One of the things I noticed here in Bucharest is the popularity of the Motorola V975) shown in the picture.  It is currently offered by Connex, which was recently bought by the Vodafone Group (the biggest telecom deal in Romania in 15 years, announced in March 2005).  Of course, my cousin has one and it looks pretty cool (there are lots of features, such as push-to-video, ringtones, and lots of multimedia applets).  Amazing to see 3G so widely available and deployed.  Other mobile providers in Romania include Orange and Cosmorom. 

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Blogging live from Bucharest, where I am for a few days for a short visit before going to give a talk about IMS in Cannes. GIPS' stock has been doing quite well, and that's because it secured now licensees such as Google, Yahoo! and Skype, which is quite impressive.  The company's CODEC is on its way to becoming the most dominant one in the Internet VoIP market.   more »

Telcotrash (hat tip: Andy Abramson) reports on three VoIP MSO deals in Colombia, all with CedarPoint Communications.  Interesting to see this unfold in Latin America.  The three companies are: TVCable (in Bogota), Promision (in Bucamaranga) and Costavision (in Cartagena) - all together make up about 1 million subs.   more »

As a few follow-ups to yesterday's entry:

1- Google Talk is up and running (if you visit http://talk.google.com, you will get automatically redirected).  Thus far, I just had a quick test, and it seems to be find (albeit I could not see any different vis-a-vis Yahoo! Messenger as of yet, or Skype, for that matter - except for the connection to the GMail inbox, which Skype does not have ;-). 

2- Yet another great coup for GIPS (Global IP Sound).  As I mentioned before, the Swedish CODEC maker is a  great company, and whoever buys it, will certainly cause a lot of disruption.  IMHO, GIPS could be a very astute purchase for anyone willing to buy it.

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The resourceful Om Malik figures out a key part of the Google puzzle.  He claims that the new product to be introduced by the search engine giant will be an IM client using Jabber (self-proclaimed "the Linux of IM" - hey, if their stuff works for AOL and Orange, then why not Google?).  Om also points to a couple of extra hints: the talk.google.com URL, which redirects you to a google.com/talk with a 404 message (site not found) with a secure XMPP server waiting for connections. 

In the meantime, here are the del.icio.us tags on Google & Jabber...  this will be an ongoing thread.

Note: on the above link, there is a good piece by Sean Kerner highlighting, among other things that with the Blogger acquisition, Google also got some IM technology (called Hello).

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Andy Abramson had his own take today on Google's raising of $4+ billion (a non-trivial amount, as pointed out by Cody Willard in his note today - more than10% of GM's and Ford's combined market caps).  I would have to agree with Andy - the proceeds of this sale are not for Skype (or Sk-hype, as Om affectionately refers to the company).  Google's management is astute and too pragmatic for that.  But then, Andy makes a whole plethora of telco plays (including a softphone SIP client, buying RIM or a directory service play). 

Some folks (like John Markoff from the NY Times) suggest that Google will continue to make small R&D-focused acquisitions such as Android (click here for an interesting insight on that transaction, including a battle with Microsoft for being the leading software agent in the wireless search segment of China's mobile phone market).

Which gets us back to what will GOOG do with the money?  Well, I still think that for M&A's of small companies (or even slightly bigger ones), cash is certainly not needed (instead the stock can be used as currency), or it if is, it certainly will not be anywhere near the vicinity of $4b billion. 

So I dare speculate that it could very well be a telco play.  But one that involves deployment of infrastructure.  And which infrastructure?  Wireless!  Broadband wireless, be it WiFi, WiMax, or even proprietary.  There is a big opportunity for the emergence of a third competitor that could offer triple play services in the US (not a telco, and not an MSO).  If such a player comes up with a good, basic wireless service (one that is "good enough" will do), eventually complements it with an MVNO to offer voice, video and data and then prices it below the current oligopolistic equilibrium price between ILECs and MSOs, that will create some real competition and a major threat to the incumbents. 

How much would it cost to set up such a nationwide network?  For Wi-Fi, we have already some parameters (the City of Philadelphia Wi-Fi project will cost an estimated $10 million).  For WiMax, the time horizon is much larger, so I really do not believe that the offering equity should have been now, unless Google management wanted to crystallize some of its winnings right now to build a considerable kitty of cash.

But hey, maybe this is too far down the road.  Google is raising this money here and now, and so it could very well be that it could be to create its own IMMM (Instant Multi-Media Messaging) client application (allowing the sharing of video and audio files via video/audio streaming, IM, etc.). 

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In a recent SEC filing, Google said it plans to sell up to 14.8 million shares (the highly connected and resourceful Om Malik even has some details about who is selling how much - just click on the Stalwart link in his article). Based on Google's closing price on Friday of $280.00, the company could raise $4.144 billion, or about 5.3% of its current market value.  Paul Kedrosky speculates on what are some of the things that Google can afford with the proceeds of all this cash.  There are some rumors about a possible telecom play - James Enck wrote a bit about those.  Looks like Fred Wilson's is bang on with his "relevance vector" story - it's going to take more than just simply searching, and this is proof that Google's management is aware of this and will put some of those resources into play - the only question is why the cash when they could leverage the high current stock price?  Stay tuned - this story is still developing.   more »

Another proof point of VoIP's uptake: VoIP has made it in Jeopardy! It wasn't the final Jeopardy question, and the contestant got the answer only partially right (albeit host Alex Trebek gave credit for the partial answer). I guess the next step is for a company like Vonage to get a famous sports star or actor to advertise its VoIP plan, and after that nobody else will deny that VoIP has really become a mainstream technology.  Paul Brent wrote about the story on today's National Post (note: unfortunately, the story is only available to subscribers, so when you click on the link, you will be prompted for your username and password ID).  Since I happen to be a subscriber, there have been some folks that have asked me to repost it, but I did not want to violate any copyrights, so I will not reprint the story entirely (unless somebody from the National Post can give me explicit approval for this).  Here is just one excerpt with the details from the program:

VoIP, the tech-heavy acronym thrown about by telecommunications executives as shorthand for voice over Internet protocol, has gone mainstream in a big way. This week VoIP served as an answer in the TV game show Jeopardy and the college-aged contestant providing the answer got it nearly correct: "Voice ... Internet ... protocol." Host Alex Trebek gave credit for the partial answer.

The story is Copyright © National Post 2005.   more »

It is with a lot of sadness that I read on Isen.blog that the once famous Bell Labs Laboratory 1127 (the lab which developed Unix and that had brilliant minds such as Thompson, Ritchie, and Kernighan, among others) will be consolidated and disappear. This according to a "reliable source" via David Isenberg. I learned C with the aid of the famous Kernighan & Ritchie book ;-(.  If this story is true, this is really some sad news... But it goes to show you how great Bell Labs was (and still is, despite this tough decision).  That is why I am hopeful that all this work will carry on... 

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Tom Keating had a post in which he references a Skype Forum chat that mentions that China Telecom is engaged in blocking Skype access:

Others in China piped in the thread that they weren't having problems accessing Skype's website, while another posted stated that as far as he knew, "Skype.com is blocked in Shanghai, the only place I know that skype.com isn't available in mainland." Regardless of which areas of China is being blocked, this is very disturbing news. Fortunately, as of right now, according to the forum, they are only blocking access to Skype's English .com website, thus you can simply go to Skype's German site or another foreign Skype site to download Skype or setup a SkypeOut account. Assuming you can read the foreign language of course.

Only a matter of time before bureaucrats there figure out this loophole and close it. But while it is relatively easy for the Chinese to block SkypeOut, Skype is another matter altogether - with the peer-to-peer / supernode architecture, this is not an easy task. Which brings up the question on the supernode: I suspect that its selection is not arbitrary (i.e. Skype probably assigned a number of its own supernodes around the world right from the start, in order to be able to get some reasonable grade-of-service, particularly for paying customers).  If that were the case, after some hacking, could there be a way to block communication if the IP address lies within certain ranges, no?  It would probably take a bit of time to trace all of those, and by that time, a whole lot of the Internet would be blocked, but unfortunately, that probably already happens in some regions of this world. 

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James Enck writes about the results of a few Euro telco incumbents and they all have something in common: accelerating fixed line losses.  Consider the following:

KPN annual rate of landline erosion: 5.3% (double from '04)

Swisscom fixed line loss: 4.2% (double the level from '04)

Deutsche Telekom: 4.4% (again, double from '04)

It will not be surprising to see these players look at innovative ways to stop those losses, and one of those will be fixed-mobile convergence (via IMS).

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Lots of stories in the blogsphere about Skype, including its imminent IPO. James Enck astutely points out how many versions of the same report came up (picking up on Om Malik's own skepticism). Business Week, The Independent, the original Robert Cringely post... and the list goes on. 

Robert suggested that for a US$ 3 billion valuation, each Skype user is worth $150.  Is that realistic?  In my previous Skype valuation note, I wrote that an annual ARPU of $50 per user for SkypeOut would be reasonable, along with a guess-estimate of $40 for SkypeIn, for a total of roughly $90 per customer (assuming the same customers sign in for both SkypeIn and Skype Out).  So even for the paying customers, $150 represents 2/3 more than $90.  But wait - that was just for paying customers - and the key variable is figuring out what percentage of the overall Skype installed base can be counted on to regularly subscribe to these services (most folks are guessing single digits thus far).  Therefore, the US$3 billion valuation is huge!  So based on these arguments, I honestly join the skeptics list.  Skype might go public or be sold, but, in a "rational market", it should not be worth these huge multiples, unless I am missing something here (well, considering the recent action on search engine Baidu.com and on portal Alibaba.com, one might say: "it's the market, stupid!" and start wondering if we are about to get into yet another speculative bubble - to temper those thoughts, I recommend a good dosage of "creative destruction" courtesy of Schumpeter ;-).

Last but not least, Mark Evans also has a Skype story today, and he talks about what might be motivating the company to talk to Morgan Stanley and explore its options (including possibly an IPO).  He speculates on whether founder Niklas Zennstrom wants to cash in his gains now, considering the low barriers to entry or new potential threats (Mark mentions Michael Robertson's Gizmo service).  If one were to buy into this last factor, I would also add Jeff Pulver's newly re-launched FWD (including the pulver.Communicator) to the list (and Jeff has one of the very best brains working on this project, namely Henry Sinnreich, the father of SIP, who recently joined Pulver.com after having a distinguished career at MCI).  Another issue I would throw in the list is the fact that carriers will not stand pat (e.g. the BT Communicator).

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I came across a good article written by Joan Engebretson on the hot subject of IMS.  Joan interviewed carriers such as Bell South and Sprint, and the discussions were very candid about the expectations about the technology and whether it can be the delivery mechanism for next-gen services.  For good measure, she also sought the opinions of vendors like Lucent and three analysts (including Tom Nolle, Tom Valovic and yours truly).  It was actually somebody from Lucent who pointed me to the article, and it was a great read.

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A while back, Mark Evans and yours truly both read a Globe and Mail Saturday feature interview with Bell Canada CEO Michael Sabia.  I meant to pick up on this thread but the work caught up with me, until today, while Googling around at work trying to uncover some Canadian telco data, I accidentally came across a great find.  Like the saying goes - some great findings are truly accidental - and this was no exception to that adage.  I discovered an editorial that Dr. Yves Rabeau wrote in the Financial Post back in August of 2004.  Dr. Rabeau has impressive credentials, including a Ph.D. in Economics from my alma mater (MIT) and is Professor of Business Strategy in the Faculty of Management Science at UQAM and Director at the MEI - Montreal Economic Institute). 

More importantly, at the bottom of the web page article, I discovered a link to an excellent discussion paper authored by Dr. Rabeau that I wanted to share with TF readers.  The study is called "The Schumpeterian Wave in Telecommunications: Policy Implications", and it is a must read.  At the time of my discovery, I made an instant connection to the Schumpeter reference in the Sabia interview with the Globe and Mail.  Joseph Schumpeter (shown in the photo) struck again - the Austrian economist that so greatly influenced the economic development theory and coined the famous term "creative destruction".  Schumpeter is not only Sabia's favorite economist, but also an inspiration for Dr. Rabeau's paper. 

The "Schumpeterian Wave" is very well described in the discussion - long waves of innovations both create and destroy wealth.  However, the net long-term effect is positive, because innovation eventually brings productivity gains which enhance the living standards in the economy.  Of course these innovation cycles bring about some major turmoil - new firms and existing ones that can adopt the new technologies can thrive under this environment, whereas others eventually vanish because they cannot make the necessary adjustments. 

But the central theme of the paper is to determine whether, if telecom regulation were in tune with the changing technology and the competitive landscape, this could have limited excesses such as the telecom speculative bubble.  More importantly, the study also raises a few very important questions about what role the CRTC should pursue, and whether or not the goal of achieving a healthy level of competition in the local markets is a realistic one.  The big question asked is - while trying to balance the interests of new competitors with those of the incumbents, will the CRTC end up in an "economic impasse" (where it seeks to create a competitive regime that is not naturally cost-effective) that will also curtail the flexibility of the incumbents? 

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Nortel finally announced its Q2 numbers, and they came in strong, jumping 12.6% QoQ totalling $2.86 billion, ahead of Wall Street estimates between $2.67 and 2.70 billion.  Regionally, the numbers were strong in North America (US and Canada) but fairly flattish overseas. 

Enterprise revenues jumped considerably (33% QoQ), due to the recognition of previously deferred revenues (~$100 million) related to specific PBX software upgrades in the U.S. and Europe.  However, no mention of the much anticipated MPE9000 IP router (also known as the Neptune), and the book-to-bill ratio came a bit under what was expected (0.84).  More importantly, almost all the Nortel enterprise voice (PBX/IP PBX) competitors had great quarters: Cisco, Avaya, Mitel, Inter-Tel and Aastra.

On the wireless side, CDMA was the bright spot, with performance being driven by EV-DO sales to players such as Bell Canada, Sprint and Verizon.  However, the GSM revenues were lower, due to the completion of a major contract in Europe and lower than anticipated sales to BSNL.  Finally, wireline saw declines in long-haul optical and traditional circuit switching for voice and ATM switches for data, although these drops were compensated by higher sales in VoIP switches and metro optical gear.  It would have been nice to see more detail on the Verizon Class5 switch replacement project.

All in all, a good quarter, considering the recent turmoil, but there is $1.3 billion worth of debt coming due in early 2006, and more visibility on the company's strategy will be helpful for most investors.  Despite the jump in revenues, Nortel turned in an EPS of 1 penny, so cost cutting will need to continue.

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For those of you not familiar with British papers, let me tell you that the Sunday versions often come with some juicy gossip (M&A rumors, takeovers, tenders, etc.).  However, unfortunately more often than not, there is also a lot of speculation.  Case in point: The Sunday Business in London, which yesterday had a wild story that Cisco would make a pitch for Nokia.  That must have obviously worked very well from a PR perspective, as today I got a call from a Brazilian journalist seeking my comments on this.  But how likely is this deal?

Anybody that knows anything about the Cisco traditional M&A strategy would tell you that this is just plain speculation to sell some papers, because this is 100% incompatible with the classic Cisco acquisition philosophy: buy small pieces that you can chew and then use the rapid integration GE model.  There are many examples throughout the past few years: Selsius (the IP PBX division of Intecom), Unity (UM division of Active Voice), Geotel, and more recent purchases such as P-Cube, Airespace, Sipura, Topspin, etc.

What all of these companies have in common is that they are small and represent niche plays in areas that Cisco wanted/wants to grow in (again, at the time Cisco made the acquisition -of course, the IP PBX and IPCC grew a lot, but Cisco bought Selsius back in 1999 when IP PBXs were mostly deployed in labs ;-).  Besides being small in size, they all have excellent revenue growth potential, well above Cisco's current 10-15% level.

However, a Nokia buy would curtail Cisco's ability to reach its 10-15% growth target in 2006 (most Wall Street analysts forecast Nokia sales to grow 8% YoY in 2006).  So why so much speculation?  Well, both companies (Cisco and Nokia) did form a small enterprise VoIP alliance, but things never evolved above and beyond this partnership.

So will Cisco go after Nokia?  Not very likely.  And I would dare say that even, per absurdum, if Cisco's new CDO (Charlie Giancarlo) were to embark on a new and more daring M&A strategy, there would be other companies that would better suit Cisco's interest, including Nortel (a very remote possibility, given the massive sea of red/employee layoffs that such a merger would entail, but imagine for a second what Cisco would look like with Nortel's wireline and wireless carrier divisions ;-).  I think at least that one is a juicier Sunday paper read.

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There was an interesting note from AFP yesterday about the new CEO of Australia's major telecom incumbent, Telstra, namely Solomon Trujillo, an American recently settled in Australia. Mr. Trujillo stated that Telstra is way over-regulated and that other carriers (such as SingTel-owned Optus) should share the burden of offering services to remote and rural areas.  As a newcomer, he certainly did not temper his statements with some diplomacy, going as far as saying that such requirements for services to outback customers "belong to the last century".  That did not sit very well with the Communications Minister.

The stakes are pretty high - the Australian government is planning to sell its 52% share in Telstra next year (at a price tag of roughly 24 billion US$), and the coalition partner wants the rural service guarantees to remain in force even after the sale. 

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Here's what I was talking about when I meant that the Canadian consumers get at best a so-so deal in terms of pricing for broadband, TV and LD.  Yannick Laclau (hat tip: EuroTelcoblog) mentions that Free (the broadband service provider that everyone is talking about in France) has reached 1.3 million ADSL subs (of which 900k are on unbundled lines).  This is good for a 17% ADSL share (43% when only counting unbundled lines). 

For a monthly fee of 30 Euros (about Can$45), Free offers 20 Mbps ADSL2+ access, unlimited local and national telephony (recall that in Europe, the "impulse" for local calls is often charged), 80 digital TV channels (with an option to get 200) and a selection of digital radio stations.  All of this delivered via a box that plugs into a user's TV, can also be hooked up to a stereo sytem and has built-in Wi-Fi to talk to a computer system. 

We can only dream as consumers to get a deal like this in our current competitive telecom landscape.  But alas, to make us feel a bit better, Yannick does say that Free's offer is much further ahead of those available from other providers in countries such as the UK, Germany or Spain.  But why settle for the lowest common denominator instead of shooting for the stars?  The CRTC has a key role to play to establish the type of competition that would create the need for having such offerings in Canada.

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Dragos (from @rgumente) wrote about a ZDNet survey about what are the most widely used applications by cell phone users.  A total of 2,112 Internet users were surveyed and here were their top replies:

• voice: 60%
• address book: 44%
• text messaging: 30%
• calendar:29%
• emails: 24%
• view/take pictures: 24%

It would be interesting to know the breakdown of the 24% e-mails usage (i.e. how many used smart phones such as the BlackBerry or Treo models versus mobile e-mail on traditional cell phones without QWERTY keypads).

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Mark Evans writes about Rogers' and Bell's plans to reduce bundling discounts.  He attributes this to the lack of a need to offer these incentives, as there is the so-called "convenience" factor of dealing with just one service providers.  Granted that the Canadian consumer might not be as cost-conscious as other nations' consumers around the world, and in fact, convenience does play a role in choosing more than one service from the same provider.  But I would be willing to bet that the other half of the story is the lack of a perfect (or as perfect as it gets) competitive market in the Canadian telecom landscape.  The reason for that is manifold - in the wireless side, for instance, contraction was to blame (once Rogers took out the market disruptor - Fido - "price discipline" came back), on top of the lack of action by the CRTC vis-a-vis wireless local number portability.  On the cable side, the DBS players (Bell Canada and Shaw) have not really given the Canadian MSOs (Rogers, Shaw, Videotron, Cogeco, etc.) a run for their money.  Not that I expected Shaw to cannibalize its own cable revenues, but at least ExpressVu could have made things interesting here in Ontario.  But the last salvo was the CRTC VoIP decision, which really took out any chance of any significant price cuts for local service.  So is there really any surprise not to see any bundling discount?  There is no major incentive, as "price discipline" rules and maximizes profits for these companies.  Only when we have a more competitive system in place will bundling discounts come into play.   more »