Tuesday, February 2, 2016

India 700-MHz Spectrum Reserve Prices Will Discourage Bidders

Minimum prices set for an auction of 700-MHz spectrum in India are so high (two to four times higher than prior auctions)  that many of the leading mobile companies will not bid. And, according to Fitch Ratings, the eventual spectrum winners might well regret having won. That “winner’s curse” has happened before, often with 3G spectrum auctions.

India's telecom regulator recommended a reserve price of INR115bn (US$1.7 billion) per MHz for nationwide 700MHz spectrum.

Fitch Ratings “believes that efficiency gains from deploying 4G services on 700MHz will be insufficient to offset the relatively high price.”

The reserve price is about twice the price set for 800-MHz spectrum, 3.4 times the reserve price for 900-MHz spectrum and four times the minimum prices set for 1.8 GHz spectrum.

Winning therefore “could exert further pressure on participating telcos' balance sheets and cash flow, and limit their ability to invest in capex over the medium term,” say Fitch Ratings analysts.

In fact, the top four telcos, including Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications may hesitate to bid, as balance sheets already are “stretched,” while available cash is expected to become an issue once Reliance Jio enters the mobile market in the spring of 2016.

Instead, the leaders might choose to rely on spectrum they already have acquired. Bharti Airtel will use 900 MHz, 1.8 GHz and 2.3 GHz.

Reliance Jio, after having invested about US$15 billion on spectrum and networks, will use 800MHz and 850MHz spectrum.

Every single cost in any telecommunications or other ecosystem ultimately is paid for by customers or business partners, it goes without saying.

That is true of all infrastructure costs, including the cost of spectrum, which is why many observers favor increased use of shared spectrum and unlicensed spectrum as a way of expanding capabilities while minimizing end user cost.

The cost of licensed spectrum, typically a major expense, now is an issue in India, which is preparing to issue licenses for 700-MHz spectrum. High costs were an issue in earlier spectrum auctions as well.

After a massive auction where incumbents essentially had to pay whatever was required to retain use of frequencies they already were using, “the industry simply does not earn enough to support the bids,” some have argued.  

In that spring 2015 auction, India’s mobile companies bid Rs 1,10,000 crore for spectrum across four bands that were substantially above the reserve (minimum) prices.

Buyers paid 1.79 times the reserve price for 800MHz spectrum and 1.95 times the reserve prices for  900 MHz.

Operators paid less of a premium for higher-frequency spectrum, just 1.16 times the reserve price for 1800 MHz spectrum and 1.05 times the minimum for 2100 MHz spectrum.

John Giusti, Chief Regulatory Officer, GSMA, is among observers urging the Indian government to lower minimum prices for the 700-MHz auction.

“The GSMA is very concerned by TRAI’s recommendation to set a starting price of US $1.7 billion per MHz for pan-Indian 700MHz spectrum,” said Giusti.


India has one of the lowest average revenue per user (ARPU) metrics globally (US $2.45 at the end of 2015).

High spectrum costs, combined with limited revenue contribution from data services, new competitive pressures and high capital investments to upgrade to 4G, mean it will be difficult to sustain business models, if high spectrum prices hold, Giusti argued.

“The more mobile operators have to pay for a spectrum licence, the less capital is available to roll out new mobile networks,” Giusti said. “We encourage greater focus on the long-term benefits of connecting more people in India to affordable mobile broadband, rather than on short-term financial gain.”

“High reserve prices and an unrealistic predetermination of spectrum value could also reduce the willingness of potential bidders to buy the spectrum,” he noted. “For example, in Australia, an unrealistically high reserve price resulted in a valuable portion of the 700MHz spectrum left unsold and unused.”

“Setting reserve prices at reasonable levels will be key to achieving the Digital India objectives, allowing operators to focus their resources on building the necessary infrastructure to deliver high-quality mobile services for Indian citizens,” Giusti said.

Verizon Will Sell Keeper Enterprise to its Business Customers

Keeper, which says it is the leading enterprise password management software platform, has announced a new distribution partnership with Verizon.  AT&T and Orange also supply Keeper to consumers and enterprises.


Beginning in January 2016, Verizon will begin selling Keeper Enterprise to its corporate customers as part of  the Verizon Partner Program.  

That is one example of how app providers and service providers can work together. As now generally is the case, apps get developed by third parties. But service providers can act as key distributors, while enhancing their core products by doing so.


Keeper Enterprise is a software platform that provides both password management and secure digital file storage for corporate customers. Keeper Security is a privately-held company based in Chicago, Illinois.

Monday, February 1, 2016

Global Startup Competition Offers Funding for 18 Winners

Early stage startups are encouraged to apply now for a chance to get funding from the newly formed Global Innovator Fund, which is sponsoring a competition that will award 18 winners a share in $1 million in funding from the fund’s limited partners including Cheetah Mobile and Sequoia Capital.

All startups accepted into G-Startup Worldwide receive the opportunity to pitch their company for funding.

Each local G-Startup victor will receive a $50,000 investment prize, while second place will receive $20,000.

The nine local G-Startup winners will pitch one final time at GMIC Silicon Valley, with the overall champion receiving an added $250,000 and the runner-up receiving an added $120,000.

Additionally, each local winner receives a free trip to the finals at GMIC Silicon Valley, to be held September 28-30, 2016.

Applications are now open for:

The Global Mobile Internet Conference (GMIC), will host a G-Startup competition at all nine GMIC 2016 locations, including additional stops in:
  • Tokyo (July 15, 2016)
  • Jakarta (August 9, 2016)
  • São Paulo (August 24, 2016)
  • Bangalore (November 16-17, 2016)
  • Taipei (October 21-22, 2016)
  • Silicon Valley (September 28-30, 2016)

Past judges for GMIC competitions include Lei Jun, CEO and Founder at Xiaomi; Dave McClure, Managing Director at 500 Startups;James Shen, Managing Director at Qualcomm Ventures; and Tim Chang, Managing Director at Mayfield Fund.

Startup alumni include App Annie, the go-to place for understanding app analytics, and Didi Kuaidi, a skyrocketing ride-sharing service that hosted over a billion passengers in 2015 alone.

GWC has existing investments in startups around the world, focused in China, India, and the United States.

G-Startup Worldwide intends to become the world's most influential global startup competition, with over 100,000 expected attendees for 2016 GMIC events, an expected 1,500+ startup submissions, and 700+ mobile executives within the G-Network portfolio.

Startups interested in competing are recommended to have raised a seed round not exceeding $1.5 million and have produced a minimum viable product with initial signs of traction in its local market.

Submissions from mobile, IoT, wearables, virtual reality (VR), drones, robotics, education, health, cloud, social, and commerce are welcome, with preference given to startups that show evidence of making a profoundly positive impact on the world at large.

GWC was founded in 2008 with the vision to be the world's most influential mobile innovation platform. It includes the G-Network, a member network with over 700 CEO industry members; the Global Mobile Internet Conference (GMIC) event series; GHome, a China-US innovation incubator; and RobotX, a leading  AI and Robotics innovation platform.

GMIC, the Global Mobile Internet Conference, hosts mobile executives, entrepreneurs, developers, and investors from around the globe and across platforms to build partnerships, to learn from industry thought leaders, to better understand mobile technology trends, and to shed light on how mobile is positively changing the world.

U.S. Internet Progress: Lies, Damned Lies and Statistics

The latest Federal Communications Commission report on the status of Internet access does not vary much in one respect from earlier reports: people in rural areas tend to be underserved or unserved.

Beyond that, one has to interpret the results, as the report paradoxically suggests Internet access is getting worse, when in reality it is getting better.

Specifically the FCC report suggests the nation is going backwards, in terms of capability, when in fact capacity has been growing at nearly Moore's Law rates. The report, as always, is right to point out gaps between urban and rural availability and performance.

But it is completely wrong about the trend.

Where in 2012 “100 percent” of urban consumers had “fixed advanced telecommunications capability,” that dropped to 57 percent in 2013 and then to 54 percent in 2014, the report states.

Cable TV operators, who have done the most to improve Internet access speeds, for the most people, have increased speeds  at nearly Moore’s Law rates--doubling nearly every 18 months--for years.  

And now we have Google Fiber, plus gigabit investments by third party providers and telcos including AT&T and CenturyLink.

In fact, over the last year, U.S. Internet access speeds grew 105 percent, ironically using figures the FCC itself provides.

“Between September 2013 and September 2014, we observe a 105 percent increase in the maximum advertised download speeds among the most popular service tiers across participating ISPs weighted by the number of participants using a given ISP,” the FCC said.  

“We find that, over the course of our reports, the average annual increase in actual download speeds by technology has been 28.2 percent for DSL, 61.2 percent for cable, and 19.2 percent for fiber,” the agency said.

The point is that the most-recent FCC broadband progress report has to be heavily interpolated, even as referenced against other recent FCC reports on the subject.



To be sure, updating definitions is not an unreasonable step, over time. Since end user requirements change over time, while supplier capabilities likewise increase, it does make sense to use reasonable “current market” tests. The problem is that comparisons over time then become difficult.

“What” one measures matters. Measuring “fiber to the home” (the means for delivering) instead of capacity leads to distortions, for example. Those sorts of distortions will grow over time as new platforms become widespread, in addition to making comparisons over time less useful.

To be sure, the FCC report points out the gap between urban and rural service, which is real. For an agency whose mission includes universal service, that makes sense.

On the other hand, because the definitions keep getting changed, the sense of progress is blunted.

On the other hand, even using the new 25-Mbps definition, not the older 4 Mbps definition, over the past two years alone, the number of people who have “no fixed advanced telecommunications” service has been cut in half, while the percentage of people living in urban areas without that same level of access likewise has been cut in half.

The report also suggests 10 percent of all residents have “no access.” That is a “platform specific” approach, and will come as news to satellite broadband providers, for whom that group is the primary customer target.

Eventually there will be some other new wrinkles that could skew the results. Mobile Internet access has become more important, and eventually will have to be accounted for, as it now is impossible to evaluate Internet access globally without reference to mobility.

It Isn't So Much That People are "Mobile First" as They Are Mobile All Day

Of the 7.4 hours a day people in the United States spend in front of screens, 34 percent involves a small screen (mobile device), while 33 percent is spent in front of a television.

Some 23 percent of screen time occurs in front of a personal computer. About 10 percent of a typical user’s time is spent with a tablet.

The small mobile screen gets used in just about every setting, though.



Ofcom Chief Opposes 3, O2 Merger

A decision to approve the proposed U.K. merger of O2 and Three lies with the Europe Commission’s antitrust regulator Margrethe Vestager, not Ofcom, the U.K. regulator. And some might argue the merger, which would have faced high obstacles, will face higher obstacles.

Sharon White, Ofcom CEO, now says she opposes the merger, which would create a new market leader with 40 percent share.

The arguments opposing the deal mark the strongest position taken on the £10.5 billion merger by Ofcom CEO White.

Ofcom’s intervention raises further doubts about the attempt by Hong Kong’s CK Hutchison to acquire O2 from Telefónica to merge with Three, the smallest mobile operator in the UK.

White argues the creation of another, fourth network to replace O2 "might be one answer" for some of her concerns, but would take "time and considerable investment".

That is one example of regulator belief that four leading operators are required to obtain the benefits of robust competition. Ofcom, for example, notes that average prices, over the past 25 years, are as much as 20 percent lower in markets with four operators, compared with those with only three leading networks.

Much hangs in the balance. The proposed merger is seen as a test case for similar deals across Europe.

Saturday, January 30, 2016

Paradoxically, Higher Capex is a Negative Unless Big New Revenue Streams are Created

Paradoxically, heavy capital investment in telecom networks often is considered to be a negative in financial markets, even if such investment results in higher consumer welfare and an arguably better long-term strategic position.

So it is mildly surprising to hear Globe Telecom touting aggressive spending to improve services in the Philippines. Some might argue that is the only way Globe, and others, can prosper, long term.

Still, it is somewhat uncharacteristic to hear Globe touting a boost in its capital-to-revenue ratio up to 28 percent in 2015, after climbing to 27 percent in 2014.

Globally, telecom capex-to-revenue ratios have been running between 15 percent and 20 percent, with a declining trend.

There is a clear logic. Global telecom revenue growth has dropped to less than GDP growth, according to PWC.

“Some segments (e.g., fixed line) are already in absolute decline, and even global mobile revenue is expected to begin declining in 2018, according to some researchers,” says PWC.

Under such circumstances, it no longer makes sense to invest as heavily as once made sense, since revenue gains will underperform the intensity of the investment. That is a strategic issue of paramount importance.

Ongoing investment might be required, but financial returns might be slim. Inevitably, that means the challenge is to uncover and discover big new revenue streams that justify higher sustainable investment.


Of course, much depends on what sort of infrastructure is being deployed. Capex in the mobile business is less expensive, compared to fixed network, but also includes spectrum costs.

Still, generally speaking, U.S. mobile market ratios have been falling for some time.

Those levels lead local telecom industry averages of 23 percent in 2015 and 2014.

The capex-to-revenue ratio in China was 36 percent in 2015 and 33 percent in 2014.

In 2015 and 2014 capex-to-revenue ratios in Singapore were 26 percent and 22 percent, respectively; in Indonesia with 24 percent and 26 percent, respectively.

Thailand’s ratio was 23 percent in 2015 and 21 percent in 2014. India had a 2015 ratio of 17 percent and a 2014 ratio of 16 percent.

Taiwan’s 2015 ration was 14 percent and 16 percent in 2014.

Hong Kong had a 13 percent 2015 ratio and 14 percent 2014 ratio.

Malaysia had 13 percent ration in 2015 and a 12 percent ratio in 2014.

Fundamentally, higher capital investment, relative to revenue earned, is a difficult long term proposition. What must be discovered are ways to boost the “revenue” part of the ratio. Higher sustained investment is possible, when that happens.

Why Agentic AI "Saves" Google Search

One reason Alphabet’s equity valuation has been muted recently, compared to some other “Magnificent 7” firms, is the overhang from potential...