Stop SOPA: which are the proper arguments against it?

There's a lot of resistance to SOPA and PIPA, but good argumentation is rather scarce. Look at these links to find useful explanations about what is actually wrong with these bills:

• Five reasons the Internet’s still protesting SOPA and PIPA
• Killing the Internet to save Hollywood
• SOPA, Internet regulation, and the economics of piracy
• Even without DNS provisions, SOPA and PIPA remain fatally flawed

For many, the content industry is the industry one loves to hate. It makes excessive profits (or so it seems), and they slice & dice their products in a consumer-unfriendly way (windowing) to maximise profits. Today, the people want instant access to digital files (streaming or downloading), while the content industry wants to sell very lucrative discs. Hence some sympathy towards illegal downloading.

However, this reasoning is irrelevant. It is Hollywood's right to determine how it wants to sell its products. And illegal file-sharing is still a form of theft. After all, China needs to shut down fake Apple stores, and it is illegal to wiretap the electric grid for free power.

And yet, there are good reasons to oppose bills such as SOPA and PIPA. ISPs simply do not want to police the internet, for two reasons:

• It would produce a lot of administrative work. This could also be a growing burden, as more sites etc. are to be taken down. And then there is the risk of not complying in time and being liable.
• It doesn't work. Technology will always find a way around.
• Not ISPs alone will be targeted by laws such as these, but also the DNS, search enginmes, etc.

Further, content owners would get just too much power:

• They could ask a site to be taken down without a court order.
• Forcing players other than ISPs (search engines, payment processors, advertisers) not to do business with such sites.
• Forcing anybody (mainly sites such as Facebook and YouTube) providing links to such sites (even for discussion purposes etc.) to take these down.
• What would come next? Sites providing recipes being taken down on a request from a restaurant chain?

Hence the risk of limiting free speech, the open internet and innovation.

Finally, the content industry claims that piracy destroys their business. But this is not at all proven, at least not the extent to which this claim would be true:

• File-sharing is not illegal per se.
• And if it is, it is also a form of content discovery. Heavy downloaders may very well be heavy buyers of legal content as well.
• Spendings on legal content (discs) may be down, but concert ticket sales are up dramatically. Assuming that a household's total media budget should not change dramatically over time, this should be taken into account.
• Piracy is going down with the rise of companies such as Netflix and Spotify. UltraViolet may also contribute to an acceleration of legal streaming/downloading revenues.

KPN is reversing its position versus the OTT market

A very disappointing turn of events is taking place at KPN. KPN has been a champion of the European incumbents for a long time, with an open view to the realities of the over-the-top market and open access networks.

Ad Scheepbouwer himself developed in a very positive way, during his 10 years at KPN. Back in 2003, he was quoted saying that companies such as Tele2 are "like parasites on our network". However, in his last days as CEO of KPN, Ad Scheepbouwer was quoted as follows:

Meanwhile, Scheepbouwer is dismissive of suggestions from rivals, such as Telefonica's CEO Cesar Alierta and Vodafone Group PLC's CEO Vittoria Collao that the biggest generators of network traffic, such as Google Inc., should pay for the benefit of reaping a huge amount of revenue from infrastructure in which they have invested. "The Internet is open and free for all to use and the solution isn't to start charging Google money. Then we should have invented Google ourselves."

(Total Telecom, April 5, 2011).

We thought that the A.T. Kearney report (for DT, FT, Telefonica, TI) claiming the opposite of what Scheepbouwer was saying, had been thoroughly buried by now, by Communication Chambers, Plum Consulting, and over here as well. In October, at a Fiber Summit in Amsterdam, Alcatel-Lucent's Ben Verwaayen left no doubt about where his company stands in this discussion: it is firmly behind DT, FT, Telefonica and TI. And we all know where Alcatel-Lucent, and its CEO, are going.

The turn of events at KPN is not only disappointing , but also points to conflicting views within the KPN management. The current director of Wholesale & Operations dismissed the concept of Google et al contributing only a week ago. When an Alcatel-Lucent worker (!) asked him how he planned to start charging Google et al, he replied: 'we want to join in, ring fencing is pointless', which seemed to suggest that he is firmly on Scheepbouwer's side.

Dish Network goes OTT and LTE

Dish Network has an interesting strategy, further expanded under its new CEO Joe Clayton. Since it doesn't have a fixed-line network, it apparently needs a work-around. This comes in two forms:

• LTE. The company owns 40 MHz of nationwide spectrum (and some). There are TD-LTE plans (probably for a fixed-wireless solution), but a cooperation seems more logical - such as making an offer for T-Mobile USA.
• OTT. Since it has nationwide content rights, why not piggy-back on somebody else's infrastructure? It is a loyal Google TV partner, has the Blockbuster business (including Movie Pass) and could even go further.

Wireless solutions help maintain the digital divide

Can wireless replace wireline? The obvious answer is 'no', but it is remarkable to see that a growing number of companies is trying to answer 'yes'. Some instances:

• Vodafone Germany: migrating DSL subs to LTE.
• Verizon will not expand FiOS beyond the currently planned 18 million homes, instead relying on LTE and the new spectrum it is buying from cable companies (and perhaps also to safeguard peace with those very same cable companies).
• Chinese investors are invading Belgium on the back of a 4G license for TD-LTE spectrum.
• NSN has introduced outdoor CPE for TD-LTE based service.
• O3b is building a global satellite network for 'the other 3 billion'.
• SES (Astra2Connect) and WildBlue Communications are raising speeds (to 10 and 12 Mb/s) and lowering prices (to 28 EUR/mo and 50 USD/mo) for BB-over-satellite.

Observations:

• On the positive side: These solutions are for underserved areas (whether third world or rural) and will provide rather basic needs only.
• On the negative side: These investments will reduce the direct need for fiber to rural areas, which may lead to an ongoing digital divide between rural areas (speeds up to 10 or so Mb/s, but in reality probably a lot lower and possibly capped) and denser areas (to be served by true FTTP, which is gradually moving to 1 Gb/s).

The thin line between following the market leader and collusion

The offices of the three Dutch MNOs, KPN, Vodafone NL and T-Mobile NL, were raided by the antitrust authority NMa on suspicion of price arrangements (collusion) and carving out distribution (retail) channels. The three aren't denying, but guaranteeing full cooperation. KPN stated that five employees have been singled out for the investigation. The NMa stated that they have official statements from two whistleblowers.

There are speculative reasons to believe both sides (it's an investigation, and pending the results no one is guilty):

Speaking for the operators:

• Price arrangements would be stupid because of the PR risk. The operators have only recently been convicted for similar charges dating back to 2001.
• Price arrangements also appear to be unnecessary in the light of the oligopolistic market, where Voda and T-Mo follow KPN - which is not illegal.
• There was a direct reason for all operators to move quickly and raise prices during 11Q2: a rather sudden change in consumer behavior from late 2010, embracing IM/chat/VoIP apps. This put pressure on voice/SMS income. Moreover, charging for these data comms apps was made impossible because of the new net neutrality laws.

Speaking for the whistleblowers:

• They, and the NMa, appear to be very serious.
• The operators are not denying.

What may have been the case?

1. The allegations are true. In this case, consequenses will be severe, both in terms of fines and in terms of regulation. NPS numbers will go down the drain.
2. The allegations are not true. The whistleblowers are in fact disgruntled employees - or so. Naturally, they approach right-wing media and populist politicians, such as the neo-fascist PVV party supporting the current government.

At this point it is impossible to say which is true. Perhaps the whistleblowers speak the truth. But if they cannot see the difference between 'following the market leader' and 'making illegal price arrangements', then the charges may very well be untrue.

B4RN is a go - Gigabit fiber coming to Lancashire

Lindsey Annison kindly allowed us the scoop on B4RN reaching its first target. Wonderful news, and Lancashire will likely be connected to gigabit fiber over the next few years.

Here is the entire press release:

B4RN (Broadband 4 the Rural North) has passed its target, in a mere three months, to gain enough interest to proceed with the project to connect 8 parishes in rural Lancashire to a community designed, built, owned and operated gigabit FTTH network. Full details of the project are available on the website http://www.b4rn.org.uk

There are Press Passes available for the launch event on Dec 15th at 2pm at The Storey, Lancaster.

Thank you for all your support. 

FOR IMMEDIATE RELEASE - 1st December 2011


Residents in North Lancashire launch Fibre Optic Broadband Company

An exciting community initiative, initially across eight parishes of rural Lancashire, to deliver a world class hyperfast fibre optic broadband network is being launched at The Storey in Lancaster on 15th December at 2pm.

Broadband has become essential for every sector of the community and increasingly important for our daily lives. Government and the large telecom companies plan to upgrade broadband to ‘superfast’ but not in many rural areas, where limited internet and mobile coverage affects  businesses, homes and farms. The difficulty is reaching economic viability when private companies’ costs are so high and subscriber numbers are low.

Broadband for the Rural North (B4RN) plans to lower the costs, both in the building of the broadband network and to the end user, by using local contractors and the community. “Farmers and local people have the skillset we need for this project. They know the land and people, and have been offering to work for shares, which means the digging for the core network can start early in 2012. We expect this to be completed in approximately 3 months, weather permitting, and then we will begin to connect the first users,” stated Professor Forde. Shares will be available from 15th December - further information and application forms will be available on the B4RN.org.uk website on that date.

B4RN’s plans are for a hyperfast broadband network fit for purpose far into this century. A 1 gigabit (1000Mbps) connection will ensure that any interaction with the Internet will be quick and easy. Television, films, cheap phone and video calls over the Internet, the ability to extend local mobile phone networks to cover black-spots, local security, telehealth and medicine applications - all will become possible. B4RN will be initially be providing the broadband connection and VoIP telephony, with further services to follow as the network rolls out over the coming years.

Barry Forde, B4RN Chief Executive, will explain the project and launch the share offer in the company to raise the necessary capital required over the next few months. Representatives from the first phase communities of Melling, Arkholme, Quernmore, Abbeystead, Wray, Tatham,
Roeburndale, Wennington and Caton with Littledale will be at the event as well as local dignitaries and celebrities.

B4RN is a community benefit company, owned by its shareholders. Income made will be re-invested in the service and spent within the communities the company serves. The shares are being made available under the EIS (Enterprise Investment Scheme) that offers 30% tax relief, with a minimum investment of £100 and maximum of £20,000.

B4RN hopes to attract the support of local, national and international investors, whilst remaining a truly community-run business, bringing fast, future-proof, sustainable Internet access to the rural uplands, for this generation and those to come, leaving a lasting legacy for the area.


NOTES TO EDITORS

1. B4RN has been more than three years in the planning and development stage. The B4RN project will bring a state of the art, fibre optic broadband connection to the rural communities long before most of the urban areas. Rural Lancashire plans to be a world leader in “hyperfast”.

2. Professor Barry Forde (B4RN Chief Executive) is a networking expert with many years experience of designing, building and operating high performance networks. He was responsible for the CLEO network which provides connectivity to over 1000 schools and public sector sites across Lancashire and Cumbria. Bios are available for Professor Forde and the Management team http://tinyurl.com/6tpdkmt

3. The full business plan is available on the website, along with details of the pricing and payment structure for local residents and businesses. http://tinyurl.com/895uvdx This includes bonuses of free install and connection for 12 months with a £1500 investment, three further free months for early bird investors, and payment in shares for involvement in the deployment of the project.

4. A target of 662 registrations of interest were required for a green light and this was passed in just three months. The project moves one step closer to implementation with the launch of the Share Issue. “The phased network will be built by the community over three years for the seven phases. Now we have passed our target of over 700 registrations of interest in investment and taking a service at £30/month for 1Gbps, we can proceed to raise the capital required for Phase 1,” said Barry Forde.

5. B4RN will initially provide internet and telephony with further services in the future. Each home will have a battery backup so telephony over the fibre means landline connections are no longer required.

6. Christine Conder, a farmer’s wife and rural broadband pioneer, who successfully dug and installed the first rural fibre cable to her farm in Wray in 2009, knows it can be done and sums up the enthusiasm and ethos of B4RN, “If we don’t do it ourselves then it will never get done, so B4RN is the answer, let’s all JFDI.”

6. Photos (to be accredited to B4RN) are available at http://www.flickr.com/photos/b4ruralnorth

Contact details:

Professor Barry Forde, Barry@B4RN.org.uk
Christine Conder, Chris@B4RN.org.uk
Lindsey Annison, Lindsey@B4RN.org.uk

Telephone: 01524 221588 or mobile: 07952 503253 / 07967 670759
Twitter: @dig2agig
Website: http://www.B4RN.org.uk
JFDI (Just Farmers Doing IT)

How to reduce incumbents' power: ban all domestic takeovers

KPN made several dozen acquisitions over the past few years. I count 51 (and probably missed a few) since early 2005 in just about every category, mainly in the Netherlands, but abroad as well. Small companies and bigger ones, such as Telfort, Tiscali NL, Getronics, Reggefiber and iBasis. Fixed and mobile, consumer, business and wholesale. Some assets were sold on, but generally the acquisitions fortified KPN's market shares, or even propelled it into a new business. And takeovers compensate for negative growth in KPN's traditional business.

KPN is the incumbent, has SMM in several markets and is therefore regulated. But one measure has not been part of the regulator's toolkit: a ban on domestic takeovers. Just imagine what that would have meant, especially for the home market:

• Opportunities for challengers to buy assets at lower prices (KPN probably drove up valuations).
• No easy 'exit' for start-up entrepreneurs banking on a sale to the incumbent.
• Significantly lower market shares for KPN in most markets.
• Much stronger challengers and market shares much less skewed toward the incumbent.
• An earlier end to deregulation in several markets.

The message to the incumbent would be: all takeovers are prohibited; if you want to add technology, expertise or a share in a new market, you simply should go build it yourself.

Tablets eliminate one premise of connected TV

Connected TV suffered several blows recently:

• Broadcom and Intel abandoned the TV market.
• Logitech abandons the Google TV ecosystem.

So far, connected TV was all about:

• More content: internet-to-TV, multiple VOD, apps (widgets)
• Better content discovery: UI/menus, EPG/IPG, remote control, keyboard, recommendations, search, browser, social, personalisation, voice control, gesture-based control
• Around the home: second screen, multi-screen, multi-room
• Companion screen: complementary content, interactivity.

But an important new aspect was added: the tablet, both for second screen and companion screen

Implications:

1. One of the premises of connected TV was knocked out from under it. Connected TV wasn't justified by the notion bringing additional content to the TV and putting the viewer in the driver's seat (the rise of on demand), but also: any video content is best consumed on the biggest screen in the home, i.e. the living room TV. The tablet has proven that this is not the case. People are happy watching TV/video on a tablet screen.
2. Real interactivity (beyond ordering movies or pausing live TV) is stil in its infancy. Yahoo! IntoNow is interesting, and AT&T made somes moves. But it remains an underexplored area.

KPN's broadband market share is down, not up

After assessing the KPN Q3 results,

• Below expectations, guidance maintained.
• Hit by regulation and restructuring.
• Performace analysis by division.
• Guidance and other targets.

the question remains: were they good or bad? The organic performance was solid in Mobile International, and weak in the Netherlands. Cable is forcing KPN's broadband market share down. VDSL is no cure, not even interim. FTTH needs an accelerated roll-out, and indeed is now playing the 'captive market' card: Reggefiber has up to now entered no fewer than 155 municipalities, out of the nation's total of 418. KPN's customer base will keep shrinking, but what is left over will take more RGUs per customer. It opens an opportunity to once more grow by acquistition, especially when the broadband market share  goes further down below 40%.
In mobile, Consumer NL is weak, but other areas are strong.

Group revenues
Results were hit by regulation (MTA, roaming) and restructuring (mostly KPN Corporate Market), and benefitted from minor takeovers and release of provisions:

Reported:

• Group growth: revenue -3.4%, EBITDA -11.6%
• Netherlands (includes iBasis and Getronics) growth: revenue -5.2%, EBITDA -13.6%
• Mobile International growth: revenue flat, EBITDA -4.9%

Underlying (organic):

• Group growth: revenues +0.8%, EBITDA -0.1%
• Netherlands growth: revenue -2.9%, EBITDA -1.5%
• Mobile International growth: revenue +8.3%, EBITDA +5.9%

The Netherlands then perform dismally, obviously a result of cable competition. Mobile International benefits from Rest of World reaching break-even at the EBITDA level, but most of all from playing challenger. It remains to be seen how sustainable that is.

Coming in below market consensus caused a small share price decline. Investors must be wondering: how can free cash flow for 2011 be > EUR 2.4bn when YTD FCF is only EUR 1.5bn? KPN maintains guidance and points to less MTA impact, no payment of any dividend and no share buy-backs in Q4. Of course it has capex and asset (real estate) sales to play with, so when they say they will meet guidance, that probably will happen.

One question remains: why is organic EBITDA growth weaker than organic revenue growth? It must be the price of expanding networks (mobile) and services (IPTV), which take a toll on work contracted out.

Dutch broadband market

KPN lost 11k subs, despite gaining 16k FTTH subs. In other words, 27k DSL subs were lost. Indeed, VDSL is not much of a weapon against cable. FTTH additions are not impressive, but will probably accelerate going forward (unless heavy frost hits the country once again). The total number of BB subs is back to the level of mid 2008. Market share is going down to 40% now, but in fiber areas KPN claims 44%. Overall, the target still is to raise the market share to 45% by 2015. A stretch.

Dutch TV market

The TV market share is up to 17% (in fiber areas 27%), but associated revenues are just EUR 43m this quarter as a result of the low ARPU. Cable ARPU for TV alone is not published, but is probably at least twice this number. Cable is migrating analog subs to digital, at a conversion rate of roughly 80% (i.e. 20% of customers lost are moving to IPTV, FTTH or DTT). KPN is doing a similar thing: migrating DTT subs to IPTV. Dynamics are a bit different, and overall KPN is growing the number of video subs, so the coversion ratio would be something like 500%.

Dutch customers base

KPN doesn't publish customer numbers, like cable does, only RGUs. But it now reports the RGU per customer metric, which must increase to 2.4 by 2015. It now stands at 1.9, which implies roughly 3.5m customers. Compare Ziggo's 3.02m (its network has a population coverage of 57%) and UPC's 1.86m (population coverage 38%).

Mobile

• Consumer NL: subs are going down steadily. Contrary to what KPN states, MoU is holding up, but SMS is going down rapidly. ARPU is down slightly. Revenues are down.
• Business NL: both MoU and SMS/sub are going down, but subs are up strongly. Revenues roughly flat.
• E-Plus: subs and revenues are up, but MoU is flat/down.
• Base: subs up strongly, but MoU slightly down and revenues are up only slightly.
• RoW: no sub numbers, but EBITDA is positive for the first time.

KPN: what to look for in the Q3 results?

KPN will report on 11Q3 tomorrow. First, see what the Q2 report looked like:

• Job cuts at Getronics.
• Revenues down in NL, up at Mobile International, EBITDA down.
• Weak in NL, solid abroad.
• But maybe not so bad as to warrant a profit warning.

Next: guidance:

• 2011: EBITDA > EUR 5.3bn, Capex < EUR 2bn, FCF: up (2010: EUR 2428m), DPS: > EUR 0.85
• 2012: FCF EUR 2.4bn, DPS EUR 0.90
• 2013: DPS EUR 0.95

Market consensus:

• Revenue: EUR 3303m (last year: 3378)
• EBITDA: EUR 1320m (last year: 1408)
• EBIT: EUR 760m (last year: 847)
• Net result: EUR 431m (last year: 406)
• EPS: EUR 0.28 (last year: 0.27)

General:

• Will guidance be maintained? How is the new strategy (Strengthen, Simplify, Grow) progressing?
• Economic crisis (mostly felt at Getronics and KPN Business)? Getronics benefitted from the certificate problems at DigiNotar.
• Job cuts planned: 4-5k of which 2.0-2.5k at Getronics (now: KPN Corporate Market).
• How will the mobile international activities (Simyo) in France and Spain be ended? Will Ortel (now in 6 countries) be involved?
• Pension fund coverage was OK in Q2 (108%), but if below 105% needs extra cash.
• Will a share buy-back be planned (probably at the Q4 results)?
• Where is the planned takeover of Caiway (still at NMa)?
• Any sign yet of the new company structure as of Jan 1 2012 (i.e. new heads for Consumer Wireless NL and Consumer Wireline NL)?
• Expectations for the spectrum auction of 12Q2 and a possible Reggefiber buy-out?
• More deals such as the Spotify deal coming?

Mobile NL:

• What is the impact on voice & SMS of apps such as WhatsApp?
• What is the impact of new pricing at KPN and Hi (Telfort to follow 12Q1)?
• How many iPads were sold?

BB NL:

• How do the net adds hold up against Ziggo (+38k) and Tele2 (-16k)?
• How does the RGUs/customer ratio develop (1.9 in Q2)?
• How is FTTH doing (HP, net adds, XS4ALL, Telfort)? When/where will the 500 Mb/s service be offered?
• Where is VDSL (roll-out of outer rings), both VDSL@CO and FTTC?