Friday, December 14, 2012

Tele2 Capital Markets Day: highlights

Overall: moving from Discounter to Best Deal and now to Value Champion.

  • Comviq discounter brand, Tele2 Value Champion brand.
  • 3P on OA networks by YE 2013: 600k households.
  • Focus on network roll-out. Coverage 75% mid 2013.
  • Auction (800, 900, 1800) coming 13Q1.
Kazakhstan (Tele2 51%, Asianet Holding 49%):
  • EBITDA-breakeven by 13H2.
  • Network coverage 92% in 2015 (today 80%).
  • Tele2 leads in 9 regions, is a challenger in 21 and a newcomer in 8.
  • Focus on 2G; quotes:
    • "maximize the 2G opportunity
    • make progress on technology neutrality
    • absence of MBB will not be critical in approx. 2 years
    • >90% of data usage is social networks, where EDGE speed is enough for good user experience"
  • "Evaluate possibilities to expand carefully through new licenses as well as by complementary acquisitions."
  • Tele2 (and others) aims to launch LTE in 1800 band. 58% of its base stations are LTE-ready and 67% of its transport network.
  • MNP is coming to Russia Dec. 1 2013.

Friday, December 07, 2012

Deutsche Telekom Capital Markets Day (3): highlights Germany

  • "We believe highspeed network quality will be key differentiator".
  • Rev stabilisation in 2014.
  • Coverage to 85% by 2016 (from 38% now).
  • Peak performance 75 Mb/s in 800, 150 Mb/s in 1800 band.
  • Capex 1800 70% lower than HSPA (in terms of capex per Mb/s)
Fiber (FTTC):
  • Speed FTTC max 50/10 Mb/s, with vectoring 100/40 Mb/s
  • Capex FTTC + vectoring 70% lower than FTTH (in terms of capex per home).
Hybrid access (FTTC with vectoring and LTE in 1800 band):
  • Down: FTTC + LTE 200 Mb/s (100 each), ADSL + LTE 116 Mb/s (16 + 100).
  • Up: FTTC + LTE 90 Mb/s (40 + 50), ADSL + LTE 51 Mb/s (1 + 50).
  • Vectoring and hybrid prolong copper lifecycle up to 10 years.
Mobile targets 2015:
  • Smartphone LTE sales 67% share (now 4%).
  • 10m contract subs (+47%) (now 6.8m).
  • Service rev EUR 7bn (+ 2-3%), market share 35%.
  • Focus on wholesale to secure network utilization.
  • Targets 2015:
    • 2.7m fiber subs (+240%), market share 43%
    • 3.0m Entertain subs (+60%)
    • Connected home rev EUR 5.4bn (+2%).
    • Growth initiatives (cloud, intelligent networks, De-Mail, M2M) rev EUR 0.7bn.
    • Total growing rev EUR 9.2bn (+1.7%)
    • Total rev EUR 22.2bn (from 22.7 in 2012), o/w >40% from growth.
                              2012  2013  2014  2015
REVENUE TEL DLD               22.7              22.2
          BASIC               15.2              13.0
          GROWTH               7.5               9.2
            CONNECTED HOME     5.3               5.4
            MOBILE DATA        2.0               3.0
            INITIATIVES        0.2               0.7

OPEX                          13.9              13.8
  DIRECT COST                  4.8               5.1
  INDIRECT COST                9.1               8.7

EBITDA MARGIN                   40    40    40    40

CAPEX   TEL DLD                3.6   3.4   4.1   4.3
          BASIC                                  3.2
          FTTC                                   1.1

Deutsche Telekom Capital Markets Day (2): highlights Europe

Market revenues estimates 2012-2015 from EUR 65 to 67 billion:
  • Blue Ocean CAGR +6%
    • mobile internet EUR 4 to 6 bn
    • connected home EUR 10 to 11 bn
    • IP services EUR 5 to 8 bn
    • B2B/ICT EUR 17 to 19 bn
  • Red Ocean CAGR -6%
DT targets:
  • Blue Ocean CAGR 2012-2015 12% and raise to 28% share of rev.
  • Red Ocean: indirect cost redux cum EUR 0.6bn (6%) by 2015, direct cost decrease 2% by 2015.
One DT Europe strategy:
  • All IP: "All-IP transformation represents the creation of a simplified and standardized network", separation of OSS and BSS.
  • B2B 'Big Bang'
  • Mobile internet, innovation: targets 11 NatCos with LTE coverage of at least 60% (today 4 with 30%).
  • 'Cost revolution', operational excellence: Shared service centers, IT supply centers
"Differentiated steering of NatCos, according to market position, to create relevant focus"; 4 NatCo clusters:
  • Senior leaders (Greece, Hungary, Croatia, Macedonia): stabilize topline, "Increase Blue Ocean topics revenue share" (the growth areas), radical opex redux
    • Macedonia: capex redux.
  • Junior leaders with a challenge in mobile (Romania, Slovakia, Montenegro): FMC, radical opex redux.
    • Romania: smart TV, B2B FMC
  • Mobile runner-ups (Poland, CR): Increase market share.
    • Poland: boost B2B
  • Smart attackers (NL, Albania, Austria): increase revenue (esp. B2B, mobile data), reduce capex.
    • NL: unconventional attacker, boost efficiency, "network performance is only a hygiene factor"
    • Austria: leading attacker.
Focus from quarterly EBITDA to 'cash contribution' (i.e. EBITDA - capex). Focus on revenue + cost.

Targets 2012-2015:
  • Revenue CAGR organic +1.4% (reported -0.6% as a result of regulation) to EUR 14bn in 2015.
  • Traditional from 81 to 72% share, growth areas from 17 to 24%, B2B/ICT from 3 to 4%.
  • Capex stable at EUR 1.7bn (excl. spectrum).

Deutsche Telekom Capital Markets Day (1): highlights overall

From Deutsche Telekom's Capital Markets Day.
  • Dividend to be lowered.
  • Capex to be stepped up, focus on LTE and FTTC.
  • Focus on cloud, partnerships with Microsoft (Office 365) and Box (Box Business).
  • Growth markets: B2B/ICT, mobile data, TV; will go to 40-45% of rev by 2015 (2010: 24%).
  • Revenues to return to growth by 2014 (Germany stabilising, USA only from 2015).
  • Dividend policy to be reviewed for 2015, will be a mixture/choice of cash dividend and share-based dividend.
  • Net debt/EBITDA 2.0-2.5, equity ratio 25-35%.
  • Germany: "High-speed Internet access on a scale never seen before", LTE (150 Mb/s, coverage 85% by 2016), FTTC (coverage 65% by 2016 or 80% incl public co-funding; with vectoring 100 Mb/s; capex 2013-2020 EUR 6bn), hybrid LTE + vectoring (hybrid-box, 200/90 Mb/s), EBITDA-margin to 40%, market shares 35% in mobile service rev and 43% in BB lines.
  • USA: LTE (2x20 MHz; capex $4bn; coverage 225m pops YE 2013; MVNO platform), agreement with Apple (from 2013). MVNOs 12Q3: 3.9m subs (+11%), rev $126m (+15%). B2B 12Q3: 6.3m subs (+5%), target 2013 growth 8-10%.
  • MetroPCS: subs to be migrated by 15H2, CDMA to be recommissioned, spectrum to be re-farmed for LTE, DAS network (6k nodes) to be upgraded to HSPA+ and LTE, addressable pops to 280m.
  • USA targets mid-term (5 yr): rev CAGR 3-5%, EBITDA CAGR 7-10%, FCF CAGR 15-20%, margin (of service rev) 34-36%. Sources of growth: contract (flat growth), no-contract (the 'un-carrier'; 80-90%), geographic expansion of MetroPCS brand (10-20%).
  • Considers IPO for EE, strategic alternatives for Scout group, more network sharing deals.
  • IT savings EUR 1bn per annum by 2015; One DT Europe program (centralizing shared tasks) to leverage economies of scale in Europe.
Assuming inclusion of MetroPCS from 1/1/2013:
                  2012      2013      2014   2015   2016

SERV. REV USA            20.8-21.0

EBITDA    GROUP     18      18.4        up
          USA              5.8-6.0

MARGIN    GROUP                                40
          USA               27-29

EPS                                          0.80

DPS               0.70      0.50      0.50

CAPEX GERMANY                3.4       4.1    4.3    4.5
      USA                 $4.7-4.8    $3.0   $3.1
      GROUP        8.3       9.8              9.5

FCF                  6         5                6

Wednesday, November 21, 2012

Scarcity-based business models may elicit government intervention

Government intervention in the broadband market conflicts with free markets. It arises from fears of market failure as a result of:

  • Ineffective duopoly i.e. oligopoly and too little competition.
  • Underinvestment by the incumbent, the cable company, and challengers.
  • Scarcity-based business model at both the incumbent and (if any) the local cable company.
About scarcity vs. abundance as the foundation of the business:
                         Scarcity            Abundance
Revenue driver           price               volume
Bits are like            wood, water         electrons
Bandwidth                throttle            maximize
Business focus           connectivity        VAS
Business model           usage-/speed-based  one proposition
Market                   saturated           growing
Innovation               none                maximize
Vertical integration     yes                 no
Infra-based competition  yes                 no
Structural separation    no                  national infra
Marketing, propositions  maximize            minimize
Customer focus           increase spending   increase satisfaction
Business model           subs, transactions  ads, transactions
Customer data            full                growing
It appears that telcos, cablecos and ISPs traditionally belong to the Scarcity group, whereas Amazon and Google are in the Abundance group. Netflix, Facebook and Apple seem to be moving from left to right. Microsoft and Nokia may be moving in the opposite direction.

If the governement believes there is market failure, or that Abundance is a better foundation for economic growth than Scarcity, then it has several options to intervene and contribute to broadband performance and coverage:
  • Limit the effort to bringing broadband to rural areas where xDSL doens't work and cable is absent. But then, it could be left to the market to provide LTE services, or even satellite-based broadband.
  • Facilitate all market participants by reducing red tape, providing loans, becoming an anchor tenant, etc.
  • Participate at market terms to create a third infrastructure (FTTx). But do not expect existing players to simply quit competing and become service providers on your FTTx network.
  • Regulate in such a way that competition truly increases. For example:
  1. forbid the incumbent to consolidate the market, or even do any takeovers at all.
  2. force structural separation upon the incumbent (see New Zealand). But raising wholesale prices is clearly a way of helping just the incumbent, and foregoing the interests of its wholesale customers.
  3. nationalise (see Australia, NBN).

Tuesday, November 06, 2012

Fixed/mobile convergence 2.0: 10 varieties

In the business market, fixed/mobile convergence is probably the biggest issue at the moemnet, with cloud computing. But what does it mean in the consumer market?

1. Apps. In the mobile data world, apps helped break open the market. In the fixed broadband market they are not new, but they may redefine how we use the internet.

2. Mobile-only. Why hang on to fixed voice, unless it is given for free as an add-on.
3. Unified communications. A call is routed to any handset, based on preferences managed in a portal such as Google Voice.
4. Quad play. The 3P and mobile are combined into a 4P. The addressable market is much smaller than the 3P market. Virgin Media UK's 4P penetration grows very slowly and now stands at 15.6%.
5. OTT. Apps, whether independent (Skype, WhatsApp, Viber, Facebook Messenger, Google Talk, Rebtel, VoipBuster, Kakao, KeKu, IKmobiel, Tango, Fring, Nimbuzz, eBuddy) or operator-controlled (pfingo (StarHub), Joyn (Vodafone, T-Mobile), TuMe (Telefonica), UPC Phone, SmartCall (Virgin Media UK)) branch out to offer a full communications suite (text, voice, video calls), from fixed, mobile and WiFi, with free on-net calls.

6. TV Everywhere. Content on any screen, primarily VOD but live TV as well. Primarily in and around the home, but anwhere as well (Slingbox, Belkin's @TV).
7. Second screen. The tablet or smartphone functions as second screen, as social TV or as remote control.
8. Cloud. Content (and in TV Everywhere: the UI) moves into the cloud (Apple iCloud, Google Drive, Amazon Cloud Drive etc.) and so can be consumed on any connected device/screen.

9. WiFi. This is where fixed and mobile networks meet, whether public (free or net), private (whether open or closed) or shared (MiFi, TriFi) hotspots. Backhaul network (fixed or mobile, or even satellite) is more or less irrelevant. Cable companies consider foregoing mobile and focus on WiFi instead.
10. LTE. This may be a fixed-line replacement. Not for the entire market, but the addressable market could still be interesting. See for instance Cota's TD-LTE in Spain.

Monday, October 01, 2012

Smartphones and tablets convert hardware, paper and discs into software and touch screens

We may worry about the exhaustion of natural resources due to the rise of the smartphone and the tablet, but the truth is much rosier. The ease of having so many devices integrated into one, no doubt represents massive energy savings. After all, advanced smartphones, such as the Samsung Galaxy S III, and tablets allow the user to do away with a growing number of devices - they are true 'Swiss knives':

  • Phone, either mobile or desk.
  • Computer, if you are not a very heavy user.
  • Other devices:
    • Camera, since picture quality is very high.
    • Baby mobitor, if your operator/subscription allows it.
    • Navigation/GPS device, thanks to Google Maps.
    • Clock, alarm, watch and stop watch.
    • Gaming device, portable console.
    • Barcode scanner.
  • Video:
    • TV screen, second screen.
    • Video player, DVD player.
    • Remote control.
  • Audio:
    • Radio.
    • CD player, MP3 player.
    • Voice recorder.
  • Other:
    • Piano, if your musicality doesn't reach beyond fiddling with an on-screen keyboard.
    • In time: wallet, keys, banking/credit card.
    • If the technology is integrated into your Google Glasses, it obviously replaces your glasses as well.
    • Once sensoring devices (movement, smell, air quality, etc.) will be integrated, the smartphone will also replace those kinds of hardware tools.
Not to mention access to all sorts of media and information services on paper and discs: dictionary, diary, newspaper, city map, cookbook, TV guide, photo album, CDs, DVDs, etc.

In short, the smartphone saves tons of resources and energy from the conversion of hardware, discs and paper into software and touch screens. And owning a personal device such as a very cool smartphone also reconsiles us with the fact of having a smaller screen and reduced audio quality, which in itself also saves us resources and energy.

Monday, August 13, 2012

Q2 reviews for Dutch big 6 telcos

Here are the reviews of the Q2 results of the 'big 6' telcos in the Netherlands (background articles: subscription required):

Available in Dutch:
Available in English:

Full service:
  • KPN: broadband is being repaired, but mobile is still worrisome
  • Tele2: small positive: growing share on the mobile market
  • Vodafone: unremarkable
  • T-Mobile: outperforming the mobile market
  • Ziggo, UPC: losing focus but still OK

Wednesday, August 08, 2012

Mobile data aren't mobile at all

Mobile operators claiming that the vast majority of their subscribers use less than 500 MB of data per month are talking differently in public than in a recent survey, in which most operators say they expect a 20 fold rise over the next 5 years. Just do the math on watching YouTube at a 1 Mb/s bit rate: you would burn through your monthly allowance in just one hour. 500 MB is really just nothing.
So, if these operator claims about users staying below the 500 MB threshold are right after all, then there are two possibilities:

  • Subscribers aren't using mobile data's full potential.
  • They are on WiFi all the time.

Wednesday, May 09, 2012

America Movil may swap its 28% KPN stake for 100% of E-Plus and Base

What could Carlos Slim's rationale be for making an unsolicited public offering for a minority of KPN's shares?
KPN finds the price too low, but so does Slim, of course, or else he wouldn't see any upside potential.
Then again, even the people at Blackstone aren't financial wizzards: after buying a 4.5% stake in Deutsche Telekom in 2006 for 14 EUR/share, the stock price declined and now hovers around EUR 8.50.

Here are the options:
  • A purely financial investment, based on KPN's near halving of its share price in a year's time. This doesn't really make sense because based on multiples the stock isn't cheap and the future looks grim: mobile is going down, there may be a new market entrant as early as next year, the broadband market share keeps dropping, TV is not generating much cash, Germany and Belgium are losing momentum.
  • Reducing the overall risk of America Movil. In itself, this makes sense, because its portfolio is heavily geared toward high-risk Latam countries.
  • Taking control of KPN. America Movil will likely demand a few seats on the board. The question remains: why? The KPN management is doing whatever it can and Slim isn't in the position to know better. And synergies will be very limited.
  • A first step toward a full public offer for all of KPN. Hard to tell, but this could be the case. The question remains: why first build a minority share? And what will the KPN management do?
  • Sort of take control of E-Plus. This could make sense. Slim now holds a trump card in the possible consolidation of the German mobile market, where arch rival Telefonica may be looking for an exit to reduce its debt. Slim can easily fund an offer for O2 Germany and create a strong competitor to Deutsche Telekom and Vodafone. Or else he could demand a nice price for E-Plus and exit Europe once he sells E-Plus to Telefonica or anybody else.
Whatever the case is, here is my guess at what will happen next: America Movil will at some point split KPN. Their interest is probably in the mobile assets, and possibly in the non-Dutch ones only: E-Plus (Germany), Base (Belgium) and Ortel (European MVNO). Some assets may be sold off (iBasis) and what remains is a focused Dutch integrated operator (which may spin off its passive network assets to become a service provider - but that's a different story).

Carlos Slim could make this work by swapping his 28% KPN stake for a 100% stake in KPN Mobile International plus debt.

Monday, April 23, 2012

KPN: results 12Q1 preview

KPN reports 12Q1 tomorrow, April 24 at 7:30 AM. Here's what's going on at the company.

  • 12Q1: revenue EUR 3136m, EBITDA 1131m, EBIT 560m, net 309m, EPS 20c.
  • 2012: revenue EUR 12715m, EBITDA 4778m, EBIT 2430m, net 1341m, EPS 95c
Reported numbers: the DSL-market is beiung slaughtered, but FTTH is on the rise.
Results 11Q4 and guidance: see here and here and here.
  • 2012: EBITDA EUR 4.7-4.9bn, capex 2.0-2.2bn, FCF 1.6-1.8bn, DPS 90c.
  • 2013: the previous 95c DPS was withdrawn from guidance
  • Broadband market share NL: to 45% by 2015
Financials. Doubts remain over the sustainability of current trends.
  • Several profit warning in 2011.
  • Several ratings cuts.
Management & structure: see here and here. KPN is nearing the end of its restructuring.
  • C-level management was installed; new CFO pending.
  • An Executive Committee was created.
  • Yes Telecom management was discharged; Atlantic Telecom is integrated in Telfort Business.
  • Job cuts ongoing.
Regulation: no relief yet.
  • MTR: tariffs will reach a (preliminary) bottom by Sep 1 2012.
  • International roaming: preliminary tariff bottom from July 1 2014.
  • Increased regulatory oversight from Opta (KPN hopes to resolve this by the end of 2012).
  • NMa investigation of collusion on mobile market.
M&A: see here
  • KPN Spain is for sale.
  • Base is for sale, rumoured value EUR 1.8bn (= 6.6x 2011 EBITDA). A sale and subsequent debt reduction will not automatically lead to an improved net debt/EBITDA ratio, since the EBITDA-margin is quite high.
  • What about the other international assets: E-Plus, iBasis, Ortel?
  • Reggeborgh ISP takeovers pending at NMa. Will probably be approved.
  • Acquisition of Reggefiber ISPs was approved, but the Caiway deal was not.
  • Ongoing tower sales.
Mobile NL:
  • T-Mobile NL is for sale. A new owner could step up competition.
  • Auction 2012, likely to cost KPN EUR 300-400m; enabling a newcomer?
Reggefiber and broadband NL:
  • At YE 2011: 951k HP (so probably around 900k HC) and 277k HA.
  • Quarterly additions in 11Q4: 107k HP and 38k HA (o/w 25k for KPN).
  • In 2012, HP additions will be close to 400k and HA at around 35-40% i.e. 140-160k.
  • Expanding the stake from 41 to 51% for EUR 99m at 1m HC or Dec 31 2012. HC will be nearing 900k by 12Q1 and 1m by the end of 2012.
  • Expanding stake from 51 to 60% for EUR 116-161m at 1.5m HC or Jan 1 2014. This will lead to consolidation, which will contribute to both net debt and EBITDA.
  • Reggeborgh can exercise its put option on the remaining 40% stake from July 1 2017, for EUR 647m.
  • When will FTTH net adds start to compensate for DSL losses? FTTH subscriber net adds were 25k in 11Q4, but overall BB net adds were -9k. Looks like both FTTH net adds and DSL net losses could accelerate.

Friday, March 23, 2012

Water-fiber system: cheap way to enter a home

There is a new branch in the ever expanding universe of fiber deployments, ranging from fiber-to-the-X to fiber-through-the-X.

The latest version has been trialed in Germany, in Adenau, last year: WFS (water-fiber system), or fiber-through-the-waterworks. The local water utility in nearby Bonn is working with the Adenau utility and two technology companies, Stadtwerke Bonn is reporting: FRIATEC (manufacturer of ducts and pumps) and egeplast pro cable. Now, it is proposed to bring fiber to the towns of Adenau and Altenahr, using this technology.
It looks like the technology works by inserting an empty duct into the water duct, but only for the last few meters from the nearby fiber duct into the home. FRIATEC appears to have a similar solution for gas pipes.

Two memorable quotes:
"Es wird nicht mehr diskutiert, ob der Glasfaseranschluss nötig ist oder nicht. Es geht nur noch um die Frage, wie schnell und in welchen Konstellationen die Glasfaser zu den Kunden gelangt."
"Für Großstädte bringt diese Technik Einsparungen in Millionenhöhe, da aufwändige und kostenintensive Tiefbauarbeiten entfallen und für ländliche Bereiche scheint dies aktuell der einzige reale Ansatz um die Glasfaser bis zum Kunden zu bringen."

Wednesday, March 14, 2012

B4RN: let the digging commence

B4RN announces that it will actually start digging on March 31. Here is the full text of the release:

B4RN Breaks the First Sod and starts its Community Dig 
March 31st at Jubilee Tower, Quernmore, starting at 1pm, 2pm Grand opening ceremony, 3pm tea and cake.

The community-owned, rural, gigabit Fibre To The Home project, Broadband 4 the Rural North, has passed another major milestone this month. 

The Early Bird offer ended on 29th February, and B4RN CEO, Professor Barry Forde, is pleased to announce that sufficient shares have now been sold to commence the digging which will begin at the event on March 31st.

"We are delighted with the response to the share issue, which has surpassed even our highest hopes," said Professor Forde. "This proves that the appetite for investment and support of such community owned broadband projects is alive and well, and that solving the problem of rural broadband for the next generation is prompting people to invest even in times of economic hardship."

At the launch the local community will be celebrating the start of the dig.  John and Andrew Metcalfe, local farmers, will be breaking the first sod, and are some of the many farmers who will be laying the ducting in order to buy shares in B4RN.  “This will make a major difference to our community, and to me and my young family.  As they grow they will be able to use the technology that children elsewhere take for granted, and we will be able to diversify our business through it. “ says Andrew Metcalfe

The launch will be held at a local beauty spot that is half way along the first of the core routes.  The dig will progress out from either side of the start point,  and all 13 core routes should be live in 3 months, weather permitting. Subsidiary routes and spurs to properties will branch out from that.  There has been so much enthusiasm that the management committee is considering whether to bring forward the timescale for later phases of the build.

B4RN is the only UK community offering gigabit broadband, meaning that consumers will have the opportunity to work, live and play faster and more efficiently than most places in the world. This forward-thinking, fully-fibred approach has been recognised as the optimal solution to the digital divide, and will encourage regeneration of this deeply rural area, bringing new jobs, opportunities and revenue to rural Lancashire.

The support of the local community has been key to B4RN's success to date, and there are many people and businesses within the area who will be earning their shares through sweat and labour as well as investing their money.

Prof. Forde stated, "This is where we can reduce the costs that a traditional telecommunications company would face, by using local skills and knowledge, working directly with the community, and being a part of it. B4RN is a 100% community project, with neighbours helping neighbours. The community spirit is strong in rural areas and B4RN is a showcase for that spirit."

Share ownership starts from £100, with 30% tax refunds available to anyone investing between £500 and £20,000 under the Government's EIS (Enterprise Investment Scheme), which makes it an attractive proposition for all investors. £1500 ensures a Foundation Membership with additional bonuses such as a free connection and one year's free subscription to the gigabit service.  B4RN’s coverage area is close to the coast, the Lake District and the Yorkshire Dales, making it an ideal base for weekend breaks, holidays and the chance to explore some of the north of England's most beautiful tourist areas. External investors can nominate a property within B4RN coverage area for the free connection, including holiday cottages.

Full details of the share issue, including the business plan, are available on along with maps of the coverage area and phases.

Wednesday, January 18, 2012

Stop SOPA: which are the proper arguments against it?

There's a lot of resistance to SOPA and PIPA, but good argumentation is rather scarce. Look at these links to find useful explanations about what is actually wrong with these bills:
For many, the content industry is the industry one loves to hate. It makes excessive profits (or so it seems), and they slice & dice their products in a consumer-unfriendly way (windowing) to maximise profits. Today, the people want instant access to digital files (streaming or downloading), while the content industry wants to sell very lucrative discs. Hence some sympathy towards illegal downloading.

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

And yet, there are good reasons to oppose bills such as SOPA and PIPA. ISPs simply do not want to police the internet, for two reasons:
  • It would produce a lot of administrative work. This could also be a growing burden, as more sites etc. are to be taken down. And then there is the risk of not complying in time and being liable.
  • It doesn't work. Technology will always find a way around.
  • Not ISPs alone will be targeted by laws such as these, but also the DNS, search enginmes, etc.
Further, content owners would get just too much power:
  • They could ask a site to be taken down without a court order.
  • Forcing players other than ISPs (search engines, payment processors, advertisers) not to do business with such sites.
  • Forcing anybody (mainly sites such as Facebook and YouTube) providing links to such sites (even for discussion purposes etc.) to take these down.
  • What would come next? Sites providing recipes being taken down on a request from a restaurant chain?
Hence the risk of limiting free speech, the open internet and innovation.

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