I'm too sexy for my product

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

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

Null points!

Back on the block

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

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

The tracks of my tears

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

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

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

Looking for a datacenter?

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

More depressing data points for old media

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

Virtual coffee break - 6th August 2009

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

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

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

So, who's the online video daddy?

Yep, you got it. Nice timing to boot.

Into Africa

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

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

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

Ferrari, Ford, or Trabant?

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

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

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

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

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

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

Mega rebUKe

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

Misadventures

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

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

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

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

Fiber a la casa

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

My small contribution towards VMED shareholder value

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

eComm Europe 2009, an unsubtle reminder

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

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

More retro telco oddities

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

(Face)Book of the Dead

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

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

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

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

How not to create a market, 1976-style

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

Shock horror newsflash: the consumer is changing!

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

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

Upstream, without a paddle

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

Does Facebook cause brain damage?

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

Virtual coffee break - 7 July

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

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

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

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

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

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

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

It's always the unlikely posts...

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

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

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

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

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

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

The most dilapidated Virgin Media box ever

My talk from Manchester last week

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

James Enck @ NextGen09 from MDDA on Vimeo.

Wednesday omnibus

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

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

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

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

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

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

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

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

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

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

Returning from the new Digital City State

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Trash to the curb

I'm honored, really. Stefan, over at IntoMobile, deigns to give us insight into what criteria he uses to reduce his RSS bloat in an attempt to become a better blogger, reader, etc. Apparently he has concluded that he should unsubscribe:

"This is a classic case of 'blog that covers a certain niche turns into a blog being more about the author’s life that what it was originally about.' EuroTelco used to ask hard hitting questions about the telecoms industry, now it’s turned into a personal diary."

I think those of us with a respect for English grammar would say "than what it was originally about," but apart from this petty criticism, I'm genuinely sorry that Stefan feels let down. Of course I'm very concerned about the opinion of any blogger who would take the time to selflessly write a series of articles about how they're trimming their RSS feeds, and why. I also enjoy licking sandpaper, eavesdropping on the conversations of self-obsessed gadget bores, and counting in-bound links from IntoMobile (I'm currently up to three).

Not that I owe an explanation, but I'm in the process of starting up an investment company, which is understandably taking the majority of my time. In our potential investment pipeline are a number of situations which would form the basis for many interesting posts on critical issues facing the industry, but in my position, it is inappropriate to telegraph these sorts of things in public, and in some cases the situations are not even public, so saying anything would violate NDAs.

This blog is not, and never has been, a source of income for me (contrast this page with the ad-encrusted IntoMobile), so given the choice of how to allocate my time and energy, I am naturally focusing more on activities which are for the time-being. I've been pretty lucky over the past five years to have a large number of readers who were not only interested in the "hard-hitting questions," but also the person asking them. To think that the two could, or should, be separate in a personal blog is absurd, so I'm happy to see anyone who doesn't grasp that unsubscribe.

Live Monday from Madchester

Turns out the Manchester event is going to be webcast live from 1:30 PM UK time (that's 2:30 PM CET, 8:30 AM EDT, 8:30 PM Hong Kong), with me leading off, followed by Dirk van der Woude from Amsterdam, and a recuperating Benoit Felten from Paris via video link. Should be good fun.

Link to event stream

This treadmill goes to 11

Once again I find myself starting a small post with an apology for the lack of output, but suffice it to say I am struggling with bandwidth issues. Last week I attended two conferences in two days, and they might as well have been on different planets. Both were well-run and very interesting, but the audiences could not have been more different.

Open Mobile Summit: audience - older, very technical; laptops - many; WiFi - yes, free; iPhones - near-ubiquitous.

DB High Yield conference: audience - younger, not very technical; laptops - I counted two; WiFi - none; Blackberries - 99% penetration.

At the DB event, the organizers had very kindly set up a mobile charging station, with sixteen chargers arranged in four rows of cubicle enclosures. Throughout the day, being a keen observer of tedious things, I passed by the charging station several times, just to see who was using it. One quarter of the charger connections were for Blackberries, and always hotly contested. Three or four were "universal", which I used to charge my HTC, but which a number of Blackberry users also eventually figured out would work for them. There were three spots for Sony-Ericsson, which I never saw being used, and four for Nokia, which also had no takers throughout the day, as far as I could see. There was one iPhone charger, which I saw being used only once.

I guess none of this should surprise me, but perhaps because of my visit to the Open Mobile Summit the previous day, it started me thinking about mobile segmentation, brand profiling, and user behaviors, and how non-obvious some of this stuff can be. Ostensibly, the DB conference should have had more iPhone users because of the demographic, and maybe they are iPhone users on the side, but their weapon of choice is clearly the almighty Blackberry. I also continue to be amazed at the lack of participants from the finance world in industry-facing conferences such as Open Mobile.

One other takeaway was the stunning graphic from Kenneth Karlberg of TeliaSonera, on slide seven in his presentation at Open Mobile, which tracked data users and volumes consumed on Telia Sweden's mobile network in December 2008. We knew anecdotally that iPhone users are different, but it must be a profound source of embarrassment to others in the space to see the difference illustrated so clearly, and it underlines a comment from a mobile app developer at the conference that, as far as he can see, the only investment going into the mobile app space is into iPhone apps. The rest have a mighty hill to climb.

Anyway, now on to the original thing which brought me to this post - shameless self-promotion, once again. I am looking forward to presenting at the Next Gen Manchester Euro Conference on Monday. Looks like an interesting program, and I'm looking forward to catching up with a couple of old friends and making some new ones. I have peppered my presentation with some fascinating quotes from history on why certain innovations were impossible, and why no one would want this or that. I think you may know where I am heading with this tactic...

State of the art telephony, 1951

This piece may buffer a bit, and the dramatization at the beginning is very 1951, but the other footage is amazing.

Stranger than (pulp) fiction

Yesterday, I made an offhand but macabre joke to a colleague about the possibility that all the soon-to-be-dormant GM plants could be converted to data centers. Today the same colleague discovered something I had missed - a paper mill to data center conversion in Finland (press release is here, and additional commentary on the last page of this Stora Enso Q1 report), by none other than the Big G. Maybe I'm on to a nascent regeneration trend...

A green (bamboo) shoot

I spent last week with my children in a tent in Suffolk, pretty much disconnected and oblivious to the news. The only green shoots I saw were dandelions. I kept in touch with the news enough to know that, unsurprisingly to me, most of it was bad. The recent reporting season in Europe has confirmed, at least for me, that the Accident & Emergency wards of European capitalism have taken significant pre-bookings for emergency reconstructive surgery on a number of bloated LBO monsters (I could point fingers to various corners of Europe, but will refrain), which should keep lawyers and advisors busy for months and years to come. Just to clarify, in many of these cases, I think that the assets are good or great, but the capital structures look insane with the benefit of hindsight. So, the hard work begins...

Yet, it seems that sanity prevails in at least one small pocket of the globe, far from Europe. If you're feeling jaded and need a bit of relief, consider my friends at City Telecom in Hong Kong, or HKBN, as it is commonly known locally. Here is a company which has long pursued a singular vision of superior connectivity, has come from virtually nowhere to be number two in broadband, has grown both ARPU and EBITDA margin in the past six months, generates cash, pays a dividend, has leverage of only 0.3x and, for its small size, has an extraordinary attitude towards fostering the next generation of - wait for it - people. I was privileged to visit the company on a recent trip to Hong Kong, and can testify that the culture is young, disruptive, frugal, and above all, proud of what it has achieved so far and ready for much more.

And in case you didn't know it, the punchline here is that this company is devoted almost entirely to fiber access. We can argue endlessly about the unique economics of Hong Kong housing density and terms of access for service providers, which are undeniably key to the KPIs behind the story, but if it's the economics alone which are so compelling, why is this the only company starting from technical scratch and sticking to its guns throughout? Favorable economics may be meaningless in the absence of the vision and informed conviction necessary to seize upon them. So, it made me smile last week when I saw the recent results, and once again thought, "Yes, Virginia, there is a business case for fiber."

From a tent in East Anglia

That's where I am - but rest assured it's a family holiday, not a life choice... I have sporadic internet access, thanks mainly to the wonders of 3G and a cheap portable power supply. My intention was to lie low and not do much of a professional nature, blurry as the definition of that has become, but a Palladium Club mega-value reader sent me a link to this blog today, and I thought it deserved "fast-track" attention. It's an intriguing and revealing account, which seems too surreal to be anything other than genuine, of life within a (presumably UK) telco, though I hope for the sake of the author that it does not resemble the Reginald Perrin saga too closely. The accounts of meetings confirm my skepticism around the real prospects for "telco transformation" - it's a culture thing, clearly I wouldn't understand...

Mierda, ventiladores, televisión de pago, y la implosión económica

(Okay, I know I haven't been keeping to my word on posting frequency...)

It's interesting to listen to the differing takes coming out of companies in Q1 on just how defensive pay TV might be in the economic downturn. It seemed to me that UPC, for example, showed much stronger performance in its pay TV numbers than in broadband, and for my money Virgin Media also performed better than I had expected.

Then again, maybe it's a matter of degrees. What might things look like if the economy got really bad, as is the case in Spain? GDP run-rate decline of nearly 8% (quarterly decline, annualized), unemployment heading for 20%, that sort of degree of badness.

Well, a picture is emerging from Spain which is not particularly encouraging for pay TV bulls. I concede there are likely to be all sorts of drivers at work here, such as household creation, repossession rates, etc., which could cloud the numbers, and we may see something different in next quarter's results. However, on the basis of the numbers reported by key players in the Spanish market, pay TV no esta caliente.

Telefonica's numbers showed that ULL and wholesale DSL in Spain grew by 119k, which is 5.6% sequential growth. Telefonica's own retail base grew by 46k, and Orange was flat. ONO, which reported today, added 12k broadband customers in the quarter, which is seqential growth of a little under 1%. However, in pay TV, Telefonica's Imagenio lost 7,700 customers, ONO lost 23k, Orange claims to have grown IPTV subs by 12k (but as it looks like 6Mbps and national calls is priced the same as the above plus IPTV after the special offer period, does this really count?), and Prisa's Digital + satellite offering lost 24k and suffered a 30% decline in pay-per-view ARPU.

So in summary, on the basis of these numbers it looks as though broadband overall grew by 177k, and pay TV contracted by over 43k, at least among the companies cited here. I'm cautious about trying to draw too many conclusions from one quarter, nor am I sure that anyone should really care, except that, in snapshot form, it appears to confirm my own suspicions about consumer behavior when forced by events to confront what they really can and can't live without.

Incalculably crap

A true story:

Four people sitting in an office with their personal laptops. One is running Vista with Office 2007, one running XP with Office 2003, one running Office for Mac, and one (me) running XP with Open Office. Our Office for Mac user opens an Excel spreadsheet (originally created on a Windows machine) which contains several XIRR formulas, and for no good reason, the calculations are borked - everything is hard-coded. The XP Office 2003 user then opens her copy of the same spreadsheet, and gets the same result. Office 2007 man has a go, and also fails. As a final act of desperation, the Open Office user opens the Excel file - and that's right, the formulas work flawlessly. Saves file, sends back to other users, all of whom can now use the sheet as it was intended. 

This has happened twice, and none of us can explain it. 

If not for whatever magical healing fix Open Office seems to have applied, we would have come to the depressing and unavoidable conclusion that the sheet would have to be rebuilt - an unappetizing and time-consuming proposition. Rather than rant about Microsoft, let's just let the facts speak (very loudly) for themselves.

Openly shameless self-promotion

The good people at the Open Mobile Summit have asked me to chair on the first day of their upcoming event in London, June 10 - 11, and I have agreed (you can check out some of the presentations from the previous event here). Hope to see you there, so book now to avoid disappointment! 

Fala Portugeek?

Looking through the ZON Multimedia Q1 results, I came across a reference to a study carried out by the Portugese regulator, Anacom, into broadband performance.  The Anacom website has some awesome material in it, and I have always been perplexed as to why small markets like Portugal and Denmark have regulators devoted to market research, while some notable larger markets produce next to nothing (you know who you are!). 

Anyway, I'm not 100% sure that this is the study they're referring to in the release, but nevertheless I stumbled across this very detailed report from last month, detailing performance of both fixed and mobile broadband. It's in Portugese, but I think most readers will be able to get something out of it, or at least enjoy the nice graphics. For those less adventurous, a summary of the findings is here. I particularly like the observation:

"With regard to upload speeds it is seen that the speeds of mobile technology are higher than those provided by fixed technology."

I've got a 3G dongle which typcially sits idly by at home, as I ponder just how slow a cable modem upload can be. It would be nice to bond the two together somehow.

No bandwidth please, we're British

BT's CEO got the virtual equivalent of a mass Glasgow kiss (definition) for his recent Ford vs. Ferrari comments. But events have proven he's partially right - only 75% of Virgin Media's new customers want 10Mbps or more, suggesting that the other 25% are content with 2Mbps. This segment of bandwidth prudes could be an incremental growth target for UK ADSL players, as ADSL has proven it's fully capable of delivering 2Mbps, mostly (see point 1.8 on page 3). 

But they'd better hurry - Virgin no longer even markets its 2Mbps product, and the remaining 2Mbps customers are going to be dragged kicking and screaming onto 10Mbps packages from this month. 

Nice to see the cable industry finally doing what I have always believed it could and should do: use its network advantages as a blunt weapon to batter telcos with (Telenet results also show a similar trend and tone - 78% of subs are >12Mbps). In cases where the incumbent is unwilling or financially challenged to respond (4.8x leverage is a steep hill to climb), things are going to get very, very ugly. 

This does nothing to bring closer the demise of the bete noir of asymmetry - this person felt strongly enough about the issue to devote a blog entirely to it, but apparently gave up out of despair. (I recently set up a YouTube channel, and people, let me tell you, the upload times are excruciating.)

Still, it's interesting to ponder that telcos who have enjoyed relatively benign financial climes in days-gone-by avoided making the investment in preference for M&A adventurism, share buybacks and dividends, only to find themselves now under duress to play catch-up in much less forgiving conditions. I've heard this story somewhere before. 

More fun with charts

Well, it's Friday afternoon, and if you're being honest with yourself you probably haven't done much work this afternoon anyway. So take a few minutes to re-live the last ten years of trading in Amazon and eBay shares (eBay shareholders won't like the last segment, but then they probably know that anyway). Go to this chart, right click and select "Animate" and watch the lines dance. Apple and Microsoft is another good one.

Five pretty pictures

Internet infrastructure stocks are on a tear, indeed they are veritable "pitbulls on the pantleg of opportunity" following a set of strong Q1 results and broadly encouraging guidance. Bear in mind that if you view these charts after this writing - 30 April, 2009 - they may look very different, but what they show now is Akamai up 10% today, Savvis hanging tough after a 16% rise yesterday and having more than doubled since its March lows, Switch & Data has also doubled, Rackspace up 74% since early March, and Equinix up 68% since its own March nadir. I know a rising tide generally lifts all boats (NASDAQ up 41% over the same period), but these have gone airborne. We're back to "picks and shovels" here, but I think this time the market has it dead right.

The magic of flipping a light switch and escaping the dark is experienced at home, but the real magic takes place in an unseen power station miles away. The magic of Facebook actually happens in a number of deeply un-sexy, harshly-lit, sterile rooms with well-above-average air conditioning. Without the humble server jockey, tending his flock of racks, the code geeks got nothin'. Our dependence on web services of various flavors will inevitably intensify from here (especially if we end up working and studying more from home), and I would be very surprised if the critical infrastructure components of what the father of the internet, Senator Ted Stevens, once sagely called "a series of tubes", did not continue to grow strongly throughout this downturn and beyond. I think this pie could get very high indeed.

Teleporkalypse Now!

Today my elder daughter came home from school with log-in details for an online virtual classroom service, which she had never heard mention of before. It's kind of a private email/virtual homework site, a sort of very low-quality version of Facebook. Part of me suspects that this has been in the works for months, is for purely educational purposes, and that the timing is just coincidental. Another part of me thinks that some bright spark is ahead of the curve and is expecting a lengthy period of school closures. But that may be giving the local government too much credit. Tomorrow will tell, perhaps. Meanwhile, I continue to monitor newsmap and HealthMap with interest. I'm increasingly fascinated by how decentralized news flows can inform, and perhaps mis-inform, in times like these.

UPDATE (in DEFCON 1 flaming red): What's interesting about the Bloomberg article is the observation that Obama wants $1.5bn to deal with an outbreak. So, it takes a paltry $1.5bn, practically a rounding error by recent standards, to deal with something which could cause the deaths of tens of millions, when dealing with the fallout from fictitious bank assets apparently costs $X trillion - and counting. No wonder Mother Nature is out to kick our collective ass. We have achieved Koyaanisqatsi, on steroids.

LSE study on the benefits of investing in digital infrastructure

Put this in your pipes and smoke it (hat tip Jim Baller).

"While the report does not advocate a specific level of investment it models the benefits of £15 billion spent across the three areas:

• £5 billion on broadband networks (creating or retaining 280,000 jobs) with spending focused on getting broadband to unconnected areas, increasing network performance in low-speed areas (3 Mbps or less) and encouraging household take-up of broadband. Spurring more and higher speed broadband would boost business productivity.

• £5 billion on intelligent transport systems (creating or retaining 188,000 jobs). ITS would also improve traffic flows through measures like adaptive traffic signals and electronic tolls and provide travellers with real-time traffic information, The report also finds that extra spending on ITS would deliver environmental benefits and make the country more productive.

• £5 billion on developing a smart power grid (creating or retaining 235,000 jobs). By using two-way communication and sensors, the report argues, a smart grid will deliver power more efficiently and reliably. Houses could be fitted with smart meters which allow people to use electricity at cheaper times of day and which could work with smart fridges or washer-driers to perform high-energy cycles at times of low demand. One US study suggested this could cut 10 per cent from utility bills. The smart grid would also allow the deployment of new greener technologies including plug-in hybrid electric cars."

Unintended consequences

Much crowing from the content industry over last week's Pirate Bay verdict (hardly surprising when you hang out with the judge), but is this really the sort of reaction you want to prompt?

Hey you, get on to my cloud

Check out these piping hot videos just out from Akamai on the environmental benefits of cloud computing.

Semi-random links drive-by - 21 April, 2009

Just dashing off to a meeting, but here's a few tidbits of interest(?).

Take the Design Council challenge and help take the profit out of "mobile theft for fun and profit."

Fitch Ratings (annoying registration required) is concerned that DOCSIS 3.0 deployments could kick some telco butt, at least in the UK, Netherlands, Belgium and Portugal. I agree, though the asymmetry problem is getting worse.

UK consumer misery loves company - more online time devoted to social networking, less to shopping.

Last night I heard a good joke:

Q: How many people work at BT?
A: About half.

If you're looking for something to do over your lunch hour, why not give a listen to some classic songs reinterpreted, excruciatingly, in Esperanto? Volare is particularly scintillating. With support like this, I now understand why I have only met one Esperanto speaker - ever.

Eyes Wide Open

There seems to be some major outrage about the IPR issues surrounding Skype, but I'm happy to say that I reported on this way back in 2006 - as always, read the fine print...

As I quoted at the time:

In November 2003, Skype signed an agreement with a software development company [could this be the one?] which granted Skype a perpetual non exclusive license on its software, with exclusive use of the software for the limited purpose of providing P2P telephony, multi-directional video communications between end users via the internet. The founders of this software company are also founding shareholders (and senior management) of Skype.

The Joltid license is something I have mentioned frequently in presentations, but it has always seemed to me that no one has ever heard about this before, and people have always reacted with astonished expressions. The 2003 - 2005 Skype filings are still up, by the way, you can find them here.

I've always assumed that beyond the long-term commercial rationale for housing the Fast Track IPR in another company, it was also a shrewd defensive move given the legal onslaught against KaZaA at the time. It still doesn't answer the question as to what eBay management were thinking (or smoking) at the time, but it's clear that they felt a $4.1bn level of comfort with the arrangement.

Sharper vision

I know, I've been a baaaaad blogger recently, but I won't bore you with the reasons why. I have, however, resolved to mend my ways, so here's a micropost.

I've been working on a freelance project recently which seeks to explore some of the ways in which broadband, or whatever we end up calling it, can spur innovation. I'm trying to focus on non-trivial examples where broadband is either a critical enabler, but not the end service itself (as in the smart grid), or where the existence of broadband forces innovation elsewhere (as in the prevalence of cloud-enabled applications, which forces innovation in the data center).

My point of departure in thinking about this was a conference I attended a couple of years ago, where the CFO of an incumbent telco in Europe was asked about the rationale for FTTx deployment in the company's home market. The response was that the pay TV market in the country was deemed to be suitably competitive already, so it was difficult to make a case based on return on investment. Ergo, fiber = video. I am trying to write something which prompts a move away from this sort of thinking. Anyway, we'll see how it turns out.

Meanwhile, here's another item for your list of reasons why fiber is good for you - it improves your night vision.

Pimp my grid

This may have been blogged already by one of my esteemed Dutch friends closer to the action, but sadly I have been too absorbed to notice (sorry guys - if you have, send me a link to point to), but I just stumbled across a link to a presentation delivered last month in Italy by the Almere Grid, which I wrote about here in those heady days of 2006. Looks like a predictably interesting piece of joined-up thinking from the Netherlands, combining an access strategy, shared backup services for SMEs, academic research, and city planning. It's ironic to discover that Almere is twinned with Milton Keynes...