Telekom Austria Wants to Buy Serbia Broadband

Telekom Austria wants to buy cable operator Serbia Broadband, a deal that might cost as much as  1 billion euros ($1.3 billion), and illustrates a number of key trends in the European telecom market.

As now is clear in virtually every developed telecom market, organic growth, when it can be obtained, is very difficult. That always makes rational a search for growth by acquisition. 

Such acquisitions also often tend to make more sense "out of region" than in domestic markets.

Also, it also sometimes makes sense to diversify into complementary or other strategic assets, as in this case where a telco (fixed and mobile) wants to buy into a cable TV broadband asset. 

Telekom Austria owns mobile operations in Serbia,Croatia and Slovenia and is looking to add fixed-line assets in the region as well. 

What is noteworthy, at least in part, is the choice of a cable TV asset rather than a "telco" asset. That is at least partly a recognition that a cable TV network is, by definition, a broadband access network. 

NSA Spying: How Can We Trust Anything You Now Say?

In the wake of newly revealed scandals about the extent of National Security Agency spying, a reasonable person would be permitted to say he or she no longer believes, or trusts, the NSA or the executive and legislative or judicial branches of government that supposedly police such spying. 

"The three pillars of American trust have fallen," the Electronic Frontier Foundation says. "It's time to get a full reckoning and build a new house from the wreckage, but it has to start with some honesty."

A government that loses the trust of its people is in trouble.

Is Square "Western Union?"

Square, the mobile payment service, has been fined  $507,000 by Florida’s Office of Financial Regulation for operating a payment service without a money transmission license.

In other words, Square is being regulated like an entity used to send funds from one person to another, such as Western Union. Some of us think that is crazy. Square is a retailer cash register. 

But never underestimate the abiliy of an increasingly-overweight administrative state, and its legions of bureaucrats, to come up with new ways to control the lives of its citizens and impose new taxes (oh right, those are just "fees," not taxes) by fiat. 

Square is not a money transfer service, such as Western Union. It is a cash register. 

TOT Delays 3G Expansion in Thailand

TOT, the Thailand-based mobile service provider, has delayed plans for an expansion of its third generation network, because of funding concerns.

TOT’s 3G network includes 4800 base stations. The proposed THB30 billion network expansion would have added 15,000 more base stations.

But the Thai government, whose approval is required, wants TOT to spend THB38 billion. 

TOT also has announced plans to expand its Wi-Fi network to 150,000 hotspots by the end of 2014, as part of the ICT ministry-backed Smart Thailand program.

TOT already has deployed 10,000 Wi-Fi hotspots while a total of 120,000 hotspots have been deployed by other agencies as part of the initiative. 

Some 20,000 TOT hotspots are planned for Bangkok, with another 130,000 to be deployed nationwide.

Google Fiber in Provo Prices Same as Kansas City

Google Fiber in Provo, Utah will be priced the same way as Google Fiber in Kansas City. People will be able to sign up for free 5 Mbps download/1 Mbps upload service, with the offer guaranteed for seven years.

Symmetrical gigabit access is priced at $70 a month.

When bundled with Google's video entertainment service, the dual-play package will cost $120 a month.

Using a Drone-Mounted Camera to See what a Surfer Sees "In the Water"

If you've ever seen a picture of a surfer (the ocean kind), shot from shore, you have one view of what's going on, but you can't see what the surfer sees while on the wave. 

Sometimes you see a head-mounted camera shot, and that gives you a different sense of what the rider is experiencing. 

But here's something I have never seen before, namely a video camera apparently mounted on some sort of drone, that is shooting from above the rider and along the ride itself. 

As somebody who used to spend lots of time in the water, this is closer to what the rider sees: how you know the wave is moving over shallower water and is going to wall up, or moving over deeper water, and about to reform. 

In the former case, you need to drive faster to make the section, or you'll be in the soup (the white water).  In the latter case, you need to cut back, to ride the most-powerful part of the wave (the curl). 

It's fun. A great way to waste about three minutes. 

Skype Will be Native Part of Windows 8.1 Start Screen

A decade ago, many observers might have argued it would be provocative if a major over the top communications app was made a basic part of the Windows operating system, since that would make communications a basic part of the PC operating system. 

But it now seems nobody will protest when Skype becomes part of Windows 8.1, eliminating the need to download a client.

Insrtead, Skype will be "front-and-center" as a native part of the Windows 8.1 experience.

That shows how much the communications market has changed. Communicating using an over the top messaging app simply is a daily part of Internet experiences for many people. Microsoft doesn't really have to worry about angering its business partners by building Skype right into the operating system. 

"Communicating, connecting and sharing should be a seamless part of every Windows experience," Skype says. 

International telephone traffic grew five percent in 2012, to 490 billion minutes, according to TeleGeography. 

However, as call volumes continue to grow, so do the challenges facing the international long-distance industry. But as any industry excecutive can tell you, calling volumes are different from calling prices. 

International migration, the rapid uptake of mobile phones in developing countries, and steady reductions in international call prices, especially in the form of flat-rate and free calling plans, have contributed to traffic increases. 

Nevertheless, recent volume growth rates are well below the 13 percent average annual increases in volume that carriers could count on to offset price declines over much of the past 20 years, TeleGeography says. 

So while international phone traffic growth is slowing, traffic from voice and messaging applications like Skype is growing faster. Cross-border traffic using Skype grew 44 percent in 2012, to 167 billion minutes. 

This increase of nearly 51 billion minutes is more than twice that achieved by all international carriers in the world, combined.

Moreover, if Skype’s traffic were added to the volume of international phone calls, international voice traffic would have grown 13 percent in 2012, in line with historical trends. 

This suggests that the "lost calling volume growth" has been displaced by Skype calling. 

Technology Adoption Rates Show Danger of Getting to Market "Too Early"

If you are familiar with the notion of "hype cycles," you will have some idea why important new technologies quite often take longer than expected to reach critical mass, often said to be the point where 10 percent of households or users have adopted the innovation.

Being late to get into a market can be dangerous, but being too early might be the more prevalent mistake. 

Though the tablet might be the fastest-growing consumer appliance of all time, most devices and appliances take quite a long time to reach ubiquity. 

Consider smart phones, which many rightly consider to be among the faster-growing devices of all time. IBM Simon, with its rudimentary touch screen, in 1993. It didn’t catch on. 

About 2002, personal digital assistants started to have the ability to make and receive phone calls. 

RIM shipped its first BlackBerry about that time. 

In late 2006 only 715,000 smart phones were sold, though, representing just six percent of U.S. mobile phone sales. Up to that point, the smart phone was spreading not much faster than personal computers had done, according to Technology Review.

Still, keep in mind that It took landline telephones about 45 years to get from five percent to 50 percent penetration among U.S. households, and mobile phones took around seven years to reach a similar proportion of consumers. Smart phones have gone from five percent to 40 percent in about four years. 

But it likewise took about 11 years for use of mobile phones to reach 10 percent penetration, so it took about 18 years for use of mobile phones to reach about half of people in the United States. 

Since it took about eight years for smart phone penetration to reach 10 percent of people, and then another seven years to reach half of users, it took about 13 years for smart phones to reach half of U.S. consumers. 

And that has been about the fastest adoption rate of any appliance, in the U.S. market. 

Global adoption of mobile phones in the developing world has been stunningly rapid, as well. 

In 1982, there were 4.6 billion people in the world, and not a single mobile-phone subscriber. 

Today, there are seven billion people in the world and six billion mobile cellular-phone subscriptions. In other words, the world has gone to about 86 percent penetration in about 30 years. 

From the standpoint of human progress, that is fast. From the standpoint of any single company, that is a long time. 

And that is worth keeping in mind. Most truly important consumer technologies take time to reach ubiquity. Would-be market leaders have plenty of time to misjudge market progress, and fail before “ubiquity” is attained.

Content Owners Will Decide Whether Apple Really Has "Cracked the Code" on Internet TV

Steve Jobs famously said shortly before his death that he had “cracked the code” on how to change the TV experience. 

But is it possible Jobs mostly had the insight that a combination of more convenient hardware (tablets or smart phones), easier navigation (no remotes), easier access (seamless integration of Internet and linear TV sources) and the ability to buy programs one at a time for 99 cents would create a dramatically new experience?

It’s hard to say. Perhaps we will understand as early as September 2013; perhaps we will have to wait longer. At least so far, content owners seem unwilling to consider licensing content show by show, as iTunes suppliers now license songs one by one. That suggests the wait for a disruptive TV assault, by Apple or anyone else, is going to a bit longer in coming.

No matter what innovations Apple can create in displays, interfaces and navigation or remote control substitutes, television still is about the content. And without access to a new way of buying programs, the other advances, though incrementally more pleasing, are unlikely to create a breakthrough.

So what we are left with, for the moment, is simply a glacially slow movement away from subscription TV services sold by cable and satellite, market share gains by telcos, but a slight and slow dip in overall market demand.

One might argue that high-definition TV and digital video recorders have been incremental improvements. The ability to display Internet sourced video is another incremental improvement.

Consumers also long ago also signaled a clear preference for flat screen technology and bigger screens. But some might argue 3D has flopped. Interactive TV proved to have almost no demand.

At the same time, Netflix and other streaming services are showing promise, though largely as an incremental complement to linear television. Mobile consumption is growing. Tablet consumption is growing faster.

But nothing so far suggests a major shift in television experience or content distribution is ready to begin in a big way.

The predictable changes we now expect to see are small market share gains by telcos, every quarter, at the expense of cable TV providers, with satellite provider share roughly stable.

That was the story in the second quarter of 2013, according to IHS. AT&T U-verse and Verizon FiOS (with some small additions by independent telcos) added a net 398,000 video accounts during the second quarter, up from 304,000 net adds in the second quarter of 2012.

The U.S. video subscription business as  while lost a net 352,000 subscribers in the second quarter, according to IHS.

In a market with nearly 95 million to 104 million subscribers, that really isn’t such a big deal. That’s a market shrinkage of about one-tenth of a percent, to three-tenths of one percent.

So we might be past the peak of multichannel video subscription rates, if not yet revenue. But the present rate of decline is not alarming, though indicative of the long term trend.

It might not matter so much which provider segments are growing, and which are shrinking. The most important single fact is that the overall market is very slowly shrinking.

That suggests content owners are not yet ready to abandon current distirbution models. And without major changes in licensing, it is doubtful Apple or any other firms can revolutionize television.

Baltimore to Explore Own Internet Access Network

Baltimore is hiring a consultant that would help the city develop a plan for expanding Internet service provider options for businesses and residents. For the moment, the only expectation is a study that provides options, such as creating greater incentives for any would-be ISPs to create a facilities-based new network.

Presumably, the study also will explore options for anchoring such a new metro network with fiber Baltimore could lay to support its own internal operations, or other initiatives to lure a few anchor tenants that could build on such a network. 

Baltimore was among cities that had bid to become a site for the first Google Fiber operation.
And Verizon has decided not to upgrade Baltimore with FiOS. 

In all likelihood, Baltimore will find it must hope for some sort of public-private partnership to "spot build" new facilities in Baltimore, as so far, the financial return for a full citywide build appear quite daunting. 

PCs are for Work, Other Than That, People Will Prefer Tablets, Smart Phones

Perhaps some executives in the PC industry actually believe they can build a PC that entices people to part with their smart phones or tablets. Some of us think that is a fool's errand. 

Some might say devices such as the Chromebook are designed for affordable browsing. Some of us would not agree. Browsing is what people prefer to do on other devices, when they are not working and producing large amounts of content. 

That probably has implications for the use of all the devices. A "work" device is not necessarily as "personal" a device as a smart phone, or as much fun as a tablet. Some devices (think of most devices in your kitchen or livingroom or bedroom) just have to work. You don't think about them too much. They aren't necessarily personal statements, as your clothing or jewelry or fragrance most likely are. 

And that's the issue with PCs. There's no such thing anymore as "web-centric" users. That's everybody, doing everything. 

When the PC was the only computing device, people might have been more attached to them. These days, the PC increasingly is something you use when you have to work. Most other things you'd prefer to do on a tablet or smart phone. 

That likely has implications for how much people are willing to spend on a work appliance, if they are spending their own money. 

Lenovo Sells More Smart Phones, Tablets than PCs

Lenovo says it is becoming a "PC Plus" company. In its most recent quarter, Lenovo ’s  sales of smart phones and tablets surpassed PCs for the first time. During the first quarter, Lenovo became the world’s fourth largest smart phone supplier and recorded the fastest growth among the top five vendors, growing 132 percent. 

In China, Lenovo is now the second largest smart phone company, the company says. 

One might point to several elements of that story. The rise of computing devices other than PCs, the shift of technology supply in the direction of Chinese suppliers and a concomitant retail pricing pressure on existing suppliers are some of the themes one might point to.

Another apparently non-related item, namely Cisco's most recently quarterly report, points to another broad theme, namely a shift in global technology leadership from broadly diversified firms to specialists. 

Nobody yet is suggesting Cisco is going the way of Nortel Networks, one of a handful of firms that once lead global telecom infrastructure sales by supplying a broad range of products, but went bankrupt. 

Still, these days, being a supplier of lots of infrastructure products, with a coherent fit between thenm, is a much-tougher feat. 

In today's market, most firms have found it much easier to focus on a segment: mobile, fixed network only, switches and routers, radios or optical transmission. 

Sooner or later, Cisco might have to respond to critics who say it operates in too wide a range of businesses. And that will mean a smaller Cisco, one might argue. 

DoJ Opposition to US Airways, American Airlines Merger has Telecom Implications

The unexpected lawsuit by the Department of Justice to block the proposed US Airways merger with American Airlines reminds some of us of merger strategy in the U.S. telecommunications business.

In the past, when a merger wave is about to break out, it has been better to be the first such combination, not the last. The reason is that, for all the oversight issues, it has been easier to be the first to move, rather than the last to move. 

After clearing a number of other similar transactions, DoJ now seems to have concluded that the merger wave has gone far enough. In 2008 DoJ had approved the merger of Delta and Northwest Airlines. In 2010 it approved the merger of United and Continental. 

In terms of share of domestic seats sold in September 2013, Delta Air Lines has 22 percent, Southweset Airlines has 21 percent, United Airlines has 17 percent, US Airways has 12 percent while American Airlines has 13 percent. 

Granted, the profit is in the overseas routes, but those earlier mergers, which dramatically reduced competition, seem to be bumping against an analogy to the "rule of four" that many telecom regulators apply to mobile competition.

And that rule is that four competitors are required. In the airline industry, it appears DoJ deems four to be insufficiently competitive. 

1 Regulator or 28? Competition or Investment? Are the Questions are Connected?

Should the European Union have only a single telecommunications regulator, or keep 28 national regulators? That appears to be a live question now that rival “proposals” are floating around the EU.

Neelie Kroes, the EU telecommunications commissioner, has proposed an arrangement that some would think is more policitically feasible, namely keeping the 28 national regulators in place, while nevertheless removing restrictions that hinder cross-border operation, cooperation and ultimately mergers.

However, in a document obtained by the Financial Times, Joaquín Almunia, EU antitrust executive, called for a more-radical plan of abolishing the separate national authorities and replacing them with a single EU telecommunications office.

Fair-minded observers might say each plan has merit. Many service provider executives might agree that a single, continent-wide market would be more efficient, easier to navigate, at less cost.

But observers might also say there will be much more political opposition to the one-regulator plan, than to plans to harmonize and liberalize cross-border operations, while keeping the national regulators in place.

So the Kroes plan might arguably have the advantage of faster implementation. It might be hard to envision national governments potentially giving up the revenues national spectrum auctions might raise, nor the ability to customize national universal service plans between their own urban and rural areas, for example.

On the other hand, policymakers still appear “conflicted.” They still seem to want to promote competition by maintaining low-cost wholesale access to dominant carrier networks.

On the other hand, policymakers also want those dominant carriers to make huge new investments in next generation networks that will subject to the same low-profit, competition-enhancing arrangements that make those investments risky to stupid.

It isn’t so obvious that one regulator or 28 cooperating authorities is necessarily the better plan. Simplicity is good. But so is speed of implementation. And both sets of proposals seem to have the same objective, namely rationalizing operating environments and paving the way for mergers and consolidations that will produce fewer, but stronger, providers.

Under any set of circumstances, service provider executives and policymakers might well agree that current scale of operations for most service providers is not optimal. They need to get bigger.

Most EU policymakers also must address the risk and high costs of building next generation fixed networks, without addressing investing firm ability to capture adequate financial returns.

Nobody Knows What Will Happen to Service Provider Revenue Once Major Video Cord Cutting Happens, Really

Adult broadband users with an Internet-connected TV are twice as likely as those with non-net-connected TVs to be “highly inclined” to cancel their current subscription video service, according to a new report from The Diffusion Group (TDG Research).

Those findings likely would not come as a surprise to anybody who normally watches developments in the video entertainment business. It is a trusim that a person cannot become a user or customer of any product unless that person is physically able to purchase or use.

So it should not be a great surprise that when able to view Internet-delivered TV on a big screen TV, some users might decide they can do without a video subscription. Without the ability to view Internet-delivered video, a person has no option to consider whether that experience is a reasonably workable substitute for a video subscription.

To be sure, most people probably would simply augment what they already do, and add some Internet sourced TV to their broadcast TV or video subscription or other home video sources such as Blu-ray players.

But perhaps seven percent of consumers, at any given time, might be interested in abandoning their video subscriptions for some sort of over the top or broadcast TV alternative, TDG Research suggests.

Some 8.8 percent of connected TV users say they are highly inclined to cancel their current subscription TV service in the next six months, compared with only 3.5 percent of non-net-connected TV users, TDG Research says.

Virtually no executives whose firms are major providers of subscription video services would argue it makes no difference to their revenues were widespread abandonment of subscription TV to be replaced by widespread viewing of over the top alternatives.

On the other hand, assuming they are not forced to offer low-cost “unlimited” service where there is no matching of usage to retail price, watching more over the top television is going to create demand for orders of magnitude more bandwidth.

So yes, service providers will lost a big chunk of video revenue. But they will gain a big chunk of Internet access revenue. Or so the logic might suggest.

The stumbling block, and it is a serious problem, is a shift of rival major competitors to something like Google Fiber’s pricing and usage plans: unlimited usage of a 1 Gbps symmetrical Internet access service, for $70 a month.

That would wreck most tier-one service provider revenue models, in the event of a major drop in video subscriptions, and an equally big shift to over the top services using Internet delivery.

There is one more huge issue as well. In addition to spending more for Internet access, consumers will still be paying for the TV programs or channels they want. When all the costs are added up, it is not entirely clear that the total cost of ownership will be dramatically less than what they already pay.

The conventional wisdom is that cable companies and telcos will be savaged on the revenue front when a widespread shift to over the top delivery begins. That isn’t necessarily the case.

Much depends on consumer demand. Heavier video entertainment users might find it costs less to keep buying linear TV services. Moderate users might find net costs roughly the same. Lighter users, though, probably would be best positioned to achieve savings.