Many folks were anxiously waiting for the first FCC ruling after the appointment of Kevin Martin as the new Chairman, succeeding Michael Powell, to observe whether or not there would be a change in bias within the Commission. If the first ruling after Martin being named is at all a valid indicator, the FCC might become a bit more pro RBOC (albeit that UNE-P and the fiber ruling last October also benefited RBOCs).

Some VoIP providers will find it hard to digest the news that the FCC has again sided with the phone companies, issuing a controversial split-decision that they do not have to abide by state rules requiring them to sell stand-alone high speed Internet service (the final vote was 3x2 in favor of Bell South, which opposed regulation in Florida, Georgia, Kentucky and Louisiana that forbid its practice of linking DSL service to local phone service).

This will also prove to be a major challenge to “cord cutters” (i.e. a group of 20 million US residents who chose not to have local phone service and instead rely solely on cellular phones). These cord cutters that had naked DSL might now be forced to buy local phone service.

The interesting question is whether or not this will work in favor of the RBOCs, as the cord cutters were already unsatisfied with their local phone service, and certainly would not want to be in a position where they would be forced to buy that service just for the sake of having DSL. Therefore, they might consider cable (if available in their area) or maybe some broadband wireless option before, as a last option acquiring local phone service again.

   more »

As I wrote in a January note after the Cisco acquisition of Airespace, there would be many ramifications arising from that transaction, including possible partnerships between Alcatel, NEC and Nortel and WLAN vendors such as Aruba, Meru, Strix or Trapeze.  Well, one of those new partnerships was officially announced earlier this week, when Nortel and Trapeze Networks agreed to an OEM and development partnership.

Trapeze will embed its technology into some of Nortel's platforms to give wireless capabilities to things like remote access, switching and security.  The first co-developed product between both companies is expected to be introduced during the May/June timeframe.

Note: It looks like Alcatel also found a similar partnership in the WLAN space, with Aruba Networks, initially capitalizing on the latter's security and other network management products.

   more »

Interestingly enough, despite my previous post on the dismal record that M&As have had in the past, one of the biggest topics du jour that is occupying the mind of many telecom analysts is that of equipment vendor consolidation, given the similar activity that has happened on the carrier side. 

The rationale goes that because they are fewer customers and probably some reduced CAPEX spend, there will be less revenues to be had by the same number of vendors, ergo the trend is for some of the vendors to amalgamate and be bought.

Light Reading went wild with a few scenarios that could be read here.  Even in Wall Street, some analysts have been in a speculative mood lately.  For instance, CIBC World Markets mentioned in a report that Nortel could potentially beef up its enterprise division by acquiring companies such as Mitel or Inter-Tel (I really do not see either scenario happening, as there would be a lot of duplication and not enough synergies, although a Mitel sale to another vendor such as Hewlett Packard should not be discarded in the long-term future). 

But speculation keeps the world turning.  We will definitely see some M&A activity happening later this year, but certainly not as being anticipated by some telecom industry insiders. 

   more »

Gizmodo had an interesting entry about KDDI's AI-MATE (see photo to the left), a prototype which the Japanese operator is calling a "hybrid communicator", blending the functionality from a cell phone and a PDA.  The model will make its debut at the Expo 2005 in Aichi, Japan (which begins on March 25th).

On a separate note, we can add a couple more datapoints to the "Chaku-Uta Full" polyphonic tones download service that I wrote about recently.  KDDI announced earlier this month that the service surpassed the 3 million download mark on March 1st, after surpassing 2 million downloads earlier in February (on Feb. 5th).

   more »

Nortel (NYSE:NT) reported its Q3 2004 results, with a revenue tally of $2.179 billion (as opposed to the Street's consensus estimate of around $2.270 billion). Enterprise results were in line, whereas wireline were a bit lower and wireless a bit higher than expected. But the shortfall really came in the optical side, mostly attributed to "a cumulative correction of approximately $80 in the third quarter of 2004 for revenues previously recognized primarily in 2001 and 2002 relating to the delivery of future contractual post-contract support, or PCS, and other services.”

But going forward, if Nortel is to win back the full confidence from the Street, more transparency in the reporting of results will be required (as Lucent did after its own settlement with the SEC).  So, in the future, items such as the mysterious $159 million charge on the BSNL contract (that adversely impacted gross margins) need to be better explained.

   more »

Of course no sooner that I wrote about Nortel's optimism about its prospects in Asia, two things happened: one, Q3 results started being dissected over the weekend (Mark Evans had a good piece about that), and then today (Monday), there was a lot of talk on the Street about the reorganization of China Unicom.

It turns out that China Unicom is considering abandoning its dual network (CDMA/GSM) strategy, selling its GSM network to China Telecom (a wireline carrier).  That transaction could then open the way for China Unicom to align itself with another wireline service provider (China Netcom).  So what's the upshot of all this?  Well, perhaps a short term increase in 2/2.5G spend with easing demand for a 3G ramp-up, as both wireline and wireless carriers will now have 2.5G wireless offerings to concentrate on the short term.

It is expected that the Chinese government will still issue three or four new 3G licenses before the end of 2005, but the initial pace of deployment will be slower than initially anticipated.  So what's the impact to Nortel?  As one of the primary CDMA suppliers in the China Unicom account (alongside Motorola and Lucent), Nortel will benefit in the long-term, as the Chinese operator will only have to focus on the evolution of its CDMA network.  But in the short to medium term, spending will be reduced, as there is a lot of unused capacity in China Unicom's current CDMA network.

   more »

Industry sources have informed us BT will seek to select its short list of equipment vendors for the 21 CN RFP by March 31st (although some folks feel that might actually come in April, during their analyst call). There has been a lot written about BT's major next-gen network initiative, also known as the 21st Century Network (or 21 CN, for short) RFP. This ambitious undertaking calls for the building of a new network, followed by the switching off of older PSTN infrastructure by the end of decade, and is pegged at £10 billion ($18.7 billion). 

Companies in the running include Alcatel (access and Ethernet), Cisco (which might see some action involving its new CRS-1 core router and hopes to leverage its long standing relationship with BT), Fujitsu (DSLAMs), Marconi (which is a long-term supplier to BT, and one of the favorites to win a part of the VoIP buildout; there will be lots of lobbying for Marconi), and Siemens (one of BT's strategic suppliers, providing gear such as the HiPath next-gen line).  There could be also some companies which can benefit from partnerships to win a portion of this business, such as Sonus, which has a non-exclusive partnership with Marconi (if Marconi is one of the winners, it will leverage Sonus' gateway)

   more »

Nordic Wireless had an interesting post on the success of Japan's new polyphonic ring tones download service called “EZ Chaku-Uta-Full”. These polyphonic songs play 64 notes simultaneously and can be downloaded to mobile phones via 3G networks.  The service made its debut in mid-November of last year, and notched 1 million downloads within a span of 48 days: on January 5th, KDDI and Okinawa Cellular (a KDDI company) announced that milestone.  As of January, only KDDI was offering chaku-uta in Japan, with four handset models being supported and a base of 410,000 users.

What does this mean?  Can we have a future in which there will be more chaku-uta downloads on the wireless networks than i-Tunes downloads on the wired Internet?  Well, the graph below certainly suggests that, as the chaku-uta full service has had a much faster ramp-up.  One key takeaway is that for some applications, the mobile network might actually be the preferred means to get a service (particularly with the advent of HSDPA and burst data rates of up to 14.2 Mbps).  Another one is that the iPod will get more competition not only from Dell, Virgin, Creative Labs, IRiber and Archos, but also from cell phone manufacturers, which will embed mp3 functionality on their handsets and team up with service providers offering chaku-uta-like services.

   more »

Since I was at 3GSM and VON, I could not attend CTIA this past week, but a friend gave me some interesting information about 3G developments in China. There was quite a bit of chatter in both New Orleans and Cannes that the 3G licenses in China would finally be issued by the end of 2005. Apparently, China Unicom mentioned that any service provider consolidation or reorganization would be revealed by that time frame. That is why there is an expectation that the first equipment contracts will be issued the end of the year or  the start of 2006.

Nortel (NYSE:NT) was bullish about its 3G chances in China.  The company hopes to leverage their current incumbent position with China Unicom (having roughly a 20% share of the Unicom account) into an EV-DO contract once 3G licenses are issued.  Nortel was also optimistic about taking advantage of its JV with LG to win some more business in South Korea, hoping to benefit from the KTF and the SK Telecom buildouts.

   more »

Since I saw Larry Borsato mention some figures in the 99.999% availability requirement-for-VoIP-networks debate, I decided it was time for me to dust off my networking theory book and implement Erlang's formula on an Excel spreadsheet using VBA, to get a better feel for how much each "9" matters.

Here are the results that I got:

Availability	Associated Downtime per Year
99%	87 hours and 36 minutes
99.5%	43 hours and 48 minutes
99.95%	4 hours and 23 minutes
99.99%	53 minutes
99.999%	5 minutes

Again, in Greg Galitzine's example, a Verizon bureaucrat's two plus days delay in dispatching a technician to handle the case resulted in service availability going down from 99.999% to under 99.5%... wow! - how quickly that number can fall!

   more »

About a week ago, I wrote an entry asking how reliable VoIP should be and mentioned some research that was conducted by Professor Henning Schulzrinne and one of his students (Wenyu Jiang) at Columbia University.  The actual research on VoIP service availability in the Internet was conducted a while ago (the paper was presented at the PAM (Passive and Active Measurement) Workshop in La Jolla, CA back in April 2003.  That particular study reported that when the Internet is used as the transport network, the VoIP service availability is approximately 98 percent.  The key factors in arriving at this figure were the call success probability (on average 0.47 percent) and the outage-induced call abortion probability (i.e., the likelihood of the caller hanging up after a service interruption, found to be on average equal to 1.53 percent). Combined, the results yielded a net service availability of roughly 98 percent.

Then, I mentioned the Ofcom figure of service availability for wireless networks in the UK (running at a rate of 97 to 98 percent service availability, according to a 2002 survey).  My intent was just to talk about the social aspects of VoIP, and to speculate about how some of the technology's early adopters were willing to tolerate something in between the availability of wireless service and the "assumed" 99.999% POTS figure (I say "assumed" because of stories such as Greg Galitzine, whose Verizon service outage of more than two days took his POTS availability to less than 99.5% for the year).

Well, Om Malik jumped all over my post, believing that I was really prescribing VoIP as a POTS replacement technology at a smaller availability than the status-quo.  Of course, that was not the case at all.  I was just putting myself on the shoes of a new entrant to the marketplace, and trying to figure out how much is needed as a minimum initial threshold, until more mindshare and market share are captured, before making a higher CAPEX commitment to raise the bar of the service. 

The fact of the matter is that, on a controlled network, one can greatly improve the availability, by adding redundancy (e.g. using RAID hard drives and "hot standby" servers or by implementing a highly reliable LAN/WAN design with multiple switches and routers at the Layer 2 and Layer 3 network levels for redundant connections and call paths).  These more highly available systems require more equipment and supported communications links, thereby increasing the overall system cost.  I was just trying to ask how much each 9 is worth, and what are the tradeoffs in terms of what the investment requirements are and what the customers are willing to accept.

Of course five 9s is highly desirable, because of the possible consequences of a service outage (even as temporary as it might be).  Here, the notion of expected value takes hold - i.e. even starting with a low probability event, when factoring in the bad consequences associated with it, the expected value could be high (e.g. someone who is relying on VoIP service as a primary line and all of a sudden cannot call an ambulance due to a service interruption).  That is why I advocate adherence to this high availability target.  But Rome was not built in one day - and neither were fully redundant, highly available and controlled VoIP networks, so this will be a gradual process.

One final comment - five nines as a goal should be pursued only when VoIP is to be relied on as the only means of communication, but with the advent of data apps (IM, web collaboration, etc) and the proliferation of mobile networks (3G, WiFi, and eventually WiMax), other means of communication are becoming widely popular, which means that POTS is no longer as exclusive as it once was.  It is important to keep in mind that when the POTS network was built, the telephone was the only game in town, and that was a key consideration that had to be factored in the design of that network.

   more »

Research in Motion (Nasdaq:RIMM) shareholders were probably jumping for joy after the company announced yesterday that it reached a favorable settlement with NTP on their ongoing dispute over some intellectual property rights.  Some expected much worse than the deal that RIMM was able to arrive at, including not only an upfront cash settlement, but also a hefty ongoing royalty.  As it turned out, the company managed to settle all the damages from the previous infringement and to gain a paid-up perpetual licence for $450 million (apportioned as follows: $137 for past and $313 for future infringements). 

Now investors can forget about this issue and start focusing on the fundamentals behind the stock, and the increased competition that is looming over the horizon.  The addressable market opportunity is still a substantial one, with China providing a good upside, particularly considering a potential rollout at China Mobile.  Furthermore, the Fast100 Program (calling for a rollout of RIMM's platform at 100 small carriers on an accelerated basis) remains on track.

   more »

An insider Wall Street source called me today to let me know that a White House official hinted that Kevin Martin will be named as the new Chairman of the FCC, following the departure of Michael Powell.

Many had considered Martin to be the favorite in succeeding Powell, due to the fact that he already has considerable regulator experience (4+ years at the FCC), the fact that he worked on President Bush's campaign, and that his wife is an assistant to the President on economic policy.

It will be interesting to see what Martin brings to the table, particularly regarding the VoIP friendly stance that was adopted by Powell.  Although Martin has clashed with Powell before (on local phone competition back in 2003), he maintained the party line for the most part of his FCC tenure.

   more »

One interesting thing that happened while I was in Cannes last month at 3GSM was the frequency that I would hear the default Nokia ringtone song.  Particularly when attending press conferences of some rival equipment vendors (such as Ericsson or Siemens).  It seemed that the standard Nokia tune kept getting played and disturbing some of these events (one fellow even joked that Nokia always had someone planted in the audience with a cell phone, but it could have been just a coincidence, as attendees often forget to mute their cell phones and put them on vibrate mode).

Well, one Finnish colleague told me that the song is nothing more than just a piece by Jean Sibelius (the Finnish composer shown on the photo, who authored a piece called Finlandia, which later became the country's national anthem) simply played backwards.  I was a bit puzzled, since I never heard the story.

As it turns out, he was pulling my leg.  I did a bit of digging and found out that in fact, the tune comes from a classical guitar work called Gran Vals, which was composed by Francisco Tarrega in the 19th century.  I was also able to discover a good article detailing the history of ringtones.

   more »

Jeff Pulver was a guest speaker yesterday at a dinner event hosted by Ditech Communications, a major sponsor of Spring VON.  Ditech delivers echo cancellation and voice processing products used by wireline, wireless and VoIP service providers. 

One of the highlights of his speech was his lobbying for a wider adoption of wideband CODECs in the VoIP world.  The impressive uptake of IP phones and the imminent roll out of 3G wireless handsets have both generated a substantial opportunity to deliver better than toll-quality audio performance in the new packet-based telephone network.

This better than toll-quality sound can be obtained by using the capabilities of the data network that is not limited to 8-KHz sampling rate (about a 4-KHz pass-band) present in the existing telephone network.  Jeff's point is valid, since inexpensive DSPs can compress wide bandwidth signals for transmission over the packet network, and a slightly bigger bandwidth consumption should no longer be a major issue.  If I were a VoIP marketer, I would love to play side-by-side two clips: one with G.711 and one with G.722, and then explain that the first clip was legacy wireline sound, whereas the second really captures the essence of VoIP - being able to deliver a much better sound quality.

   more »

Much has been written about Nortel's appointment of a new COO and President on March 4th.  Gary Daichendt, who has remained pretty much on the sidelines of the telecom world since stepping down from Cisco after a six year tenure in 2000, is the newest exec to join Nortel.  Daichendt was the VP of worldwide sales at Cisco (just one of two VPs reporting directly to CEO John Chambers, with whom he worked both at IBM and Wang Laboratories). 

As a result, Nortel CEO Bill Owens will give up his title of President, while becoming Board Co-Chairman, while new CFO Peter Currie will gain the extra title of Executive Vice President.  The fact that Owens will get expanded powers as the CEO (as a co-chair in the board) and that his handpicked CFO is getting the exec VP title indicate that the Nortel Board might not be preparing to replace Owens with an executive with more industry experience, contrary to some views expressed in the blogsphere. 

However, Owens nearly impeccable reputation got a bit stained when Nortel's accounting department failed on repeated occasions to deliver SEC filings by certain deadlines promised by him.  In January, the failure to deliver at least Q3 2004 results by the end month might have resulted in the departure of Bill Kerr as the CFO, and the appointment of Peter Currie to the job.  While Mr. Kerr was planning to step down anyway, the word on Wall Street was that the switch was triggered by this latest setback in reporting results on time.  Currie became the company's sixth CFO in the past five years.

So what does Daichendt's hiring mean?  Of course, he brings a lot of intangibles to the table, including his extensive telecom background, which is particularly important when attempting to secure major carrier deals where industry know-how is sine-qua-non for understanding deal lingo.  Bringing in an IP champion in the executive suite also shows Nortel's commitment to the technology, as the market transitions from TDM-based equipment to packet switched gear.  The company certainly has been further along in incorporating IP-based technologies into its product mix.

   more »

Om Malik reported on the outages of Vonage and Lingo last weekend, and also a similar instance last year with AT&T's CallVantage service.  He wonders what the impact will be in terms of customer satisfaction, once users realize that current VoIP services will be hard pressed to deliver a service that matches the 99.999% reliability of a carrier. 

While the above mentioned service outages make one ponder on the availability of VoIP, I wonder whether the bulk of the current VoIP users really have such high expectations about the reliability of the service.  Or, even more importantly if they are able to live with less than 99%+ reliability.  The question is: is that carrier-grade reliability necessary for the current early adopters of VoIP?  Particularly when considering that with the advent of mobile communications, the end-user tolerance for noisy lines, dropped calls, etc. has gone way up.

Columbia University Computer Science Professor Henning Schulzrinne has been determining the availability of an average VoIP call as early as April 2003.  One of his findings is that when the Internet is used as the transport network, net VoIP service availability is approximately 98 percent.

Recall that VoIP service availability is defined as the likelihood of a VoIP call being successfully established on the caller’s first attempt. To put the 98 percent number in context, the PSTN runs at an availability rate of 99.99% to 99.999%, whereas mobile networks in the UK run at a rate of 97 to 98 percent service availability (according to a 2002 survey ran by Ofcom, the Office of Communications, which is the is the regulator for the UK telecom industry).

Professor Schulzrinne's findings show that the early adopters of VoIP services relying on the Internet for transport are already used to living with less than even two nines worth of availability.  So how important really is the 99.999% figure?  Perhaps all that is required for the VoIP SPs using their own networks is sufficient CAPEX to fine tune these networks to offer just enough availability.  And how much is "just enough"?  I would say somewhere in the middle between the availability of wireless and POTS services.  It would be interesting exercise to estimate how much CAPEX each 9 is worth...

   more »

The MCI sweepstakes soap opera took yet another twist this past Thursday (March 3rd), when Carlos Slim Helu (the richest man in Latin America, owner of Telmex and America Movil, and MCI's largest shareholder with a 13.7% stake) announced his opposition to the deal with Verizon.  On the other hand, he also called Qwest's offer "insufficient". Thus far, at least 26% of MCI's shareholders have voiced their opposition to the most recent offer that Verizon has put on the table.

No wonder Slim is ranked #17 at Forbes' list famous "World's Richest People" ranking.  Many believe he invested nearly $300 million in WorldCom bonds, after the IXC went into bankruptcy protection.  Those bonds were later converted into almost 43 million shares once MCI was listed on the Nasdaq, which led to his holding 13.7% of the company stock.  Another investment that made him money recently is Global Crossing.

Although Verizon's offer ($6.75 billion) is considered to be right at the fair value of MCI, Qwest's $8 billion offer is slightly better.  A further increase in Verizon's offer will definitely be gravy for MCI shareholders, but the size of the deal is small enough that a higher offer would only entail a modest decrease in the consensus Wall Street valuation of Verizon stock.  

   more »

Madison River Communications, a North Carolina telecom service provider, has been assessed a $15,000 fine by the FCC.  The company, which operates four RLECs in the Southeast and Midwest US, was engaged in "port blocking" all VoIP traffic on its networks.  Madison River was trying to impede certain types of traffic, including VoIP packets, and Vonage took notice, filing a complaint with the FCC.  Departing Chairman Michael Powell, issued the hefty fine, to be paid to the government, and issued a decree preventing Madison River from engaging in this practice for 30 months.  Apparently, Vonage is not the only VoIP carrier affected by port blocking: even smaller players such as Nuvio (a small VoIP SP from Kansas City) had its VoIP traffic blocked by a cable operator. 

   more »

Virgin Mobile launched its service in Canada earlier this week, in a truly grandiose style: Sir Richard Branson (photo), the company founder, jumped from an office building and performed a few other stunts.

Obviously, the company will go after the casual users that do not want to be bound by long-term contracts, as well as the youth segment, which is typically more cost conscious (the very same segment to which Fido used to cater to).  Of course, now that City Fido is gone, many look to Virgin as being the true disruptor in the Canadian wireless service landscape.  The truth is that not too many of the City Fido users per se will be jumping ship to Virgin (after all, these are "all you can eat" type of consumers that are seeking a cheap large volume deal, and to them, the 10-25 cent a minute pre-paid deal might prove to be a bit steep), but the casual Fido users definitely will consider flocking over to the Virgin camp.  The same holds true for Telus and Bell Mobility casual users. 

I suspect that Virgin will cause some disruption, and I welcome that.  For one thing, by charging a per-minute fee of 10 to 25 cents, Virgin can offer free features such as voice mail, call waiting, call forwarding and three-way calling.  Also, Virgin will push for wireless number portability (the CRTC has been so morose in pushing for that initiative that the Canadian Government has requested the CRTC to expedite the issue in this year's budget, but Virgin will be lobbying alongside).  Another issue that Virgin will challenge is the controversial $7 system access fee, which does not exist anywhere else in the world.

The Virgin model is about to be proven in Canada, which should prove to be a fertile ground for MVNOs, due to the oligopolistic nature of its mobile communications market.  Hopefully, consumers will win as competition returns.  For more info about Virgin and its charismatic founder (Sir Richard Branson), here is a great interview conducted by Mark Evans, the senior telecom reporter for the National Post.  Definitely, a very enjoyable read.

   more »

A growing proportion of cellular phone shipments are replacements (last year, almost 60 percent).  So it's no wonder every year, we see new handset models, as vendors try to incorporate new functionality to drive up replacements.  Over this past year, there was added emphasis placed on camera phones, which are great not only for the handset manufacturers themselves, but also for operators because they can hopefully increase data traffic.  So it was no wonder to see the so many models having built-in cameras at 3GSM, including the sleek Motorola SLVR V8 show on the figure (hat tip: Gizmodo).  The model is really compact and features tri-band capabilities (GSM/GPRS/EDGE), 5 Megs of memory, Bluetooth support, color display, push-to-talk, MP3 playback, and an MPEG4 VGA camera.

Camera phones are tracking at about 50% of new handset shipments in Western Europe, and part of the reason for their success is that vendors have been able to keep the costs down (the integrated camera models is about 5% of the total bill of materials for the handset).  One of my own biggest questions from 3GSM was - will users want a cell phone that can take pictures or a camera that can make phone calls?  Honestly, one could almost not tell the two apart.

   more »

Upon hearing that MCI (Nasdaq:MCIP) shareholders had questioned the wisdom of accepting a $6.64 billion offer from Verizon (NYSE:VZ) rather than an initial $8 million bid from Qwest (NYSE:Q), it seems that Qwest executives decided to up their ante and submit a revised $8 million offer with more guarantees and upfront money.  The idea is to offer more cash up front and also protect MCI if Qwest shares drop by as much as 10% before the deal closes. 

The reason that some MCI execs initially were more inclined to accept the Verizon bid (even though it came in lower than Qwest's) was the debt that Qwest is currently burdened with ($17 billion).  The reality is that while Qwest is the incumbent in 14 Western and Midwestern states, it faces a lot of competition for HSI (High Speed Internet) and cable TV services.  The company incurred more debt when building its state-of-the-art national fiber optic network. 

This latest offer will get the full consideration from the MCI board, but predicting its reaction is difficult, considering the public manner in which the bid was made and the turbulence of some of the shareholders.  It could very well mean that MCI will leverage this latest Qwest bid to get more money from Verizon.  But the million dollar question is how much more MCI will be able to fetch from Verizon - some folks in Wall Street are guessing that increase will not be very significant (less than $0.50 per Verizon share). 

   more »

Alcatel (NYSE:ALA) announced a couple of days ago a partnership with Microsoft (Nasdaq:MSFT) geared towards developing an integrated IPTV delivery solution.  The idea is enable MSOs to deploy IPTV faster and cheaper.  This relationship is the first significant one that unites a major triple play solution vendor and one of the top IPTV software vendors.

Interestingly enough, prior to signing this agreement, Microsoft and Alcatel were competing in the IPTV middleware segment (in fact, Telecom Italia was trialing both platforms).  Alcatel had acquired a couple of software houses to create its own IPTV offering (the Open Media Suite).  But Microsoft kept piling win after win (SBC, Verizon, a trial at Bell South, and Swisscom. among others), and Alcatel had to implement Microsoft's IPTV system in deals where it was the primary equipment supplier for DSLAMs and routers (such as SBC, for instance).

So nothing like a partnership to solve the issues.  By jointly developing an IPTV solution with Microsoft, Alcatel saves considerable system integration time (since it can integrate Microsoft's software into its hardware).  Microsoft wins a way to tap into the world's large carriers.   

   more »

Om Malik reports on the ongoing broadband price war in India, where $8 a month can get you a basic 256 kbps service from Bharti Telecom (still nothing compared to the French broadband bonanza that was discussed previously here, but cheaper than Indian incumbents BSNL and MTNL).  The original story appeared on the Times of India, and is worth reading.

The part of Om's blog entry that I found interesting was his comment on how difficult it was to get a phone line in the old days (often entailing bribes).  Well, my experience growing up in Brazil was not much different: getting a line from TELESP in the good old days was very, very difficult, and the wait was enormous (baksheesh in India was better, because at least that is a bit faster - in São Paulo, there were bribes and on top of that, there were middlemen... really, there were "brokers" who got into the game and used to charge extra bribes supposedly for faster turnaround times).  Of course, this was way back in the late 70's-early 80's and many years before Telefonica entered the market.

   more »

Tom Evslin wrote a great insight on the topic of vertical integration and how it is no longer a sound business strategy (hat tip: Fred Wilson from A VC).  It is an excellent article that explains the transition from vertical to horizontal integration.  IBM, Tom argues, was in the older days of computing the typical model of vertical integration: it made the hardware, chips, application software, OS, and even peripherals, while also providing instruction, consulting services and accessories.  However, with the advent of the microcomputer, a paradigm shift took place, with the business changing to a horizontal model: Intel became the microprocessor king, while Microsoft dominated the OS and applications.  IBM had to change itself, and managed to adapt to the new environment thanks to initiatives such as IBM Global Services, although it is not the dominant force it once was.

Tom wonders whether or not SBC will be able to make vertical integration work with its acquisition of AT&T.  Clearly, the vertical strategy failed at AT&T, since it lost the opportunity to be an ISP powerhouse and a key local access player.  Tom makes it clear which strategy is his preferred one:

"A horizontal company has a high surface to volume ratio. It sells all of its outputs in a competitive market. It is free to buy all its inputs in a competitive market. Its managers are not isolated from the markets they compete in. A vertical company spends most of its time and energy dealing with itself rather than the external market. Meetings are dominated by esoterica like transfer pricing between divisions because this is what determines internal success. The real marketplace is distant from most of the managers trapped inside the vertical structure. Buy vs. build and capital allocation decisions inside a vertical company are made by office politics in a vain attempt to optimize across the whole vertical organization. Horizontal competitors optimize only for the layer they are competing in and so end up being superior to the vertically integrated company layer by layer."

Read it all! - This is definitely a great insight.

   more »

The search for growth opportunities is getting to be difficult, since mobile operators in some regions such as Western Europe are staring at nearly 90% penetration rate. In North America, the take rate of cellular phones is in the 50-60% range, so the market is not quite as saturated, but the growth prospects are not as bright as they once were.

Increasingly, wireless service providers are seeking to make investments in emerging markets such as Asia/Pacific (penetration in the mid teens), Caribbean and Latin America (penetration at about 20 percent) or Eastern Europe (penetration moving closer to 40%). Take Norway’s Telenor, for instance, which has been that country’s incumbent for nearly 150 years. Faced with a domestic market that was nearly tapped out, Telenor started taking ownership positions in a few foreign operators in countries such as Bangladesh, Pakistan, Russia and Ukraine.

The Pakistani fully owned subsidiary is expected to be launched in April, and there is optimism about the success of that operation, given the low penetration in the region (less than 5%). In Russia’s case, Telenor only owns a 30% stake at Vimpelcom, but the future is looking bright, considering the nearly 8.5 million net adds registered for the entire Russian market last December, which represents more new customers than what all Chinese operators gained during the same period. These foreign investments catapulted Telenor to the 12th spot in the world, with an installed base of around 50 million subs and roughly 19 million net adds in 2004.

Of course, closer to home Cingular prevailed over Vodafone in the AT&T Wireless stakes, thanks to a last-minute bid that triggered a late night board meeting (the idea being not to give Vodafone a chance to up the ante because of the time zone difference).  But after a few so-so investments in regions such as Brazil, are American operators ready to take the plunge again and try their luck with emerging markets?

   more »

There was a flurry of WiMax events last week, which definitely were positive for a wider uptake of the technology. WiMax got quite a bit of attention at 3GSM, partly because of the high throughputs it can offer (15 Mbps, which is comparable to HSDPA). Despite that, most of the talks focused on WiMax as an alternative for fixed line broadband, emphasizing that the opportunities lie mostly in rural markets (with WiMax being used instead of ADSL buildouts). Here are a few announcements:

- Alcatel and Intel announced that they will jointly develop WiMax products based on the WiMax mobile spec (IEEE 802.16e) in mid-2006.  Alcatel already sells fixed WiMax (802.16d) products from Alvarion.  Alcatel plans to price the technology to consumers somewhere between DSL and 3G.

- T-Mobile introduced WiMax net access for UK trains, relying on the technology as a way to uplink to the Internet.  WiMax allows T-Mobile users with Wi-Fi access to get Internet access on the go by sharing the 32 Mbps WiMax connection, which should be plenty for a large number of concurrent riders. 

- In Malaysia, a number of equipment manufacturers are already trialing handsets that use mobile WiMax and other new wireless technologies, with commercial launches expected within less than year.

- Cisco is paying more attention to WiMax

- Sprint has joined the WiMax Forum

- DirectNet (leading Brazilian ISP) ordered WiMax gear from Alvarion totaling $1 million over the last few months.

Hopefully, some of the WiMax skeptics will start seeing the glass half full rather than half empty

   more »

Cannes certainly is a very charming setting and has gained a lot of acclaim with events such as the famous Cannes Film Festival or the Formula One Grand Prix in nearby Monaco. But the overall consensus was throughout the 3GSM show was that the French Riviera town is a bit stretched to the limit of its current resources to host a conference of this magnitude. So next year, the host city will be Barcelona, although by 2007, the show could be back in Cannes, when the Palais de Congress is expected to be ready (reportedly, it will undergo some renovations geared towards increasing its capacity). Of course, some analysts will miss being briefed on yachts, or conference rooms of classy hotels such as the Majestic or the Carlton Intercontinental.  But the reality is that, given the 35,000 attendants, the current floor space is tight, whereas the infrastructure needs some upgrades or capacity expansions.   more »

One strong indicator of a rebound in the telecom sector has been the wider attendance in the traditional big annual events, and 3GSM is no exception to that trend. This year’s audience has been one of the biggest over the past few years, with quite a few notable developments, including, among others:

- gizmos galore: lots of mobile handsets that I have never seen on the other side of the Atlantic, including the introductions of a variety of new phone models.  There have been a few new models introduced, including Motorola's impressive slim black Razr.

- Microsoft made a full court press with its wireless initiatives in the enterprise and carrier spaces.  The Peabody is a new GSM/GPRS low-cost platform based on the Windows Mobile software.  Although Microsoft finally overtook Palm in the handheld market, the mobile phone market still remains an elusive target.  The company claimed that Microsoft Windows Mobile-based devices are capable of yielding a higher jump in ARPU than its competitors (37% higher).  On the enterprise front, Microsoft secured another ActiveSync licensing agreement, this time with Nokia, which joins Motorola and palmOne.  Microsoft also added Flextronics to its Smartphone ecosystem. 

- the IMS (IP Multimedia Subsystem) architecture is being covered in several sessions, including Convedia co-founder Grant Henderson’s talk today (Convedia is a key IMS enabler, being the de-facto leader in media servers).  IMS is a framework that provides a SIP-based control layer with open interfaces to the transport layer below and the services layer above. This will allow wireline, wireless and cable operators control over services on a per-session basis. Even though the original IMS concept was originally defined as a 3GPP specification, the IETF also is developing the standard, and even CableLabs is incorporating the IMS concept into its planning.

The pace has been quite hectic today, and considering that Monday is supposedly a "slow" day at 3GSM, perhaps this is indicative of many more new product launches and announcements to come.

   more »

Nortel (NYSE:NT) and Research in Motion (Nasdaq:RIMM) signed an agreement under which BlackBerry devices will have added VoIP capabilities via Wi-Fi.  This will require a tight integration between RIM's BlackBerry enterprise platform and Nortel's CSE 5100 multimedia server.  As announced at VoiceCon 2005, the first model to incorporate this feature will be the BlackBerry 7270, albeit it will be a VoIP-only device (to be used not only in enterprises, but also over public WLAN hotsports).  However, the future is really all about seamless roaming, so the market is IMHO ready for a dual mode BlackBerry that could function in 2.5/3G mode or in Wi-Fi/WLAN mode. 

Note: RIM also signed a similar partnership deal with 3Com, which will use its own IP PBX and WLAN switch (licensed from Trapeze).

   more »

Andy Abramson reported on the EU´s recent "light touch" approach in regulating VoIP.  It looks like the folks from Strasbourg are taking a page out of the FCC's book (i.e. the VoIP friendly strategy employed by Chairman Michael Powell).  The key decision driver for the EU is to increase the broadband penetration for all its current members (which currently stands as only 6.5 percent on average for the EU 25).  The idea is to offer new services such as VoIP at more attractive prices by stimulating the competitive environment.  The ruling clearly states in one paragraph:

The Commission favours an EU-wide “light touch” approach to Internet telephony as the best way to encourage competition between internet carriers of telephone traffic and traditional telephone networks. As the market develops, the European Commission intends to ensure, jointly with the national regulators, that throughout the EU, the roll-out of new IP-based services will not be hindered by regulatory hurdles. It is in the interest of Europe’s businesses and citizens that new technologies should be able to flourish and deliver better services at lower cost.

Wouldn't it be nice to see the CRTC follow suit and also establish an equal level playing field in Canada?  Hopefully, if enough regulatory bodies worldwide endorse a similar position, this has a better chance of happening.

   more »

Rodrigo Sepúlveda Schulz (hat tip: Om Malik) reports on the incredible broadband price wars going on in the French market.  For instance, free.Fr offers 20 Mbps service for €29.99, or $1.50 euros per Mb/s a month.  Neuf (subway ad shown to the right) has an 8 Mbps access monthly package for €14.90, whereas Noos (an MSO) offers 10 Mbps for €10 a month. 

So what's behind all this?  Could it all be due to France Telecom's decision to "be all it can be" (to borrow the catch phrase for US Army recruitment)?  France Telecom (FT) opted to offer the maximum throughput available on all ADSL lines in France, having pretty much reached an almost universal plateau of 6 megs to the majority of its customers last year.  This is in sharp contrast to its neighboring incumbents (BT and Deutsche Telekom), that are still engaged in limiting their DSL data rates.  FT's DSL penetration is roughly 90 percent and is expected to grow over 95 percent this year.  Also, this year, ADSL 2+ will be deployed and speeds will go up to 16 Mbps (pretty amazing).

But despite all that progress, Rodrigo wonders whether or not these service providers are committing harakiri in dropping rates so low that even costs are no longer covered.  I am drooling thinking "what if" Bell Sympatico and Rogers could ever offer us such value (dream on).  But what will the French net citizens do with so much bandwidth?  That's a pretty valid question.  HDTV is roughly 19 Mbps, and one of the highest riders.  Perhaps video conferencing? 

What if Vonage were to offer a three-way conference calling service in France and call it "Vonage à Trois"?  Are you laughing?  It certainly would not be beyond the realm of possibility.  Mark Evans reported on a poll that Vonage Canada conducted with the help of Decima Research, geared towards finding out who people would want to engage in phone sex with.  The result?  Brad Pitt (the top choice for the ladies) and Angelina Jolie (the top gentlemen's pick).  This is all a part of a branding campaign launched just in time before Valentine's Day.

   more »

Despite some gloomy forecasts out there about the wireline capex impact of the fusion between SBC and AT&T, there will be also a few opportunities to be had.  Management's guidance was that there is little impact in capex plans for 2005 and that there will be some savings of 3% of their total budgets (roughly $200 million).  It is debatable whether or not those will hold true, but the fact remains that AT&T (NYSE:T) and SBC (NYSE:SBC) mostly have a non-overlapping footprint (with the exception of some of AT&T's metro networks). 

From a TDM switching perspective, the legacy Lucent and Nortel Class 4 and 5 switches will stay in the SBC network until either their useful lifetime expires or there is a real compelling business case for migration to IP.  SBC has been evaluating softswitches from Alcatel, Nortel and Sonus for quite sometime, and there are some rumors that Nortel might have a slight edge over its competitors.  While SBC has been slow out of the gate in replacing its Class 5 infrastructure (when compared to Verizon), it could be conceivable that the new SBC might accelerate those plans, particularly considering the IP-centric nature of AT&T's core.

On the AT&T side, a capacity upgrade of the backbone might become necessary to support the extra SBC traffic, with such a deal being pegged at a quarter of a billion dollars.  The usual DWDM suspects will be in the running for such an RFP when it is announced, including Lucent and Siemens.  It is also likely that AT&T will develop some video infrastructure to support the offering of triple play services.

Regardless of the above-mentioned opportunities, it is true that historically, carrier consolidation disrupts vendor sales.  At the end of the day, a vendor like Cisco might sell less IP gear because SBC might no longer have to build its backbone on a nationwide scale.  But the flip side of that argument is that if carriers are integrating networks, this might accelerate the migration to an IP infrastructure. Also, the pursuit of synergies might lead a carrier like SBC/AT&T to pursue a newer architecture such as IMS (IP Multimedia subsystems).

   more »

Tyler Hamilton writes about the imminent launch of Virgin Mobile Canada (around March 1). He believes that the clues are manifold: Sir Richard Branson (the flamboyant multi-millionaire) is coming to Toronto to participate in an upcoming Canadian Club lunch event (in March), more front-line sales activity and perhaps the fact that there is no longer a low-entry option for the young, consumer market segment, now that Rogers killed the old City Fido plan, so what better time than to grab those customers.  Coincidentally, Virgin will go after that exact same clientele that Fido once did (before it got neutered).  Which makes one wonder why Virgin and Bell could not have made a stronger play for Microcell after the initial low-ball offer from Telus?  Granted, it was a different network, but it would have gotten Bell a piece of the GSM action, something which Virgin Mobile is quite familiar with.  Besides, just having the same infrastructure will not eliminate other headaches such as OSS/billing integration, etc.

So here is some hope that the entrance of Virgin might shake up this otherwise oligopolistic market - although to follow the musical thread from the previous post, I would not even hold out as much hope for that, slapping on an andante tempo on cellular price drops... (the reason being that Virgin will rely on Bell Mobility's network).

   more »

Characterizing the market development of VoIP and the overall adoption of the technology can be tricky sometimes: one has to take the good news items and the bad ones and then try to see how they fit within the big picture.  There are many people drinking the VoIP Kool Aid and believing that the Class 5 switch to softswitch migration can take place within five years or that the entire enterprise installed TDM PBX base can migrate to IP PBXs by 2006. History shows that these transitions take far more time (witness how long it took for switches like the DMS to be deployed worldwide or how long the "digital PBX revolution" took). 

Despite that, there has been an incredible amount of optimism within the VoIP industry particularly during the past year (witness the great increase in attendance of conferences such as VON, Internet Telephony, and VoiceCon).  Perhaps the best way to temper some of these high expectations is to use a musical term: allegro ma non troppo.  This Italian tempo marking literally means "quick but not too quick".

Here are a couple of examples that suggest that VoIP's tempo is definitely not the presto that some are suggesting.  Om Malik wrote in his blog about a Forrester survey that found that only 13% of consumers were "interested" or "very interested" in VoIP.  Furthermore, that interest only goes up when consumers have a tangible benefit such as savings.  And, closer to home, Mark Evans mentions a Pollara survey that suggests that only 9% of Canadian Internet users would buy Internet service if it were priced at $20 per month.

   more »