Friday, December 23, 2005

Off to the shops!

Posting may be a bit thin for a few days. Enjoy the sacred or secular seasonal observance of your choice, or not (that should cover all the potential sensitivities).

Peace on earth and IM goodwill

Blessed be the third party interoperability geeks. A mega-uber value reader pointed me towards this big announcement yesterday, and I was just starting to post on it when I realized that Thomas has already done a great job with it. I would only add that Google has the GAIM-master on board, so clearly the company itself will undoubtedly also have something exciting in the works beyond the AIM deal. It's also nice to see Skype dragged (undoubtedly kicking and screaming) into this process without the need for the usual niceties. Meanwhile, in Mac-land, Om and Andy have both written on developments around Gizmo (for what it's worth I am seeing a lot of VoIP geeks who have always refused to use Skype turning up on Gizmo).

In all the years that I have been pestering clients about VoIP/IM, I have never once said that the PSTN would be killed outright as a result. Rather, I have argued that if VoIP/IM communities got big enough and interconnected their various closed platforms, the PSTN would be progressively less relevant. It will be a death of 453 million cuts, and in 2006 it will move into higher gear.
Fancy a change of scenery in '06?

BitTorrent is hiring... Intriguing desired competencies:

  • Design and implementation of large scale search engines
  • Experience in algorithmic video processing

I bet the Friday afternoon office quiz is brutal.

Take the EuroTelcoblog holiday challenge

As we're nearing the peak of the silly season ("I'd like to discuss razor stubble, please."), let's indulge in a little silliness ourselves. This morning I woke up, inexplicably, with the word "WiBro" in my head, and I started thinking about how telcos around the world might "overbrand" WiBro in the future (let's ignore the fact that spectrum availability may render some of these infeasible in any event). So, I have put together a list of 10 fictitious WiBro brands/marketing slogans of the not-too-distant. Can you identify which carriers I am referring to? Ten-out-of-ten wins you a Gmail account invitation and promotion to the EuroTelcoblog Platinum Club (perks currently under development).

1. T-Bro
2. Can-you-hear-me-now-Bro?
3. Bro Zone
4. The Future's Bro
5. Raising the bar, Bro
6. We never stop working for you, Bro
7. Bro-mode
8. Live! Bro
9. Express Yourself, Bro
10. Bro With a Passion

Thursday, December 22, 2005

Fiber supplement

I just received an SMS reporting that the Amsterdam City council has apparently voted unanimously (45 out of 45) in favor of Phase One of the municipal FTTH project, which I have written about ad nauseum in the past, but which most of the market seems to have steadfastly ignored - no doubt that will change now (though the formal shareholder agreement has yet to be ironed out). I had previously heard predictions that we might expect 75 - 80% council support, so this looks like a complete knock-out blow for the proposition of muni networks. Call me alarmist, but I think this opens up a dramatic new chapter for EuroTelcoland, and is a perfect start for 2006 for those who wish to see more robust connectivity for all!

Wednesday, December 21, 2005

And one thing more...

In all the reporting that I have seen in recent days ahead of the Google/AOL deal, nowhere did I see a reference to point four in this press release. That's some afterthought, having GTalk and AIM users able to communicate, though I guess it could be considered somewhat elementary given Google's potential to harness GAIM to unilaterally achieve universal interoperability for GTalk. At any rate, it's interesting to see such a prominent placement of voice and IM in a deal which the media has overwhelmingly covered as a search/content-driven transaction.

Tuesday, December 20, 2005

Year of the Bear

For our monthly sector product (which I found recently, somewhat to my surprise, that some people actually seem to read) I entitled my end of year piece "Annus horribilis, annus mirabilis," which is precisely how it feels.

As of the close of play today, EuroTelco has underperformed the STOXX 600 by 21% year-to-date, and is the only sector to have lost money in an otherwise buoyant stock market. If investor attitudes were country music song titles, then this year would be called something like "Take Your Share Buyback and Shove It." Results in Q3 contained some bleak outlook statements regarding the next couple of years, to be followed (of course) by a strong recovery - a special Christmas menu of humble pie followed by jam tomorrow.

However, for all the shock and horror, it was a truly amazing year, the likes of which we may not witness again:

  • The vision, if not necessarily the net present value, of voice at the edge of the network was decisively validated - the sheer pace of innovation unleashed around this issue has been nothing short of jaw-dropping.
  • Decentralized and social media exploded this year, and it's difficult to find any company which does not claim to have a strategy for capturing the value created by user-generated content. I'm pretty sure this will be as easy as pinning Jello to the wall, but many will try anyway, and the facilitators will get paid and/or acquired.
  • There was also a lot of wild and wacky newsflow around alternative access technologies.
  • Things turned serious for P2P, and P2P got serious.
  • Google scared the hell out of everyone, well me at least.
  • The floorspace occupied by VoIP, IPTV and telco triple play industry events exceeded the total surface area of Canada for the first time in history, and the delegates to these shows, marched side-by-side into the sea, would form a neverending column - these are both facts, and I stand by them.
  • Equally hard to believe, but much more serious, was the RBOCs attempt late in the year to crash the hippy love fest (as they would probably term it) which is the open internet.

I've left a lot out, but as telco watchers of the future will no doubt say, if you can remember 2005 you weren't there!

My favorite telco event of the year was actually a fictional one - the arrival of the Wasp T-12 Speech Tool. I still occasionally get hits, sometimes from telcos and handset makers, searching for this - "What is the ARPU potential?" I can imagine them hopefully saying.

Anyway, it was an amazing year to behold and be part of (in my small virtual way), and no doubt 2006 will bring more wonders and horrors. I look forward to strolling through a nuclear winter EuroTelcoland in 2006 with you, my dear mega-uber value readers. Thanks to all of you for making this the best, and worst, year ever for EuroTelcoblog. God bless us every one.

More Christmas fun

Stylish, multicultural, Thomson.
More self-esteem damage

I'm still pessimistic that anyone reads or cares much about surveys like this one, but it certainly doesn't have a happy ending for telcos (and telco analysts) if they are reading.

Monday, December 19, 2005

More heartwarming Christmas greetings from EuroTelcoland

Today brings festive greetings from Alcatel and KPN. Interesting that the telco and equipment e-cards I have seen so far this year seem to be entirely devoid of any real sense of fun. Meanwhile, the "old school" directories player Yell wants us to play. Is telco in a state of holiday depression?

Friday, December 16, 2005

You've really got to love television a lot

French market stats

Just out, a set of statistics on the French market. Interesting observations:

  • 18% of the population over 12 has no fixed line phone
  • 7% of the population over 12 uses voice over DSL (via Freebox, Livebox, or other access-provider based product)
  • 4% of the population over 12 uses Skype or another IM client capable of voice.
More power to Christmas

With 32% of analysts sellers of the stock, I don't know how supportive we've actually been, but here's what we got from BT IR today - created in-house. Hey, this convergence thing is really happening!
The ghost of Christmas past

Christmas is a time for reflection and nostalgia, so let's take a break and relive a great moment in telco history, verbatim and courtesy of a nostalgic Triple Platinum mega-uber value reader:

How the world got flat-fee Internet (and why they are still trying to “correct the error”).

This story is from a supplier to the cable industry. He once asked a bar full of top-dogs from the industry if his reconstruction was correct. They told him he only made one mistake: it was actually on a golf course...

Act 1 : middle of the crazy 90’s, USA, board room of a leading cable company.
Jack (CEO), Ted (CTO), Dick (VP Marketing).
Ted: Hey guys, I tested these new boxes from XYlabs and it works. I get Internet access on cable.
Jack: Great. Now we can compete with dial-up. Dick, start selling it. What are you going to charge for it?
Dick: Dunno. Ted tells me he can’t shut it off so we cannot sell minutes. Furthermore we don’t have the billing systems now to charge anything but a monthly fee.
Jack: Shit. If we wait someone else will start with this. What do you think they are willing to pay per month?
Dick: Uhh, maybe 50 bucks?

Act 2: competitor cable company
Harry (CEO), John (CTO).
Harry : [Expletive deleted] Why don’t we have this Internet thing? What have you been doing? Sleeping?
John : [Blah, blah, feeble excuse]
Harry: I don’t care. Get the f”*& out of here and get me the results.
John: I got this stuff from Xylabs and it works indeed.
Harry: Roll it out and tell marketing we will charge whatever the other guys charge.

Act 3: Telco
Carl (CEO), George (CTO)
Carl: Dammit, the cable guys are selling their Internet access like crazy. We need to get an always-on product too. George call Lucent and find out if they have something.
George: They say they will have something called ADSL soon.
Carl: Get it as soon as possible, and get the cost down, we cannot charge more than the cable guys.

Act 4 : leading cable company
Jack (CEO), Charles (CFO), Dick (VP Marketing).
Charles: The more we sell this Internet product, the more losses we create, the fees are too low to recover the investments. Dick you have to tell your customers we are selling this at a loss so we can raise prices.
Jack: No, no. Look, the share prices are going through the roof, our option package is worth millions, invent a new EBITDA-something to show we are doing great.

And so the world got an abundance of flat fee internet access. And since that time the industry is trying to backtrack to the wonderful times of selling “Internet by the Pound”.

Thursday, December 15, 2005

Old year, new new thing

I have been struggling for the last few days with year-end deadlines and other chores, and have fallen woefully behind in blog-reading, company announcements, posting, and everything else. This is a catch-up post, sort of a Christmas basket, if you like.

Firstly, a housekeeping note. Someone wrote in this week with the following after my short post on Yahoo!'s launch:

"Ordinarily I love reading your blog, but when are you going to do some serious modelling on the VoIP business case? This stuff about Singapore is not up to it. We heard it all in 1997 at the ITU Asia Telecom show. Even you can figure out that's nearly 10 years ago! You should be VERY much more critical. There is no business case for VoIP - not now, not ever, NEVER!"

I thought that by using phrases like "IP as a blunt weapon of mutual annihilation" and "IP-fuelled deflationary spiral" with great regularity over the past two years, I had by now conveyed the view that I don't exactly think many people are going to get rich out of VoIP services - with some obvious exceptions (and here I would also include regulatory lawyers, hockey-stick-adoption-curve industry forecasters, industry trade publications and particularly conference organizers - when will we see the first perpetual itinerant VoIP conference on a cruise ship? 2006 could be the year!).

To be sure, there are today some successful businesses in the VoIP space, which wouldn't exist if the legacy pricing structures of the PSTN didn't give them something to arbitrage against. That's fine for as long as it lasts. However, some time ago I stopped even talking to clients in terms of VoIP as a business model per-se. These days I talk about it (I think for very obvious reasons) as a means to an end, and that end is gaining and maintaining a share of consumers' attention, which can then be directed to something else that generates serious money. I very much doubt that Yahoo! has any expectation of making a significant amount of money from its voice offering. I think it's more likely that we should view it as an element of "AAC," or Attention Acquisition Cost. I didn't think I needed to spell this out, but there we have it.

While on the issue of Yahoo!, I see that Andy has been doing some interesting musing on a wireless strategy, and this matches up nicely with some other developments this week which started me thinking. A lengthy and valuable chat and brainstorming session with Platinum Club charter member mega-value reader Thomas Anglero then put all the pieces into place. So here's a bold prediction for 2006, and it goes something like this...

I haven't really seen any commentary on this yet, but GIPS came forward this week with two new iterations of the Voice Engine - one for Symbian 9 and the other for Windows Mobile 5.0. Each is compatible with previous OS generations (7 and 8 for Symbian and 2003/04 for Windows Mobile), which opens up some interesting possibilities for lower end-user price points and a wider range of devices. This has been in the pipeline for a while, but it's particularly pertinent as we head into the new year. For one thing, it's pretty clear that Nokia is going to launch a staggering range of 3G devices over the next 12 months (and that something like half of the new models will also have WiFi).

It is also safe to assume that capacity utilization on European 3G networks is pretty abysmal at present, as the proportion of 3G customers to total subscriber base for companies like Vodafone and Orange is only 1 - 6%, depending on the country. As these exceptionally expensive assets sit built out to their statutory requirements and largely dormant, is there not perhaps a rationale for getting investors off your back and generating some wholesale revenues in the short term, by becoming an enabler of a flat-rate, data-only 3G MVNO?

The incumbent mobile players will have to take their own services this way anyway eventually, but not before there's no other choice, which means there's no particular rush - why not let someone else take the pain of working out the kinks, and if they become a successful franchise then acquire them, as TDC did with Telmore in 2G (and turned it into an exportable model)? For the newcomers, you've got yer wideband codec (with encryption in this latest version) to plug into a softphone on the mobile OS of your choice, global IP-to-PSTN termination should be pretty cheap (take a look at this Michael Robertson post where he claims his termination cost in the US is 1/2 cent), throw in some voice peering (this issue is going to be a big story in 2006), and you've got something truly compelling for the consumer. For the access-independent VoIP crowd, as well as perhaps the cable guys, this looks like a logical extension of what you've already got in place. My feeling is that what we see come out of IPMobile in Japan will be very much along these lines, and I also suspect that someone in Europe is bound to break ranks at some point in 2006.

Wednesday, December 14, 2005

Strange, but true, and not new

I am bemused by the flow of information on the net sometimes. Some fairly trivial stuff gets repeated and cross-posted ad nauseum, while other highly significant events seem to sit dormant for weeks. For the past three weeks I have been doing a large number of client meetings, in which I have discussed little else (at the popular request of clients) besides the possible implications of incumbent attempts to impose some form of IP interconnect on third party content/voice providers (for which read "household internet names.") My impression from these meetings is that these ideas have been entirely new to most investors (they have all invariably been both fascinated and appalled), though I have by no means been alone in expressing anxiety over these developments. (In fact, it was precisely this issue which prompted my online musical debut last week, which has today been Volokhed.) Today, however, some high profile sites have picked up on the issue, which should heighten awareness and paranoia levels considerably above what my feeble efforts could manage. I am, however, surprised that Slashdot seems to think that all this was speculation previously - no, it has been a matter of public record for a month, and comments on the Universal Service Reform bill are due on 23rd December. Merry Christmas, open internet, too bad you won't be around for the Congressional Christmas party next year!
Christmas wish list

For a recent presentation, I put together a mock-up image of a Google personalized page of the not-too-distant future, and some of this stuff looks really similar - except these actually exist. Personally, I'd like to see someone write an application which would allow me to access Blogger directly from my page, as well as Google Analytics - oh, and GTalk of course.

Tuesday, December 13, 2005

Euphemism of the day

In the conference call slides for this transaction, Vodafone uses the phrase "Vodafone approach is similar to that for a new licence." Translation - here is a 9m subscriber business which has to be rebuilt from scratch - Telsim capex for the past three years combined was apparently only $120m. Based on the $4.55bn transaction value and performance KPIs from H1 2005, it looks like Vodafone is paying $523 per sub for a user base which on average (again my calculation) appears to generate undiscounted lifetime subscriber value of $540. It's tempting to conclude that there is a slight air of desperation to make up for lost time in emerging markets.

Monday, December 12, 2005

Don't unbundle, bypass

Seeing product announcements like this makes me want to consider emigrating to the Czech Republic or Lithuania - I bet the food's better too!

I guess following the principal that the sun rises in the east, it would appear that Yahoo! has chosen to fire its opening salvo in Singapore, though I can't get the beta site URL to open (I would be interested to hear from any Singapore-based readers who can view it). The East is red with telco blood, and I guess it's flowing this way, though I don't see any signs of PSTN breakout in the European sites I've checked so far. (Uber-thanks, Hermano Nordico!)

UPDATE: A very helpful mega-uber value reader points me to the right URLs. Thanks!

Friday, December 09, 2005

Getting on with getting on with it

The UK Telecom Adjudicator's report for November seems to show some genuine improvement in delivery of ULL, and current projections are for bulk migration of around 500k lines over the next six months, or more than three times the current cumulative total of lines. Welcome to the 21st century!
Cat amongst the pigeons

Cisco just held its analyst shindig, with quite some attention given to "co-branding and revenue sharing opportunities" (translation - "stick 'em up"). Disruptive Dean was in the audience, and predictably asked a pointed question of Mike Volpi about the open internet (at seven minutes into the final Q&A session - watch the body language of the panel as he's asking the question). Mike Volpi's reply starts with the observation that broadband is not a "guaranteed right for human beings," and goes on to defend the carriers' positions in the sort of language we are hearing from the RBOCs. Along the way, he stresses that broadband is not a utility service. I guess not - my electricity company hasn't ever tried to charge me more for frivolous usage (such as having Christmas tree lights or playing an electric guitar) than responsible/essential usage (cooking my children's dinner). They pretty much just set the price and let me get on with using my electricity in the way that suits me. Hmmm... Mike Volpi, carriers' friend, defender of legacy telco investments against free-riders, where have I heard that name before?

Thursday, December 08, 2005

What's Estonian for "Don't Be Evil"?

Poor old Skype. First, a few weeks back, some comedians inside the Beltway produced some language which looked like it was written specifically to undermine Skype (I'm sure this was a coincidence). Then, as the post-merger dust settled, the two-headed Hydra of West Coast hyper-bloggers "ripped 'em a new one," as we'd say down South. Then yesterday Yahoo! delivered a little Christmas card to eBay (message - Christmas is cancelled). Now Verso, in the finest "kick 'em while they're down" tradition, has produced audited results of its Skype-killer, claiming it's validated, and throwing in a few nicely worded reasons for why Skype is a bad thing, just in case anyone had forgotten the message. And it's still only Thursday.

Wednesday, December 07, 2005

Not on my Amazon wish list

Dug this old chestnut out yesterday, a very interesting account of the BT IPO process, stolen from the Nikko Securities London library in the days just before the company shut down in late '98. The BT IPO was arguably the pivotal event in the development of the EuroTelcohell investors are living through currently.

UPDATE: Double Platinum Club charter member Chickenman chimes in to let me know that this book is actually very valuable. At £53.78, it's worth 25 BT shares at their current price, or around 3.8 shares at their mid-bubble high. Does that observation in itself prove something?


I alluded to this presentation slide in a previous post, and finally got around to converting it to a .gif using the amazing CaptureWizPro.

Granulate my presence

After an abortive attempt a couple of weeks back, dashed by a Canadian blizzard, yesterday I finally had a chance to catch up with Alec Saunders of Iotum, to discuss the company's Relevance Engine. (Rich Tehrani's post gives a great overview, which I won't duplicate here.) Suffice it to say that this seems to be a big step towards the kind of refinement of presence management which many have been yearning for. I would love to try it out, but at present it's only available in Canada, though I would expect that EuroTelcos may take a keen interest as they all pursue the Holy Grail of home gateway-centered/converged services. If we accept this proposition as being an attractive one to the end user, then a solution like Iotum's may be the essential glue to make multi-service communications a smooth and satisfying experience for the user, rather than yet another form of technoppression. I am also curious how the device manufacturers (both mobile and in the gateway/set-top box space) could run with this concept in future, particularly if we assume that devices inevitably become more context-aware. This is clearly only the tip of the iceberg, but it is an impressive start.

Tuesday, December 06, 2005

Your core, my loss leader

My boss just returned from the Centrica North America Strategy presentation, during which it was mentioned in passing that the company is offering new gas customers in Ontario five hours of long distance calls each month for free just for signing up. So here's a company giving away the core product of a 35% margin industry to bolster its own 5% margin core business. Any telcos fancy giving away gas?

UPDATE: Wow, Canadians love a bit of attention! A surprising number of readers from north of the border have written in with responses to this post. The best so far is this one, which portrays a slightly different view to that promulgated by Centrica:

"Just for fun, I called Direct Energy and after being transferred three time within Direct Energy’s customer service help desk, they finally asked me to call Rogers Telecom directly…which I did.

As it turns out, you have to subscribe to Rogers' home phone service for $29 CDN in order to get the free minutes and one free service (e.g, call display). At current rates, you can subscribe to a local home phone service from Bell for about $20-23 CDN + $6-8 for the feature. Therefore, Rogers is really using the LD as a simple means of acquiring the customer. While the offer sounds great, it does come at a
price of switching service providers."

My lament for the open internet

Recent sector shenanigans have got me down, so I have composed a short lament using this clever tool. If you have your own song inside, send it to me and we'll make a compilation.
Behind closed doors

The clock is ticking on data retention policy for the EU, and the good folks at EDRI (along with many others) are miffed at the process, which they question as being less than democratic and transparent. Not to mention that the entire exercise is almost certainly pointless and counterproductive. Point five of the letter to European MPs, being delivered just about now, is particularly insidious:
"5. The Directive requires more invasive laws. Once adopted, this Directive will prove not to be the ultimate solution against serious crimes. There will be calls for additional draconian measures including:

-the prior identification of all those who communicate, thus requiring ID cards at cybercafes, public telephone booths, wireless hotspots, and identification of all pre-paid clients;

- the banning of all international communications services such as webmail (e.g. Hotmail and Gmail) and blocking the use of non-EU internet service providers and advanced corporate services.

EuroTelcos will scream about the compliance costs, but if the long-term by-product is degradation of user experience for third party communications tools (as well as crushing financially weaker small upstarts), I very much doubt they will drown in their own tears. As with all these attempts at centralized control, however, I'm skeptical - every action invites a reaction, and this is just the incentive for a truly plug-and-play Tor.

Monday, December 05, 2005

Just because you're paranoid...

...doesn't mean people aren't out to get you, or so goes the saying, one of many common bits of "wacky" cubicle wisdom. My presentation to clients last week consisted of one Europe-specific section, and one global section dealing with the Attack from Cyberspace, and emerging telco strategies for dealing with it. Each time I presented this section I sat there thinking to myself, "This sounds completely demented - I know it's true, but I fully expect someone to tell me I've been smoking crack." Little did I know at the time that I was getting some of the best backup in the world. You couldn't make this stuff up, could you? I love the smell of napalm in the morning...

Beyond the quadruple play

The Centrica story alluded to below has started me thinking: once all the hot-ass quadruple play business plans have been executed, what's left for telcos? Well, I think for smart ones it will probably be something which seeks to amortize the costs of multiple other domestic services across a common customer base and set of functions, as Centrica has attempted to do (let's face it, no one cares how good your VOD offering is if they're freezing butt with a broken boiler, or if they're at the mercy of the fluid work schedules and opaque pricing of one of this country's many fine independent builders). At c.10%, operating margins in this business are lower than EuroTelcoland is accustomed to (but interestingly, are more than double that of Centrica's traditional core business). Then again, what are we working towards here, glamor or survival? I wonder how many telcos have considered this as a realistic option for the future, and how many would consider it beneath them somehow?

Good riddance to bad rubbish

Nice to be back in London, where advice like this is both readily given and universally ignored. Conveniently, it pretty much sums up investor views on telecom from my series of meetings last week, and also fits in nicely with a view of "the year that was" (the only STOXX 18 sector in negative territory year-to-date, etc...). More red on my screen today, largely as a result of the UK "quadruple play" story, and DowJones is reporting that Centrica has pulled the sale of its OneTel arm after only one bid was submitted at GBP100m. My boss, an energy analyst, reckons this is roughly the amount of invested capital in the business to date, i.e., it's a nil-premium bid.

The hills are alive with my mobile lifestyle

Oh, the havoc that my friends and I could have wrought with photo-sharing and blog tools back when we were living in Japan... Oh well, at least our spiritual descendants are putting these to good use. I agree with anenglishmaninosaka that this ad campaign from Vodafone, touting the virtues of the family calling plan just launched last month, probably pushes the boundaries of credulity, and as for me, I can't get away from associations with other images which make this even harder to take seriously. Surely a hired gun gaijin film star (a pouting Nicole Kidman?) might have been a better bet?
Triple play, we hardly knew ye

Apologies for the loss of momentum on Japan-blogging late last week. Too many meetings, too many late nights, I'm afraid. Back in a very grey London, with a tenuous grasp of time zone, there is nevertheless no respite from the deflationary spiral which is our beloved UK telecom market. This move is hardly surprising, given a well-telegraphed strategy by NTL. What is, perhaps, surprising is the speed with which a mobile piece is being pursued, and also the fact that the approach is inorganic. At the last set of Sky results, James Murdoch was asked about the possibility for a mobile piece to the SkyEasynet newco and remarked that he thought the company had enough on its plate in the short term. I would be surprised if that were still the case this morning.

Wednesday, November 30, 2005

Iwashi power

As anyone who has ever lived in Japan can attest, approximately 98.6% of Japanese television programming is either quiz shows or food programs. This evening I was treated to a show which was both - one whole hour devoted solely to the humble iwashi, or sardine.

Location, location, location

Casting a red glow (this photo was taken just as the sign was lighting up) over a prominent intersection in Ginza is Vodafone. Several clients have asked over the past couple of days if there was a case to be made for a withdrawal from the Japanese market. My natural response would be that there is, but when I see the sheer amount of Vodafone advertising in this country (the "Vodafone crosses borders" slogan is also part of a ubiquitous TV ad campaign), I sense they genuinely are in for the long haul.

The Big Apple, Tokyo style

It's big, it's Ginza, it's packed, it's an iPod Christmas for Japan, apparently.

Monday, November 28, 2005

Makenai Furansu-jin

My personal laptop, from which I write, doesn't have Japanese character entry, unfortunately. Anyway, this title means something like "The French are nothing to sneeze at." While I waxed lyrical about broadband in Japan earlier, Yannick is riffing rather amusingly on French broadband bete noir Free's broadband brinkmanship. Inspired.

Step right up!

Inside the Yodobashi Camera store there was a long counter where sales representatives were promoting various broadband products, with most of the usual suspects represented. How about 50Mbps DSL for EUR28.50 per month? You got it. An extra EUR21 per month gets you 100Mbps symmetrical fiber. We asked one sales guy where fiber services were available, and he chuckled and replied, "Within the Kanto region (a mega-conurbation of 40m people), basically anywhere where there's train service." Which I unscientifically calculate as being pretty much everywhere...


Today I had a chance to stop off for a look in Akihabara. My locally based colleague remarked that the area's been under intense pressure as the various product ranges of its old specialist shops are subsumed in giant category killer stores around the city, such as the world famous Bic Camera. A new one, the Yodobashi Camera superstore, has descended on Akihabara, with an almost obscene range of tecnology on display. It was truly jaw-dropping stuff. If it ain't here, it probably doesn't exist.

Sunday, November 27, 2005

Bad to the bone

Vodafone and au may be struggling to get their marketing messages across, but stroll up the road to MosBurger and there's an undeniably powerful message waiting for you, possibly literally in your face, depending on which way the wind is blowing: "Feel the chicken."

Waves of love

At the other end of the tech spectrum from poor old "News-kun" was this wedding ceremony occuring just under my window. The happy couple were standing on a glass platform erected over the lavish hotel swimming pool. The guests were seated around the pool, and if you look carefully you can see the organist in the upper left corner.

News-kun, we hardly knew ye

One thing which I find really interesting about Japan is that, for all the orderliness and sparkling, hi-tech infrastructure, there is a layer of retro rot just barely concealed under the surface, and a fair amount of retro-futurism, which I love. This is a newspaper vending machine, my guess is from the 1980s, still standing on the street, with newspapers still inside (I couldn't see if they were recent), but it looks entirely forgotten and forlorn. It's called "News-kun," "kun" being a suffix indicating a younger person, or a boy.

Pachinko fever

Pachinko fever
Originally uploaded by jimiinc.

This is a very poor photo, but I was walking past and shot it just as the doors slid open. Basically, I am afraid of pachinko parlors and their management, nuff said. Anyway, one thing that has always amazed me about Japan is the seemingly inexhaustible appetite which many people seem to have for it. It's hard to tell from this picture, but most of the people inside looked to be college students, or around that age, not the sad middle-aged man crowd which I always associated with pachinko when I lived here. Internet gaming, with all its attractions, is indeed impressive, but it seems that people who play pachinko are looking for something which may not be replicable online, even if they were allowed to win money. It seems to me that the experience involves some very unique aspects (cramped seating, a choking cigarette haze, deafening music, and the incessant din of the machines themselves), which no amount of Ajax could recreate.

au, get off of my cloud

Just across the road from the Vodafone shop, things were much quieter in the au shop (au is the fantastically successful mobile brand of KDDI). So quiet, in fact, that the management saw fit to send two young girls in long puffer jackets (deja vu of Yahoo! BB's tribe of street-pounding evangelists some years back) out in front of the shop. One exhorted passersby with a microphone and hectoring nasal tone unique to young Japanese women, while her colleague handed out packs of tissue, which believe it or not, are very common advertising tools in Japan.

Vodafone in Japan

The Vodafone shop in Monzennakacho near my hotel was very lively this Sunday afternoon, somewhat surprising for a brand which is struggling. The lifesize cutout of some popstar (unknown to me) in the shop window bears a clever marketing pun. The text reads "Vodafone crosses borders," but the word "borders" is rendered in a Japanized English rather than the native word. This comes out as "bōdaa," which sounds like the first two syllables of the Japanese pronunciation of the company name, i.e., "Bōdafōn."

Tokyo Nagaremonogatari

EuroTelcoblog is on the road in Tokyo, and while I intend to stick to the usual themes, I will exercise my editorial fiat to go offroad from time to time over the next few days.

Friday, November 25, 2005

Tokyo bound

I am headed to the mother ship tomorrow at midday. Hope to do some photoblogging while I'm there.
Toxic parents

Poor Swisscom. "No you shall not go to the ball, we want our dividends."
Sold on telecoms

Sell-side analysts no better than salesmen? Pshaw! Analysts covering FTSE 100 companies may be 90% positive/neutral, but hard-nosed European telecom analysts can confidently hold their heads high, proud in the knowledge that they are only positive/neutral 87% of the time. At least according to my digging on recommendations as reported by Bloomberg.

I don't want to mix business with pleasure, so I won't go into the specifics of my coverage, but suffice to say that 63% of my recommendations are neutral and 37% negative. I have no outperform or buy recommendations (our ratings are made against the wider market, not against the sector - if the policy was to make recommendations against the sector then things would look a bit different). Astute readers of this bloglet may have picked up on a nuance of pessimism I have towards the sector, and there's your proof.

I guess I would have been fired from somewhere else long ago, but I'd like to think that our clients like hearing it like it is, and that this is appreciated by my management. Anyway, I guess the performance numbers tell the real story. Here's the STOXX Telecom industry group's ranked relative performance against the STOXX 600 18 industry groups (1 being highest, 18 being lowest).

One month - 18
Three months - 18
Six months - 18
Year to date - 18
Two years - 16
Five years - 15

This probably gives some sense of the analyst fatigue which I assume many fund managers must feel. Given a poor performance track record, and an increasingly brutal set of competitive and technological risk factors, where can this overwhelming sense of positivity come from? I certainly don't have a clue, but hope definitely springs eternal. One other thing I notice from perusing Bloomberg's data is that average price targets on Vodafone, France Telecom, Deutsche Telekom, Telefonica and Telecom Italia (i.e., the five biggest constituents in the sector, which generate the highest trading volumes, and therefore commissions) are 20% above current trading levels.

Here's the data, as compiled from Bloomberg:

Positive/Neutral/Negative splits (%)

France Telecom 74/18/8
Vodafone 67/28/5
Telenor 62/29/9
OTE 57/43/0
Deutsche Telekom 56/36/8
Telefonica 55/37/8
Telekom Austria 54/46/0
TeliaSonera 44/36/20
Portugal Telecom 37/47/16
Tele2 36/43/21
Telecom Italia 34/41/25
TDC 30/50/20
BT Group 27/38/35
Eircom 25/75/0
Belgacom 22/50/28
KPN 56/36/8
Swisscom 5/57/38

Thursday, November 24, 2005

Let's go back in time

I know there's a lot of very heavy stuff going on in the sector, and I could very rightly be accused of being overly negative and pessimistic, so mea culpa. But it's nearly Friday, so let's forget all that and enjoy a little nostalgia, returning to a simpler time, when we didn't have to think about the "database of intentions" or deep packet inspection, but we were definitely in search of something more (though I am amazed that the obsession with remote control of domestic appliances apparently goes back some 41 years, at least). And people wrote letters...
More Mesh Mapping Goodness

Very nice indeed. Would be very interesting to have this sort of facility for customers of the traditional players' networks (maybe a site called "How overbooked is my DSLAM?"), but I imagine Beelzebub might purchase a parka before we see that day.
Land of hope and Google

There's been plenty of media coverage of Google's London office opening, but a mega-uber value reader points me to an apparently new outreach initiative, Google Space at Heathrow Terminal 1. I wonder if we'll start to see Google sponsored hotspots turning up around London, say at Victoria Station?
To the max

Pipex, which frequently has a significant lag between press releases being emailed out and posted to the site (thus no direct link at this point), has this morning released an update of progress in its 802.16-2004 trial with Airspan. Its drive tests have achieved stable non-line of sight connections in excess of 1km from the base station, and the company is talking about hitting 8Mbps by March of next year. Towards the end of the release there is a reminder of progress being made towards 802.16e compliant handsets. I'm sure there are a lot of kinks to be worked out along the way, but I wonder how many investors have factored in what is in effect a sixth UK mobile network (and maybe a seventh, if the prohibition of handoff is lifted?) coming into the picture just as Vodafone, T-Mobile and Orange hope to begin seeing the fruits of their marketing pushes?

Meanwhile, Disruptive Dean has an interesting take on the market dynamics behind the xG Technologies story.

Wednesday, November 23, 2005

Do you speak Google?

(Just stumbled across this): Global domination can still be fun.

I think future iterations should include the telco doublespeak version, as well as the Dubyaficated version (Go to the button marked "Wordify" on the "Amusements" tab, and enjoy).

UPDATE: A few sample "Bushifications" -

Enck -> "mis-Enckicity"
EuroTelcoblog -> "over-EuroTelcoblogication"
Daiwa -> "Daiwaization" (簡便してくれ)
Mongolia -> "super-Mongolia-protection"
disruption -> "dedisruptionizational" (this is a timely word)
long tail -> "anti-long tailicity"
net neutrality -> "under-net neutralistic"
stupid network -> "stupid networkification"
misunderestimate (itself a documented Bushism) -> "mis-misunderestimatify"

Tuesday, November 22, 2005

Calling Dr. Orwell

I've spent the past week writing a piece for our global sector product, and putting together slide packs for clients, on the emerging issue of net fragmentation. Being an ardent believer in the principals of net neutrality, and the idea that openness and interoperability eventually pay huge dividends, I feel very strongly about this issue. Nevertheless, each time I commit a line to paper/cyberspace, I'm seized by a feeling of doubt for a few seconds. Can it really be this bad? Am I not just being sensationalistic and paranoid? Luckily (is that really the appropriate adverb?), subsequent newsflow (in this case via a Platinum Club mega-uber value reader) invariably makes me feel better, well actually worse, but at least vindicated:

"Telephone networks are made up of regional, domestic networks united
together in agreement of the ITU framework. A similar situation may start
with the internet."

Secret German working groups concerned with IP interconnect, yet not involving ISPs (with a couple of prominent exceptions)?

Calling Dr. Orwell, we're 21 years late, but the patient is finally ready:

"Oceania was at war with Eurasia and in alliance with Eastasia. In no
public or private utterance was it ever admitted that the three powers had
at any time been grouped along different lines. Actually, as Winston well
knew, it was only four years since Oceania had been at war with Eastasia and
in alliance with Eurasia. But that was merely a piece of furtive knowledge
which he happened to possess because his memory was not satisfactorily under
control. Officially the change of partners had never happened. Oceania was
at war with Eurasia: therefore Oceania had always been at war with Eurasia.
The enemy of the moment always represented absolute evil, and it followed
that any past or future agreement with him was impossible."

Wayward mobility

I had a good lunch today with Dean Bubley of Disruptive Analysis. Turns out we worked together at Credit Lyonnais back during Bubble 1.0, if only for about five minutes, and in separate parts of the business (his small-cap team soon left en masse to another house, and I found my own exit a few months later). Anyway, he's got an acerbic style which I like, as in the case of his take on MMS:

"Yes! You can take lousy low-quality images, compress the living daylights out of them further, put them in a cumbersomely-constructed message, and spend lots of money to send them to someone else, who might occasionally receive them OK. No! Don't just upload the image to a PC and email it for free more easily instead."

He's certainly got a good point. As I think I've stated before, I almost never send an MMS, and on the rare occasion when I do, it's almost always one included in my monthly tariff, and invariably to my Flickr! account: one image transfer, to a potentially unlimited viewing audience, in perpetuity. Thinking back to the Bubble 1.0 era business projections I recall seeing (voice ARPU stays flat over the forecast period, with data growing to a commensurate level - hey, presto, ARPU doubles by 2010!), I am the nightmare customer, 2005-style.

I'm not alone. A cursory examination of European mobile ARPU (as reported by the players, caveat lector) shows that data revenues account for anywhere between 12 - 19% of ARPU, and typically around 75% of this is pure SMS. Strip this out, and we get voice ARPU down anywhere from two to more than 10% YoY, depending on the player and market. Given that voice is the only place where any telco has ever made money, there is an understandable scramble to replenish the top line and invent a public case for margin stability.

Then again, it only takes something like this to wipe a lot of potential revenue streams off the radar screen entirely. Sky UK, Sky Italia, Premiere, Canal+ , EuroCable, DSL players, anyone but the mobile players, may become the prime movers in mobile (okay, portable) content, precisely because they aren't explicitly trying to make money off of a discreet billable event, as the mobile players are natually obsessed with.
Shameless self promotion corner, revisited

Slow posting these past couple of days. I'm busily preparing three separate slide packs for my marketing trip to Tokyo next week. Two are for clients with varying interests - one very Eurocentric, one very global. The latter makes me laugh every time I look at it, because for the cover I have assembled images of telco/cable barons on the right (well, that's appropriate, isn't it?), with the global internet/media luminati on the left - between them is an inflatable kiddy wrestling ring. The title? "Let's get ready to rumble!" The third set is an introductory presentation on online gaming for the session I am moderating at the Europlace event on Tuesday.

Monday, November 21, 2005

If it ain't broke...

One of my favorite wacko Southern sayings comes from Jerry Lee Lewis, who once stated his attitude to excess thus: "Enough is alright, more is better, and too much is just about right." This might also be applied to Congressional efforts to fine-tune the economics and engineering of the internet. Just last week, we published our November edition of the Daiwa Global Telecom Monthly, and in it I wrote a leader piece dealing with the BITS act and related issues, and afterward I wondered if I had been a bit too alarmist and paranoid.

However, after reading Susan Crawford's take on the new draft bill on the Universal Service Funding mechanism (read pages 17 - 19, and then go and change your underwear), I am beginning to agree with Jerry Lee (i.e., only too paranoid is an adequate response to this kind of craziness). In other words, this piece from one year ago seems to be playing out as I envisaged - but it's actually worse.

Not only does the customer stand to get shafted, but it looks to me like purveyors of third party communications applications are left open to, in effect, being forced to pay interconnect, as well as being saddled with all manner of compliance costs (and fines, should they not play along nicely). I wonder how Skype would have handled this challenge had it remained an independent company, but even with eBay footing the bills, I'm not sure how it deals with this.

I guess this is a good time to be in the deep packet inspection field. Skype was about opening up communication, and now the sweet spot in the market is around closing it down.

(UPDATE: Those of you old enough will remember just how quickly Woodstock was followed by Altamont...)

Friday, November 18, 2005

Imagination at work

This M&A-driven market delivers one mega-deal a second. GE is getting out of insurance, and interestingly only yesterday hired two highly regarded people in the telecom and media world to advisory positions in its commercial finance arm. I wonder what they're going to do with the cash?
Hotlanta! My box runneth over

I seem to recall Cisco denying at some point in the past that it was moving into consumer electronics, but I don't know how else to categorize this. I see a box, with WiFi and SIP built-in, plus some place-shifting/remote management capability - and some headaches for a few people.
The human mesh

I'm not quite sure how I managed it, but I got invited to dinner with a bunch of interesting people last night, for a change, hosted by Kevin and Johanna Werbach. One of the attendees turned out to be Richard Lander from Locustworld, who had some great anecdotes about delivering broadband to Bolivia, as well as some other interesting (the important bit is about 7 minutes into this) developments I want to follow up on when things are a bit quieter. He also points me to this very cool mash-up of Google maps with the network status and topology stats from another Meshbox deployment in Vivian, Louisiana. Damned impressive. (Incidentally, this is the region where one half of my family comes from, and knowing it as I do, I guess the mesh pickup and bassboat are also in the pipeline!)
When in doubt, issue a press release

It's coming down to a battle for hearts and minds, and KPN has come off the ropes swinging, albeit somewhat feebly: "KPN's core network has been all fiberglass cable for many years now." Duh.
Through the keyhole

I just happened to stumble across this interesting blog, which details a rural family's experience as it drops the PSTN completely in favor of total Skypification. Interestingly, according to this unofficial survey, a significant number of people might be doing just that.
I still don't get no respect

I'm usually pretty skeptical as to the value of these company league table exercises put together by the financial press, but in the world of corporate paranoia and keeping-up-with-the-Jones', I guess they must mean something to someone. The Financial Times today has another in its annual series of "World's Most Respected Companies," a mixture of hagiography and crypto-advertising, and I'm sorry to report that, with the exception of Carlos Slim, no telco executive figures in the top 50 most respected business leaders, and not a single telco name crops up in any other category (shareholder value, turnaround, customer service, innovation, most respected company).

Some might argue that the list reflects largely global players in global industries, whereas telecom is a global industry comprised of national and regional players woven loosely together - thus, it's not a fair comparison. Balderdash, I say. Vision is vision, and where it exists it is awarded respect. At the very least, one would expect that the closest thing to a global player in the industry would appear somewhere in these lists (if nothing else, its market cap is larger than many of the companies which do appear - despite the rout of earlier in the week), but no cigar, hard cheese. You are known by the company you keep, and it looks like telecom is cowering in the corner with the dowdy wallflowers, suffering from low self-esteem.

Thursday, November 17, 2005

El huésped malo

Deutsche Telekom must be feeling slightly Iberophobic right about now. The O2 acquisition can be of little comfort (think of the competitive roaming offers for destinations like the Costa del Sol or Argentina), Telefonica recently reported that its German DSL lines were up 25% YoY in Q3, and now the company is providing Skype with German SkypeIn numbers (thanks to Richard for pointing this out). If the Equant/Google story turns out to be true, then here we have two cases of national carriers jumping on the bandwagon as enablers of next-gen voice, once again to the detriment of their neighbors (and their own retail businesses?).
Now IVE seen everything

In all the distraction I suffered yesterday, I failed to notice the Sony news about IVE (Instant Video Everywhere, in conjunction with Glowpoint), making good on earlier suggestions of a consumer VoIP offering in the works. Not sure I fully understand the pricing, which looks fairly extortionate for PSTN breakout, particularly international, but I guess it's certainly cheaper than the typical conferencing service. Who's next, Dell?
Connect the dots

Two Superfantastico mega-valor readers simultaneously point me to news out of Latin America that Google is cooking up something with Equant for global VoIP. I can't think of any other players who have points of presence in Ulaan Baator or on the shores of Lake Baikal. This could be big, and also puts France Telecom in an interesting position...

Tuesday, November 15, 2005

Two out of five ain't bad

Today was the day I chose to re-start coverage of Vodafone following the departure of the other member of Daiwa's telco mega-team. Boy, I know how to pick 'em. The market is almost closed, the share price is down 10.7%, on an almost inconceivable volume of 2.05bn shares. Luckily I wasn't planning on being overly positive anyway, but today was any doom-monger's dream come true. Spain and Italy looked decent, but the UK and German markets are obviously very tough going (as we knew), and Japan is a nightmare. That's two out of five core markets doing well. However, Japan could get a lot uglier, as could the UK and Germany (particularly if DT decides it wants to play the converged game in the UK too, and does something drastic) and I wouldn't count on Spain remaining the relative island of calm it has been.

The outlook statement gives a fairly unappetizing view of the next couple of years: margins to compress further in Japan, followed by more vigorous marketing initiatives in the other core markets in the 2006/07 financial year, bringing more of the same. (Does this sound familiar to anyone?) Capex is going up, and there's this small matter of GBP5bn in deferred tax liabilities which are to be crystallized sometime over the next three years. I think the market rightly senses that the additional GBP2bn in buybacks and increased dividend are a last gasp of the good times before the heavy weather sets in. I'm tempted to say that EuroTelco mutual annihilation is beginning to show some signs of coming to fruition.

Friday, November 11, 2005

Strategic options

I just received a press release from Fastweb, which I can't find on their site, which begins: "Fastweb explores strategic options for further development," and goes on to say, "The Board of Directors - in the light of the current consolidation trend in the European telecommunication industry, and of Fastweb's success in the Italian market - believes that it is in the interest of the Company to explore alternative strategic options that could create additional value for shareholders." I've stated quite recently who I think might be interested...
Local mobile yokel

I just downloaded Google Local for Mobile to my Audiovox Scoblephone in London, selecting "other" as my carrier. It works like a charm, albeit only with US location information.
$2.7bn over Tokyo

I don't have a clue what IPWireless would be worth in an acquisition scenario (Flarion got taken out for $800m, but without any of the mass commercial deployment which IPWireless can point to). Whatever it's actually worth, I noticed with interest that its presence in this deal seemed to be sufficient to knock 1.7% off Vodafone's share price yesterday, which equates to $2.7bn in lost value. 大したもんだ!
Where the heck am I?

A Diamond Cluster mega-value reader writes in re: Google Local for Mobile, to observe that a lot of interesting stuff has already gone on in the space, driven by much smaller players. He points me to the supercool Navio, which looks downright useful, but also has a fun side, and integrates with the fantastic A2B search engine, which correlates map coordinates with URLs. Keep pushing, innovators!
More Q3 datapoints

Posting has been slow due to the reporting season and a number of other deadlines converging. I will attempt to remedy the situation with some short updates to clear the backlog. First comes cable VoIP, which is gaining traction in Europe. Liberty Global reports today that it is adding 6,000 subs per week in its properties in the Netherlands, Hungary and France, which it says is an acceleration over Q2's rate. However, the Q2 rate was stated at 7,000 - 8,000 per week, so how they are defining this is a bit of a mystery to me. Nevetheless, 6,000 per week is respectable. Elsewhere, UPC is trialling 100Mbps symmetrical FTTH services in France (Google translation here), suggesting that its commitment to coax is not set in stone. Incidentally, the article states that UPC's French unit Noos has garnered 100k subs on its NoosTel VoIP product.

Thursday, November 10, 2005

Born free

A super-duper megavalue reader writes in re: this. His VoIP-centric take:

"If IBM, et al, lose this one, there could be potential licensing issues on a lot of VoIP-related software (especially software like Asterisk @ Home, which actually bundles the Linux OS with Asterisk on one CD). It would also increase the costs of the voice ISPs, as they'd start having to pay license fees (calculated at the moment on a completely unknown basis). Also, in light of all the 'open' stuff you've been talking about recently, I think this is quite interesting. Five big gun commercial giants getting together to keep something free for the good of the public. That's a sea change isn't it?"
More power to...

Today was BT's Q2 release, and at one point my boss, an oil analyst, seeing the share price down the better part of 3%, appeared by my desk to say, "Maybe BT should take its inspiration from BP in its corporate identity." What he was referring to is BP's marketing campaign, which stresses the idea that "BP" stands for "Beyond Petroleum." In other words, BT needs to be "Beyond Telecom," and God knows I think the management have adequately stated that idea by now. Vision is an important thing, and certainly BT has plenty of it, but the sad truth is that here in the present, BT is a company with a critical retail presence which is hurting: voice line loss of 8% annualized, market share in consumer telephony down another two percentage points, the proportion of consumer revenues "locked in" via contracts stalled at 65%, share of DSL net adds in decline again, a second quarter of net subscriber losses on the MVNO, customer losses on the MVNO in the quarter equivalent to the number of pre-registrations for Fusion. Every single KPI seemed to be wrong this time out, and the situation is not helped by both Sky and Carphone Warehouse, two credible consumer brands, going for 1,000 exchange unbundling programs over the next year. Nor was it a good day for Telewest to release results, showing that it and NTL combined had the best quarter for broadband net adds in nearly three years. I respect BT, and I think they have a reasonable chance of morphing into something with staying power, but the transition to that something is painful to watch from the outside - it must be crazy-making on the inside.

Wednesday, November 09, 2005

Less is more

Very limited posting today as I battled with some tricky stuff from Deutsche Telekom - a decent set of results, coupled with a big cut in 2006 forecasts due to an ambitious EUR1.2bn marketing and brand management revamp in search of higher growth, plus a four-hour webcast in the afternoon. A one-man-band like me gets somewhat overwhelmed in these circumstances, but I dutifully published my note, with only two typos, so overall it was a relatively good day. Watching the webcast, I was struck by a couple of things.

Firstly, it hit me that DT is trying, somewhat later than some of its competitors, but reasonably convincingly, to convey the idea that it understands Web 2.0 and speaks the same language as many of its critics. Walter Raizner, head of Broadband and Fixed Networks, at one point in his presentation stated in cringeworthy fashion that DT wanted to become "the eBay of telecommunications." This, however, was probably a bridge too far.

The other thing that struck me was the sense that today's strategy presentations laid bare the kind of inherent and irreconcilable conflicts which arise when integrated incumbents try to adopt disruptive models. Mr. Raizner painted a picture of converged services (one phone, one number, one bill) wherein his division is going to take advantage of the 10:1 pricing asymmetry between fixed and mobile networks (duh!) and generate subscriber loyalty and usage growth. Simultaneously, Rene Obermann made the case for continued growth from multiple SIM ownership and fixed/mobile substitution. Clearly these two agendas do not coexist easily within the same strategy. It's not as if DT is unique in this respect - it's just interesting to see the inconsistencies highlighted so clearly. One tenacious analyst pointed out, as if he needed to, that there is a risk that DT sees a reverse migration, from mobile to "converged service" minutes, which would be counterproductive. Management seemed to squirm at this point, reiterating, somewhat anemically, that they genuinely believed in their respective growth strategies.

I genuinely appreciate the position that the DT management are in: in the current market climate, this sort of transformation message has to be conveyed to maintain credibility, but it's damned hard to get it right. At the same time, I think it's interesting that the revised 2007 EBITDA guidance is not all that much above what consensus (or my own) forecasts were before today's "groundbreaking" announcement, though the 2007 revenue number the company is pointing to is 5% above previous consensus. The company has outlined all manner of concrete targets for triple play subs, web'n'walk handsets, etc., in an attempt to put meat on the bones, but it seems to me that investors may have some serious trouble accepting the revenue uplifts two years out, in light of all the uncertainties and dislocations confronting the industry. Nevertheless, Kai-Uwe Ricke was quick to point out that in its investment decisions, the company is moving philosophically from a focus on EBITDA to "shareholder value creation" and return on capital employed - a convenient swap when the top line forecasts jump but EBITDA remains in line with previous expectations, and you're facing a near-term capex spike. Less is, apparently, more, after all.
Telco inferno

It's 11:03 AM, the STOXX 600 is down 0.14%, our beloved telco sector is down 1.19%, Deutsche Telekom has basically wiped EUR1.2bn off consensus EBITDA forecasts (for a YoY decline) for next year as it invests for growth, and in the UK OFCOM has just cut wholesale line rental costs by 9%. Does anyone smell smoke?
Please Mr. Congressman, don't eat my internet

Via a mega-uber value reader, the man Vint Cerf speaks out ahead of today's Congressional hearing on - can it really be? - the future of the open internet. (Ironically, the man himself won't be at the hearing because he will be receiving a Presidential award for creating TCP-IP.) Whatever the outcome, I think the message for Europe is to get those alternative fat pipes out there!

Tuesday, November 08, 2005

More Q3 tidbits

For anyone out there obsessively counting VoIP minutes and subscribers, here are a few more datapoints from the steady stream of Q3 reports:

  • KPN yesterday said that it estimates there to be around 400k users in the Netherlands of what it termed to be "VoIP-like" services. That would be something over 10% of the total broadband market, but I don't see how this number could be accurate. Back as long ago as April, I had a top 20 Skype user countries spreadsheet (from the company itself) showing nearly double that number using Skype alone. I sense that a more accurate estimate would be something closer to 1m users, which would be over 25% of broadband connections.
  • In the German market, United Internet yesterday said that it is currently invoicing 175m VoIP minutes per month. Back in mid-August, the figure was 100m, up from 90m in June.
  • T-Online, besides having a knock-out quarter in its home DSL market (342k net adds in Q3), claims that over half of new customers in France are taking VoIP at point of sale. T-Online reports France and Spain subscriber numbers together (+64k in the quarter), so a hard number eludes us, but assuming that France was 70% of net additions, that implies something like 23k VoIP subs in France in the quarter. Next to Free's c.1.3m VoIP subs, and France Telecom's 484k, this is fairly inconsequential, but it's a decent take-rate for a newcomer in a market which is arguably Europe's most mature.

Monday, November 07, 2005

Color me mobile

An eagle-eyed uber mega-value reader points me to what Om wrote about earlier: Google Local Mobile. I can hear mobile operators saying "Drat!" right now.
Chinese takeaway

Just last night I was finishing up a meal in a Chinese restaurant, I opened my fortune cookie to reveal the following message: "Confucius says: Skype bad, IMS good." If this is indeed the Chinese century, we are all in for interesting times.
Silence is golden

The KPN Q3 conference call just wrapped up. I bit my tongue throughout, expecting someone to mention this minor piece of news, but no one did...

Friday, November 04, 2005

Disruption 3.0

A couple of weeks ago, a friend and Double Palladium Club mega-value reader turned me on to xG Technologies, which I linked to here in passing, with no commentary. Accordingly, no one seemed to take any notice. I also contacted the company's PR guru, to no avail as far as I can see (unless of course a response got sucked into the infinite black hole which is the Daiwa spam filters). Today xG has been Slashdotted, in reference to a media event in support of its xMax product. I've written frequently about IPWireless and Flarion in the past, but this would appear to be a very different beast indeed, and if it works as described, could be significantly more disruptive. It seems that there are many unanswered questions, and I'm not an RF engineer, so I will demure, but I am inclined to believe that, having kept so quiet until recently, there must be some substance to their claims - otherwise it's media suicide. Expect this to become the next "new, new thing."
More adventures in Q3 earnings numbers

BSkyB reported its Q1 results (that's everyone else's Q3) this morning, and while most of the key items in the P&L are broadly in line, net subscriber intake was at the weak end of the forecast range at 57k. Consensus appears to have been around 68k, I was looking for 70k, and the most optimistic forecast according to Reuters was 87k. Stripping out Sky's Ireland business, net adds in the UK were only 48k. Annualized churn was up to 11.7%, 1.2 percentage points than in the June quarter. If this were obviously being absorbed by cable, that would be one thing, but NTL yesterday reported spectacularly weak numbers for the quarter (4.2k digital additions, 21.8k disconnections on analogue). Telewest reports next week, but I'm not convinced that things will look much better. HomeChoice has today been featured in a Reuters story, claiming 34k subs currently (i.e., net adds of 19k in roughly 9 months), so its effect in Q3 was probably marginal. [UPDATE: It turns out that this was a press release, which I did not receive for some reason. ] We can only assume that what market growth there is continues to be driven by Freeview, and perhaps that interest in TV generally is trending lower, faster than some might have expected. Sky's going to have to push hard in the remainder of this quarter to hit the 8m mark it has pledged, which explains the ubiquitous ad presence. It probably also underlines just how important a move Easynet was.

Thursday, November 03, 2005


Cycling home this evening through the dark and bleak backstreets of South London, listening to stories of rioting in the suburbs of Paris and the degree to which national governments seem to be completely out of touch with the needs of their constituents, I started thinking about this Amsterdam development, and arrived at the following question: Isn't this project, and all the others we've seen recently (UTOPIA, Catalunya, Lafayette, the various French projects, and utility fiber in Scandinavia) actually a local/regional repudiation of the multi-100-billion euro privatization philosophy born of Thatcherism/Reaganism? This whole process (to which I owe my current employment, let's not beat around the bush), was supposed to stimulate competition, which in turn would deliver greater efficiency and better services. However, it looks as if some local and regional governments are coming to the conclusion that the market has failed to deliver what is needed in the time frame required, and are accordingly taking matters into their own hands.

This is particularly ironic in light of the fact that one key principle of the Reagan/Thatcher philosophy was devolution, or the passing of certain policy decisions/responsibilities from central government to the local/regional level - either (idealistically) because local people know best what they need, or (cynically) because it passes the buck more effectively. With projects such as these, however, devolution grows some teeth. The only problem is that these teeth may now be implanted firmly in the buttocks of privatized telcos (in Europe for the most part, read "only partly privatized telcos"), and those who bought into them via the privatization process. Besides the largely forgotten retail investors, no one has been more badly burnt over the past six years than the domestic institutions who bought into EuroTelco Privatization Inc./NV/Plc/AG/AB/SA/Spa, which makes the irony even richer that the previously unnamed third investor in Amsterdam is none other than ING (in line with what I suspected in my earlier post).
And the answer is...

I guess people have varying definitions for "amazing," and my teaser from last night somehow got people thinking I was talking about VoIP (and several others thought I had landed a mega-bucks job - dream on). I hope no one is let down. This is bigger than that one single issue, because it's about rewriting the rules of how telecom service is defined, funded and delivered, and re-examining the goals for which it is delivered.

Frequent readers of this blog will no doubt recall the frequency with which I have referred to the proposed Citynet FTTP project in Amsterdam. Well the embargo is now lifted, so I can reveal that Phase 1 has been formally proposed (to be debated and voted on by the City Council later this month), and the funding structure has been finalized. The City of Amsterdam is to be a 1/3 shareholder, with a consortium of five housing companies (also 1/3) and other unnamed investors (1/3). I'm curious to know who the other unnamed investors are. My guess is someone with a long-term view of investing and a preference for long-term predictability of returns. We are talking about a 20 - 30 year horizon here, so my gut feeling is that insurance companies are involved somehow.

Phase 1 consists of 40k premises, roughly 10% of Amsterdam, to begin in early 2006. Infrastructure build is to be carried out by Van den Berg and Draka Comteq, and bbned will be the wholesale network operator. This is intriguing, in that bbned is Telecom Italia. I expect there may be some interesting phone calls to KPN investor relations this afternoon. KPN was on the list of parties in the tender process (see the page entitled "oproep" in the Citynet site), but the company never publicly highlighted this fact.

These neutral network projects are not without historical precedents, but what I find so compelling here is that the city's priorities are spelled out so clearly:

"This enables our city to compete with other European cities. The fiber network
delivers to Amsterdam an innovative and freely accessible infrastructure,
suitable to support growth in demand for the next 30 years or more. In this way
we ensure a wide open marketplace for innovative service-providers and economic growth, as well as a fast track for the smarter and cheaper delivery of care, education and other public services."

Competing with other cities, yes, not just for the Olympics (hello London!), but for economic activity, tax revenues, social and cultural development (which attracts tourism and businesses). Smarter and cheaper delivery of public services, yes, as was articulated to me on my recent visit to Amsterdam. This stuff is too important to be left to gradualist measures like Ethernet over cable or ADSL2+, or to a duopoly market where investment and pricing decisions may be driven by shorter-term considerations such as share price or strategic redeployment of capital.

Not to put words in anyone's mouth, but I think the message is something like:

It may be "your network" and "your investment" you are trying to defend, but your customers are our taxpayers, our society, and we have a duty to look beyond the next quarter and where our share options are at present. Access to information is an essential building block of social development, like access to water and electricity. Highly-contended DSL products with bandwidth caps ain't gonna cut it.

This is powerful, challenging stuff, and I'm sure a lot of people in the market are going to be unhappy and stamp their feet. My sense from talking to politicians in Amsterdam was that political consensus is strongly in favor, and the press release itself expresses a high degree of confidence that Brussels will not consider this structure to be state aid. Certainly, cases like Limousin would seem to lend support to this view. I also sensed from my conversations with people in the local market that a number of other Dutch cities have been watching closely and drafting their own plans. Today is a green light to anyone with the vision to shake things up, and I’m sure that won’t be limited to the Netherlands.

I think this is an incredibly significant event for European broadband, and it's going to be fascinating to watch. How will traditionally access-oriented service providers adapt to differentiate themselves solely on price, user experience and customer care? For those who choose to sit out or attempt to fight back, what are the options open to them? What happens to pricing? (I have my ideas - remember I'm from the Deep South.) Longer term, and undoubtedly most importantly, how will Amsterdam be transformed? Neutral networks are a great leveller, commercially and socially.