Superschnell me
German alternative broadband provider QSC has announced a partnership with multiple service provider debitel to market a DSL product, expanding into DSL 2+ as QSC rolls out a network expansion. Swisscom sold debitel to Permira in the middle of last year, and the most recent official data I have on it is from the end of 2003, when debitel had 7.9m mobile and 350k internet subs in Germany, out of a European total of 10.3m (today's press release states 10.6m customers throughout Europe, and over 8m in Germany). In any event, debitel has an extremely well-known brand in Germany, is a very significant player in the mobile market, and is already present in DSL. The company has a network of national shops and claims 6,500 marketing partners, so this could be a serious source of pressure in future.
Wednesday, May 11, 2005
For what it's worth
Interesting conjecture going on regarding Skype architecture, to which I will add a couple of short datapoints. It is my understanding from recent conversations with the company itself that Skype has built and deployed its own-spec gateways, and that supernode designation is far from a random selection process. Also, the now-famous "authentication server in Denmark" is not the only one of its kind. My own bit of speculation to add is that I have long assumed that Skype has "seeded" a number of its own supernodes globally from day one, not only for SkypeOut/SkypeIn, but to assure general network quality and stability.
UPDATE: The more I think about this, if I'm right about the "seeded supernodes" idea, then I am tempted to conclude that the co-branded partnerships that Skype has in Asia must involve some rackspace in the partners' datacenters...
Interesting conjecture going on regarding Skype architecture, to which I will add a couple of short datapoints. It is my understanding from recent conversations with the company itself that Skype has built and deployed its own-spec gateways, and that supernode designation is far from a random selection process. Also, the now-famous "authentication server in Denmark" is not the only one of its kind. My own bit of speculation to add is that I have long assumed that Skype has "seeded" a number of its own supernodes globally from day one, not only for SkypeOut/SkypeIn, but to assure general network quality and stability.
UPDATE: The more I think about this, if I'm right about the "seeded supernodes" idea, then I am tempted to conclude that the co-branded partnerships that Skype has in Asia must involve some rackspace in the partners' datacenters...
Tuesday, May 10, 2005
Delta Plan Glas, revisited
KPN, in announcing some fairly turgid numbers today (missed consensus EBIT, subscriber acquisition and retention costs were up by more than 25% YoY, margin compression in its Dutch mobile business was eight percentage points after adjusting for mobile termination cuts), revealed that it is to deploy fiber to large areas of newbuild residential development (page 29 0f this slide pack). Smell the fear. For those who don't know, the company proposed a fairly radical national fiber plan back in 2003, but got dissed by the cablecos. Elsewhere UGC has reported that it is adding 5,000 homes a week to its VoIP offering in the Netherlands and Hungary on a combined basis (I would love to know the actual split).
KPN, in announcing some fairly turgid numbers today (missed consensus EBIT, subscriber acquisition and retention costs were up by more than 25% YoY, margin compression in its Dutch mobile business was eight percentage points after adjusting for mobile termination cuts), revealed that it is to deploy fiber to large areas of newbuild residential development (page 29 0f this slide pack). Smell the fear. For those who don't know, the company proposed a fairly radical national fiber plan back in 2003, but got dissed by the cablecos. Elsewhere UGC has reported that it is adding 5,000 homes a week to its VoIP offering in the Netherlands and Hungary on a combined basis (I would love to know the actual split).
Monday, May 09, 2005
Noxious
Another uncomfortable reminder for telcos of the power of the consumer comes today from UK gas retailer/domestic multi-service provider Centrica. In the first four months of the year, customer loss in its residential business (gas and electricity) was up 15% on an annualized basis (last year the company lost 1m households). This segment of the business contributed 62% of group EBIT last year, so obviously no one's terribly happy with the situation. Key differences to EuroTelco:
Another uncomfortable reminder for telcos of the power of the consumer comes today from UK gas retailer/domestic multi-service provider Centrica. In the first four months of the year, customer loss in its residential business (gas and electricity) was up 15% on an annualized basis (last year the company lost 1m households). This segment of the business contributed 62% of group EBIT last year, so obviously no one's terribly happy with the situation. Key differences to EuroTelco:
- Centrica doesn't own its infrastructure, but is one of a number of service providers on NationalGrid/Transco (i.e., must trade entirely on the strength of its own brand, service reputation and financial resources, rather than on the legacy benefits of an inherited hegemony in access).
- Gas is a finite and tangible commodity, and even though it may lose more customers as a result, Centrica is in a position to raise prices on defensible grounds.
- The company does telecom too, though it only contributes c.2% of group EBIT. Then again, how many EuroTelcos can you name which derive 2% of EBIT from something entirely outside their legacy core?
It would be interesting to see the performance of EuroTelco retail service provider businesses if forced to compete on the same basis. Maybe the Amsterdam fiber project will provide us with such a demonstration in the foreseeable future.
Quote of the day
Today’s Financial Times has an interesting feature on the rise of Linux in the UK public sector, which includes this quote from Martin Taylor, identified as Microsoft's “main anti-Linux strategist,” on the weaknesses of the company's early attempts to discredit open source:
Today’s Financial Times has an interesting feature on the rise of Linux in the UK public sector, which includes this quote from Martin Taylor, identified as Microsoft's “main anti-Linux strategist,” on the weaknesses of the company's early attempts to discredit open source:
“You could say it took us five years to figure it out. That’s fine –
we’ll take a mea culpa on that one.”
Bright news for dark fiber
A Platinum Club value reader writes in to call my attention to an EU Competition Commission ruling of last week, which found that a municipal dark fiber project in Limousin, France, does not constitute state aid.
It's interesting to ponder the effects of this on a wider scale in future - frustrated urbanites trudging along with their overbooked 20Mbps ADSL 2+ connections while the more fortunate in the hinterlands get 100Mbps symmetrical service over fiber to the cottage!
A Platinum Club value reader writes in to call my attention to an EU Competition Commission ruling of last week, which found that a municipal dark fiber project in Limousin, France, does not constitute state aid.
"The Commission has taken into account the fact that Limousin consists mainly of rural and remote areas, and that access to broadband services offered by existing market operators in Limousin is insufficient to meet the population's essential needs."
It's interesting to ponder the effects of this on a wider scale in future - frustrated urbanites trudging along with their overbooked 20Mbps ADSL 2+ connections while the more fortunate in the hinterlands get 100Mbps symmetrical service over fiber to the cottage!
Let's talk about Radio Me
BBC World Service program on the egocasting phenomenon and other changes sweeping Radioland.
BBC World Service program on the egocasting phenomenon and other changes sweeping Radioland.
Friday, May 06, 2005
Taking your ball and going home
A supersize mega-value reader alerts me to this story from De Tijd in Belgium, which reports that Belgacom has come in with a surprise knock-out bid for Belgian premiere league football rights. The current rights holders reportedly pay EUR15m per annum for the package, which was divided into six categories for this auction. Belgacom has bid EUR36m for the total package, which includes a special bonus payment if it is successful in winning all six, a move which dominant cable player Telenet has publicly protested. Other bidders have until Monday to table an improved offer. This situation is even more interesting in light of Belgacom's interest in neighboring IP troublemaker Versatel, which similarly shocked and awed with its own Dutch football rights coup.
A supersize mega-value reader alerts me to this story from De Tijd in Belgium, which reports that Belgacom has come in with a surprise knock-out bid for Belgian premiere league football rights. The current rights holders reportedly pay EUR15m per annum for the package, which was divided into six categories for this auction. Belgacom has bid EUR36m for the total package, which includes a special bonus payment if it is successful in winning all six, a move which dominant cable player Telenet has publicly protested. Other bidders have until Monday to table an improved offer. This situation is even more interesting in light of Belgacom's interest in neighboring IP troublemaker Versatel, which similarly shocked and awed with its own Dutch football rights coup.
What do you want to watch?
Two TV tidbits via a colleague and a reader. The first is Japanese broadband provider USEN's Gyao internet TV service, which just launched a couple of weeks back. It's a free VOD service supported by advertising. For the non-Japanese literate, the buttons across the center of the screen are different program genres, and interestingly there is one (currently inactive) which says "video blogs." One to watch, clearly. The second comes from a hyper-value reader - the BBC is getting on the decentralized media bandwagon, launching an interactive service over digital satellite for independently produced content, part of an initiative called "Your Stories." Recall that the BBC undertook a P2P distribution trial last year with Kontiki, and you begin to see all sorts of possibilities.
Two TV tidbits via a colleague and a reader. The first is Japanese broadband provider USEN's Gyao internet TV service, which just launched a couple of weeks back. It's a free VOD service supported by advertising. For the non-Japanese literate, the buttons across the center of the screen are different program genres, and interestingly there is one (currently inactive) which says "video blogs." One to watch, clearly. The second comes from a hyper-value reader - the BBC is getting on the decentralized media bandwagon, launching an interactive service over digital satellite for independently produced content, part of an initiative called "Your Stories." Recall that the BBC undertook a P2P distribution trial last year with Kontiki, and you begin to see all sorts of possibilities.
Sick and unloved
Source: Bloomberg
EuroTelco has underperformed the market by nearly 7% year-to-date, with an absolute return of -3.2%, making it far and away the worst of the 18 STOXX industry groups.
For those interested in technical analysis, here's a Bloomberg screenshot of a Fibonacci retracement graph of the STOXX Telecom sector (that's the benchmark we follow, for those not involved in these sorts of things).
What it shows is that, at the market open this morning, we were clinging precariously to a support level of 272.05, which we have subsequently breached. Next stop is at 266, and if that fails, it's back to the 255 area. The moving average trends and RSI (neither of which are pictured here) also look, well, pretty crap to be honest.
The contrarion view might be that with expectations so low, and such huge underperformance already, there's a mounting case for a rebound. I would argue that you can't call the bottom in an industry which is vulnerable to having its guts ripped out by a large cast of characters stretching from Bill Gates to the teenager next door (though admittedly someone like Bram Cohen was not your typical teenager). It should also be no comfort to the industry that the only period of significant outperformance since the meltdown was in the three months immediately following 9/11.
UPDATE: The US jobs data seems to have pulled our butts out of the fire for now...
I'm buyin', are you sellin'?
Taking a couple of minutes to catch up on some email and blog backlog. Louis Philip has posed the question of who's going to buy Skype. It's a timely question, given all the recent blogospheric attempts to value the company, and even moreso because I have just recently heard two stories from completely different (though I think credible and well-connected) sources on two continents about approaches being made.
Interestingly, both stories involve the same figure (over nine digits), though they differ in some respects. One version has a named bidder (a very well-known internet brand) expressing an interest and then walking away, stating that the ten-figure price was too high. The other version has an unnamed party tabling an outright offer in the same amount, but being rejected.
These are, however, only stories, though I think it's reasonable to expect that Skype is generating a lot of interest. I also think the company is probably most focused on building the user base and getting Skype embedded in all sorts of places to solidify its presence. Anyone inclined to do so could make a lot of the fact that Draper backed, built up, and then sold Hotmail, though I would argue that Skype is evolving in much richer and perhaps more unpredictable ways than email ever could/will, which I would guess makes timing a sale exceptionally difficult. All in all, I'm not at all sure that Skype would even be thinking about selling out at this stage in its development. I think there is much, much more to come, which any short-term valuation might not encompass.
For what it's worth, I would throw out two names, neither of which is the company involved in the rumor I cite above. My money has always been on Google, for obvious reasons, many of which have been touched on previously, either by me or many others:
The other name we have to consider is Microsoft, though I have previously been less willing to accept this scenario. Then again, the company has $37.6bn in cash, cash equivalents and marketable securities, and is known for making sizeable acquisitions. Skype's push into mobility is pretty well aligned with Microsoft's own ambitions, and the Groove Networks acquisition seems to demonstrate an appetite for things P2P. On the downside, we obviously have to question cannibalization of its investments in things like RTC and obviously its own MSN Messenger platform. [A Diamond Class mega-value reader tells me that his data shows an average of 70m concurrent MSN Messenger users online through a 24-hour cycle, vs. 2 - 2.5m for Skype, which is a lot of potential cannibalization]. [UPDATE: A helpful reader chimes in to remind me of what I have pointed out before - Microsoft could achieve many of the same aims by acquiring Paradial, which would be much cheaper and straightforward.]
I've got a beer riding on this one, so come on Sergei and Larry! Seriously, I would be surprised if this discussion is even relevant over the next 12 months, but no doubt speculation will intensify as Skype grows and evolves.
Taking a couple of minutes to catch up on some email and blog backlog. Louis Philip has posed the question of who's going to buy Skype. It's a timely question, given all the recent blogospheric attempts to value the company, and even moreso because I have just recently heard two stories from completely different (though I think credible and well-connected) sources on two continents about approaches being made.
Interestingly, both stories involve the same figure (over nine digits), though they differ in some respects. One version has a named bidder (a very well-known internet brand) expressing an interest and then walking away, stating that the ten-figure price was too high. The other version has an unnamed party tabling an outright offer in the same amount, but being rejected.
These are, however, only stories, though I think it's reasonable to expect that Skype is generating a lot of interest. I also think the company is probably most focused on building the user base and getting Skype embedded in all sorts of places to solidify its presence. Anyone inclined to do so could make a lot of the fact that Draper backed, built up, and then sold Hotmail, though I would argue that Skype is evolving in much richer and perhaps more unpredictable ways than email ever could/will, which I would guess makes timing a sale exceptionally difficult. All in all, I'm not at all sure that Skype would even be thinking about selling out at this stage in its development. I think there is much, much more to come, which any short-term valuation might not encompass.
For what it's worth, I would throw out two names, neither of which is the company involved in the rumor I cite above. My money has always been on Google, for obvious reasons, many of which have been touched on previously, either by me or many others:
- Distributed computing - imagine the quality of a Skype service powered by Google supernodes around the world. The recent dark fiber hoopla and the Web Accelerator announcement demonstrate that Google is aiming at an evermore robust, stickier service, and I find few services in the world which are stickier than Skype, particularly now with centralized contacts making it more flexible.
- Google is already arguably the world's largest directory, so why shouldn't it encompass a high quality tool for connecting people and businesses directly from its own pages?
- Notable absence from the IM major league, and we know that Skype kicks serious butt in this regard.
The other name we have to consider is Microsoft, though I have previously been less willing to accept this scenario. Then again, the company has $37.6bn in cash, cash equivalents and marketable securities, and is known for making sizeable acquisitions. Skype's push into mobility is pretty well aligned with Microsoft's own ambitions, and the Groove Networks acquisition seems to demonstrate an appetite for things P2P. On the downside, we obviously have to question cannibalization of its investments in things like RTC and obviously its own MSN Messenger platform. [A Diamond Class mega-value reader tells me that his data shows an average of 70m concurrent MSN Messenger users online through a 24-hour cycle, vs. 2 - 2.5m for Skype, which is a lot of potential cannibalization]. [UPDATE: A helpful reader chimes in to remind me of what I have pointed out before - Microsoft could achieve many of the same aims by acquiring Paradial, which would be much cheaper and straightforward.]
I've got a beer riding on this one, so come on Sergei and Larry! Seriously, I would be surprised if this discussion is even relevant over the next 12 months, but no doubt speculation will intensify as Skype grows and evolves.
Thursday, May 05, 2005
Skype traffic, revisited
I'm increasingly adamant about avoiding what one of my valued readers humorously (if indelicately) terms the "VoIP blogger circle jerk," but when the blogosphere works properly, it actually seeds ideas and lines of inquiry in the minds of others, which stimulates further work which ultimately improves the whole - and these are genuinely worth highlighting. My previous post on the Hitwise Skype numbers has seemingly inspired my blogfreund Lars to further explore Skype-related traffic trends. Amazing stuff. I'm going to go back to Hitwise and see what I can learn from their other markets under observation.
I'm increasingly adamant about avoiding what one of my valued readers humorously (if indelicately) terms the "VoIP blogger circle jerk," but when the blogosphere works properly, it actually seeds ideas and lines of inquiry in the minds of others, which stimulates further work which ultimately improves the whole - and these are genuinely worth highlighting. My previous post on the Hitwise Skype numbers has seemingly inspired my blogfreund Lars to further explore Skype-related traffic trends. Amazing stuff. I'm going to go back to Hitwise and see what I can learn from their other markets under observation.
Bring out your dead
I frequently hear this cry coming from the street below, as tour guides in open-top tour buses pass by, shouting it through their bullhorns. Curiously, Daiwa's office seems to always be the place in the tour where they decide to discuss the London Plague, though we had nothing to do with that (and I have a disclaimer to prove it!). Luckily, we don't face such catastrophic contagions today, but if you're a telco, you might understandably feel that your immune system is weakening.
UK telcos, sit down, have a nice cool drink, and take your blood pressure medication before reading on - you really aren't going to like this one. The good people over at web traffic and search analysis specialists Hitwise have kindly supplied me with the following data - Skype is the number three telecom brand in the UK, on the basis of website visits. Hitwise sent me some wonderful graphics which I am unable to reproduce here (maybe they will be kind enough to include them in an upcoming newsletter), but the gist is as follows:
I frequently hear this cry coming from the street below, as tour guides in open-top tour buses pass by, shouting it through their bullhorns. Curiously, Daiwa's office seems to always be the place in the tour where they decide to discuss the London Plague, though we had nothing to do with that (and I have a disclaimer to prove it!). Luckily, we don't face such catastrophic contagions today, but if you're a telco, you might understandably feel that your immune system is weakening.
UK telcos, sit down, have a nice cool drink, and take your blood pressure medication before reading on - you really aren't going to like this one. The good people over at web traffic and search analysis specialists Hitwise have kindly supplied me with the following data - Skype is the number three telecom brand in the UK, on the basis of website visits. Hitwise sent me some wonderful graphics which I am unable to reproduce here (maybe they will be kind enough to include them in an upcoming newsletter), but the gist is as follows:
- Within the telecommunications category, Skype's share of weekly web traffic in the UK has risen from just over 4% in January to 10.4% at the end of April.
- On a monthly basis in the telecom category, Skype took 9.5% of web traffic in the UK, more than Orange and Vodafone combined.
- "Skype" as a search term is ten times more popular than "VoIP" (I guess in the same way that "Coke," "Scotch tape," or "Hoover" are often used more commonly than their generic identifiers).
So, there's a virus loose in TelcoTown, and it seems to spread by popular mandate. Telco marketers and advertising execs, read it and weep, here are the monthly rankings:
Top 10 UK Telecom Sites by Monthly Visits - April '05
1. BT – 22.14%
2. O2.co.uk – 12.25%
3. Skype – 9.49%
4. Orange UK – 5.17%
5. Vodafone UK – 3.97%
6. Boltblue – 2.88%
7. T-Mobile UK – 2.59%
8. Carphone Warehouse – 2.48%
9. Dial-a-Phone Mobile Phones – 1.61%
10. CardBoardFish’s CBFSMS – 1.59%
Source: Hitwise UK
You've had your chips
I had a couple of puzzled responses to a post I made recently in which I included a reference to an impending wave of new high-spec smartphones with a production cost of $50 - 60. Here's one key ingredient, which my chips man here thinks is to be followed in short order by some other big names.
I had a couple of puzzled responses to a post I made recently in which I included a reference to an impending wave of new high-spec smartphones with a production cost of $50 - 60. Here's one key ingredient, which my chips man here thinks is to be followed in short order by some other big names.
Wednesday, May 04, 2005
UK PVR watch
BSkyB reported results today, and they look pretty decent, though not stunning beyond stronger-than-expected subscriber growth. Churn is up, and it looks like the proportion of top tier subs has contracted somewhat. On a positive note, Sky added 128k Sky+ PVR subscribers, and said that fully one third of those were complete newcomers to Sky. That's c.43k, or nearly half of total net adds for the quarter, a significantly better contribution than in the previous quarter. Sky+ households now account for fully 10% of the customer base. So far it looks like the UK, as an early adopter of PVRs relative to the rest of Europe, is proving the case for PVRs as a driver of subscriber growth. What's going to be really interesting to watch is the impact PVRs have on UK cable's fortunes later this year (this little baby has a 160GB drive, three tuners [Sky+ has two] and claims forward-compatibility with HDTV).
BSkyB reported results today, and they look pretty decent, though not stunning beyond stronger-than-expected subscriber growth. Churn is up, and it looks like the proportion of top tier subs has contracted somewhat. On a positive note, Sky added 128k Sky+ PVR subscribers, and said that fully one third of those were complete newcomers to Sky. That's c.43k, or nearly half of total net adds for the quarter, a significantly better contribution than in the previous quarter. Sky+ households now account for fully 10% of the customer base. So far it looks like the UK, as an early adopter of PVRs relative to the rest of Europe, is proving the case for PVRs as a driver of subscriber growth. What's going to be really interesting to watch is the impact PVRs have on UK cable's fortunes later this year (this little baby has a 160GB drive, three tuners [Sky+ has two] and claims forward-compatibility with HDTV).
Tuesday, May 03, 2005
Breeze, schmeeze
Unlike many nodes in the blogosphere, this author will never claim to be a "visionary," "guru," or "serial entrepreneur," nor to have three MBAs (each from a prestigious European/American institution) - nor will I ever profess an affinity for Ayurvedic skydiving, Tantric shark-wrestling, or Balkan dirtdiving. I'm reasonably sure that my readers don't care what music I'm listening to, what my children look like, or what books I'm reading. I do reserve the right, when the time is ripe, to embark on a series of posts parodying the painful style of the ever-expanding ranks of egregiously self-aggrandizing ego-bloggers, without prior notice, and just for the fun of it.
I will be the first to admit that it is rare that I can claim any genuine vision, but occasionally I have the good luck to run into someone with some interesting information. A case in point was the Macromedia story I heard back in November, which seems to be decisively confirmed by the Breeze announcement, which looks really promising and seems to have surprised some - but not me. I was surprised at the time (six months ago) that it didn't provoke more comment, though I recall a number of visits from the Macromedia URL at the time.
Unlike many nodes in the blogosphere, this author will never claim to be a "visionary," "guru," or "serial entrepreneur," nor to have three MBAs (each from a prestigious European/American institution) - nor will I ever profess an affinity for Ayurvedic skydiving, Tantric shark-wrestling, or Balkan dirtdiving. I'm reasonably sure that my readers don't care what music I'm listening to, what my children look like, or what books I'm reading. I do reserve the right, when the time is ripe, to embark on a series of posts parodying the painful style of the ever-expanding ranks of egregiously self-aggrandizing ego-bloggers, without prior notice, and just for the fun of it.
I will be the first to admit that it is rare that I can claim any genuine vision, but occasionally I have the good luck to run into someone with some interesting information. A case in point was the Macromedia story I heard back in November, which seems to be decisively confirmed by the Breeze announcement, which looks really promising and seems to have surprised some - but not me. I was surprised at the time (six months ago) that it didn't provoke more comment, though I recall a number of visits from the Macromedia URL at the time.
Through the IP grapevine
A hyper-mega-supervalue reader told me earlier today that he recently heard that a couple of members of UK super-dooper-uber regulator OFCOM have joined the Skype team. I am hoping to get some independent confirmation of this, as well as some insight as to their previous roles at OFCOM. I am genuinely intrigued, because despite Skype's oft-stated views that its flavor of VoIP should be beyond the reach of national regulators (and let me state here that I agree completely in principle), the sad reality is that, once you start selling numbers for inbound calls, interconnecting to the PSTN, and therefore unwittingly opening up possibilities for premium rate number abuse, SPIT, or worse, you become exposed to a lot of tedious national regulatory issues.
Ironically, despite its unique global, supra-national scope, I worry that Skype could end up having numerous nationally-based (for which read "largely artificial and mind-numbingly dull") regulatory complications ahead. Make no mistake, I love Skype - it has genuinely changed my life. I would hate to see its progress bogged down by legacy national regulation, but no doubt a lot of powerful people have an intense interest in maintaining the status quo at national level. Maybe the last line of incumbent defense is neither pricing nor technology, but rather regulatory lobbying, consumer paranoia and litigation (and I am wondering how long we have to wait for the first wave of negative advertising from telcos). I am skeptical that it would ultimately succeed, but it might make life difficult/painful/costly for Skype in the near term. This would seem to make my source's story all the more credible - if you were Skype, you would probably look to bolster your regulatory expertise too, in a New York (make that a London) minute.
A hyper-mega-supervalue reader told me earlier today that he recently heard that a couple of members of UK super-dooper-uber regulator OFCOM have joined the Skype team. I am hoping to get some independent confirmation of this, as well as some insight as to their previous roles at OFCOM. I am genuinely intrigued, because despite Skype's oft-stated views that its flavor of VoIP should be beyond the reach of national regulators (and let me state here that I agree completely in principle), the sad reality is that, once you start selling numbers for inbound calls, interconnecting to the PSTN, and therefore unwittingly opening up possibilities for premium rate number abuse, SPIT, or worse, you become exposed to a lot of tedious national regulatory issues.
Ironically, despite its unique global, supra-national scope, I worry that Skype could end up having numerous nationally-based (for which read "largely artificial and mind-numbingly dull") regulatory complications ahead. Make no mistake, I love Skype - it has genuinely changed my life. I would hate to see its progress bogged down by legacy national regulation, but no doubt a lot of powerful people have an intense interest in maintaining the status quo at national level. Maybe the last line of incumbent defense is neither pricing nor technology, but rather regulatory lobbying, consumer paranoia and litigation (and I am wondering how long we have to wait for the first wave of negative advertising from telcos). I am skeptical that it would ultimately succeed, but it might make life difficult/painful/costly for Skype in the near term. This would seem to make my source's story all the more credible - if you were Skype, you would probably look to bolster your regulatory expertise too, in a New York (make that a London) minute.
IMminent doom
A couple of my own observations about some of the interesting recent discussion related to Skype's impact on IM incumbents. This is indeed an issue of intense interest and one with a lot to play for. Precise numbers are sketchy, but with something like 450m IM users worldwide, there are an awful lot of people to be converted. Even if we assume that a substantial number of users may use more than one flavor of client, we're probably talking about 300 - 350m unique users worldwide, i.e., 10x Skype's current base.
What are the triggers for shifting to Skype? Noting some of the comments to the post linked to above (via SkypeJournal, to give everyone their propers), there appear to be equal arguments for and against the view that inertia may protect the IM incumbents for some time to come. However, here are a couple of testimonials which I find interesting and challenging:
A couple of my own observations about some of the interesting recent discussion related to Skype's impact on IM incumbents. This is indeed an issue of intense interest and one with a lot to play for. Precise numbers are sketchy, but with something like 450m IM users worldwide, there are an awful lot of people to be converted. Even if we assume that a substantial number of users may use more than one flavor of client, we're probably talking about 300 - 350m unique users worldwide, i.e., 10x Skype's current base.
What are the triggers for shifting to Skype? Noting some of the comments to the post linked to above (via SkypeJournal, to give everyone their propers), there appear to be equal arguments for and against the view that inertia may protect the IM incumbents for some time to come. However, here are a couple of testimonials which I find interesting and challenging:
- A youthful French reader told me recently that virtually all his friends had gone straight from ICQ to Skype, suggesting that for young users, Skype may be the second (and probably increasingly, the first) port of call in search of an IM service. The fact that it does voice on steroids may only be an added plus.
- A more mature favorite client and mega-value reader, who purports to use all IM clients but has remained skeptical about Skype so far, called me this morning to rave about Skype, which I had encouraged him to have another look at only last week. Seemingly what made it click for him was his realization that, spending more and more time with his PC, he needed something which integrated IM and telephony in a way that made sense and was easy to use. So, hello Skype. I look forward to talking with him about his changing IM use in future as his Skype use evolves.
Lastly there's myself. I was never a huge user of IM before Skype, limited to MSN Messenger, and through the excellent RealTunnel, achieved some genuinely Skype-like functionality. I would be happy to continue with that scenario, but the disincentive for me was my paltry list of contacts. Almost everyone I know with any propensity to use IM is already on Skype, my MSN contacts continue to turn up on Skype, and I am softening up the few remaining stragglers still exclusively using the Big Three.
I think that the Big Three increasingly have grounds to be concerned. I noted with interest a press release I received via email a couple of hours ago (though it is still not on the website as I post this), announcing that Level(3) is "expanded its relationship with MSN to enhance the audio conversation feature of MSN Messenger, an instant messaging (IM) service with more than 155 million active users each month." There is also a reference to enhanced firewall traversal and a more "seamless experience" for MSN users. It looks like Skype has rung bells in more than just a few Bellheads...
Just by the by
I had a brief chat this morning with Dmitry Goroshevsky of Popular Telephony. We should be prepared for a fairly subversive upcoming announcement relating to Peerio Biz in coming weeks. Also, when the company announced Peerio Data, my first reaction was to ponder what sort of implications this might have in a content distribution context. Interesting then that in today's call Dmitry expressed an interest in licensing Peerio Data to third party file sharing application developers. Popular Telephony's trials appear to suggest that it is at least competitive with BitTorrent. As I understand it, the original file upload is distributed from the start, so there is no "seed" file as such, and apparently no audit trail to lead to anyone uploading or downloading.
UPDATE: Indeed, it looks increasingly likely that the content giants are going to find discovery and interdiction ever more challenging.
I had a brief chat this morning with Dmitry Goroshevsky of Popular Telephony. We should be prepared for a fairly subversive upcoming announcement relating to Peerio Biz in coming weeks. Also, when the company announced Peerio Data, my first reaction was to ponder what sort of implications this might have in a content distribution context. Interesting then that in today's call Dmitry expressed an interest in licensing Peerio Data to third party file sharing application developers. Popular Telephony's trials appear to suggest that it is at least competitive with BitTorrent. As I understand it, the original file upload is distributed from the start, so there is no "seed" file as such, and apparently no audit trail to lead to anyone uploading or downloading.
UPDATE: Indeed, it looks increasingly likely that the content giants are going to find discovery and interdiction ever more challenging.
Will switch for bus fare
Today's London edition of Metro has an ad from Orange offering GBP40 credit on an Oyster card (London's public transport smartcard system) for new contract customers signing up in-store. My casual observation is that a significant amount of cellular traffic in London is generated by people on their way home calling to say "I'm on the bus," or equally likely, "I'm on the bus and it's stuck in traffic/broken down." This could be a shrewd subterfuge by Orange to generate more outgoing minutes. More likely, and less tongue-in-cheek, is that consumers may perceive more value from a giveaway of an overpriced service (public transport), than a flashy handset or offers of more minutes.
Today's London edition of Metro has an ad from Orange offering GBP40 credit on an Oyster card (London's public transport smartcard system) for new contract customers signing up in-store. My casual observation is that a significant amount of cellular traffic in London is generated by people on their way home calling to say "I'm on the bus," or equally likely, "I'm on the bus and it's stuck in traffic/broken down." This could be a shrewd subterfuge by Orange to generate more outgoing minutes. More likely, and less tongue-in-cheek, is that consumers may perceive more value from a giveaway of an overpriced service (public transport), than a flashy handset or offers of more minutes.
No such thing as bad publicity
Number 3 with a bullet in the UK Advertising Standards Agency's 2004 complaints list is Virgin Mobile. Hats off to the creatives.
Number 3 with a bullet in the UK Advertising Standards Agency's 2004 complaints list is Virgin Mobile. Hats off to the creatives.
UMA - Universal Mutual Annihilation
Denmark, spritual home of the disruptive MVNO model, may be about to see another source of pressure in its crowded and brutal market, from TeliaSonera, which is planning to trial a UMA-based converged product ahead of a "possible launch" in 2006. After its acquisition of Orange's Danish business last year, TeliaSonera is third in the mobile market (1.1m subs), just behind Telenor's Sonofon, though the two are very close in numbers of contract customers. TeliaSonera also has 134k broadband subs in the market, so there is probably a pretty good case, as an ambitious challenger, to stitch product offerings together in a more coherent way. I am curious, however, what the impact on pricing might be here, and also who else may follow along the same lines (France Telecom in the UK?).
UPDATE: Had barely published this when Motorola chimed in with a press release claiming seven European trials in all, but only identifying TeliaSonera by name. I assume BT is also included in this group of seven. Any ideas out there on who the other five are?
Denmark, spritual home of the disruptive MVNO model, may be about to see another source of pressure in its crowded and brutal market, from TeliaSonera, which is planning to trial a UMA-based converged product ahead of a "possible launch" in 2006. After its acquisition of Orange's Danish business last year, TeliaSonera is third in the mobile market (1.1m subs), just behind Telenor's Sonofon, though the two are very close in numbers of contract customers. TeliaSonera also has 134k broadband subs in the market, so there is probably a pretty good case, as an ambitious challenger, to stitch product offerings together in a more coherent way. I am curious, however, what the impact on pricing might be here, and also who else may follow along the same lines (France Telecom in the UK?).
UPDATE: Had barely published this when Motorola chimed in with a press release claiming seven European trials in all, but only identifying TeliaSonera by name. I assume BT is also included in this group of seven. Any ideas out there on who the other five are?
Vive la disruption
French enfant terrible Iliad added 150,000 new DSL subs in Q1, and now has over 1m customers on its Freebox, of whom nearly 100k are TV subscribers, and 850k are on VoIP. Value-added service revenue in Q1 was nearly at the level of the entirety of 2004, though it still accounts for only 7% of group revenues.
French enfant terrible Iliad added 150,000 new DSL subs in Q1, and now has over 1m customers on its Freebox, of whom nearly 100k are TV subscribers, and 850k are on VoIP. Value-added service revenue in Q1 was nearly at the level of the entirety of 2004, though it still accounts for only 7% of group revenues.
Race to zero
Here's validation of one central strategic pricing principle at work in voice - do anything to keep customers happy, or just to keep them, period. Swisscom, hot on the heels of its flat rate data announcement last week, has today voluntarily cut mobile termination rates by 40%, and also introduced a new subscription tariff offering calls of up to one hour for a flat CHF0.50 (EUR0.32) for the duration of the call - in line with fixed line pricing.
I like the fact that the frank press release cites as motivations pressure from enterprise customers, as well as an observed decline in usage - i.e., consumers know when they're getting shafted and will vote with their feet - at least this company has grasped consumer sentiment. However, this is the sort of cut that hits a mobile company where it lives. Note the reference at the end of the press release to full year revenue and EBITDA impacts from the termination cut of a maximum of CHF165m - a tacit admission that termination is a 100% margin business. In any event, CHF165m off the EBITDA line equates to 8.4% of 2004 Mobile unit EBITDA, and that's only for six months. Annualized, we're talking double that level.
Here's validation of one central strategic pricing principle at work in voice - do anything to keep customers happy, or just to keep them, period. Swisscom, hot on the heels of its flat rate data announcement last week, has today voluntarily cut mobile termination rates by 40%, and also introduced a new subscription tariff offering calls of up to one hour for a flat CHF0.50 (EUR0.32) for the duration of the call - in line with fixed line pricing.
I like the fact that the frank press release cites as motivations pressure from enterprise customers, as well as an observed decline in usage - i.e., consumers know when they're getting shafted and will vote with their feet - at least this company has grasped consumer sentiment. However, this is the sort of cut that hits a mobile company where it lives. Note the reference at the end of the press release to full year revenue and EBITDA impacts from the termination cut of a maximum of CHF165m - a tacit admission that termination is a 100% margin business. In any event, CHF165m off the EBITDA line equates to 8.4% of 2004 Mobile unit EBITDA, and that's only for six months. Annualized, we're talking double that level.
Friday, April 29, 2005
Skypeasy to the homeland
Over in Vienna, my good cyberfreund Lars has some interesting ruminations on the possibilities for Skype-enabled call shops. I don't know how much our readers in places like the US or Japan can relate to the call shop concept, but despite Vienna's probable whitebread "Sound of Music" image in the outside world, it is actually a modern melting pot, as is London (and also places like Geneva and Luxembourg - believe it or not). Not far from my home in South London, there are numerous ethnic barber shops and internet salons (I wouldn't call them cafes as such) which also offer cheap international phone calls, FAX services, and money transfers to a variety of countries. In this part of London, it tends to be mainly West Africa and Latin America. In other areas it could just as easily be Turkey, Poland, Bangladesh or Vietnam.
I guess the point is that, as Skype expands its local termination footprint to make SkypeOut a more economically attractive proposition, the incentive for small entrepreneurs to Skypify their premises will grow (Lars rightly stresses the margin enhancement potential for the shop owner). And it's not just the expatriate market that could benefit. Whenever I am in London's more touristic areas (West End, Kings Road, et al) I am invariably amazed at the sheer number of people I see in the EasyInternetcafes, most of whom seem to be from "developed" markets, many from North America. Easy Group currently has internet cafes in nine countries, and is looking to franchise out to expand elsewhere. If I were Stelios, I'd think seriously about Skyping Niklas to discuss some sort of co-branding arrangement.
Over in Vienna, my good cyberfreund Lars has some interesting ruminations on the possibilities for Skype-enabled call shops. I don't know how much our readers in places like the US or Japan can relate to the call shop concept, but despite Vienna's probable whitebread "Sound of Music" image in the outside world, it is actually a modern melting pot, as is London (and also places like Geneva and Luxembourg - believe it or not). Not far from my home in South London, there are numerous ethnic barber shops and internet salons (I wouldn't call them cafes as such) which also offer cheap international phone calls, FAX services, and money transfers to a variety of countries. In this part of London, it tends to be mainly West Africa and Latin America. In other areas it could just as easily be Turkey, Poland, Bangladesh or Vietnam.
I guess the point is that, as Skype expands its local termination footprint to make SkypeOut a more economically attractive proposition, the incentive for small entrepreneurs to Skypify their premises will grow (Lars rightly stresses the margin enhancement potential for the shop owner). And it's not just the expatriate market that could benefit. Whenever I am in London's more touristic areas (West End, Kings Road, et al) I am invariably amazed at the sheer number of people I see in the EasyInternetcafes, most of whom seem to be from "developed" markets, many from North America. Easy Group currently has internet cafes in nine countries, and is looking to franchise out to expand elsewhere. If I were Stelios, I'd think seriously about Skyping Niklas to discuss some sort of co-branding arrangement.
EU Competition Commission thought piece on municipal networks
A Platinum Circle megavalue reader points me to the latest edition of the EC Competition Policy newsletter (see pages 8 - 15), which contains an examination of what sort of public network funding scenarios might constitute state aid. My reading is that this seems to broadly support the open infrastructure model being pursued in the Netherlands.
A Platinum Circle megavalue reader points me to the latest edition of the EC Competition Policy newsletter (see pages 8 - 15), which contains an examination of what sort of public network funding scenarios might constitute state aid. My reading is that this seems to broadly support the open infrastructure model being pursued in the Netherlands.
Telio is listed
I am told that Telio, the "little Norwegian telco that could," was listed on the Norwegian OTC market this week (Bloomberg ticker is TELO NO). I can't get any pricing data over Bloomberg, but my local sources tell me that the shares are trading in the NOK22 - 23 range, with 17m shares outstanding. That gives it a market cap of NOK374m, or about EUR46m. Crudely, I guess that works out at about EUR1000 per subscriber, if that's even a meaningful measure.
I am told that Telio, the "little Norwegian telco that could," was listed on the Norwegian OTC market this week (Bloomberg ticker is TELO NO). I can't get any pricing data over Bloomberg, but my local sources tell me that the shares are trading in the NOK22 - 23 range, with 17m shares outstanding. That gives it a market cap of NOK374m, or about EUR46m. Crudely, I guess that works out at about EUR1000 per subscriber, if that's even a meaningful measure.
Problem neighbors, revisited
Each day seems to bring another variation on this "cross-border IP incursion as weapon of mass EuroTelco destruction" riff I seem to be working on. Today, speculation that cash-rich Belgacom is going to take out Dutch market disruptor Versatel.
Each day seems to bring another variation on this "cross-border IP incursion as weapon of mass EuroTelco destruction" riff I seem to be working on. Today, speculation that cash-rich Belgacom is going to take out Dutch market disruptor Versatel.
Thursday, April 28, 2005
The Alps are flat
Attention to the 300k or so Skype users (my estimate) in Switzerland. You have a new friend, and it's called Swisscom. The company today launched a flat-rate data package for mobile, priced at CHF79, or about EUR51 per month. For this you get 1GB of data inclusive, with a CHF0.50 per MB charge for overage. I think that's still pretty extortionate for mobile data generally, but, as I work it out, a Skype call requires 40kbps up and down, so this 1GB tariff might equate to something like 1,700 Skype minutes, at EUR0.03 per second. Sweet indeed, if we ignore the fact that you have to hold an exorbitantly priced data card and pay a monthly charge of EUR6.50 for a data-only subscription. You also have to be extremely talkative to get through 1,700 minutes. Frankly, I don't see hordes of people rushing to take up this tariff just for the sake of price arbitrage on Skype, but it illustrates the voice pricing compression we may see as data goes flat rate.
Attention to the 300k or so Skype users (my estimate) in Switzerland. You have a new friend, and it's called Swisscom. The company today launched a flat-rate data package for mobile, priced at CHF79, or about EUR51 per month. For this you get 1GB of data inclusive, with a CHF0.50 per MB charge for overage. I think that's still pretty extortionate for mobile data generally, but, as I work it out, a Skype call requires 40kbps up and down, so this 1GB tariff might equate to something like 1,700 Skype minutes, at EUR0.03 per second. Sweet indeed, if we ignore the fact that you have to hold an exorbitantly priced data card and pay a monthly charge of EUR6.50 for a data-only subscription. You also have to be extremely talkative to get through 1,700 minutes. Frankly, I don't see hordes of people rushing to take up this tariff just for the sake of price arbitrage on Skype, but it illustrates the voice pricing compression we may see as data goes flat rate.
Liberte, egalite, et transformation
A few interesting datapoints from the France Telecom results today:
A few interesting datapoints from the France Telecom results today:
- The company added 95k VoIP subs in the quarter in France, to 245k in total. That works out at about 7% penetration of retail DSL connections.
- 416k Livebox units have been shipped to date, up 78% sequentially in the quarter. I work that out at about 14k per week.
- The MaLigne TV product is perhaps somewhat less impressive. To date only 101k accounts are active, and 30k of these are "monoplay" (i.e., TV only) accounts.
- Over 340k Business Everywhere subscribers
- 52k mobile broadband subscribers in France (I know it's early days yet, but they have 21m mobile subs in France)
Ironically, as I was searching in the France Telecom consumer website, a pop-up ad appeared, which was for Club Internet's (that's Deutsche Telekom) special 8Mbps offer in France - EUR9.90 per month for the first three months, EUR14.90 per month thereafter. I am sure the average French household spends much more than that on bread in a given month. Telco mutual assured destruction is upon us!
Wednesday, April 27, 2005
Use your illusion
I often use musical references here, and I genuinely and sincerely apologize for the Guns-'n'-Roses reference, but it somehow seems appropriate, at least for telcos, in the short term. The past three days have been somewhat unprecedented, at least as far as I can recall, in terms of EuroTelco carnage. On Monday we had a bombshell from Tele2 (first in the sector to report), which demonstrated that it appears to be competing credibly in a number of key markets, but missed market expectations by a significant margin. The share price is down 8.6% in three sessions. Yesterday, TeliaSonera breached the low-end of consensus (EBITDA in Finland fell by over 50% YoY) and got hammered, and today was another world of pain: two day decline - 8.9%. Today, Telenor shocked and awed with the underperformance of its domestic fixed business and margin softness in emerging markets, and the market drove its shares down 9.4%. That's a helluva lot of value wiped off the sector over three days, but only at the mid-cap end of the market.
Tomorrow we have numbers from large-cap name France Telecom, and if it drops a poo-bomb on us, then I really am going to start to think that maybe all these disruptive influences I've been writing about for nearly three years have at last become undeniably evident. One thing France Telecom has going for it is that the company will be reporting based on a radically revamped organizational structure. Yes, the analysts have some pro forma restated historicals to work from, but I am always skeptical when companies change reporting lines (as has repeatedly been the case over the past three years, usually justified on the basis of a "more accurate representation of operations"). I am particularly skeptical when the structural change coincides with significant shifts in market dynamics. My cynical nature leads me to conclude that companies are buying time, but I didn't say that, and you didn't hear it.
We analysts generally like to portray ourselves/be portrayed as "industry experts," and no doubt there are a lot of very bright and talented people out there. I do not seek to denigrate their work. However, when I stand behind a podium and speak frankly to people who work in, live, and breathe this industry on a day-to-day basis, and I come away with a sense that we are living on different planets, I worry even more. Maybe it's I who am deluded, but if it's the case that the misguidedly orthodox views of the industry are filtering down to the analysts through multiple generations of spin (as I think is almost certainly the case), with all the distortion inherent therein, no wonder we see such aggressive share price targets, and accordingly see such massive share price falls when things go wrong.
Periods like the past three days bring me back to recurring conflicts I have had with our sales team from time to time, and the vague sense of incomprehension I sometimes encounter from colleagues covering other sectors. "Surely there must be something you can recommend within the sector?" is a common refrain. "Well, actually maybe not," is my typical reply, and though it concerns me, developments like we have seen over the past three trading sessions only lend support to this view. To my colleague covering utilities I typically say, "Where would power companies be if there emerged a technology for competitors to supply energy at virtually no cost?" To my automotive colleague I say, "What is the value of the auto industry if we crack the secret of teleportation?" These are patently ridiculous propositions for the industries in question, but in a telecoms context are all too relevant, if slightly exaggerated. Maybe a more salient question generally is, "What if your powerful national brand has its face ripped off by global internet players, device makers, and people you've never even heard of?"
I have often made the point to our sales force and clients that traditional telco valuation is a dangerous business in the IP world. We can cling doggedly to comfortable traditional methods, or in a pinch, desperate last-ditch bastions like multiples of net PP&E and other such relics - or we can do the right thing and admit that any valuations we attempt are speculative at best. My feeling is that investor expectations are so low that it only takes one quarter's disappointment to reset expectations to a much lower level, and ultimately this process can be repeated down to near zero. Analysts who might have felt confident in valuing Telenor at NOK 68 - 70 a few weeks back are adjusting to a new reality today, with the share price struggling to hold NOK50. Finding your feet may be increasingly challenging in the world to come, if you have failed to board the ClueTrain. No doubt we're going to see a lot of complicated gymnastics in the quarters ahead, and a lot of smoke and mirrors employed to place a brave face on a fairly grave situation. However, my sense is that the gloves truly are off as of this week, and we may be entering a new phase. For the sake of investors in the sector, and the thousands of people employed in the industry, I hope I'm wrong.
Tomorrow we have numbers from large-cap name France Telecom, and if it drops a poo-bomb on us, then I really am going to start to think that maybe all these disruptive influences I've been writing about for nearly three years have at last become undeniably evident. One thing France Telecom has going for it is that the company will be reporting based on a radically revamped organizational structure. Yes, the analysts have some pro forma restated historicals to work from, but I am always skeptical when companies change reporting lines (as has repeatedly been the case over the past three years, usually justified on the basis of a "more accurate representation of operations"). I am particularly skeptical when the structural change coincides with significant shifts in market dynamics. My cynical nature leads me to conclude that companies are buying time, but I didn't say that, and you didn't hear it.
We analysts generally like to portray ourselves/be portrayed as "industry experts," and no doubt there are a lot of very bright and talented people out there. I do not seek to denigrate their work. However, when I stand behind a podium and speak frankly to people who work in, live, and breathe this industry on a day-to-day basis, and I come away with a sense that we are living on different planets, I worry even more. Maybe it's I who am deluded, but if it's the case that the misguidedly orthodox views of the industry are filtering down to the analysts through multiple generations of spin (as I think is almost certainly the case), with all the distortion inherent therein, no wonder we see such aggressive share price targets, and accordingly see such massive share price falls when things go wrong.
Periods like the past three days bring me back to recurring conflicts I have had with our sales team from time to time, and the vague sense of incomprehension I sometimes encounter from colleagues covering other sectors. "Surely there must be something you can recommend within the sector?" is a common refrain. "Well, actually maybe not," is my typical reply, and though it concerns me, developments like we have seen over the past three trading sessions only lend support to this view. To my colleague covering utilities I typically say, "Where would power companies be if there emerged a technology for competitors to supply energy at virtually no cost?" To my automotive colleague I say, "What is the value of the auto industry if we crack the secret of teleportation?" These are patently ridiculous propositions for the industries in question, but in a telecoms context are all too relevant, if slightly exaggerated. Maybe a more salient question generally is, "What if your powerful national brand has its face ripped off by global internet players, device makers, and people you've never even heard of?"
I have often made the point to our sales force and clients that traditional telco valuation is a dangerous business in the IP world. We can cling doggedly to comfortable traditional methods, or in a pinch, desperate last-ditch bastions like multiples of net PP&E and other such relics - or we can do the right thing and admit that any valuations we attempt are speculative at best. My feeling is that investor expectations are so low that it only takes one quarter's disappointment to reset expectations to a much lower level, and ultimately this process can be repeated down to near zero. Analysts who might have felt confident in valuing Telenor at NOK 68 - 70 a few weeks back are adjusting to a new reality today, with the share price struggling to hold NOK50. Finding your feet may be increasingly challenging in the world to come, if you have failed to board the ClueTrain. No doubt we're going to see a lot of complicated gymnastics in the quarters ahead, and a lot of smoke and mirrors employed to place a brave face on a fairly grave situation. However, my sense is that the gloves truly are off as of this week, and we may be entering a new phase. For the sake of investors in the sector, and the thousands of people employed in the industry, I hope I'm wrong.
It's not all grim up North
Whew, the market really hated the Telenor numbers (stock down 9.4%), and there must be some pretty sore backsides in brokerland given some of the aggressive price targets I've seen just recently. Anyway, Norway did produce some positive news today, from Telio, which is licensing the Xten eyeBeam development kit to develop their own video softphone. Based on Telio CEO Espen Fjogstad's presentation in Barcelona last week, I expect the company must be nearing the 50,000 subscriber mark in Norway (which is huge in a market of 4.5m people), and I am reasonably confident that Telio minutes of traffic are in the 40m range per month. Looking at Telenor's figures today, that would seem to be equivalent to about 4% of traffic on the Norwegian PSTN.
Whew, the market really hated the Telenor numbers (stock down 9.4%), and there must be some pretty sore backsides in brokerland given some of the aggressive price targets I've seen just recently. Anyway, Norway did produce some positive news today, from Telio, which is licensing the Xten eyeBeam development kit to develop their own video softphone. Based on Telio CEO Espen Fjogstad's presentation in Barcelona last week, I expect the company must be nearing the 50,000 subscriber mark in Norway (which is huge in a market of 4.5m people), and I am reasonably confident that Telio minutes of traffic are in the 40m range per month. Looking at Telenor's figures today, that would seem to be equivalent to about 4% of traffic on the Norwegian PSTN.
Three days, three misses
We're early into the Q1 reporting season in EuroTelcoland, and so far things are looking rough. Tele2 missed expectations on Monday, TeliaSonera reported numbers below the bottom of the consensus range yesterday, and Telenor has repeated the feat this morning. Our forecasts were towards the more cautious end of the range (based on Reuters consensus), but revenues and EBITDA were still NOK600m and NOK400m short, respectively. That's an undershoot of 4% and 7% respectively. On the conference call just now, CEO Baksaas remarked that the weak showing from the fixed business reflects mobile substitution and "changes in the nature of the market due to the broadband generation." I think the short form of that phrase is "VoIP/IM/Skype." Another phrase used was "intensify operational excellence" in the fixed business, though no specific figures were outlined. I assume that means supersizing some downsizing.
We're early into the Q1 reporting season in EuroTelcoland, and so far things are looking rough. Tele2 missed expectations on Monday, TeliaSonera reported numbers below the bottom of the consensus range yesterday, and Telenor has repeated the feat this morning. Our forecasts were towards the more cautious end of the range (based on Reuters consensus), but revenues and EBITDA were still NOK600m and NOK400m short, respectively. That's an undershoot of 4% and 7% respectively. On the conference call just now, CEO Baksaas remarked that the weak showing from the fixed business reflects mobile substitution and "changes in the nature of the market due to the broadband generation." I think the short form of that phrase is "VoIP/IM/Skype." Another phrase used was "intensify operational excellence" in the fixed business, though no specific figures were outlined. I assume that means supersizing some downsizing.
Tuesday, April 26, 2005
My lethal weapon's my handset
This may have been blogged extensively elsewhere, I'm not sure - I've been preoccupied today with the ugly TeliaSonera results and pitched political battles against short-term thinking internally. Anyway, cutting to the chase: if there was any doubt that the handset manufacturers have seen where their future lies, then here are two more pieces of evidence which may put paid to the notion of telco dominance. I'm reminded of the old Batman series, where fight scenes were accompanied by comicbook representations of words like "pow!" and "thwack" - I almost see those same graphics when I read press releases like this. So Telcoman, take that, and that.
This may have been blogged extensively elsewhere, I'm not sure - I've been preoccupied today with the ugly TeliaSonera results and pitched political battles against short-term thinking internally. Anyway, cutting to the chase: if there was any doubt that the handset manufacturers have seen where their future lies, then here are two more pieces of evidence which may put paid to the notion of telco dominance. I'm reminded of the old Batman series, where fight scenes were accompanied by comicbook representations of words like "pow!" and "thwack" - I almost see those same graphics when I read press releases like this. So Telcoman, take that, and that.
Q1 hurts
Some serious blog congestion ahead this week as I deal with a slew of earnings releases in Europe. Last Friday I had a meeting with a new client, and when asked about my recommendations for the telecom sector, I said "buy oil and mining." Two days into results season, I might consider adding some other completely unrelated sector. Tele2 missed expectations yesterday, and got a serious kicking from the market, which continues today. Today TeliaSonera has delivered an EBITDA number below the bottom of the consensus range, and the stock is currently down 5.4%. Tomorrow Telenor, Thursday France Telecom...
I also noted with interest some extraordinarily frank comments from Rupert Murdoch in today's Financial Times (page 13 of the UK edition), in which he confesses to "quietly hoping that this thing called the digital revolution would simply go away," and describing himself as "searching for answers to an emerging medium that is not my native language." You can really tell that Sky is in its fiscal Q4, because they seem to be pulling out all the stops in the marketing arena - last week I even saw an independent sales agent with a display set up outside a shopping mall in Camberwell, South London, touting for business on the street like a charity fundraiser.
UPDATE - If it's any consolation to Mr. Murdoch, I think we're all pretty much in the same boat. Consider trying to define these two fabulous "digital revolution" examples in terms of the traditional media landscape (both via the always outstanding Near Near Future). Are they games, musical/art works, trivia hunts, cartography projects? They sure ain't television. Then again, a decade ago, what would we have made of notions like "continuous partial attention," MMOG, blogging, Skype Mega Chat, reality TV or any of the other staples of our daily lives?
Some serious blog congestion ahead this week as I deal with a slew of earnings releases in Europe. Last Friday I had a meeting with a new client, and when asked about my recommendations for the telecom sector, I said "buy oil and mining." Two days into results season, I might consider adding some other completely unrelated sector. Tele2 missed expectations yesterday, and got a serious kicking from the market, which continues today. Today TeliaSonera has delivered an EBITDA number below the bottom of the consensus range, and the stock is currently down 5.4%. Tomorrow Telenor, Thursday France Telecom...
I also noted with interest some extraordinarily frank comments from Rupert Murdoch in today's Financial Times (page 13 of the UK edition), in which he confesses to "quietly hoping that this thing called the digital revolution would simply go away," and describing himself as "searching for answers to an emerging medium that is not my native language." You can really tell that Sky is in its fiscal Q4, because they seem to be pulling out all the stops in the marketing arena - last week I even saw an independent sales agent with a display set up outside a shopping mall in Camberwell, South London, touting for business on the street like a charity fundraiser.
UPDATE - If it's any consolation to Mr. Murdoch, I think we're all pretty much in the same boat. Consider trying to define these two fabulous "digital revolution" examples in terms of the traditional media landscape (both via the always outstanding Near Near Future). Are they games, musical/art works, trivia hunts, cartography projects? They sure ain't television. Then again, a decade ago, what would we have made of notions like "continuous partial attention," MMOG, blogging, Skype Mega Chat, reality TV or any of the other staples of our daily lives?
For those interested in open spectrum issues
This comes my way via the activist sphere. Sounds like an interesting event, and potentially one capable of influencing OFCOM thinking, if the right people turn up. Best of all, it's free. Many of the best things are.
This comes my way via the activist sphere. Sounds like an interesting event, and potentially one capable of influencing OFCOM thinking, if the right people turn up. Best of all, it's free. Many of the best things are.
Monday, April 25, 2005
Dude, where's my SkypeOut credit?
Following up on this post from last week, another Gold Circle value reader chimes in with a similar experience with vanishing SkypeOut credit:
Following up on this post from last week, another Gold Circle value reader chimes in with a similar experience with vanishing SkypeOut credit:
"My account was being drained by calls to Afghanistan of all places (perhaps CIA or AlQaeda?). Skype support was clueless and essentially blamed me for being careless with my pin. Needless to say, I don’t use SkypeOut anymore. When they fix their security problem (after they acknowledge they have one), I will reconsider."
Friday, April 22, 2005
Skype shuffle
This may not impress anyone, and maybe I am just sleep-deprived and missing something, but this is what just took place. The machine I am on now has had Skype uninstalled for various reasons, but I just remembered that I have Skype (the actual application, not the executable) on my USB bar. I was able to launch it from the USB bar, and it prompted me to log in. The client opened and connected. While it lacked some functionality (for example, I couldn't see all of my account details, my contacts, or get the callto:// function to work), I was able to make SkypeOut calls, and also call and apparently initiate chats to contacts showing up in my call history window. I also called my SkypeIn number, which rang, and left myself a voicemail. I then duly got a notification of a voicemail.
UPDATE: I just repeated the exercise on a machine which has never had Skype installed, and it couldn't log me on. It's obviously looking for something which isn't there, which makes me ask, if I have uninstalled Skype from the machine where it did work, what's causing this? Maybe my uninstall was incomplete? What I'm really trying to get at is, is there a way to get a fully functioning version of Skype on a USB memory device - i.e., another angle on "pocket Skype"? And could such a version of Skype be used on a virgin PC without leaving any evidence?
UPDATE 2: I just searched the Skype forum, and whaddayaknow, someone posted this just recently.
UPDATE 3: It just gets better and better. There is a poll on the Skype forums which shows that users want such a device.
UPDATE 4: A Platinum Card value reader writes in to say that he regularly uses Skype from a USB stick on his corporate laptop due to IT policy issues. In contrast to the highly technical solution outlined in the link in Update 2 above, in his case he launches it and it 'just works'.
This may not impress anyone, and maybe I am just sleep-deprived and missing something, but this is what just took place. The machine I am on now has had Skype uninstalled for various reasons, but I just remembered that I have Skype (the actual application, not the executable) on my USB bar. I was able to launch it from the USB bar, and it prompted me to log in. The client opened and connected. While it lacked some functionality (for example, I couldn't see all of my account details, my contacts, or get the callto:// function to work), I was able to make SkypeOut calls, and also call and apparently initiate chats to contacts showing up in my call history window. I also called my SkypeIn number, which rang, and left myself a voicemail. I then duly got a notification of a voicemail.
UPDATE: I just repeated the exercise on a machine which has never had Skype installed, and it couldn't log me on. It's obviously looking for something which isn't there, which makes me ask, if I have uninstalled Skype from the machine where it did work, what's causing this? Maybe my uninstall was incomplete? What I'm really trying to get at is, is there a way to get a fully functioning version of Skype on a USB memory device - i.e., another angle on "pocket Skype"? And could such a version of Skype be used on a virgin PC without leaving any evidence?
UPDATE 2: I just searched the Skype forum, and whaddayaknow, someone posted this just recently.
UPDATE 3: It just gets better and better. There is a poll on the Skype forums which shows that users want such a device.
UPDATE 4: A Platinum Card value reader writes in to say that he regularly uses Skype from a USB stick on his corporate laptop due to IT policy issues. In contrast to the highly technical solution outlined in the link in Update 2 above, in his case he launches it and it 'just works'.
Spend your way to happiness
Advertising goliath WPP reported Q1 numbers today, and I always enjoy looking at the revenue growth in terms of industry segmentation (slide 11 of this pack):
>15% - Computer, drinks, electrical, financial services, personal care and drugs
5 - 10% - Auto, food, telecom
<5% - Oil
It's telling that the oil advertising revenue growth is below 5% YoY, while telecom is in the 5 - 10% range. Both are commodities, but oil has pricing power based on a very real scarcity. Why advertise it? It sells itself, at any price. Meanwhile the electronics and telecom folks are going great guns to push their commodity products and services, where the term "pricing power" prompts sniggers or fond memories of days gone by.
Cingular, LG and Texas Instruments alone accounted for over a quarter of WPP's new billings in the quarter, or $350m. A personal observation is that Orange, Vodafone and Sky between them seem to have bought most of the outdoor space in greater London, HomeChoice seems to be doing a lot of banners, and Barcelona Airport should be renamed Movistar International, as far as I could see on Tuesday when I flew out.
Advertising goliath WPP reported Q1 numbers today, and I always enjoy looking at the revenue growth in terms of industry segmentation (slide 11 of this pack):
>15% - Computer, drinks, electrical, financial services, personal care and drugs
5 - 10% - Auto, food, telecom
<5% - Oil
It's telling that the oil advertising revenue growth is below 5% YoY, while telecom is in the 5 - 10% range. Both are commodities, but oil has pricing power based on a very real scarcity. Why advertise it? It sells itself, at any price. Meanwhile the electronics and telecom folks are going great guns to push their commodity products and services, where the term "pricing power" prompts sniggers or fond memories of days gone by.
Cingular, LG and Texas Instruments alone accounted for over a quarter of WPP's new billings in the quarter, or $350m. A personal observation is that Orange, Vodafone and Sky between them seem to have bought most of the outdoor space in greater London, HomeChoice seems to be doing a lot of banners, and Barcelona Airport should be renamed Movistar International, as far as I could see on Tuesday when I flew out.
Morgle yourself
A new reader points me towards Morgle, an online business directory service which looks to be attempting to harness the power of VoIP, and Skype in particular. I searched under the keyword "Skype" and found (note that the page may look different when you view it): Bill Campbell of Skype Journal, the Skype Answering Machine, a solar power specialist in Suzhou, the Online-Callcenter in Christchurch, and a hospital/nursing home bed maker in Swindon U.K. (which has quizzically used a callto:// which appears to trigger a SkypeOut call). I wonder how long we have to wait before Skype callto:// URIs start popping up on Google, or even in mainstream directory services. Eventually it's going to be big enough that the information aggregators will have to get to grips with it.
Back to hospital bed maker in Swindon for a disturbing thought. There are a lot of people out there who make a nice living from hornswoggling unsuspecting users into calling premium rate numbers. The virtue of Skype is that it is a global service and to great extent makes a nonsense of national market definitions. One exception, however, is when it touches national numbering plans. A consumer in the UK might recognize certain number ranges (0870, et al) as being premium rate, and be wary of them. However, users outside the UK would be easy prey if someone had the wrong intentions, or if they weren't thinking straight. I could easily make my callto:// on this website my UK mobile number, but any naive Skype user clicking on this would be very sorry they did. As Skype gets bigger and better, issues like these are no doubt going to raise some consumer protection and regulation issues at the national level.
UPDATE: I now understand that the company in Swindon accidently included their FAX number, and shouldn't have been classified as a Skype contact. Nevertheless, it illustrates my point - a simple mistake could cost the SkypeOut user some money, not to mention the conscious trickery of an unscrupulous person.
A new reader points me towards Morgle, an online business directory service which looks to be attempting to harness the power of VoIP, and Skype in particular. I searched under the keyword "Skype" and found (note that the page may look different when you view it): Bill Campbell of Skype Journal, the Skype Answering Machine, a solar power specialist in Suzhou, the Online-Callcenter in Christchurch, and a hospital/nursing home bed maker in Swindon U.K. (which has quizzically used a callto:// which appears to trigger a SkypeOut call). I wonder how long we have to wait before Skype callto:// URIs start popping up on Google, or even in mainstream directory services. Eventually it's going to be big enough that the information aggregators will have to get to grips with it.
Back to hospital bed maker in Swindon for a disturbing thought. There are a lot of people out there who make a nice living from hornswoggling unsuspecting users into calling premium rate numbers. The virtue of Skype is that it is a global service and to great extent makes a nonsense of national market definitions. One exception, however, is when it touches national numbering plans. A consumer in the UK might recognize certain number ranges (0870, et al) as being premium rate, and be wary of them. However, users outside the UK would be easy prey if someone had the wrong intentions, or if they weren't thinking straight. I could easily make my callto:// on this website my UK mobile number, but any naive Skype user clicking on this would be very sorry they did. As Skype gets bigger and better, issues like these are no doubt going to raise some consumer protection and regulation issues at the national level.
UPDATE: I now understand that the company in Swindon accidently included their FAX number, and shouldn't have been classified as a Skype contact. Nevertheless, it illustrates my point - a simple mistake could cost the SkypeOut user some money, not to mention the conscious trickery of an unscrupulous person.
Rates of change
Quote of the day from yesterday - from the CEO of telecoms network testing specialist Spirent, which 75% of analysts rate positively, and whose share price fell 21% on yesterday's trading statement: "These problems were not unexpected, but the speed at which they have happened took us by surprise." Spooky.
Quote of the day from yesterday - from the CEO of telecoms network testing specialist Spirent, which 75% of analysts rate positively, and whose share price fell 21% on yesterday's trading statement: "These problems were not unexpected, but the speed at which they have happened took us by surprise." Spooky.
Thursday, April 21, 2005
Google local, UK-style
Just watching the CNBC people gloating about how well Google has done in its Q1 numbers, my natural reaction (as an American ex-pat of 10 years) was to think "you guys think America is the internet." Well, as we say down South, "shut my mouth." Google local in a truly local UK context looks to be pretty kickass, and I can personally vouch for that. However, as far as I can see, the short-term threat to players in the directory space seems to be limited to the UK and other English-speaking countries. Longer term, I imagine it's going to take a lot of investment and work (like hiring people with language skills and local knowledge) to get to grips with markets like Germany and France, let alone China and India.
Just watching the CNBC people gloating about how well Google has done in its Q1 numbers, my natural reaction (as an American ex-pat of 10 years) was to think "you guys think America is the internet." Well, as we say down South, "shut my mouth." Google local in a truly local UK context looks to be pretty kickass, and I can personally vouch for that. However, as far as I can see, the short-term threat to players in the directory space seems to be limited to the UK and other English-speaking countries. Longer term, I imagine it's going to take a lot of investment and work (like hiring people with language skills and local knowledge) to get to grips with markets like Germany and France, let alone China and India.
Buyer beware
A commuting mishap left me killing time on the platform of an unfamiliar station out in suburbia this evening. Gazing to the platform opposite, I saw this ad for the fictional Wasp T12 Speechtool handset, a key prop in the Nathan Barley series on Channel 4 (which I have blogged about previously). This is real guerilla marketing - there is no mention of the show or any C4 logo anywhere. In this part of London, where there are lots of people reading little newspapers with big headlines, I noticed more than one person looking at this and trying to figure out if it was real or not. Sad comment on telecom marketing (and, I guess, on the show's viewing figures) that most seemed to have great difficulty in working it out. I imagine the realworld (a term I use loosely) handset makers have enough on their plates without having to deal with non-existent competitors - particularly ones which promise "TV cast hijack function," "text abuse dictionary" and "twin MP3 turntables." I must go into Carphone Warehouse and ask for a Wasp T12, and see their response.
Know your enemy
Earlier today I spoke with an uber-platinum value reader, who commented that recent industry conferences have revealed the sheer prevalence of obsolescent hardware in the hands of the average telco employee. Aged, battered laptops are common, and for at least one carrier, Word 97 is apparently the corporate standard. We both concluded that this may contribute to some of the apparent befuddlement we witness when confronting telcos with some of the threats which may bring them to their knees.
Devices locked down by corporate IT policies, running last century’s applications on slow processors, will never know the joys of a truly good Skype connection, or marvel at the elegance with which BitTorrent can do its job under the right circumstances. This is strange in light of all the sloganeering going on. BT’s currently using “More power to you,” but perhaps that should be more appropriately stated as “More power to you - whatever it is you’re doing.”
While the telcos grapple with their own internal issues and their very size and complexity, the broadband consumer may be at least one technology generation ahead of the service provider’s people, which is a very real risk in terms of understanding the customer's point of view. Take Richard Stastny’s recent experience. Sunday he posited the idea of integrating Skype user IDs in ENUM, and by Thursday someone had done it, incorporating the Skype callto: URI in an ENUM softphone. More power to us, whatever it is we’re doing!
Earlier today I spoke with an uber-platinum value reader, who commented that recent industry conferences have revealed the sheer prevalence of obsolescent hardware in the hands of the average telco employee. Aged, battered laptops are common, and for at least one carrier, Word 97 is apparently the corporate standard. We both concluded that this may contribute to some of the apparent befuddlement we witness when confronting telcos with some of the threats which may bring them to their knees.
Devices locked down by corporate IT policies, running last century’s applications on slow processors, will never know the joys of a truly good Skype connection, or marvel at the elegance with which BitTorrent can do its job under the right circumstances. This is strange in light of all the sloganeering going on. BT’s currently using “More power to you,” but perhaps that should be more appropriately stated as “More power to you - whatever it is you’re doing.”
While the telcos grapple with their own internal issues and their very size and complexity, the broadband consumer may be at least one technology generation ahead of the service provider’s people, which is a very real risk in terms of understanding the customer's point of view. Take Richard Stastny’s recent experience. Sunday he posited the idea of integrating Skype user IDs in ENUM, and by Thursday someone had done it, incorporating the Skype callto: URI in an ENUM softphone. More power to us, whatever it is we’re doing!
I love the smell of napalm in the morning
Readers of this humble blogatelle will recall that occasionally we stray into a consideration of the disruption likely to befall our own industry (investment research) at the hands of alternative sources of information/opinion/analysis, or God forbid - a concerted open source research project. Well, my very industrious cyber-bubba, Stephen Castellano, has fired the starting gun. I think I smell smoke...
Readers of this humble blogatelle will recall that occasionally we stray into a consideration of the disruption likely to befall our own industry (investment research) at the hands of alternative sources of information/opinion/analysis, or God forbid - a concerted open source research project. Well, my very industrious cyber-bubba, Stephen Castellano, has fired the starting gun. I think I smell smoke...
It ain't just about voice
Popular Telephony yesterday announced the release of Peerio Data, a distributed storage solution employing the Peerio protocol, and for my part I'm curious to see how this concept could also be applied to media distribution - no doubt there is something cooking on that front as well. As this is VON Canada week, I think it's safe to assume we can expect some further announcements, though exactly what remains, as always, a mystery.
Popular Telephony yesterday announced the release of Peerio Data, a distributed storage solution employing the Peerio protocol, and for my part I'm curious to see how this concept could also be applied to media distribution - no doubt there is something cooking on that front as well. As this is VON Canada week, I think it's safe to assume we can expect some further announcements, though exactly what remains, as always, a mystery.
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