Demand drives FTTH drives separation

FTTH and separation are probably the most important trends in telecom right now. They are also linked.

I believe demand for bandwidth and nations competing for a larger share of the worldwide GDP pie will drive investments in FTTH networks. Telcos feel the heat and are preparing investors for a large capex round.
At the same time, realisation builds that there is value in both networks and services. Telcos are leaning toward the latter, and are preparing for their new roles by introducing sharing, outsourcing and separation.

Below I elaborate on these issues.

1. Drivers

1.1 Demand

Demand growth remains high. Statistics from internet exchanges, IPTV, the rising popularity of YouTube, monitoring services, etc. are used to corroborate this point. Add to that the following. As long as there is no true end-to-end connection and bandwidth is shared at some stretch (either on the open internet or in the last few yards), bandwidth should be redundant. So, if you need let’s say 30 Mbps, you really need peak performance of 100 Mbps. Check out Dean’s remarks.

1.2 Competition among nations

A valued reader suggested that there is a race going on between nations. Already, eastern European countries leapfrog places like Germany by building FTTH networks. If you want to maintain your share of the world’s GDP, you better not stay behind. Places ranging from Chattanooga (Tennessee) to Malaysia acknowledge this. No wonder Italy is weighing a massive investment into Telecom Italia’s network, once the company is separated. No wonder also why Ofcom launched a consultation, apparently aimed at paving the way for FTTH.


2. Future proof solution: FTTH

This point hardly needs any back-up, even if your long-term view is that the last few feet will be wireless. You better bring fiber at least to the doorstep of all the places where people like to hang out.
As I have written before, telcos are actually preparing investors for the big plunge.


3. Sharing

I believe sharing is going to gain popularity. Right now it appears to be concentrated in areas where demand or scale is limited. You can find examples in such diverse areas as mobile TV (German operators jointly building a single network), WiMAX (look at this consortium in Malaysia), FTTN/VDSL (altnets in both Australia and Germany) and 3G (in the UK, for instance).
The question remains: which part are you willing to share? The passive (dumb) layer is an obvious candidate, but you want to remain in control of traffic and services. The Vodafone/Orange UK example takes (tower and antenna) sharing one step further than sharing deals elsewhere (including the Sprint/Clearwire deal), which are mainly focused on extending coverage to rural areas. For Vodafone and Orange, sharing means: separating the network from the services. It implies that the network must be redundant (so there will not be an issue over who gets how much capacity), and also that the days of network coverage as an USP are behind us.


4. Outsourcing and separation

4.1 Outsourcing

The next logical step seems to be outsourcing. If you decide to sacrifice full network control, why not let some third party handle the network?
KPN is a case in point, since it started outsourcing many tasks in its fixed network to a whole range of IT providers. To be sure, I do not believe that KPN will save on costs. We all know the ways of IT companies. There will be lots of talk and writing policy documents. I counted at least 7 IT companies involved. IBM will be the lead integrator, but I am unconvinced that this structure will save KPN any opex within the next 3 years. I believe the move is designed to sharpen the focus on services, perhaps even pave the way for more (i.e. core network outsourcing and structural or even ownership separation).

4.2 Separation

The new focus on services opens the gates to (further) separation. In fact, it is already amongst us. First of all, let’s not forget that selling the tower business by mobile operators can be viewed as a form of separation, even if this only sets site sharing apart (and not antenna sharing or any activities ‘higher up’).
But there is much more. In Switzerland, Swisscom Broadcast received a DVB-H license, but it must provide equal access to all operators. Shortly before, TeliaSonera took the unusual step to create a separate infrastructure/wholesale unit in Sweden. Another voluntary action comes out of EchoStar, which proposed to split its satellite fleet (with wholesale operations) form the service provisioning unit (the Dish Network).

Telecom New Zealand will be split along the well known BT Openreach lines, creating a unit in charge of the access network in order to jumpstart LLU.
It remains to be seen if this effectively creates a new stumbling block on the road to FTTH, as the new structure focuses on LLU and therefore on maintaining ADSL(2+). It would be my preference to try and leapfrog intermediary technologies as much as possible and go straight to FTTH.

Some companies are obviously atttracted by the wholesale business model (the NetCo part of the business, as opposed to the higher valued ServiceCo units), providing a ‘natural monopoly’ and ditto cashflows. Consider such diverse players as Reggefiber (the FTTH company in the Netherlands), Frontline Wireless (plans a national safety network in the US, stresses the importance of wholesale access to the new 700 MHz spectrum in order to foster new entrants) and even Gaiacomm International (whose proposed VLF/terahertz network would not compete with exiting service providers).

Will mobile network sharing lead to separation?

This news from Thailand again brings up the matter of separation in wireless networks. Thai Mobile seems to volunteer the building of the nation's first 3G network, to which it will offer open access to all operators.

Other recent news around mobile network sharing:

• Vodafone UK and Orange UK plan RAN sharing (3G and 2G) to reduce capex and opex by 20-30%.
• Hutch Essar and Bharti plan infrastructure sharing, to be supported by the regulator.
• Nokia's solution is expanded to supporting up to 4 operators.
• Yoigo (TeliaSonera) and Telefonica Movistar plan antenna sharing.

(Now, it is important to realise that sharing may be done at different levels: sites (towers), antennas, RAN, backhaul.)

Some observations, beyond the obvious cost savings target:

• Similarly, operators are teaming for mobile TV (be it a shared DVB-H network, wholesale access to Qualcomm's MediaFLO or any other technology). So, why not for 3G as well - or for that matter: for 2G (not to mention 4G)? As in fixed, sharing and separation make a lot of sense in an IP-based world.
• Differentiating by touting network coverage (as Verizon Wireless still does) will become a thing of the past.
• So, operators will need to make sure they can differentiate on the services and applications level.
• If network operations are to be separated, a new (natural) monopoly will arise. As long as existing service providers are deemed to have SMP (significant market power), this may give rise to new open access obligations at the network operator. On the other hand, the rise (not the fall) of MVNOs could preclude this (what will the difference be between MNOs and MVNOs anyway)? However, spectrum will always be much more of a scarce resource than anything equivalent in the fixed world (duct access, access to sewers, etc).

Network sharing: government interference done right

Network sharing is gaining (a little) momentum in several places. Two recent ones stand out (below), also in light of Benoit's post on government involvement.
On the one hand, there is the traditional capitalist view of seeing every government involvement as negative. These s#%$bags screw up all the time. They should sell to the public, so that WE shall be in control, etc.
On the other hand, infrastructure investments require a long term view, which investors do not habitually seem to foster.

Forced or stimulated network sharing is one way for governments to get involved - even passively, without any dear taxpayer dollard/euros coming into play:

• Switzerland: the regulator calls upon the mobile contenders (sunrise, Orange) to join forces by sharing their networks, in order to create stronger competition against Swisscom. In other words, governments can help by providing regulatory clarity, and by allowing companies to not take spectrum license conditions too literally (regarding sharing, trading, technology).
• France: the government considers forcing MDU owners to fiber up their buidlings. In-home networking is a bottleneck in the (stalling) FTTH roll-out in France, so this could be helpful. (The next logical step could be to force municipalities to sink ducts in every single street they open up for any kind of repair work.)

I still believe there is scope for sensible government subsidies. New Zealand (or Singapore) may be a prime example, if the NZI gets its way.

Outsourcing leads to sharing (a single infrastructure)

Here is an interesting read on a case of outsourcing. CTO Don Price of Bharti Airtel acknowledges to having been an avid opponent ("I was screeming the loudest about not outsourcing"), but now he sees all the benefits:

What happened immediately was that rather than me getting 30 messages an hour relative to network performance, sites being down, trouble tickets being raised, with my phone ringing off the hook, that was all happening to my managed services partner. We were having dinner together, my phone was relatively quiet and he was on the phone constantly. And I'm saying this model is great!'

There are many interesting topics. As you will see, outsourcing leads to network sharing, even to a single infrastructure! That obviously leads to separation and open access. There you go - all my favorite topics.

• Managed capacity (equipment supply) v. managed services (planning, operations, maintenance).
• The motivation is efficiency ("I have a group of roughly 200 people who are managing a subscriber base of more than 60 million and a base station count of roughly 70,000").
• "When I was building sites I was building 400 a month, now my partners are building 3,000 a month."
• "There's one argument that says your managed services partner should be vendor-agnostic, because he will bring you the best in breed kit. Then there's another argument that says there's nobody better to operate and maintain the network than the guy who designed and manufactured it. But as an operations person having done this for a number of years, I would tend to say go with the latter, because there are benefits."
• About not outsourcing: "The things you would want to retain are things like market planning. I want my business guys to draw my cloud for me in terms of where they need coverage. I wouldn't just leave that up to a third party because ultimately they have to deliver a P&L."
• "This is the most difficult part of the entire exercise because people feel that network is their core competence, their key differentiator."
• "... first of all, the network is important. But if you look at the relative importance today versus a few years ago, it's changing. A few years ago network was a potential delight factor. Somebody got their phone, they pull it out of the box, they make their first call and they are absolutely thrilled. Now if they pull the phone out of the box, pop the SIM card in it and if it doesn't work in the parking garage in the basement, they get pissed off. So network has moved form a delight factor to a dissatisfaction factor because expectations have increased."
• "As a network person I can do very little do drive the top line but I can certainly do a hell of a lot to drive cost out of the middle. So therefore I believe things like passive network sharing, site sharing, co-building of sites and ultimately even the active network sharing is the right path to go down. If you and I are competing in the same market, it doesn't make sense for both of us to do the build out. We have an expense that we can't reduce, you're left with an expense that you can't reduce. You're on the left side of the highway, and I'm on the right side of the highway. What did we do? We crossed the finish line six weeks apart. So as we go forward in the industry, as a network community, let's build one highway, one common infrastructure and let the sales and marketing guys compete on the cars."
• "If you are a managed services partner, you have a business of trying to drive growth in terms of your revenues and profitability. You're getting a fixed amount from me for services. But beyond that you're somewhat limited. So what do you do? You try and figure out ways that you can take cost out of the middle as well. So you start outsourcing to other agencies. So you get double and triple hop outsourcing. All of a sudden I come into a meeting, look across the table at the other people. They're not my guys, they're not NSN guys, they're a third party. The guy's been out of school six months. He can barely spell RF and he's designing my network. (...) But at the same time a part of me says that as long as you're meeting my KPIs and SLAs, why should I be bothered? But the guys I work with, it's an emotional thing, it drives them absolutely crazy. I have to pull them back and say: "Are the KPIs better? Are the site deployments better? Is the customer satisfaction better?" If the answer is yes to all three then there's really nothing to discuss."

France Telecom offers little to support growth forecasts

France Telecom has presented its targets for the period 2011-15 at an Investor Day in Paris. This follows its 'Conquests 2015' plan presented in July 2010 and subsequent announcements such as plans for Orange Business Services (September 2010) and the FTTH roll-out in France (February 2011).

Some elements of the strategy already announced:

• Focus on emerging markets, where revenues should double within three years (18 June 2010);
• Further cooperation with Deutsche Telekom on network sharing, Wi-Fi roaming, M2M, R&D and joint procurement (11 February 2011); sharing agreements are already in place in Austria and Poland, as well as the joint venture Everything Everywhere in UK; the procurement project has also started (18 April 2011);
• Working towards network sharing in Austria, Romania en Slovakia (27 April 2011); in Belgium (Base) and Spain (Vodafone) it’s already working with partners;
• A review of assets for possible sale, outside France, Poland and Spain (3 May 2011).

'Adapt' and 'Conquer'

The new plans add to the above. The period 2011-2015 is split in two phases:

• 2011-2013: the ‘Adaptation Phase’. The company will invest and expand in new markets, such as apps. The company will also be strengthened. Sales growth is expected at an average 0.6 percent per year (CAGR), and EBITDA is estimated at a cumulative EUR 45 billion. Capex will total EUR 18.5 billion. Operating cash flow, defined by FT as EBITDA minus capex, is put at EUR 27 billion. Capex will be 12.6 percent of revenues, excluding FTTH in France, with a peak of 14 percent in 2012.
• 2014-2015: the ‘Conquest Phase’. A return to sustainable growth, with a revenue CAGR of 2.7 percent and EBITDA CAGR of 3.4 percent. Cumulatieve capex is forecast at EUR 11 billion, and operating cash flow will grow at a CAGR of 9 percent. Capex will drop to 10 percent of revenues.

The company also targets cost savings from network sharing and IT. These are expected to reach EUR 3 billion per year by 2015. For the FTTH plans in France, the company will invest as earlier announced EUR 2 billion. France Telecom will also sell minority stakes in companies where it has no operational control, such as in Austria (35 percent in Orange Austria) and Portugal (20 percent in Sonaecom). The dividend was set at EUR 1.40 per share for 2011 and 2012.

A look back, and forward

First we compare the targets to the company’s recent results (2009, 2010 ) and the market expectations to 2015 (see table).

EUR bln	2009A	2010A	2011E	2012E	2013E	2014E	2015E
Sales	46.13	45.50	45.79	45.43	45.36	44.83	44.94
EBITDA	16.28	15.64	15.27	15.05	14.95	14.77	14.71
Capex	5.32	5.52	6.12	5.84	5.70	5.63	5.44

We see that the targets for the first phase are in line with market expectations, although capex will probably be higher than is currently expected. However, the aim to accelerate growth in the second phase is not in line with current market estimates, which predict a continued erosion in results. Estimates for 2014 and 2015 should be taken with a grain of salt, as most analysts do not provide estimates beyond 2-3 years. The coming days will show whether the market was impressed by the plans and the presentation from CEO Stephane Richard. If so, the estimates should move up.

France: difficult market

The first reaction from investors was slightly negative, with a small drop in the share price. This reflects the fact that the targets for 2014 and 2015 are a bit of a shot in the dark. Furthermore, France (in 2010 good for 49% of sales and 59% of EBITDA) is no easy market:

• A fourth mobile operator (Iliad/Free) will enter the market in 2012.
• A bit of a half-hearted FTTH strategy, where the target of 10 million homes passed in 2015 (see our commentary ‘If KPN wants to match the French FTTH plans, it should buy out Reggefiber’) is difficult to square with the capex budget of just EUR 2 billion. Furthermore, there is significant competition in FTTH, from Iliad/Free, Numericable, SFR and numerous local initiatives.
• Possibilities à la KPN to cut jobs are more limited, due to the public status of many of the 170,000 employees. FT did recently estimate that in the period to 2020, around 30,400 employees should be eligible for retirement.

Positive effects include an end to sharp cuts in termination rates and expected economic recovery. Outside France, much will depend on good portfolio management. This includes the sale of minority stakes as well as takeovers, such as Meditel (Morocco, September 2010) and Korek Telecom (Iraq, March 2011). At the same time, the level of risk is growing, due to the political developments in the Middle East and North Africa region. Cost savings, though network sharing and the cooperation with DT, are also important.

Conclusion

At the moment it’s not totally clear what FT expects to support the growth targets for after 2013, apart from economic recovery and an easier comparison (the big cuts in MTA end in 2012 and Free Mobile is expected to start in early 2012). In addition to acquisitions, investments from the preceding years should make a contribution, but then it’s curious that the investment level (capex as a percentage of sales) for the period from 2014 is projected to quickly drop back to 10 percent. This puts growth in the period after 2015 at risk. In short, after years of contraction through both competition and regulation, the question for France Telecom and the telecom sector general is can it return to the status of growth sector? Or do we need to settle for the low growth seen in the utilities sector?

This post originally was published here on May 31, 2011 as a translation of this Background article (subscription required)

A case for legal file-sharing?

An Australian judge has outlawed Kazaa, software for P2P file-sharing. It followed in the footsteps of a US court. And in June, the American Supreme Court decided that Grokster is liable for illegal use of its software.

Sharman Networks, owner of Kazaa, will probably appeal because it feels it is not responsible for misconduct of its users. The music publishing industry will most likely claim millions from Sharman.

The Australian court wants to see changes to the Kazaa software. It should filter illegal files (tracks for which no copyright is payed). This is interesting for two reasons:

1. This sounds like the Supreme Court's decision against Grokster: the essential part was that Grokster induces people to illegal acts.
2. There is a technology capable of filtering. It is called Snocap and was built by Shawn Fanning, co-founder of the old and outlawed Napster (sold to Bertelsmann and subsequently to Roxio, which re-introduced the service and took its name to compete with the likes of iTunes). His first deal is with Mashboxx, a site for legal file-sharing from Wayne Rosso, co-founder of Grokster. Mashboxx is to be launched mid-September and offers Sony BMG and Universal Music content.
   

Still it seems a tough uphill-battle to get legal file-sharing off the ground. When one site or technology is banned, people flock to the next. CacheLogic calculated Kazaa's market share in June/July to be around 10%. And now even BitTorrent (34%) is overtaken: 51% for eDonkey.

Week 4 in Telecoms, Internet, Media

Corporate

• KPN
• AFM: America Movil stake raised to 20.02% (841423137 ord shares) up from 16.08% [see 181128]
• 20Q4
• Orange: Partners with Sanofi, Capgemini, Generali to establish e-health JV platform, funding EUR 24m, to launch June 2021 (virtual), Dec 2021 (physical)
• TIM: Establishes Noovle: cloud & edge services for enterprises [see 200527], to be based on 17 datacenters, targets rev CAGR 20% to EUR 1b by 2024 with EUR 400m EBITDA
• Telia: 20Q4 final, Annual Report 2020, motto Dare Care Simplify; Strategy update Reinventing a Better Telia; establishes Telia Asset Mgt (towers & fiber); focus on raising mobile ARPU (from improved customer experience & 5G monetisation), FMC (reduces churn, upselling potential), ICT (new rev streams), FWA; to establish separate Infra Cos (to crystalize infrastructure value & accelerate investments); Outlook 2021-23: service rev  growth LSD, adj EBITDA growth LSD-MSD, capex/sales from 17% down to 15%; leverage target 2.0-2.5x, div floor SEK 2.00 with ambition of MSD growth
• Elisa: 20Q4
• Vodafone
• Rumor: to merge Vodafone ES (& PT) in 60/40 (or 50/50) JV with MasMovil (= KKR, Cinven , Providence)
• Bloomberg: to sell Vodafone Ghana stake to Vodacom
• Liberty Global: Plans more M&A deals, interested in VOO (Wallonia), MNO Ireland
• RTL
• 2020 prelim: rev EUR 6.0b, adj EBITA 850m
• Rumor: RTL considers selling M6 stake, Vivendi, Altice Europe, Mediaset, TF1, Daniel Kretinsky candidates; valuation EUR 3b
• Vivendi: Closes stake sale to Tencent 210129, UMG plans IPO 2021/22
• Vimeo: Raises $300m equity from T Rowe Price Group and Oberndorf Enterprises at $5b valuation; spin=off planned 21Q2; 200m users in 190 countries, 1.5m paying subs
• Facebook: 20Q4; outlook 2021: commerce ongoing shift to online and consumer demand shifts from services to products positively impact advertising, yoy rev growth 21H1 stable to modestly accelerating, 21H2 pressured (due to reversal of corona virus trends), ad targeting headwinds from platform changes (iOS 14 from March 2021), 2021 total expenses $68-73b, capex $21-23b, tax rate high teens; expands SBB by $25b
• Twitter: Acquires newsletter publishing platform Revue (NL, 6 employees)
• AT&T: 20Q4; charges $15.5b on pay-TV, $650m on WarnerMedia
• Verizon: 20Q4

Networks

• FTTP
• TIM: Proposes co-investment in OA FTTH via FiberCop to Agcom: fiber to 1610 munis in grey & black areas (urban & semi-urban) to connect 75% of premises by 2025; atrchitecture to balance eficiency, infrastructure competition, simple customer migration; to comply with EU Telecom Code
• CETIN: Avege download speed 2020 105 Mb/s (+25%); to expand FTTP/FTTB to 150k YE 2021, 1m by 2027 
• Virgin Media plans FTTP at new homes built by Barratt Developments, 15k in 2021 - Rolls out FTTP in Shrewsbury - Launches FTTP in Debdale (Greater Manchester), 5k HP
• GlasVoorNop starts roll-out in Noordoostpolder (10 villages, total 47k pops), first in Creil; RSP: KPN (incl Solcon, XS4ALL, RoutIT), T-Mobile (incl Tele2), Online (= Canal+), Youfone, Tweak, Kliksafe, Freedom Internet, Oxxio, NEM, Budget, ONVI, Qonnected, HeldenVan.nu, hallo,
• Google Fiber launches 2 Gb/s in Salt Lake City and Provo (Utah) and in Atlanta (Ga)
• Mobile network sharing
• O2, 3, Vodafone UK to expand Shared Rural Network project by 222 towers (2021-24) to improve rural 4G to 84% area coverage [see 200120]
• Orange FR & Free (Iliad) scrap network sharing plan [see 210108]
• DNA and Telia FI expand network sharing agreement (incl spectrum combination) via Finnish Shared Network [see 140411] to 62.5% area coverage, 28.5% pops coverage (~70% of pops to be covered by their independent separate networks)
• 5G
• Ericsson launches 5G RAN slicing, proposes slicing for high-revenue generating use cases (cloud gaming, smart factories, enhanced video, smart healthcare), enables 1 ms latency at RAN (with SA 5G)
• 6G
• EU launched Project REINDEER (REsilient INteractive applications through hyper Diversity in Energy-Efficient RadioWeaves) as part of 5G PPP, funding from Horizon 2020, 210101 until 240630, Ericsson to develop multi-antenna-based smart connectivity platform, with KU Leuven, Linköping University, Lund University, etc; RadioWeaves technology is key deliverable: fabric of distributed radio, compute & storage, to enable large-scale intelligent surfaces & cell-free wireless access to offer capabilities far beyond future 5G networks, to offer capacity scalable to quasi-infinite, perceived zero latency & interaction with a large number of embedded devices
• LEO
• Starlink asks FCC permission to lower LEO system, Amazon opposes over interference fears with Project Kuiper

Services

• Television
• VodafoneZiggo: Ziggo Sport adds Ziggo Sport Tennis channel, holds exclusive ATP rights 2021-23
• Telenet: Rebrands channels VIER, VIJF, ZES as Play4, Play5, Play6; to add Play7 (females) 210402
• B2B telecoms
• Youfone launches Youfone Zakelijk for medium & large enterprises (minimum 8 lines)
• Streaming video
• WarnerMedia: HBO Max 17.2m activations at 201231; to launch AVOD tier (reduced price) 21Q2
• Discovery: Launches discovery+ Channels: linear streams of 9 series
• Documentary+: Launches
• Streaming music
• Spotify: Launches audiobooks (trial), exclusive
• Online advertising
• Google: Federated Learning of Cohorts (FLoC, replacing cookies (to be phased out by end 2021) in Privacy Sandbox) has >= 95% of conversions of cookies
• Apple: Launches iOS 14 (beta, full release spring 2021), includes App Tracking Transparency: opt-in requirement for allowing tracking; Identifier for Advertisers (IDFA) enables data sharing - Google details impact - Facebook considers suing Apple in antitrust case
• Hardware
• Amazon: Launches Ring Video Doorbell Wired, $60: 1080p video, night vision, custom motion detection zones, support for other Ring products & services
• Orange: To refund buyers of Djingo smart speakers (EUR 100 for subs, 150 for non-subs) [see 201007] 

Regulatory

• Auctions
• Ofcom (UK) delays auction (700 & 3.6-3.8) by 2 mo over corona virus to March 2021
• MNUs HU (Magyar Telekom, Vodafone, Telenor) extend 900 & 1800 licenses by 15 yr until 370409, HUF 150b (EUR 418m); Magyar Telekom 16 MHz in 900 & 40 MHz in 1800; Telenor 26 MHz in 900 & 40 MHz in 1800; Vodafone 2x9 MHz in 900 for HUF 22.7b & 2x20 MHz in 1800 for HUF 26.4b
• Switching
• Telecoms Minister BE & BIPT plan relaunch of Easy Switch system

Network sharing versus intramodal competition

As always, the TMT markets are moving rapidly. The interesting thing is that several seemingly unrelated deals can quite easily be connected. Let me set out on this small journey by starting with an Australian newspaper group and ending in the very same country.


The WSJ proves its value

The Wall Street Journal once more proves its value, this time at a very convenient moment. The Bancrofts may be pushing Murdoch for raising his Dow Jones offer, or they might want to entice somebody else to mount a counter offer.

Just two days ago a WSJ story carried this headline: Will Vodafone Be Put in PlayBy ABN-Energized Activists?. And today, John Mayo steps forward with his ECS Assets vehicle to push for the freeing up of up to GBP 38bn.

Bravo WSJ.


Will wireless be a duopoly market as well?

Further, one may question the long-term chances of a standalone wireless operator such as Vodafone, along the lines of consolidation in the European broadband markets: AOL has vanished (as an ISP), Tiscali has retreated to the UK and Italy, Pipex is up for sale, and today France Telecom and Deutsche Telekom are swapping assets (see below).
Vodafone's break-up value could be considerably more than its current market value. For now, mobile is a far more attractive game than broadband, in terms of margins, justifying 3, 4 and 5 player markets (not to mention markets like Bangladesh, served by 6 operators). But in a few years, mobile could be another utility. Look out for cablecos to snap up mobile operators once they have their networks and balance sheets under control.
Also, imagine the kind of cost savings when access networks are shared. In the end, base station networks are extremely overlapping access networks, which may very well be shared.


Telco/cableco duopoly nearing in the Netherlands

As to the FT/DT swap: today Ya.com is snapped up by France Telecom and Orange NL goes to T-Mobile.
Spain is consolidating:

• three major players (Telefonica, France Telecom, Vodafone)
• two standalone operators (Yoigo in mobile, Jazztel in fixed)
• cable company Ono.

The Netherlands too:

• it will be a 3-player mobile market (KPN, Vodafone and T-Mobile).
• there is no obvious buyer for the Wanadoo-part (ISP) of Orange NL.

What could happen to the former Wanadoo-part of Orange NL?

• I am sure T-Mobile is not interested - unlike FT, DT has a mobile-only strategy 'abroad'.
• KPN is restricted, as the regulator barely allowed its recent Tiscali NL takeover.
• Tele2/Versatel could be a serious candidate; if not, do not be surprised to see Tele2 abandoning the country altogether.
• Scarlet could step in and move to a facilities-based business plan (following the Tele2 example).
• Vodafone doesn't seem interested, as it uses Tiscali NL as its broadband partner for its 'Total Communications' strategy.
• Finally, bbned (Telecom Italia) is a candidate, but its commitment to the Netherlands is doubtful.

In other words, the Netherlands seems to be advancing toward this telco/cableco duopoly.

I believe PTT's are increasingly proving to be winners, but so far this seems to be visible in the Netherlands only. Pushing fiber deeper into their networks (FTTC: fiber to the street cabinet - not to mention FTTH) makes LLU a thing of the past and effectively forces altnets to follow or die (see below).

Unless PTT's allow munifiber to get a too strong foothold, will many markets move toward a US-style duopoly of telco v. cable.


If SLU is impossible, network sharing should be considered

As I have written several times before, KPN is trying to kill LLU by moving to an All-IP network, which includes FTTC. The most obvious replacement would be SLU (sub-loop unbundling: from the street cabinet, instead of the central office), but Analysys has shown that this is not economically viable.
OPTA, the local NRA, is grapling with this dilemma. A 'full alternative' to LLU was promised for Q2, but so far hasn't emerged from OPTA's offices.

In my view, the obvious way out would be the Australian way, where 9 altnets have come together to propose an alternative to Telstra's fiber plans. Sure, altnets are backed by competing companies, but shouldn't they set aside their differences to work locally on a country-by-country basis? It simply makes no sense for 9 altnets to want to each compete with a strong incumbent.

Still, one may question the long-term viability of intramodal competition (operating active elements like DSLAMs on the incumbent telco network). Fiber will be extended - sooner or later all the way to the user: FTTH. Any xLU model (LLU, SLU, ?LU) would imply altnets replicating more and more of the incumbent's network, in the end actually replicating the whole thing, as the copper last mile gets shorter and shorter. The only way out seems to be to sooner or later admit that a single fiber network is the only economically viable situation. Now that LLU is coming under strain seems to be the time to acknowledge this. In other words, altnets should aim for network sharing with incumbents. However, the PTT could be tempted into wanting to go it alone. Hence, an NRA like Arcep (France) is trying to facilitate network sharing.

The viability of intramodal competition in general was questioned earlier this week by the Australian Kevin Morgan. He referred to this an arbitrage game. Frankly, I hadn't looked at it that way before, but I suppose he has a point as altnets are merely kept alive by regulatory intervention. It reminds me of what the Bells over in the US kept repeating a few years ago, when the 1996 Telecom Act was replaced and intramodal competition was effectively killed: after 8 years of competition and cherry-picking, altnets should have built their own networks. However, Kevin does not acknowledge one important thing: how LLU operators have increased competition, driving prices down and broadband penetration up.

Anyway, the end of intramodal competition seems to be nearing. FTTH, fiber in the last mile, seems to be a natural monopoly. If PTTs do not see this, newcomers (like Reggefiber, Iliad, neuf Cegetel) will.

Which leaves cablecos: will they follow?

Week 19 in Telecoms, Internet, Media

CORPORATE

• Orange
• Reuters: plans to acquire TDF (= Brookfield Infrastructure, APG Asset Management, PSP Investments, Arcus Infrastructure Partners, Credit Agricole; 19k RTV & mobile towers, fiber in FR), rumored value EUR 5.9b; to merge with Totem
• Orange ES plans 485 (15%) job cuts
• Telefonica: Sells 4 datacenters (2 in ES, 2 in Chile) to Asterion for 20% stake in Nabiax (manages 11 datacenters already) to be held by Telefonica Infra (Asterion retains 80%)
• Tele Columbus (Morgan Stanley): Raises EUR 475m from capital increase for Fibre Champion strategy
• AT&T: Bloomberg: plans to merge Warner Media with Discovery (Liberty Media (John Malone) 30%); Discovery CEO David Zaslav to be CEO, WarnerMedia CEO Jason Kilar to lead D2C business
• Vimeo: Spin off from IAC 210525, symbol VMEO
• Amazon
• Brand Protection Report 2020: invested $700m, employed 10k people to protect stores from fraud & abuse; prevented 6m attempts, seized 2m products, blocked 10b listings, counterfeit complaints over <0.01% of all products sold
• Plans to raise debt, 8 tranches - Raises: 0.250% Notes due 2023 ($1b), 0.450% Notes due 2024 ($2.5b), 1.000% Notes due 2026 ($2.75b), 1.650% Notes due 2028 ($2.5b), 2.100% Notes due 2031 ($3b), 2.875% Notes due 2041 ($2b), 3.100% Notes due 2051 ($3.25b), 3.250% Notes due 2061 ($1.75b); all maturing May 12, total $18.5b - Prospectus supplement; gross proceeds $18.437b, net proceeds $18.395b, underwriting discounts & commissions $42m (10 manager banks, 6 co-managers) - 8K filing: to finance or refinance, in whole or in part, green or social Eligible Projects
• CEO Jeff Bezos sold shares 210507-10; started with 51,731,171 + 34 shares = 51,731,205 shares, ended with 51209269 shares [sold 521,936 shares at average ~3250 $/share = $1.70b]     
• To hire 75k employees in US for fulfillment & transportation, minimum wage 17 $/hr, sign-up bonus max $1000
• Redwood Software: Raises EUR 315m from Turn River Capital

EARNINGS

• Deutsche Telekom: 21Q1; raises guidance 2021
• Telefonica: 21Q1, FTTH in Spain reaches 25651 premises (take-up 29%), 5G covers 80%; shut down 769 copper exchanges in Spain (of total 8532), targets full fiber replacement by 2025; to close 3G in Spain 2025
• Telefonica Deutschland: 21Q1
• United Internet: 21Q1; confirms outlook 2021
• 1&1 Drillisch (United Internet 75.1%): 21Q1; to start 5G roll-out 21Q3; maintains outlook 2021: SR EUR 3.10b, EBITDA 650m (incl initial 5G costs 30m, excl 34.4m positive impact from adjusted MVNO deal)
• BT: 20/21Q4; plans FTTP JV to add 5m HP, raises target to 25m premises by 2026; Openreach plans copper switch-off at 77 locations (700k premises) from 220429, total 297 locations (2.9m premises)
• Walt Disney: 20/21Q2; to launch Star+ SVOD service in Latam 210831

NETWORKS

• Fixed
• IDATE for FTTH Council Europe report FTTH/B Market Panorama in Europe (EU39 at Sep 2020, bottom-up rerearch): 182.5m HP (52.5% coverage from 92% in Belarus to 5.6% in Belgium) o/w 39% incumbents, 57% altnets, 4% munis/utilities; 81.9m HA (44.9% take-up, from 70.7% in Iceland to 1.3% in Belgium); Homes left to be passed in EU27+UK from 34.7m in UK to 45k in Malta; total ~400 initiatives
• Ofcom (UK): average BB speed 2020 80 Mb/s (+25%)
• Proximus orders ultra dense vectoring (2MX6) from Nokia: raises # connections per cabinet (Proximus has 28k street cabinets) from 200 to 300 (later 400), bandwidth doubles from 17 to 35 MHz, power usage lower
• 5G
• Ericsson ConsumerLab 5G report (survey of 31k in 26 markets): 5G users spend 2 hr/week more using cloud gaming, 1 hr/week more on AR apps compared to 4G users
• Omdia for Orange report on 5G impact (economy, employment, emissions) in FR, ES, PL, BE, RO by 2030: value creation EUR 407b (o/w 25% in manufacturing), adds 420k jobs, avoids 33 Mt of greenhouse gas (GHG) emissions (equals city of Berlin) 

VIDEO

• Netflix: Considers adding bonus materials to orginals for N-Plus (production outtakes, cast interviews, bloopers, related video, podcasts, do-it-yourself content, user-generated music play lists)
• Amazon: Launches MiniTV in India: free AVOD, in-app (web-series, comedy shows, content around tech news, food, beauty, fashion etc)
• Google
• YouTube: Launches YouTube Shorts Fund in US, India, to pay out $100m in 2021-22; Shorts adds functionality
• Google Play launches Entertainment Space: feature (section in home screen) for Walmart tablets, to expand to Lenovo, Sharp, other Android tablets (one-stop, personalized home for all favorite movies, shows, videos, games, books, with recommendations)
• Walt Disney
• 20/21Q2 (per 210403): Disney+ (incl Disney+ Hotstar) net adds 8.7m to 103.6m; ESPN+ net adds 1.7m to 13.8m; shortened 45 day theater window for Shang-Chi and the Legend of the Ten Rings (210903, Marvel) & Free Guy (210813, 20th Century), some films to go to Disney+ directly, some day&date in theater & Disney+ for Premier Access ($30; Cruella on 210528, Black Widow on 210709, Jungle Cruise (Dwayne Johnson, Emily Blunt) on 210730); to launch Star+ (incl Disney and ESPN content) in Latam 210831 as stand-alone SVOD service
• Hulu (Walt Disney, Comcast): 20/21Q2: reaches 41.6m subs (+2.2m), SVOD +2.4m, Hulu With Live TV -200k to 3.8m
• NBCUniversal (Comcast): Rotten Tomatoes (= Fandango) launches streaming service The Rotten Tomatoes Channel (24/7 loop of 100 hr of inear video), distr via Roku Channel, Peacock, XUMO
• WarnerMedia (AT&T): Average usage of HBO Max 2 hr/day
• Pinterest: Plans in-app live streaming event (trial) 24-25 May 2021 with 21 creators (with moderators, max 5 guests, unlimited viewers): fashion design, cooking, health, etc
• Regulatory
• Regal Cinemas (= Cineworld) agrees shorter theatrical window with Universal Pictures (NBCU), to share rev from Premium VOD [introduces a new window #2 for PVOD] - And with Walt Disney
• Cinemark (#3 theater chain US) partners with Netflix: to pre-release Netflix originals in theaters [short window #1]
• BIA Advisory Services for NAB report (Economic Impact of Big Tech Platforms on the Viability of Local Broadcast News): broadcasters lose 1.87b $/yr on local news to Google Search & facebook News

WEB SERVICES

• Facebook: Diem digital currency abandons Swiss license applications, moves to US, partners with bank Silvergate to issue a dollar-backed stablecoin
• Twitter: Developing Twitter Blue premium service, 3 $/mo with extra features: Collections (save & organize favorite tweets into collections), Undo Tweet (wait 5-30 sec before sending), possibly also Scroll (ad-free), Revue (newsletters)
• Apple: Plans expansion in advertising (App Store, Apple News+, Stocks app) - Counterpoint Research: new ads rev stream based on iOS 14.5 could be $60b (Apple ads replacing 3-rd party ads from Facebook & Google)
• Google tests feature for Chrome: Desktop Sharing Hub or Chrome Sharing Menu: generating a QR code, sharing to devices, casting a tab and other actions that revolve around sharing the current page to another person or device from a centralised location
• Regulatory
• Apple: Rachael Kent (King's College, University of London) starts mass-action claim over App Store fees
• Platforms: FTC appoints pro-separation legal scholar Lina Khan - Rumor: FTC to appoint Eyitayo St Matthew-Daniel (currently US DoJ) head of antitrust unit (300 employees)

Week 43 in Telecoms, Internet, Media

Corporate

• Telefonica: Establishes Telefónica Tech Ventures, with ElevenPaths & Telefónica Innovation Ventures (TIV) to invest in cybersecurity
• Rostelecom: Acquires Synterra Media
• Play (to be acquired by Iliad): Sells towers to Cellnex: 7k sites, EUR 800m for 60% stake, to close 21Q2; to add 5k sites in 10 yr, EUR 1.3b
• TalkTalk: Rumor: interested in Post Office telecoms unit, 500k BB/voice subs, GBP 100m; also: Sky, Shell Energy (130k BB subs)
• Eurofiber: Transfers services business of Unet Groningen to Hallo (= merger of Fieber, Tritel)
• BMG: Acquires majority of Undercover (live concerts; Germany)
• Walt Disney: California sets guidelines for reopening Disneyland & other large theme parks
• ITV: Plans restructuring by March 2021, to focus on VOD, reduce office space London; to establish Media & Entertainment division with 2 BUs (broadcast, VOD), VOD unit around Hub (catch-up), Hub Plus (ad-free), BritBox
• ProSieben: Sells Windstar Medical (92% owned via NuCom) to Oakley Capital, EUR 280m
• ViacomCBS: Restructures streaming division to cover SVOD & AVOD globally
• NENT Group: Moves license registrations from UK to Sweden
• Google: Google study released on interest-based advertising: collective ad targeting of audience cohorts (people with similar browsing histories & interests) performs better than random user groupings
• Amazon: To hire 1500 employees for 4 Amazon Fresh stores in Chicago

IPO

• Orange: Considers IPO for Orange Cyberdefense
• Vivendi: UMG plans IPO 2022
• Canal+ Polski (Vivendi, Discovery, Liberty Global): Plans IPO from TVN Media (Discovery) & Liberty Global selling stakes (32% resp. 17%)
• Round Hill Music: Plans IPO to raise $375m
• Nextdoor: Considers IPO, valuation $4-5b; raised $470m
• Databricks: Bloomberg: plans IPO 21H1 

Earnings

• Telia: 20Q3
• Telenor: 20Q3
• Tele2: 20Q3
• Orange Belgium: 20Q3
• Telekom Austria: 20Q3
• Vivendi: 20Q3
• Netflix: 20Q3
• Snap: 20Q3

Networks

FTTP

• Telecom Italia: Bloomberg: to expand FTTH coverage to 10m HH, EUR 4.0-4.5b, incl. maintenance & upgrade of 13m lines (2021-25)
• Croatia plans NP-BBI: national FTTI network (public institutions: national, regional & local government offices & branches for educational, health, cultural, tourist, judicial institutions) 
• NetCologne orders G.fast (212 MHz) from Nokia for in-building add-on to FTTB network (30k), max 1 Gb/s (replacxes VDSL2)
• Total Play Telecomunicaciones (Mexico) raises $500m, Fitch rates BB-/stable

Mobile

• NOS & Vodafone PT plan passive & active (antennas, amplifiers, other) network sharing

Satellite

• Inmarsat and Hughes Network Systems plan free in-flight WiFi (GX+ North America), plans trial 20Q4, commercial launch 2021, first in N-America

4G

• Cell C (ZA) to close RAN network to become Full MVNO on MTN
• NASA orders lunar 4G network from Nokia by end 2022
• DT demos stratospheric 4G (at 14 km), with Stratospheric Platforms Limited (SPL), with remote-controlled aircraft; 70/0 Mb/s over 10 MHz in 2.1 GHz band

5G

• 15 EU countries ask EU to actively fight 5G disinformation; total 140 attacks in EU
• Telefonica ES plans Private 5G (700 MHz & 26 GHz) at El Corte Ingles logistics center in Valdemoro, with Ericsson
• Verizon Business partners with Microsoft Azure on Private 5G MEC - Launches Private 5G platform for customers in Europe, Asia-Pacific, with Nokia
• VodafoneZiggo trials Open RAN, with NEC, Altiostar; demos voice call
• CETIN (CZ; PPF) orders 5G from Ericsson
• Telia orders 5G RAN from Nokia (5 yr) for FI, from Ericsson (5 yr) for SE & EE; Nokia Core network for all Nordic & Baltic ops
• Port of Antwerp plans Private 5G, with Ericsson, ISea
• Asia Pacific Telecom (APT) launches 5G in Taiwan 201022, sharing spectrum with Far EasTone; ordered 5G (NSA & SA) from Nokia; ordered cell site router deployment from IP Infusion
• Smartisan (= ByteDance) launches 5G smartphone (Nut R2), CHY 4500 ($675)
• Telstra's Enterprise Wireless solution and Cradlepoint's NetCloud Service for Branch trialed by Taylor Construction, improves performance 20x over 4G
• Technische Universität Kaiserslautern (TUK) launches 5G SA Private network, with Nokia, Smart Mobile Labs
• O2 UK (Telefonica) reaches 108 cities
• Cellcom (Israel) to launch 5G in 48 cities
• Huawei launches Mate 40 series with 5G: Pro Plus (EUR 1400) & Pro (EUR 1200), Porsche Design RS (EUR 2300)
• Asia Pacific Telecom (APT) launches 5G in Taiwan in 3.5 GHz band (based on spectrum sharing with Far EasTone) & 28 GHz band; 600 TWD/mo for 500 Mb/s & 24 GB/mo & unlimited on-net calls, 2700 TWD/mo for 1.5 Gb/s & unlimited data & unlimited on-net calls
• T-Mobile CZ plans 5G NSA launch 201101 in Prague & Brno
• Reuters: Italy Gvt prohibits Fastweb from buying 5G Core from Huawei 

6G

• 6G Symposium (2 days); FCC: 6G to be fully virtualised, blockchain for spectrum allocation; AT&T: to focus on AI, edge, latency; Ericsson: use cases: internet of the senses, connected intelligent machines, digitalised & programmable physical world, connected sustainable world; Samsung: immersive XR, high fidelity mobile holograms & digital replicas (enable remote monitoring of robots using VR or holographic displays)
• NGMN Alliance launches 6G project: 6G Vision and Drivers

Services

Telecoms

• UPC CH fined CHF 30m by Comco for not sharing ice hockey TV rights 2017-22 (abuse); plans appeal
• Rumor: T-Mobile US to expand TVision nationwide (announcement 201027) [see 200724, 200720, 190410]
• Google Fi (MVNO) launches separate (without mobile subscription) smartphone subscription program: 9 $/mo (24 mo contract) for Pixel 4A or 15 $/mo including device protection plan & upgrade after 24 mo (note: discount on the phone is lost if remaining balance is paid off ahead of time)
• Virgin Media UK adds smart home portfolio from Google (Nest Hub, cameras, doorbell), from 10 GBP/mo

Video

• Universal Pictures (Comcast) to shorten theatrical window, earlier option for onlines rental
• Walt Disney: Hotstar to expand SVOD to Singapore 201101, 70 SGD/yr; distr deal with StarHub
• Discovery: Rebrands Dplay (free AVOD) as Discovery+ in UK/IE, integrates with linear TV offering (Discovery Channel, TLC, Animal Planet, ID, Discovery Science, Discovery Turbo, Discovery History); 5 GBP/mo or 50 GBP/yr, 6 EUR/mo or 60 EUR/yr
• Salto (France TV, M6, TF1): Launches: 19 live channels, catch-up from TF1, France Télévisions, M6; 3 tiers: 7 EUR/mo (1 screen), 10 (2), 13 (4); to add exclusive content - Tech from Bedrock (= M6, RTL)
• Quibi: shuts down to save equity, to sell assets - Spent $63m on ads - To close around 201201
• Apple: Launches Apple Music TV: 24/7 music videos in Apple Music and in Apple TV (free, no ads), with exclusive content (premieres, special curated music video blocks, live shows & events, chart countdowns, guests)
• XITE Partners with Vevo to launch TV app Vevo powered by XITE
• France Channel: Plans launch in US early 2021 via Netgem, 7 $/mo

Music/audio

Spotify

• Overall deal with Ithaca Holdings (Scooter Braun) for podcasts, first series Country Shine
• Launches first daily morning show The Get Up as playlist (led by hosts; combines news, pop culture, entertainment, music; music is personalized)

Apps, other

• Google Launches Camera Go app for basic Nokia & Wiko devices, developed by Next Billion Users team (300 employees); other apps: Gallery Go (search & edit photos), Assistant Go
• Facebook
• Expands Facebook Dating to Europe (32 countries) (so far in 20 countries)
• Trials Neighborhoods feature (local groups) in Calgary
• WhatsApp launches In-chat Shopping (link to Facebook, add buy button); launches Facebook Hosting Services to host online assets & activity for SME (free); to start charging for WhatsApp for Business (50m business users, total 175m pops)
• Huawei launches Petal Maps (navigation) & Huawei Docs (office)

Regulatory

Spectrum

• EETT (GR) reserves spectrum (5 MHz in 700 band, 10 MHz in 3.4 band, 200 MHz in 26k band) + 25% of auction proceeds for universities and start-ups
• PTS (SE) approves Telia, 3 Sweden, Teracom, Net4Mobility (= Telenor, Tele2) for 5G auction (2.3 & 3.5 GHz bands) 201110; excludes Huawei & ZTE as suppliers (to be removed from core networks by 250101)
• MoC (Israel) awards 5G license to Cellcom

Self-regulation

• Facebook
• Oversight Board launches
• Prepares for US POTUS election 201103: slow the spread of viral content, lower the bar for suppressing potentially inflammatory posts 
• Google: Removed 3 Android apps for kids over data collection violations
• Patreon: Rermoves accounts promoting Qanon

Regulation

• Google: DoJ & 11 State AGs sue in DC over abuse of monopoly, to respond by 201219
• in Search (general search services, search advertising, general search text advertising) in US through anticompetitive and exclusionary practices (exclusive distr deal with Apple for iOS, estimated value 15-20% of Apple's annual profit, $8-12b; also pays LG, Motorola, Samsung, AT&T, T-Mobile US, Verizon, Mozilla, Opera, UCWeb; default in Android; 'Some of these agreements also require distributors to take a bundle of Google apps, including its search apps, and feature them on devices in prime positions')
• Google opposes (market share based on consumer preference for Google; 'we pay to promote our services, just like a cereal brand might pay a supermarket to stock its products at the end of a row or on a shelf at eye level'; 'Today, you can easily download your choice of apps or change your default settings in a matter of seconds')
• Facebook: DCP (Ireland) starts investigation of Instagram over leaking data (email addresses, phone numbers) of 5m kids
• Platforms
• FTC Japan proposes alliance with US & EU regulators in regulating internet platforms
• Associated Press (AP) election results to power voice, video & search products around US elections 201103 for Amazon (Alexa), Microsoft (Bing, News, MSN, Edge), AT&T (DirecTV), Google (Search, Home, Nest Home Hub)
• No competing cloud gaming apps in Apple App Store
• Ofcom publishes guide to regulatory requirements for video-sharing platforms (VSPs): protect children from potentially harmful content, protect all users from criminal content & incitement to hatred & violence, ensure that standards around advertising are met
• PBO (ZA) proposes digital tax on consumption and income generated by digital economic activities & cross-border activities
• EFF: leaked proposals for EU antimonopoly enforcement for gatekeeprs (part of DSA)
• Prohibitions (customer transaction data to be shared with competitors, opt-in for combining platform data with other data, ban on preferential ranking of platforms' own offerings, ban on pre-laoding own apps only, ban on prevention measures for removing apps, ban on contracts that force businesses to offer their wares everywhere on the same terms as the platform demands, ban on prevention of side-loading, ban on prohibiting complaints about the platform, ban on requiring use of specific email provider, ban on requirement to sign in)
• Compliance system
• Greylist of activities