsheets and flex assumptions until we're blue in the face, and the analysts tried to do that today verbally, but management weren't willing to show all their cards, if indeed they had even seen them.

More power to me

I picked up on a couple of interesting changes in the messages coming out of last Wednesday's presentation from BSkyB - one was an apparent acceptance that the internet is indeed a serious issue to confront (interesting that this came against a background of a mooted bid for Skype by parent NewsCorp), the other was the emphasis placed on the wholesale side of the business, i.e., selling channels to UK cable operators. A cynic (such as me) would view the subtext of this (as I stated in my note to clients) as preparing the investment community for an impending resurgence from cable, backed by VOD and better PVRs than Sky currently has in circulation. Today we get another indication, as NTL follows the lead of European cable players, and leapfrogs DSL in the bandwidth stakes. As an NTL customer, I'm thrilled. I guess NTL had better hope my internet consumption doesn't grow so great that I decide to churn off my ridiculously bloated "family pack" of cable channels. After four days in a tent in Suffolk, I know my kids can actually live without TV...

Apocalypse, eventually

Versatel, soon to be part of the Tele2 group, has let slip that its much-heralded DSL 2+ rollout has only captured 20k subs to date, with only 12k lines connected and ready for next week's first Eredivisie match broadcast. One structural problem it claims to face is notice periods of up to 12-months for customers seeking to switch from another supplier.

Like watching paint dry

Just back from four days in a tent in a British seaside holiday camp, I know the true meaning of tedium (just kidding, it was lovely, apart from the weather and the food). For those interested in truly tedious pursuits, such as measuring glacial advances in real time, here is the July update from the UK Telecoms Adjudicator. 90k lines unbundled - my granny could do that with one arm tied behind her back!

$3bn?

A Platinum Circle reader just sent me this extraordinary link from late last week. Rupert Murdoch? $3bn? I must go home, have a glass of wine and contemplate this. It's an intriguing post, and brings up some interesting questions which not many people have dared raise - with the exception of a valued client of mine about a week ago. Indeed, why doesn't one of the carriers take Skype out? So far we're seeing the EuroTelcos doing what they have always done, i.e., buy more network. However, if footprint expansion is what they're after, they couldn't do much better than Skype, and at ultra-low opex and microscopic capex. Who dares wins, but it takes imagination and a grasp of long-term strategy. Eventually we'll find out who has it.

An open plea to Charles Dunstone

There's an old joke which goes something like this:

A rude English tourist is in a restaurant in France and gets irritated by the imperious attitude of the waiter. He blurts out, "Bloody French, always putting on airs. 'Ere, what's so great about France? If you take away the art, the cuisine, the philosophy, the literature, the fashion, the beautiful women, what have you got left, tell me?" The waiter responds curtly, "England."

Over in the broadband paradise which is France (yet another reason for UK residents to feel resentful) Yannick has an impassioned plea for Carphone Warehouse to take over Iliad before it falls into the hands of an inept and backward looking telco. I agree, it's a sexy idea, but I can see two potential issues: 1) CW has traditionally not gone in for telecom businesses involving a lot of network infrastructure; 2) CW is only capitalized at EUR2.35bn at current exchange rates, while Iliad's market cap is EUR1.88bn. An outright takeover would either involve a massive amount of leverage or a lot of CW paper, which I doubt Iliad shareholders would want. Sadly, I think this one may fall to an incumbent, and my bets would be on Teutonic or Iberian players.

UPDATE: A Platinum Circle reader subsequently writes in to challenge my statement on network assets, pointing out that CW's Opal unit carries a lot of CPS traffic in the UK. I had a feeling someone would make that point - what I should have said was that CW has previously avoided owning assets at the local loop level, as well as the kind of CPE/inventory issues involved in the kind of model which Iliad operates with Free.

100% natural disruption

This morning a little bird told me that there may be some serious disruptive wireless happenings taking shape in relation to a place in the UK called Kennet. Don't know yet if that's Kennet in Wiltshire, or this place here. For those unacquainted with UK geography or corporate trivia, Newbury (the bullseye in the map linked above) is the corporate headquarters/company town of Vodafone, which makes the irony even sweeter if this turns out to be the one.

Freestylin'

French enfants terribles Iliad have just reported Q2 numbers, showing that Free had 1.135m VoIP subs at the end of June, up from 850k at the end of March. That's an 86% take rate on voice! The company is also unbundling at an unprecedented pace - now accounting for 67% of their 1.3m DSL lines, up from 53% at the end of 2004.

Maintaining control

Much of what BT management said last week at its results indicated a greater enthusiasm for the role of wholesale provider, which is what it should be saying in light of the OFCOM settlement. That's fine, as long as BT can remain in control at the wholesale level, but this deal between OneTel (telecom/internet unit of multi-utility Centrica) and Easynet (on my list of emerging takeover candidates in the PTT battle for the IP Holy Grail) is a real poke in the eye for BT, and a sign of things to come. There is at least one other (largely unknown) player waiting in the wings to push this business model forward in the UK.

UPDATE: An uber-value reader writes in to suggest the following:

"How about the next big one being Telefonica? Looking at their aggressive line sharing-based announcements in Germany and their know-how, I could very well imagine them taking that business model to the UK as well - even more so after the establishment of BT's Access Division and the new governance rules for dealing with third parties."

Telefonica hadn't crossed my mind, but I can't argue with the scenario laid out here, particularly following the tortuous logic of the "IP-as-weapon-of-mutual-annihilation" thesis. In light of recent cross-border M&A trends, I might be inclined to think that Telefonica might turn up in France first, but maybe there's more upside left in UK market.

Disruption in action

The earnings reporting season is upon us, accounting for a marked blogging slowdown as I torment myself. BT reported some pretty decent numbers today, and to be fair there was a lot to be positive about in them, but in the detail there is some stuff which shows where the retail market is heading - which is for trouble, despite the recent euphoric rally in the sector:

• Retail share of net DSL adds went down to 28%, taking overall market share below 35% on my reckoning. This is worrying because Retail lost 319k consumer voice lines this quarter, the worst result in living memory. Throw in the business voice lines lost and you get a decline of 400k voice lines. Even taking into account the DSL additions, we're still looking at a loss of 305k customer relationships, a 1% sequential decline. Bear in mind that unbundling is only 1.3% of the market at present, so the challenge to replenish the line base is only going to get much tougher.
• Wholesale line rental lines went up 424k this quarter, that's a sequential increase of 41%! Management were a bit cagey about whether the increase started early in the quarter (in anticipation of the OFCOM settlement), or whether it was a direct response to OFCOM - i.e., next quarter's number could be far worse for Retail. Management did comment that, in their view, about half of the new converts to WLR were also new CPS users, which is a dangerously high conversion rate.
• BT claims to have had 15,000 expressions of interest in Fusion since it was launched on 15th June, which frankly seems a bit low to me. More worrying is that the MVNO business (which could be an interesting cross-selling foothold for Fusion) suffered a net customer loss of 13k this quarter in the consumer segment.

It's interesting to see all this coinciding with changes to company reporting presentation which, while apparently designed to take complexity out of the organization, also have the effect of minimizing the Retail division's perceived financial contribution to the whole business, which is increasingly being driven by a Wholesale and Enterprise orientation anyway.

It's my party, and I'll Skype if I want to

Hard to believe it's been a year. SkypeOut rates have been cut by an average of 15% today in celebration, and the press release I just received claimed over 1.8m SkypeOut users, which suggests (based on my numbers) that Skype is adding about 19,000 SkypeOut accounts per week.

Approachabili-T

Tiny, but technologically advanced, MSO Primacom yesterday suggested that it is getting a one in three response rate to its early-stage VoIP marketing in its footprint, and expects to have Primafon available to 185k households by the end of the year.

The race is on

I'm reminded of an old George Jones song by this name, which contains the fabulous line:

"Now the race is on, and here comes pride up the backstretch,"

and culminates with:

"And the winner loses all."

I don't know if that summation will apply to the M&A arms race unfolding in Europe, but certainly the starting gun on phase two has been fired today. I doubt if there were even any Tuareg nomads who could have been oblivious to this deal, as it was so extensively leaked. There is a conference call in a few minutes and I will return with more later. Suffice it to say that broadband/VoIP/mobile convergence is hereby confirmed as the central deal driver in Europe (as I have previously said), and given the tit-for-tat history of the PTTs in Europe, I think it will not be the last - not by a long shot.

Alpha Mail

The UK Post Office has cut line rental on its WLR product to as low as GBP9.95 per month for those paying by direct debit. The press release mentions 140k subscribers, which is up by 40k over the past seven weeks, and the PO is claiming a 97% satisfaction rate with users.

Kiss me quick

A Platinum Circle mega-value reader writes in with some views on the Cisco/Kiss deal:

"I'm not sure if you're familiar with the Kiss product line, but they have a bit
of a cult following - an Ethernet-connected PVR/HDD/DVD player which is easily
hackable (loads of people produce and download modified firmware versions) and
which runs its own markup language (KML). Online programme guides for something like 1,000 channels and you can log into the Kiss portal from your mobile phone and tell your Kiss device at home to record a certain programme for you. Plus you can play games, read the news etc - way more extensible than Tivo etc... it could be quite exciting... especially if they bring out a device which has the
Kiss features plus Wi-Fi and voice in one box."

As for the last statement, I think we can count on it, and this presumably makes Cisco a strong contender in the quest for the all-singing, all-dancing placeshifting PVR media gateway Holy Grail as far as I can see, though this article contains a denial of any plans to enter the consumer electronics space.

Adversi-T

DSL may have had things pretty much its way in Germany historically, moreso than in any other market except for Italy, but it looks like cable is now starting on a long road back from oblivion. Kabel Deutschland, which at 10m customers, has over half the cable households in Germany and is Europe's largest single market operator, is to offer triple play services in its Rhineland-Palatinate and Saarland networks to 1m homes from October. Reading on in the press release we find that by year end an assault will also be launched on Munich, Berlin and Hamburg. Check out the coverage map (Flash).

Silent voice

Om has been digging through Yahoo!'s 10-Q, and pondering what the cash outlay was for Dialpad. I haven't a clue, and reading through the conference call transcripts, I was amazed to see that none of the analysts even mentioned it - not once!

VoIP visibility

Listening to the Telenor conference call just now, CEO Baksaas remarked that Telenor estimates that VoIP in Norway (including its own subs, but excluding Skype) now accounts for around 90k users, defined as persons who have ported their PSTN numbers to VoIP. He identified this as being 5% of the market (I work it out to be closer to 4%, but what the hell). Accordingly, he said that Telenor would be committing to greater efforts in this area. One interpretation of this 90k figure might be that naked DSL in Norway could possibly account for as much as 14% of DSL connections...

Let it be

It's been a shitty couple of weeks on the whole: the 7x7 bombings, one of my favorite colleagues being shipped back to Japan, today another set of bombings and another favorite colleague resigning for pastures greener. Still, it's not all doom and gloom. If at home with the broadband is the safe option, then newcomer Be may have just the ticket: 24Mbps DSL and a free all-singing, all-dancing Thomson SpeedTouch 716g router.

Bombs

More bombs being reported, mobile networks appear to be seized up.

Know your units

No, it's not a cautionary statement on alcohol consumption, rather finger-pointing at journalists who don't know millions from billions. The quote:

"Skype's annual revenue has not been disclosed, but analysts suggest that it could be in the $6 billion to $10 billion range."

I don't know which analysts they've been talking to, but Skype revenue estimates of $6 - 10bn would make it two to three times the size of Google. It would also be quizzical for a company turning over $10bn to consider being taken out for 0.1x sales.

Is there an echo in here?

Bambi Francisco thinks Google might be a good bet to acquire Skype. Wow, wish I'd thought of that.

You've got megachat

Very busy trying to get caught up with a lot of nuts and bolts stuff ahead of the Q2 reporting season, blogging is going to be minimal today. Further to Monday's rumination on how Skype has stimulated innovation and a sense of urgency among the IM camp, a mega-uber value reader draws my attention to AIM Triton reloaded, with group voice chat for up to 20 persons, via RTC 1.2. Ignore at your peril.

What we've got here is a failure to communicate

There's been more than enough oxygen and paper expended on coverage of Vodafone's poor performance in the Japanese market, as well as a lot of spin coming out of the company itself, but what we love about the blogosphere is its ability to give us live views direct from the front lines. Here's a damning assessment from Jeff, on the ground in Tokyo.

Digging telco's grave

Interesting short video (MPEG, right click and save) showing the hands-on efforts of a rural community in Sweden to get fiber to the farmhouse.

Skloud

Given last week's Boingo announcement, I guess this should have been a no-brainer.

Moral fiber

Lafayette's muni-fiber decision is getting plenty of attention on this side of the pond, particularly in Amsterdam, where the interest is more than academic. One post in this site generated a comment from a reader ("Maximus MBA") who speculates that the underlying monthly cost of a FTTH network per household could be EUR8.63 ex-VAT. This is earth-shattering stuff. He bases his calculation on the EUR750 per household calculation appearing in the Rotterdam report from last year, applies a 25-year depreciation period (EUR2.50 per month), network maintenance costs of 2% per year (EUR1.25 per month), and derives capital costs of EUR4.88 per month using a WACC of 7.8%.

Offshoring your identity

The mega-value reader who first alerted me to Boingo's UK woes follows up with this, also from the company's customer service department - apparently everything works as long as you lie about your country of residence:

"Thank you for contacting Boingo Wireless. For UK residents, during account
creation, if one selects Ireland in the country pull down, this will circumvent
the UK restriction. However please be advised of premium pricing on certain
UK locations. Refer to the location directory on our home page for details."

Talk ain't cheap

This IDT/Net2Phone situation appears to be getting serious. A press release on Bloomberg from Friday states that Bull & Lifshitz is filing a class action against NTOP, and I have been separately contacted by an attorney who claims to represent shareholders jointly holding 2m shares (over 4% of the equity), who has forwarded the letter he has sent to NTOP's independent directors:

"Re: Net2phone, Inc., and IDT Corporation’s attempted buyout at $1.70

Dear Sirs:


I am an attorney and a member of a shareholders group in the above referenced
corporation which has great concern about the possible buyout of the corporation
by IDT Corp.

As you are all aware, NTOP’s great interest lies not just in its cash, portfolio of patents, net operating loss carry forward, facilities and current business, but more importantly, on its partnerings with numerous cable service providers. For your reference, I am attaching a schedule prepared by a fellow member of our group which details that Net2phone and its cable partners will be offering VOIP service to the approximately 3.2 million homes passed by the various cable providers. Net2phone has been extremely guarded in its financial projections, but however these opportunities are valued, it is clear that the values are substantial and that a zero value is inappropriate.

There has also apparently been a fairly compelling case made that MCI’s residential VOIP service trial is powered by NTOP’s VOIP service. (See the following blogs: Eurotelcoblog http://eurotelcoblog.blogspot.com/; Om Malik's Broadband Blog http://gigaom.com/2005/06/29/mci-voip-powered-by-net2phone/; and Voip Watch by Andy Abrahamson http://gigaom.com/2005/06/29/mci-voip-powered-by-net2phone/). Admittedly this has not been confirmed officially, but it certainly does seem likely to be true. What the economic value that will come from this
remains to be seen, but again, a zero value of this opportunity likewise seems
inappropriate.

In view of the company’s current position and its future prospects, the 2 million shares controlled by our shareholder group will vote against a merger with IDT at the price discussed and at any price which is no more than a moderate premium to the $1.70 that was offered.

Should any of you have any questions regarding our group’s position, feel free
to contact the undersigned.

Very truly yours,

xxxxxxx"

Skype as inspiration

A member of the MSN Messenger development team, Leah, has been in touch regarding my post on the GIPS/MSN "anti-Skype backlash," with some interesting insights:

"In the opening line of the post you mention 'The anti-Skype backlash.' Even as
a member of one of Skype's biggest competitors, that is not how I would
describe the current VoIP market. As a lower-level individual contributor
to MS, I'm pleased to see a company forcing issues like improved quality and
ease of use. It makes all of our companies become acountable for delivering
truly quality features. I want customers to tell me the work I'm doing is
awesome, not satisfactory - especially because VoIP is all about people and
relationships. But in order to do so, I need Microsoft to value VoIP enough
to fund it appropriately, and Skype is making that happen. I would actually
consider the recent VoIP innovations the result of a "pro-Skype backlash."

Double Dutch

The KPN board must hate waking up on Mondays. Today, as further evidence of Tele2 getting serious about infrastructure in an unprecendented manner, the company has revealed today that it is tabling a joint bid with Apax to acquire Versatel, whose German assets will then be bought out by Apax on a standalone basis. With unbundling well-entrenched in the Dutch market, and full service billing coming into play, this is a market that Tele2 can really sink its disruptive teeth into.

Yes, we have no Boingo

A Gold Circle hypervalue reader in the UK writes in with a curious email reply from Boingo customer support. He was interested in signing up for the $21.95 Unlimited offer, but was told the following:

"Due to a contractual agreement with oneof the local providers there in the UK, we cannot authorize new customer signups for customers based in the UK at
this time. We hope to be able to renegotiate this with the local provider there in the near future, but at this time we do not have any estimate on when this will change."

Torrents from heaven

Stumbled across this good article on a new BitTorrent client called WinMobile Torrent. I don't speak Bahasa Indonesia, so I am not in a position to say whether the company name is meant to be an English pun, but I like the fact that it's called Adisasta.

Here comes Tele2

Though this company has previously shied away from the unbundling issue, and from fixed line infrastructure generally (outside its home market), Tele2 has today joined the unbundling race in Spain, acquiring Comunitel, giving it 191 central offices and coverage of 30% of the residential market from day one. I think I hear a collective "ouch" passing through the industry.

Dialing up 404

A mega-value reader points me to this announcement from Nomad International of a dialup VoIP solution. Before I rush out to buy one, I'd prefer to see a corporate website, but the URL in the company's own press release doesn't work. Maybe it's DNS hijackers at work again...