Tuesday, August 30, 2005

Taiwan is heading the wrong way

The Taiwan government is planning the auction of WiMAX spectrum. Operators will not be allowed to offer voice services (VoIP over WiMAX). This way 3G operators are to be protected.

Personally I feel this is not the way to go. 'Voice is an application' in an all-IP world. This is too artificial and too much protectionism instead of free market dynamics. If 3G operators are afraid of WiMAX (notably the 802.16e incarnation that offers mobility), this shows the potentially disruptive nature of WiMAX.

IDT Spectrum (WinStar) heading back to the public

What's new? IDT Spectrum, the former WinStar, plans a new stock market offering. Parent IDT wants to raise $58m.

What's the relevance? IDT Spectrum holds potentially valuable licenses and has an extensive network, that took $5 bn to build. It could compete in the broadband wireless access (BWA) arena, assuming LMDS is a forerunner of WiMAX (as Iberbanda in Spain seems to imply, as it works with pre-WiMAX vendor Alvarion). IDT Spectrum could become a WiMAX pureplay.

The history: WinStar bought LMDS spectrum (I count at least $58m) to deploy an LMDS broadband wireless network and built a fiber backbone. Lucent supplied vendor financing (as it did to companies like XO (formerly NextLink), Teligent, etc.), In February 2000 WinStar attracted $900m financing from Microsoft, CSFB, Cascade Investments and Welsh Carson et al.
The market proved not ready for LMDS deployments: the technology wasn't ready, there was no standard-based interoperability, there was a shortage of devices and equipment and demand simply never took off. WinStar entered Chapter 11 in april of 2001 and was auctioned off to IDT in December 2001 for $40m.

Monday, August 29, 2005

Fraud: not all bad news

CacheLogic reports that BitTorrent is losing out to eDonkey. But what is most striking is the amount of P2P traffic. In 2004 it accounted for 60% of all internet traffic.
Guess who is riding this wave of (probably mostly) illegal file sharing? Telcos and internet providers, a.o. Could these parties be the subject of a legal battle because of secondary liability? Doesn't look like it.

In a way it reminds me of the click fraud phenomenon. Google et al benefit from this illegal activity (even though they are being sued).

Moving on, we get to Niklas Zennström, co-founder of both Skype and Kazaa. Because of his activities for the latter, he cannot enter the US.

The next step is only a small one: Vonage's Jeff Citron. Using an earlier company he ran, Datek, he committed fraud and settled the matter with the SEC for $22.5m. He is now planning his company's IPO.

To make full circle in the T.I.M. universe, let's not forget about Hank Asher. He flew seven plane loads of cocaine into the US, but in a new life he succeeded in making hundreds of millions by selling his company (Seisint) to Reed Elsevier.

Brand dilution hits Talpa

Talpa was launched some two weeks ago in the overcrowded Dutch TV market, and the viewer statistics are modestly positive. Especially so since Talpa isn't at full steam yet. Also, considering the fact that the Dutch TV market is dominated by three powerful parties (3 stations each for public tv, RTL and SBS), makes the first numbers for Talpa only slightly disappointing.

One aspect however is interesting from a marketing point of view. Talpa experiments with a new show that mixes news, sports and entertainment (hence the name NSE). Beau van Ervan Dorens, who built a reputation as the anchorman for the RTL entertainment show 'Boulevard', hosts this daily program. Viewer numbers have been far from spectacular, and deteriorating by the day. Beau's previous employment lost viewers, but still holds very well.

So what is there to conclude?
  • The Dutch market doesn't seem to be ready for this kind of show. The NSE combination seems to have been borrowed from the American TV market, which is not surprising considering John de Mol's knowledge of that market. However, in the Netherlands, if you want to see a news program, nothings beats the public networks. For entertainment, it is the 'Boulevard' show. And the sports market has enough to offer an each of the three providers.
  • Beau is suffering from 'brand dilution'. He did very well at the focused 'Boulevard' show, but his brand value doesn't seem to cary over very well beyond this type of program.
  • In a more general sense, Talpa could very well contemplate an offer for the Dutch activities of SBS, which itself is being bought by KKR and Permira.

Thursday, August 25, 2005

Yahoo! v. Google

Yahoo! reported a good many deals recently.

What does it mean, when we compare Yahoo! to Google?

Three things:
1. Yahoo! diversifies more. Sponsored search is almost 100% of Google's revenues, but probably around 50% of Yahoo!'s.
2. Yahoo! managers are true deal makers. This is very relevant, because Yahoo! need to entertain visitors for as long as it can in order to maximize not only advertising but fees as well. (Visitors spend little time on Google property - another distinction.) Besides, Yahoo! still needs many deals to beef up its content offering.
3. No VoIP yet (apart from voice-over-IM, VoIPoIM), but it will come, if it was only for the Dialpad acquisition. Google Talk was launched yesterday.

Yahoo!'s August deals:
1. Extension of the existing alliances with Verizon (low-end DSL) and SBC (music downloads).
2. Alliance with Viacom, that will be a distributor of Yahoo! Search.
3. Content deals with CNN and ABC News. News clips will be accessible for free on Yahoo!.
4. Entrance of the Chinese auctions market by acquiring a 40% stake in Alibaba.
5. And then I'n not even looking at the unstoppable stream of new and enhanced products and services.

Analysis of the MGM v. Grokster case

There is an interesting article on Mondaq: a brief analysis of the June 27 Supreme Court verdict in the 'Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd' case. This time content providers had their victory: peer-to-peer file sharing sites like Grokster are 'liable' for illegal use. The earlier verdict of the Ninth Circuit court, that took sides with Grokster, was overturned.

No law suits yet, based on this verdict. And that's not surprising. The ruling is complex and anyone venturing into a legal battle has a lot to prove. What's more, intent to stimulate illegal use is very hard to prove. Furthermore, the Supreme Court was internally divided over the interpretation of the earlier and infamous 'Sony v. Universal' case (see below).

The authors, Castanias en Sokol, point out these things:

1. File sharing is illegal since it constitutes 'copyright infringement'.
2. The Supreme Court tried to balance the interests of the music and film industries (copyright owners) on the one hand and those of software- en hardware vendors on the other (innovators).
3. Whoever offers services that induce copyright infringement, is liable. This is indirect infringement and therefore secondary liability. It formed the basis of the Napster fall (it was bought by Bertelsmann, sold on to Roxxio and relaunched as a legal download service to compete with the likes of Apple's iTunes).
4. The June 27 Supreme Court decision is based to a large extent on the 1984 'Sony Corp. of America v. Universal Studios, Inc.' case. Universal sought to ban the Betanax videorecorder because of indirect infringement, but Sony was let off the hook. Sony wasn't liable, because the videorecorder has extensive legal purposes.
5. The Supreme Court overturned the lower court that had favoured the Grokster position. The 'Sony v. Universal' case had been misinterpreted. Even if legal use of Grokster occurs (sharing of non-copyrighted files), Grokster took actions that Sony did not: it actively stimulated illegal use. The Supreme Court points to a number of specific actions on the side of Grokster: the slogan "When the lights went off at Naster ... where did the users go?"; the use of names such as 'Grokster, 'OpenNap' en 'Swaptor'; Grokster's CFO saying "(our) goal is to get in trouble with the law and get sued. It’s the best way to get in the news."; the dependance of advertising sales on the number of downloads of the Grokster software.

Tuesday, August 23, 2005

Explosive deal coming in European telecoms?

According to James Enck of Daiwa, an explosive EuroTelco deal is around the corner. Let's take a look at some of the possibilities, in 7 categories:

1. Deutsche Telekom: rumours:

  • Acquisition of O2 fell through, but who knows. T-Mobile UK could use some reinforcement and O2 Germany can be sold on to KPN.
  • In other news today, the Handelsblatt writes that T-Systems is interested in Atos Origin. T-Systems so far is mainly focused on Germany and would welcome international expansion. Moreover, ICT-services are part of DT's growth strategy (as much as it is for BT and Swisscom).

2. Vodafone: hasn't finished shopping:

  • It could make a bid for T-Mobile USA, and at the same time sell its Verizon Wireless stake to Verizon. That would allow Vodafone to switch to GSM technology and truly integrate the US operations.
  • The other minority stake that doesn't sit comfortably in Vodafone's portfolio is SFR. Possibly Vivendi could at some point part with it.

3. Consolidation among Southern European PTTs, looking for growth in Eastern Europe:

  • Portugal Telecom, according to market rumours would be considering making an offer for a minority stake in OTE. Telefonica has an interest in Portugal Telecom and owns Cesky Telecom. OTE too has interests in Eastern Europe.
  • Telefonica apparently is a candidate for a bid for O2 as well.
  • And Egyptian Orascom, owner of Italian mobile and fixed operator Wind, likes to build a pan-Mediterranean mobile operator by acquiring providers in Spain and Greece.

4. Companiews leading the current consolidation trend among mobile and broadband operators are PTT's and the likes of Tele2, the Vodafone-of-fixed-line-telecoms:

  • Orange (France Telecom): after taking over Spanish Amena, more is to be expected.
  • Telecom Italia has broadband assets in France, Germany and the Netherlands, markets that still need to be consolidated further.
  • Tele2, acquirer of Versatel, has most likely not yet ended its shopping spree.

5. VoIP:

6. Other assets that are possibly for sale:

  • Arcor, Deutsche Telekom's largest challenger and part of Vodafone. A suitable prey for APAX, that will buy Versatel Deutschland after Tele2 completes the Versatel deal. APAX wants to be a national player in Germany. Other candidates are Telefonica Deutschland and Telecom Italia.
  • Colt Telecom: focuses and the not-so-hot wholesale and business markets. Its shares hardly moved since the start of the year.

7. Candidates for private equity or an LBO:

Friday, August 19, 2005

VNU's increasing deal spread to IMS

Reuters reports that investors are increasingly worried over the planned IMS Health acquisition. As you can see below, the deal spread fell in the first few weeks from $2.16 to $0.88, but has since jumped to $2.35.
VNU doesn't exactly have a good reputation when it comes to integrating acquisitions and extracting synergies from them. As part of the $5.8 bn take-over price is to be payed in cash, earnings will dilute. Future EPS might possibly benefit more from a large-scale share buy-back.

Still, most investors didn't seem to think VNU overpays (the AGM is only in January of 2006). And VNU is actually stepping up its efforts when it comes to realising synergies. I would assume that VNU will end up owning IMS.

date vnu ims offer delta
08/07/2005 27.80 25.89 28.05 2.16
11/07/2005 26.99 26.50 27.56 1.06
12/07/2005 27.50 26.76 27.86 1.10
13/07/2005 27.90 26.83 28.10 1.27
14/07/2005 28.42 27.19 28.42 1.23
15/07/2005 28.18 27.19 28.27 1.08
18/07/2005 28.36 27.03 28.38 1.35
19/07/2005 28.30 27.15 28.35 1.20
20/07/2005 27.97 27.04 28.15 1.11
21/07/2005 28.63 27.66 28.54 0.88
22/07/2005 28.36 27.31 28.38 1.07
25/07/2005 28.50 27.14 28.47 1.33
26/07/2005 28.55 27.16 28.50 1.34
27/07/2005 28.65 27.38 28.56 1.18
28/07/2005 28.76 27.51 28.62 1.11
29/07/2005 28.74 27.23 28.61 1.38
01/08/2005 29.13 27.65 28.85 1.20
02/08/2005 28.93 27.60 28.73 1.13
03/08/2005 29.08 27.80 28.82 1.02
04/08/2005 28.87 27.53 28.69 1.16
05/08/2005 28.56 27.35 28.51 1.16
08/08/2005 28.86 27.55 28.69 1.14
09/08/2005 29.69 27.89 29.19 1.30
10/08/2005 30.95 28.16 29.95 1.79
11/08/2005 31.62 28.47 30.36 1.89
12/08/2005 31.76 28.27 30.44 2.17
15/08/2005 31.31 28.00 30.17 2.17
16/08/2005 31.48 27.90 30.27 2.37
17/08/2005 31.15 27.52 30.07 2.55
18/08/2005 30.56 27.36 29.71 2.35
(all prices in $)

Thursday, August 18, 2005

PTTs up for sale?

According to this Wall Street Journal article (subscription) two private equity groups (Apax + Permira + Blackstone + Providence and KKR + BC) are looking at TDC for a possible buy-out. TDC closed up 15% yesterday.

Reminds me of my August 1 article on the possibility for KPN.

Tuesday, August 16, 2005

Battle of the (non) standards

Qualcomm's buy of Flarion Technologies has implications for several wireless technologies.

First, let's look at the wireless space. Roughly these are the leading long-range wireless technologies with mobility: 2 in traditional cellular, 2 in broadband wireless access (BWA):

  • GSM, with upgrade to GPRS and W-CDMA as 3G version
  • CDMA, with upgrade to 1x-RTT and CDMA2000 (EV-DO and EV-DV) as 3G technology
  • the 802.16e WiMAX version
  • non-standard BWA technologies, such as Flash-OFDM (Flarion) and UMTS TDD (IPWireless)

This could be how the Flarion deal changes the wireless world:

  • Flash-OFDM is a direct competitor to WiMAX. It has the advantage of being ready for shipping, whereas 802.16e will only hit the market in 2007 presumably. WiMAX of course has the advantage of being standards-based, ensuring product interoperability. This is valuable to carriers as it makes them not dependent on a single vendor. On the other hand, carriers may not mind the non-standards status of Flarion, now that it is to be part of a $66 bn company. Flash-OFDM therefore could be interesting to wireless carriers who are particularly afraid of mobile WiMAX. This could lead to a hybrid technology (cellular/Flash-OFDM). At the same time, Qualcomm takes out a potential competitor to its current technologies.
  • Qualcomm could use the technology to benefit its Media-FLO network for broadcast services to cellular phones, because this also uses OFDM.
  • Who knows Flash-OFDM could become the de facto 4G standard.

Some further implications:

Monday, August 15, 2005

Talpa soccer show: good for Versatel

Over the weekend the new Talpa channel, owned by Big Brother billionaire John de Mol, kicked off broadcasting highlights from the Dutch soccer league ('Eredivisie'). Reactions from connoisseurs, the media and viewers appear to be modestly positive. Time will only tell if Talpa can hold an audience similar to the one former host NOS (public network) boasted, which numbered up to 3.5m. Last night's main program attracted 2m viewers.

Personally I feel that Talpa will have to settle for a considerably lower number than 3.5m. First, the soccer-on-tv market is fragmented by the entrance of broadcaster RTL5; one full live match each Friday night should quench some thirst for football. Second, last night I counted not more than just 28 minutes of soccer highlights from three matches (apart form highlights from earlier matches). Even the high-profile Feyenoord match was awarded no more than just 12 minutes. For that you had to sit through a 90 minute show, filled with commercials and the usual crap from football experts. Third, Versatel is making pay-TV offerings a lot more interesting than the former Canal+ offering (low price, double/triple play).

In other words, the Talpa soccer show just might entice a considerable part of the audience into taking a(nother) good look at the Versatel offering.

Thursday, August 11, 2005

Enertel Wireless: TowerStream of the Netherlands

Last week my colleague Jos Versteeg and I met Keimpe Algra, chief executive of Rotterdam based Enertel Wireless. This is a start-up exploring the possibilities for WiMAX in the Netherlands. Keimpe appears to be focused on the economic viability, as much as on the technology side of WiMAX.

It was a very insightful meeting, that can be summarized in this straightforward manner:

  1. Wireless technologies beat both wired and cellular access methods in the broadband arena.
  2. WiMAX is the most useful broadband wireless access technology.
  3. Enertel Wireless is very well positioned to take advantage of these conditions.
First, the most important take-aways:
  • Cellular technologies cannot compete in the broadband arena. Cellular providers simply don't have the kind of spectrum it takes. UMTS and HSDPA will not change this. On the contrary, massive take-up of multimedia services would soon clog up their networks. Personally I would add: it remains to be seen if re-allocation of analogue TV spectrum to wireless technologies can make a difference. First, several technologies compete for this spectrum. And besides, remember how costly the UMTS auctions in Europe were?
  • Obviously, WiMAX has been hyped for a long time ('hysteria', according to ArcChart's Blueprint). CNet elected it 'Technology of the Year' in 2003. Still, it is hard not get excited over this fairly new technology. Performance data are often overstated. Wireless technologies are all, at some rate, dependant on distance to the base station, the frequency band used and the chosen power output. I would add that the distance dependance even goes for fixed technologies, such as DSL. Performance drops considerably after just a couple of kilometers.
  • Similarly, one has to watch out for non line-of-sight (NLOS) claims. Each wireless technology is limited by physical barriers, the rate depending on the frequency used and the distance. NLOS can only be guaranteed at distances up to 1.5 kilometers or so. But working with distances like these would wipe out much of the economic advantages of a wireless network, since it would require too many base stations.
  • Using licensed spectrum is an essental part of the WiMAX story. It makes spectrum scarce. This will prevent networks clogging up from usage by too may operators.
  • Vendors of proprietary non-standards may have really cool technologies, but these will never survive standards battles at the IEEE or any other standards body. Therefore, it makes a lot of sense to go with WiMAX: it has been ratified and equipment certification is happening right now. This is a condition for equipment (base stations and CPE) prices to drop, which will stimulate demand. Also, only when there is a standard will equipment 'talk together' (interoperability). This in turn will incentivise vendors to develop hardware, and so on and so forth. Personally I would add: the likes of IPWireless may go the way of iDEN. This proprietary cellular technology from Motorola is used by a.o. Nextel. But the merger with Sprint will see iDEN abandoned and replaced by CDMA (and in the mean time Sprint Nextel will have double network opex for keeping iDEN running).

About Enertel Wireless:

  • Enertel Wireless is a subsidiary of Enertel, which is the telecoms operator that was set up by the power utilities in the Netherlands. Enertel was first sold to British Energis, and subsequently taken over by Greenfield Capital Partners.
  • Enertel Wireless won one of two licenses for broadband wireless access (BWA) in the Netherlands in December 2003, for EUR 4m. The other license went to Versatel. EW's license is valid through 2015 and covers 80 MHz of spectrum in the 3.5 GHz band.

About WiMAX:

  • WiMAX is a broadband wireless access (BWA) technology. The IEEE way of describing WiMAX is 802.16. Last year, the 802.16d version (or 802.16-2004) was ratified. The next step is 802.16e, which will allow for mobility.
  • Maximum reach and throughput claimed to be 50 kilometers and up to 120 Mbps, respectively, are unrealistic. The system will have to be used by more than just one customer to make it economically viable. So, bandwidth has to be shared. Therefore it is much more realistic to think of WiMAX performance in terms of a range of 10-15 kilometers and a bit rate of 5 Mbps.
  • WiMAX can be used for broadband internet access, for WiFi backhaul and even for providing an uplink to a satellite system (which is by nature 'one way').

Finally, back once more to the main three arguments:

  1. BWA: Broadband wireless access technologies have improved when it comes to bandwidth, reach, power consumption, spectrum efficiency and antenna technology. By now, there are some obvious advantages of BWA technologies versus wired access methods (copper/DSL, cable/DOCSIS, fiber): no digging up the streets, it takes just a few base stations to cover an entire city or region. Therefore, costs (both capex and opex) are lower and roll-out schedules are much shorter.
    BWA has an important advantage to cellular networks as well. The latter are constrained by the amount of spectrum they control.
  2. WiMAX: BWA technologies can be divided into two classes: those aiming for WiMAX certification and those steering for their own proprietary technology.
    Pre-WiMAX technologies come from companies such as Aperto Networks, Navini Networks or Alvarion. Proprietary technologies are a.o.: UMTS TDD (mainly from IPWireless), Flash OFDM (from Flarion Technologies) and iBurst (ArrayComm, which by the way joined the WiMAX Forum). And then there are 4G efforts from NTT DoCoMo and probably lots more.
    WiMAX will have the advantages of interoperability: equipment being able to 'talk to one another'. Thus, service providers will not be in the hands of a single vendor.
  3. Enertel Wireless: First of all, Enertel Wireless uses licensed spectrum. Second, BWA technologies function best in the 3.5 GHz band, which is allocated to BWA in large parts of the world.
    EW's strategy mirrors TowerStream's market approach, of which it makes no secret. Both use pre-WiMAX equipment (under the PacketMAX label) from Aperto Networks.
    EW competes directly with SDSL and focuses on the business market, at least for now. Its motto: 'more for less' (i.e. more bandwidth for a lower price).

Duopoly: good or bad for competition?

Consumer advocates seem to have a good point, opposing the FCC's freeing-up of DSL-networks from competitors, and the Supreme Court's decision to declare cable modem internet an information service.

These decisions will create a duopoly, shared among the Bells and the cable companies. In this sense it levels the playing field. So, either both decisions or none at all should be reversed. Now it comes down to deciding whether a duopoly is good or bad for competition.

It seems only too obvious that the Bells will have an incentive finally to boost both the throughput performance (bandwidths) and the coverage of their DSL-networks. The US may finally catch up with the likes of Belgium and South-Korea. But I think the benefits end there. The Bells could raise their prices, especially since the cable operators are in no hurry to start a price war. I think regulators in the US should foster local loop unbundling as much as their European counterparts. Look at what Free did in France, or FastWeb in Italy.

Tuesday, August 09, 2005

New tool against click fraud

Zunch released a new tool for advertisers to battle click fraud. Supposedly Click Fraud Detective helps "identify, monitor and avoid fraudulent click-throughs, (...) gives you the information you need to request reimbursement for such fraudulent activity (...). Reports can be exported in several formats and sent to Google Adwords, Yahoo! Search marketing (Overture), Kanoodle or other PPC network representatives."

Telcos: beware the cable!

What's new? NTL, the UK cable operator destined to merge with Telewest one day, yesterday unveiled its new cable broadband strategy. A 10 Mbps download speed will be the new standard. And moving on to the new DOCSIS 3.0 standard, bit rates will be in the 30-50 Mbps range. According to Alan Breznick of Cable Digital News, speeds could even go to 100 Mbps and up, using this new standard.

What is the relevance? A 100 Mbps pipe seems to be the standard, for the next few years. Cable (coax) is not at all falling behind, compared to the copper networks owned by PTT's and Bells. DOCSIS 3.0 will do for coax what DSL does for copper. Current DSL upgrades across Europe to ADSL2+ have a theoretical maximum of 24 Mbps, but VDSL will go to 52 Mbps and VDSL2 as far as 100 Mbps. One aspect that remains to be seen, is how bandwidths drop with distance to the exchange (where the nearest fiber connection is; fiber all the way to the home (FTTH) today offers 100 Mbps and will ultimately prove to be the best (wired) infrastructure, but at the cost of digging up the streets all the way to the customer). In short, the race is still on between copper/DSL and cable/DOCSIS.

Monday, August 08, 2005

DSL deregulation good for WiMAX too

As I speculated before, the FCC indeed declared DSL an information service. The two Democrats on the Commission gave up the battle and acknowledged that deregulating DSL was inevitable.

There are some implications, apart from the ones I already discussed:
  • WiMAX could get a boost, being a third infrastructure besides DSL and cable modem. Transition to digital television may be argued forward, since this would free-up valuable spectrum for WiMAX.
  • The Bells may finally be willing to step up investments in DSL. They could make broadband available to a larger part of the US population. And they could start deploying ADSL2+. The US is dramatically lagging countries ranging from Belgium to South Korea when it comes to broadband penetration.
  • The Bells must not be allowed to block certain types of traffic (i.e. from independent VoIP providers) of certain web sites. In March, the FCC fined Madison River for blocking VoIP traffic from Vonage. And Canadian Telus for a short period blocked access to a union supported web site.

Related news, a few days ago, has Vonage teaming up with TowerStream, which offers businesses pre-WiMAX network services (vendor: Aperto Networks). TowerStream clients will be able to make voice calls using Vonage's VoIP service over the pre-WiMAX network (hence VoIPoWiMAX or wVoIP).

Orb Networks now open to developers

Ted Shelton, exec VP of operations at Orb Networks (provider of place-shifting software for video-on-demand, see previous posts, a.o. on March 30) informs me that the company opens its software to the developer community. They can now build add-ons.

Sounds like a smart move. It will add value and make the product even more interesting to all sorts of service providers (for now: Sprint, Cingular and French ISP Ozone, which operates a WiFi network in Paris). Both fixed and wireless service providers, especially the ones with interesting content, could use Orb to add value, enhance the service offering and differentiate in the crowded marketplace.

Sunday, August 07, 2005

Skype to be sold off

According to The Independent, Skype will not be sold to News Corp. News Corp was late to the internet game, but the new Fox Interactive Media unit did some interesting take-overs so far. And they are willing to pay fat prices. Skype was to be worth $3bn. An outrageous price, for a piece of software that has grown into a mega company using viral marketing only. So far, there are 45 million users, but only about 1.5 million of them subscribe to for-pay services (SkypeIn, SkypeOut, Skype Voicemail, Skype Zones).

Who's next? Yahoo! is still in the running (even though they bought Dialpad), maybe Google. And possibly even Apple, to strengthen the iPod offerring to include wireless telephony.
Look at the effect on share prices of possible take-over candidates:

COMMERCE % (3 months)
Bluefly 34%
Homestore 73%
Overstock.com 23%
Blue Nile 18%

Audible.com 15%
CNet Networks 37%
iVillage 16%
TheStreet.com 30%

Ameritrade 83%
E*Trade 35%
E Loan 37%
Binck 54%
Akamai 31%
Aquantive 40%
Monster 28%
Netflix 83%
ValueClick 40%

MIVA (formerly FindWhat.com) 30%

Versatel on track to offering soccer

Last week I visited the Versatel headquarters in Amsterdam and had a demo of its hot new product: Live soccer + internet access. It looks quite impressive.

The company is currently rolling out ADSL2+ internet access to exchanges covering 60% of the Dutch population. The tariff is 40 EUR/month but includes free live soccer from the Dutch first league ('Eredivisie'). Versatel is not adding exchanges, by the way. So, in rural areas live-soccer can only be had through a subscription to CanalDigitaal. The ADSL2+ network will be extended to covering more than 60% once there is some indication that demand will justify the investment.

A live TV-stream uses 4 Mbps. Versatel advertises ADSL2+ as a 20 Mbps service, but will only actually sell the socces product when a minimum bandwidth of 6-8 Mbps can be guaranteed (enough for one TV, internet access and telephony). This depends on the availablity of the ADSL2+ network, and also on the distance to the exchange.
At the moment, people can only have one set-top box (for unspecified technical reasons). The modem has room for two (plus 2 wired PC's, several wireless PC's and VoIP).

Everything seems to be working fine. The user interface is fully moron-proof. The TV-portal offers a transparant menu. Apart form the free soccer matches (starting August 12), there are some obvious content categories. For now, these are thinly filled, mainly for testing purposes, but also by way of teasers to the early adapters. It contains buttons for:
  • tv: same, to be introduced 05Q4; already, the Dutch and German public (state-owned) networks are available
  • video: rights negotiations with a large range of content providers are on-going; so far just some trailers
  • e-mail: under construction
  • radio: obviously not very useful through the TV-set
Practically everything is made by Samsung (already a more powerful brand than Sony, according to Interbrand). The digital rights management (DRM) software must be an exception, as it is licensed from an independent vendor. This also highlights Samsung's interest. Not only will they take pride in delivering this IPTV system in a very short period of time (8 months). Also, first and foremost they are an electronics manufacturer. So don't be surprised to see flatscreen offers including a Verasatel subsription hit the market before Christmas.
Another type of Samsung hardware that could in due course come to the Netherlands is a WiFi/cellular phone. Versatel will begin offering VoIP in 05Q3, but a wireless deal still has to be worked out. Versatel currently resells Telfort, which is being acquired by KPN. And when Versatel merges with Tele2, these companies will be stronger adversaries than ever. Maybe Vodafone will step in, using its experience in Brittain, where it works with BT on the Fusion phone.

Finally, some more details:
  • Versatel is a strong believer in 'next generation television': everything On Demand, no more broadcasting. Targeting will go to the next level: content and advertising can be targeted to individual users, since the set-top box delivers a wide range of information (exactly what is watched when) to Versatel.
  • Versatel also believes their set-top box (STB), which is pretty much like a PC, will be the center of the home entertainment. It will deliver not just video, but music and photos to the TV as well.
  • The 4 media farms in Holland, where the content is hosted, are used for a secondary purpose: anyone who wants video to be delivered through-out the country, can have it hosted on the servers in these farms. There is a trial with a Dutch retail bank. A specially branded channel will be available to all their branches in the Netherlands.
  • Similarly, a restaurant chain is interested in having a specially branded channel available to all Versatel subscribers. The channel could be accessible from the TV portal menu.
  • Dutch soccer matches are to be produced by EyeWorks for Versatel, Talpa and RTL 5. Each of these three has its own studio to add an individual look-and-feel. Versatel has its studio up and running at the Media Park in Hilversum
  • Scoop: Versatel has a deal with Brittain's Premier League. So, live English football as well.

Thursday, August 04, 2005

Germany, Japan, Poland and Honduras preparing for wireless broadband

What's new? Governments of 4 very different countries are preparing or running auctions for spectrum dedicated to broadband fixed wireless (BFW) applications.

What's the relevance? Governments are stimulating new infrastructures, to introduce competition to DSL and cable modem service, but especially to bring broadband to rural areas. With the advent of IP, voice (VoIP) and video (IPTV, TV-over-DSL) can also be offered. And not just to business customers. See my recent Holiday Considerations.

What spectrum auctions and applications is all this about? Alternative operator Netia will deploy WiMAX in the 3.6-3.8 GHz band in Poland. Japan allocated the 2 GHz band to UMTS TDD, a technology used by IPWireless. Service provider IPMobile is building. Germany considers WiMAX for the 3.5 GHz band. Auction late 2005. Honduras awarded 2 licenses in the 3.5 GHz band to Navega and to an affiliate of Millicom. They will be using WiMAX.

P2P illegal music downloading: the jury is out

UK research firm The Leading Question finds some evidence for a remarkable OECD finding (see my June 29 post): there is no proven correlation between decreasing CD sales and increasing illegal file-sharing through peer-to-peer networks. Quite to the contrary: their survey concludes that regular downloaders of unlicensed music spend GBP 5.52 a month on legal digital music, versus just GBP 1.27 spent by other music fans.

WiFi made more relevant

What's new? On the services end, Acoustic Energy and Reciva built the world's first WiFi internet radio. And on the infrastructure end: the next standard (802.11n) is coming closer, as two competing groups will merge. It will boost bandwidth.

What's the relevance? Good for WiFi operators, both retailers (such as KPN and other carriers who combine GSM/UMTS with WiFi) and wholesalers. Good for the uptake of WiFi-services. Markets are fragmenting: yet another way of listening to the radio. Bandwidth contraints aside, radio operators should embrace the internet. The new 802.11n standard will only strengthen the argument, as this will enable bit rates of over 100 Mbps.

What is a WiFi internet radio? “The AE Wi-Fi radio automatically links into your existing Wi-Fi network (with WEP encryption if enabled) and uses your broadband connection to access Reciva's internet radio Gateway. The Reciva Gateway then uploads channel listings alphabetically by country and genre to your AE Wi-Fi radio. There are currently over 2,500 stations registered on the Reciva Gateway and more are added every day. You simply select the station name you want using the rotary control knob and clear LCD display, and press play - as simple as that.”

What is WiFi 802.11n? WiFi is standardized by the IEEE in order to make equipment from different vendors 'talk together' (interoperability). That will enhance the user experience and it will stimulate vendors to actually make products that work . The current standards are 802.11a, b and g. WiFi is evolving rapidly, and 802.11n is next. This will take the bandwidth to way beyond 100 Mbps. Then reach will be the next contraint of WiFi. However, I recently wrote about another world's first: a WiFi signal crossing 125 miles. If things keep moving in the right direction, WiFi could even aim to replace DSL! Anyway, so far two groups are competing for a standard (ultimately hoping to collect roylaties form patents): WWiSE (backed by Motorola, Texas Instruments, etc.) and TGn Sync (Samsung, Nortel, a.o.). Under the deal they now reached, a compromise will be proposed to the IEEE in September, a final version in November.

DSL markets (US and Europe) moving in opposite directions

What's new? Reuters reports that the FCC postponed a meeting, hoping it could decide on DSL-based broadband. After cable modem internet service was declared an information service by the Supreme Court recently, the FCC-chairman Kevin Martin wants the same status for DSL-based internet. That would level the playing field. At the same time, the German regulator is lowering charges and tariffs for access to Deutsche Telekom facilities, supposedly to levels that are among the lowest in the country. This should stimulate facilities-based competition.

What's the relevance? Basically, good news for the Bells (Verizon, SBC, BellSouth, Qwest) in the US and the unbundlers in Germany; bad news for US resellers such as EarthLink. Facilities-based competitors in the US, mainly Covad, covering 50% of the population, seem unharmed.

What is an information service? If DSL is declared an information service, as opposed to a telecommunications service, regulation hardly applies. This means that the Bells will no longer be obligated to lease their DSL-infrastructure at regulated prices. Similiarly, in wireless communications virtual operators (MVNOs) only exist on mutual understandings between the network owner (e.g. T-Mobile or Sprint) and a company like Virgin. Virgin has several MVNO joint ventures worldwide. The network owner gains by collecting wholesale revenues (although at lower margins, but without having to do any marketing). It is left to the MVNO to market a specific niche. In the case of Virgin, it is youths.

What are unbundlers? In Germany, several carriers are building out DSL-infrastructure (DSLAMs) in Deutsche Telekom central offices: Arcor (still part of Vodafone), Telefonica Deutschland (a Telefonica unit specilising in wholesale DSL, with a company like freenet.de acting as retailer) and Telecom Italia (that wants to extend its HanseNet brand nationwide). And after Tele2 acquires Versatel and sells the German asets to APAX, the latter company wants to make Versatel Deutschland (or whatever the brand will be) a national player as well. This installing of DSLAMs means taking over the local loop (the 'last mile' of the copper wire) and the customer relation form the PTT. This process is known as 'local loop unbundling' (LLU). The same is happening all over Europe and Japan. French Iliad (brand name Free.fr) is among the most famous. Its DSLAMs allow it to offer the full triple play.

Telefonica Moviles' smart move to increase revenues

What's new? Telefonica Moviles will move away from per-second billing from September 1. After the first minute, talk time will be rounded up to the nearest 30 seconds.

What's the relevance? It's a step back in history, and could potentially scare away customers. However, it seems only logical that it will add to revenues (at least in the short term).

Will Vodafone follow?

What's new? KPN's E-Plus, O2 Germany and T-Mobile Deutschland each introduced new tariff packages aimed at the lower end of the market. E-Plus has its own simyo MVNO, O2 has LOOP and T-Mobile introduces Click and Go. They all offer very low tariffs, SIM-only, marketed exclusively through the web.

What's the relevance? First, the lower end of the market is the new battle field, but it will lower ARPU's across the wireless industry. Competition hurts. Second, operator # 4 (# 2 in terms of marketshare) Vodafone hasn't followed suit yet. Will it?

Tuesday, August 02, 2005

Click fraud is a huge threat for Google (and Yahoo!)

MarketingExperiments.com reports that Google is capable of identifying only a tiny fraction of all fraudulent clicks as such.

The survey concludes that 29.5% of all clicks may be fraudulent. The risk to providers such as Google (which almost entirely relies on this source of revenue) and Yahoo! (which has a more diversified revenue stream) is that advertisers may get frustrated and turn to different forms of advertising (ranging from search engine optimisation to traditional banners). This could undermine Google's growth prospects and stock valuation.

What is click fraud? When advertisers run campaigns on the internet by bidding on search terms, a small ad will appear on the right hand side of the results page. The advertiser making the highest bid, will see his ad appear at the top position. Google (or Yahoo! and now also Ask Jeeves) run an ongoing auction for search terms. The advertiser only pays once surfers actually click. Google gets the revenues, and in many cases shares these with distribution partners (sites that have the Google search engine installed, e.g. Planet Multimedia). Sometimes the price per click can be as high as almost $100 (as in the case of such terms as 'Vioxx', that US law firms are very much interested in).
The problem of click fraud arises when people click (and thus make the advertiser pay) who have no commercial interest. It can be disgrunteled former employees, or competitors who try to waste another company's marketing dollars. Or it can be a distribution partner, that has no other purpose for its web site than to collect revenues from Google or Yahoo!.
Google is both a victim and a beneficiary, judging by ongoing law suits. Google benefits because it receives the ad dollars. It is vulnerable to court cases when advertisers claim that the company isn't addressing the problem as much as it should. On the other side, Google fights fraudulent distribution partners, trying to make a living off click fraud. Google recently actually won a case.

Monday, August 01, 2005

KPN: competition is entering a new phase (as is KPN)

For Dutch readers: an article on the consequences of consolidation on KPN:


Versatel and Tele2 come together in the Netherlands and Belgium

For Dutch readers: an article on the merger of Versatel and Tele2 in the Netherlands and Belgium:


KPN's branding is coming together after all

A couple of years ago the diverse branding strategy of KPN's mobile business could hardly be defended. KPN and Hi in the Netherlands, E-Plus in Germany and Base in Belgium. No synergies.

Now, instead of simplifying, KPN chooses to further segment its brands. And it makes a lot of sense, as marketing can be much more focused. Also, there will be significant synergies.

E-Plus introduced a 90% owned MVNO called simyo, aiming for the lower end of the market. A tariff package called 'Code 25' is targeting 18-25 year olds. And now it introduces the Base brand in Germany, focusing on business customers and heavy users.

Belgium's Base has a number of packages aimed at several niches, e.g. expats.

It remains to be seen if the Hi brand (youth) will be introduced in Germany and Belgium, or simyo in the Netherlands and Belgium.

Freedom of speech!

Telus, the PTT of western Canada, blocked access to a union-backed web site when workers went on a strike. Telus believe that it has the right to do this but stopped blocking last Thursday, reports the New York Times (free registration required).

The site, http://www.voices-for-change.com/index.asp, was made accessible at DSL Prime, at this location.

Who needs WiMAX?

A bunch of geeks (see story on Wi-Fi Toys) succeeded in transporting an unamplified WiFi signal over a distance of 125 miles. Do we still need WiMAX, which not only boasts higher bit rates but most notably a longer range (some 50 km)?

By the way, the story also recounts the Bluetooth record of over 1 mile.

The T.I.M. diary for August

  • Orb Networks is about to announce partnetships with content providers, probably in music first.
  • Cetecom (WiMAX Forum) is to certify the PacketMAX equipment from Aperto.
  • IPdrum should be rolling-out software for enabling Skype on mobile phones
  • LBS: Intel trials WiFi based LBS services
  • KPN: launch of the Base brand by E-Plus in Germany (August 1)
  • BT a.o.: spectrum auction UK
  • Current TV: launch of this Al Gore supported network (August 1)
  • Comcast: Q2 report (August 2)
  • Wolters Kluwer: Q2 report (August 3)
  • V

    Poxa vida tenho que arrumar as malas..
    Nao estou com S

Verizon Wireless loses/dumps RadioShack

RadioShack, the number three electronics retailer in the US, will market Cingular instead af Verizon Wireless and extends its Sprint contract.

Bad news for Verizon, which is in the process of catching up with market leader Cingular (SBC, BellSouth). Cingular will report higher net adds, but also higher SAC's (subsciber acquisition costs), as dealer commissions must be higher. It seems that Verizon think they have enough marketing muscle without RadioShack and probably thought the latter were asking too much in terms of fees.

More free daily newspapers

After the Sunday Telegraph reported that Lawson Muncaster (formerly of Metro) plans a free competitor (The London Business Daily) to the Financial Times (owned by Pearson), now Reed Elsevier's 'Variety' is under threat from a new daily at Virgin. The Virgin Group denies, but Forbes reports that New York City will see a show business and entertainment focused free newspaper.

Apparently, it is not just newspapers that are threatened by ad supported free publications, but now magazines as well.

The T.I.M. diary for August

  • Orb Networks is about to announce partnetships with content providers, probably in music first.
  • Cetecom (WiMAX Forum) is to certify the PacketMAX equipment from Aperto.
  • IPdrum should be rolling-out software for enabling Skype on mobile phones
  • LBS: Intel trials WiFi based LBS services
  • KPN: launch of the Base brand by E-Plus in Germany (August 1)
  • BT a.o.: spectrum auction UK
  • Current TV: launch of this Al Gore supported network (August 1)
  • Comcast: Q2 report (August 2)
  • Wolters Kluwer: Q2 report (August 3)
  • Versatel: Q2 report (August 3)
  • Time Warner: Q2 report (August 3)
  • Belgacom: start of the Belgian soccer competition on Belgacom TV
  • IAC closes its acquisition of Ask Jeeves (first week of August)
  • Time Warner: introduction (out of beta) of the new (free) AOL.com portal (early August)
  • KPN: Q2 report + new share buy-back porgram (August 9)
  • Wegener: H1 report (August 9)
  • VNU: H1 report (August 10)
  • News Corp: Q2 report (August 10)
  • Walt Disney: start of the Roy Disney initiated trial disputing the election proces for Bob Iger's CEO position (August 10)
  • Deutsche Telekom: Q2 report (August 11)
  • Versatel/Tele2, Talpa, RTL: start of the Dutch soccer competition (August 12)
  • Brill: H1 report (August 23 after close)
  • Nethercomm: first annual Broadband in Gas conference, San Diego (August 24-25)
  • Telecom Italia: start of the Italian soccer competition on Telecom Italia Media's La7 (August 28)
  • VoIP: deadline for providers securing client notification on E911 availability (late August)
  • Wegener: introduction of the new Dutch daily, combining regional papers and the PCM-based AD daily (late August)
  • Open access publishing: the RCUK closes the consultation period for its new policy (August 31)
  • Telegraaf: H1 report (31 August, after markte close)