Telco competitors aren’t other telcos anymore

It might seem like an unusual statement to make, but if the fortunes of the fourth industrial revolution are going to be realised, telcos need to stop bickering between themselves.

The new competitive landscape seems like a very counter-intuitive one. The status quo for years has been to capture as many subscriptions as possible, building profits on top of connectivity, though the digital economy is so much more. This might seem like a very obvious statement to make, though the dangers are seemingly more apparent on the African continent, with the OTTs and cloud players a larger threat to a telco than other telcos.

This was a fear which emerged during the opening panel sessions at the AfricaCom 2018 show in Cape Town. Connectivity is not enough, especially on a continent where ARPU can be as low as $4 a month. There is of course demand for more data connectivity, but where is the value when you actually deploy data networks? According to Hind Elbashir, Group Chief Strategy Officer at Sudetal, not in the connectivity business.

“The OTTs have spread their wings, while we are continuing to compete in a very small place,” said Elbashir.

While the telcos are laying the foundations for the digital economy in Africa, they are continuing to focus efforts on traditional business models focused around connectivity and subscriptions. This is a limited section of the value chain, becoming increasingly crowded, and built on the race to the bottom. Value will become increasingly difficult to find and profitability will erode as the telcos fight for customers on pricing. However, the fourth industrial revolution is creating value elsewhere in the ecosystem.

Nic Rudnick, CEO of Liquid Telecom, echoed Elbashir’s point. While the African telcos are building the networks and spending all their time on securing more subscriptions, foreign players in Silicon Valley or China are swooping in to collect the more lucrative rewards at the top of the digital value chain. The OTTs are capitalising on the vast expenditures outlaid by the telcos and stealing the new value which is being created through enhanced connectivity.

But why is this more of a risk in Africa than anywhere else? That is a very simple question to answer; Africa does not have anywhere near the same scale or penetration of connectivity infrastructure as in the developed markets, while ARPUs are significantly lower, adding more pressure to the bottom line. With African telcos having to spend more CAPEX to deploy infrastructure to realise the digital economy than European or North American counterparts, while simultaneously collecting smaller tariffs off customers, it cannot afford to lose the added value created in other areas of the ecosystem.

This is a change in the industry’s landscape which has been coming for years, but the telcos seem to be struggling to capitalise on. The rules are shifting with the cloud and OTT players securing the lion’s share of newly created revenues without assuming the risk and vast expenditure of network deployment. Not only will the telcos have to transform culture and operations to reverse this trend, but also create new relationships with competitors.

Elbashir pointed to joint investments in infrastructure to reduce financial exposure and allow telcos to spread CAPEX further. Multiple joint ventures would allow for quicker expansion of network infrastructure, increasing the connectivity footprint of the telcos, but also allow talent to focus on creating strategies and products to capitalise on the created value in the digital ecosystem.

Collaboration is a key word, though we all know how difficult it can be to create. However, telcos should recognise the greatest threat is not from other telcos who are fighting for subscriptions, but the OTTs and cloud players who so easily secure revenues in segments of the ecosystem the telcos are struggling to exploit. The threat from the OTTs is a simple one, but if it is not addressed, growth is going to be impossible.

This is a new market dynamic, and while the OTTs might be a threat to all telcos around the world, it seems to be more pronounced in Africa.

Q3 validates O2 indifference towards convergence

Telefonica’s UK business O2 has continued a strong 2018 performance with a 7.9% increase in revenues in the third quarter, while it greedily captured an additional 120,000 subscribers.

The results perhaps justify the businesses decision not to enter into the convergence fight. Back in July, CEO Mark Evans confirmed the business would continue to focus on its mobile-only proposition, and wasn’t convinced entirely by the idea of bundled services. This statement is certainly contradictory to many telcos across the world, including its own cousin, Telefonica Germany, which plugged 5G FWA at Broadband World Forum. That said, the numbers speak for themselves.

Over the last three months, total revenues stood at £1.5 billion, up 7.9% year-on-year, while mobile service revenues grew by 3.4%, thanks to customers choosing larger bundles and MVNO growth. The O2 network now has 32.3 million customers, including MVNOs such as Lycamobile, making it the busiest network in the UK. Churn was also down to 1%, which O2 claims is the best in the UK.

“We continue to put the customer at the heart of our business, delivering leading propositions and unique customer experiences, as demonstrated by the launch of our revolutionary O2 Custom Plans, exclusively available in our direct channels,” said Evans. “O2 Custom Plan offers customers real choice, by giving them control, flexibility and transparency, and has once again driven the O2 point of difference in the market.

“Our on-going commitment to invest in our network includes enhancing 4G connectivity and preparing the ground for 5G. As champions of mobile we continue to build for the future, where mobile is one of the most powerful opportunities to strengthen the UK economy and enrich our society.”

This laser like focus on mobile is probably best for everyone involved. Despite O2 leading in the market share race, it has consistently been condemned for having the worst network in the UK. This has been confirmed quarter after quarter, by a variety of different sources. Some might come to the conclusion the consistency of poor performance simply suggests the management team does not care that much. However, efforts are being made to improve this record.

In the most recent spectrum auction, O2 claimed all the available 2.3 GHz spectrum to enhance its 4G offering. This spectrum has already been put to use, while most recently O2 suggested it was going to improve connectivity in 339 rural communities throughout the UK. The business is investing in its network, with the financial results indicating O2 spent £192 million on CAPEX over the quarter, which works out at roughly 12.5% of total revenues. This is not the highest around, but it is a healthy number.

O2 is the first of the UK MNOs to release its financial results for the third quarter, so there isn’t a fair comparison to make at the moment. However, 7.9% growth is going to be a very tough number to beat. Perhaps there is something in this ‘do what you know how to do’ mentality from O2.

We’ll be ready for 5G by 2020 – Reliance Jio

Reliance Jio owner Mukesh Ambani has stated India will be fully-4G by 2020, and is setting his eyes on the 5G euphoria already.

The statement of intent adds to a remarkable couple of years for Reliance Jio and the Indian digital economy on the whole. Starting from nothing in December 2015, Reliance Jio has risen to become arguably the most influential telco in India, dragging the country’s digital economy into the 21st century. A little over two years ago, India was in the digital baron lands, though now the Indian digital appetites are as insatiable as those in ‘developed’ nations.

“India has moved from 155th rank in mobile broadband penetration to being the number 1 nation in mobile data consumption in the world… in less than two years,” said Ambani at the India Mobile Congress, courtesy of Live Mint. “This is the fastest transition anywhere in the world from 2G/3G to 4G. By 2020, I believe that India will be a fully-4G country and ready for 5G ahead of others.”

Paying complements to the pro-active approach to stimulating the digital economy from the Indian government, Ambani is continuing the ambitious expansion of the Reliance Jio business. 5G is what will attract the headlines, most notably after a few telcos highlighted 5G is not a top priority for some nations at Broadband World Forum last week, but the broadband ambitions are just as important.

Tackling the 5G euphoria and increasing broadband penetration across the country perhaps work happily alongside each other when you consider the importance of a fibre network in both cases. The JioGigaFiber proposition, announced during the company’s AGM in July, promises FTTH connectivity in a market where broadband penetration is roughly 10%. ‘Fibering up’ the country is critical for 5G, and Reliance Jio has already started the mission.

“India will be among the largest digital markets in the world,” said Ambani. “Every enterprise must have an ‘India First’ vision to participate in this market. We will need to reinvent to grow and nurture this market to its full potential. This will be a win-win for the entire industry, for India and for the entire world.”

One interesting question which remains is whether the lessons taken from the Jio-effect can be implemented into other nations which are struggling in the lowly places of the digital league tables.

O2 commits to plugging 339 farmer Johns into the digital economy

O2 has announced it will start pumping enhanced 4G into some of most notorious not-spots throughout the UK, with 339 communities set to receive the connectivity boost.

While the digital divide is clearly still present across the UK, it does seem O2 is attempting to make use of 4G spectrum acquired in the last auction to counter the imbalance. The last 12 months has certainly seen O2 up its game on the connectivity front, Ofcom confirmed O2 had delivered against its commitment to provide 98% indoor 4G coverage and 90% geographical coverage across the UK earlier this year, and this appears to be a continuation of the positive work. O2 has stated in intends to improve the 4G experience for an additional 339 communities of more than 100 people across the UK by the end of the year.

“We know mobile has the power to make a real, positive difference to people’s lives and businesses in rural communities across Britain,” said O2 UK COO Derek McManus. “That’s why we’re proud to be investing in 4G connectivity for more than 330 rural areas by the end of this year. Technology never stands still, which is why we are always looking for the right partners and investing in our future network. Whether trialling 5G to support a future-proof, mobile Britain, or ensuring the remotest parts of rural Britain can connect to 4G, for O2, this is about continuing to invest in all areas – not one at the cost of the other.”

“4G coverage is improving all the time, but there’s more to do, particularly in rural areas,” said Digital Minister Margot James. “We’ve already reformed planning laws to make it easier and cheaper to install and upgrade digital infrastructure, and it’s great to see O2 and the rest of industry responding to ensure more people in rural Britain can share the brilliant benefits of 4G connectivity.”

Thanks partly to an enhanced mobile experience, O2 has pointed to a report from Development Economics which suggests tourism, transport and manufacturing segments could receive a financial boost with improved connectivity. Perhaps this is one of the most notorious statistics associated with the digital divide, but Development Economics predicts connectivity parity could add as much as £141 million a year to the 14,000 rural businesses who are missing out on the full digital experience.

Although this is a positive step forward, let’s not forget O2 has a lot of catching up to do, it certainly isn’t uncommon to see the brand slumping at the bottom of the mobile performance rankings. Opensignal’s most recent report assessing the performance of the four UK MNOs had O2 sat in last place for all categories aside from latency (3G and 4G) and availability, where it was second behind EE. Back in August, Rootmetrics also had O2 at the bottom of the pile for almost every category.

The performance of the network is certainly a dent in the O2 pride, but it has still managed to claim top-spot in the market share leagues. Although MNOs should stride towards creating the best possible experience for customers, O2’s top and bottom standings demonstrate buying decisions are more than performance orientated. The big differentiator between O2 and rest of the UK MNOs is its loyalty programme, Priority, which does appear to be paying dividends, while Giffgaff is still proving a successful venture to attract a new SIM-only audience. Such is the success of Giffgaff over the last few years, Three has creating its own version in Smartie, while Vodafone has launched Voxi.

That said, building the customer experience in rural areas of the UK will only add to the success of the telco, creating a more interesting proposition for customers which might have ignored the brand in the past. O2 has been swimming against the tide when it comes to convergence trends, choosing to focus exclusively on mobile, a decision which is increasingly looking justified.

BBWF 2018: Consumers don’t care about tech, just connectivity – BT

Today’s consumer is demanding but disinterested. They don’t care about mobile or broadband or wifi, just top-line connectivity. To meet these demands, BT has pointed to network convergence.

Speaking at Broadband World Forum, Howard Watson, BT’s CTIO, outlined the bigger picture. It’s all about convergence where the dividing lines between wireless and fixed or hardware and software are blurred, with connectivity is viewed as a single concept, bringing together network design, technology convergence and customer insight to create a single software-orientated network for device neutral connectivity.

“For the consumer, it’s not about their wifi, or their mobile connection, or their fixed broadband, or even their landline,” said Watson. “It’s about connectivity as a whole. And I’m pleased to say we’re already making strong progress here.”

Of course, it wouldn’t be a telco conference without mentioning 5G, and this is a critical component of the BT story. Trials have already begun in East London, though over the next couple of days 10 additional nodes will be added to expand the test. Plans are already underway to launch a converged hardware portfolio, introduce IP voice for customers and create a seamless wifi experience. All of this will be built on a single core network.

But what does this mean for the consumer? Simplicity in the simplest of terms.

The overall objective is to create a seamless connectivity experience which underpins the consumer disinterest in anything but being connected. Soon enough, devices will be able to automatically detect and select the best connectivity option, whether it is wifi or cellular for example, essentially meaning consumers will not have to check anything on their devices. Gone will be the days where you have to worry about your device clinging onto weak wifi signal or being disrupted by a network reaching out to your device, according to Watson. Signing in will become a distant memory as the consumer seamlessly shift from wifi to mobile.

This is of course a grand idea, and there is still a considerable amount of work to be done. Public wifi is pretty woeful as a general rule, and mobile connectivity is patchy in some of the busiest and remotest regions in the UK, but in fairness to BT, it does look like a sensible and well thought out plan.

With telcos becoming increasingly utilitised, these organizations need to start adding value to the lives of the consumer. Connectivity is not enough anymore, as it has become a basic expectation not a luxury in today’s digitally-defined society; providing the seamless experience might just be one way BT can prove its value. Fortunately, with its broadband footprint, EE’s mobile network and 5000 public wifi spots throughout the UK, BT is in a strong position to make the converged network dream a reality.

Don’t listen to the moaners, phones are great – Three

Three has launched a new marketing campaign designed to counter all the moaning about how bad phones are for you.

In a new campaign, simply named ‘Phones are Good’, the telco imagines how historical moments would have been different if smartphones had been around. From Henry VIII on Tinder, to the Titanic with GPS, it’s a bit of fun which indirectly encourages people to use the internet more, playing directly into Three’s USP.

“At a time when we are being told to get off our phones, Three’s customers are actually using them three and a half times more than other providers,” said Shadi Halliwell, Chief Marketing Officer at Three. “That’s because, unlike others, we understand how real people use their phones.

“And although we shouldn’t be on our phones 24/7, if it weren’t for our mobiles how would you find love lounging on the sofa? Buy new shoes while sitting on the toilet? Or get a chicken cooked, seasoned, garnished and delivered to your door at the drop of a hat? As the Best Network for Data, it is our duty to challenge the cynics, and help everyone see that Phones Are Good.”

As you can see from the video below, it’s a creative way to get Three’s message across, and quite entertaining.

While Three is suggesting all these wonderful ideas on how mobile phones could have changed the course of history, there is of course the other side of the coin…

  • If the Mesopotamians had used MyBuilder.com for its reviews of local tradesmen, their grain storage units would have never leaked and beer would not be a thing
  • The Spanish Armada of 1588 could have been successful in its mission to conquer England if Sir Francis Drake was taking numerous selfies for the perfect Instagram post instead of gazing onto the horizon
  • Had a clumsy Chinese chef been following a YouTube recipe he might not have dropped a natural coagulant called nigari into a pot of soybean milk and created Tofu
  • Juliet might never have fallen for Romeo had she done a bit of Facebook stalking beforehand (admittedly this didn’t really happen)
  • If Percy Spencer had been using a calorie counting app, he would have never had that chocolate bar in his pocket and invented the microwave
  • Finally, without the power of Twitter the US might have a logical and caring human being in charge…

Of course, the revolutionary impact of mobile devices, not just the smartphone, is countered with negatives. Instead of talking to that lonely women on the bus, we stare at cats playing the piano and or toddlers biting siblings fingers. But, we more connected to family members on the other side of the planet. There’s always rough with the smooth.

Ultimately Three is attempting to push the advantages of the internet and encourage more people to consume more data. As the telco which sells itself to the more digital-enthusiastic users, using the internet more benefits it. It sells itself on data volume more than anything else.

The idea of the smartphone contradicts all the lessons of politeness and paying attention which we were taught as children. Perhaps the next thing we should be worried about is virtual reality. Parents have been telling children all around the world sitting too close to a TV screen is bad for your eyes, yet VR places a screen inches in front of your face.

What is it with telcos and the ‘creative’ approach to advertising honesty?

The Advertising Standards Authority (ASA) has once again had to step in to put a stop to telco advertising, this time Three’s efforts, posing a pretty simple question; why do the telcos find it so easy to put misleading adverts into the world?

The latest ruling was surrounding Three’s ‘Go Roam’ claim, which states users are able to ‘Feel at Home’ by using their full data allowance without any extra costs in 71 countries. An investigation from the ASA found postpaid users were limited to 13GB and postpaid to 12GB, before costs were applied. There is text hidden away somewhere on the Three website pointing towards a fair use clause, though the ASA does not believe this is sufficient and Three has been misleading customers.

Three’s response to the claims was relatively simple. Firstly, most of it customers only use 0.75GB per month in a ‘Go Roam’ destination, therefore 12GB was excessive. Secondly, that the claim had been used since 2014 and was strongly associated with their brand, which supposedly makes it alright. It does appear some customers were using it for business purposes, making several trips abroad per month, while the offer had originally been intended for holidays.

This is a perfectly respectable defence from Three, but without informing the customer of these conditions, it doesn’t have a leg to stand on. Unfortunately this is becoming a common trend. Service providers seem to think they can do what they like before pointing to some obscure reference on websites, incredibly small print or a statement made to an irrelevant number of people at a niche event. While Three might have been caught out in this instance, it is not alone.

BT had a complaint upheld regarding its claims on wifi speeds in April. Sky was caught misleading customers in March regarding a price promotion. Vodafone was caught out earlier this month and in September for misleading claims in adverts featuring Martin Freeman. There are other examples, plus the pending investigations with the ASA and also dozens of examples over the last few months of ‘informally resolved’ incidents. Vodafone has ‘informally resolved’ 12 of these complaints so far in 2018, TalkTalk seven and O2 five. Some of these will be down to honest mistakes, but the complaints seem to becoming more common.

Of course the other factor which needs to be taken into account is the ‘up to’ metric which plagued telcos advertisements for years, misleading customers over speeds which can be achieved. Any normal person would have told any of the telco’s marketing team this is not a fair or honest way to communicate with the consumer, but it become commonplace. It seems the telcos are harbouring different standards when it comes to honesty than the rest of us.

A simple explanation of TIP – making connectivity cheaper

The Telecom Infra Project has gotten a huge amount of attention since its launch, mainly due to the Facebook brand, but why is it so important? It’s all about bringing connectivity to everyone, equally.

This might sound like PR propaganda, but it is true. Facebook wants to make sure connectivity is fair and equal for everyone in the world, ensuring the digital lifestyle extends beyond developed nations and into the ignored territories. Like the army of Mormons spreading the word of Joseph Smith, Facebook is attempting to spread its own form of enlightenment; connectivity.

Again, this might sound like a corporate giant trying to cover up nefarious objectives with a light and fluffy initiative but this is a genuine mission. It does have a tie back to the profit and loss column for Facebook, but what do you expect, Mark Zuckerberg is not the CEO of a charity.

In the simplest of terms, there are two objectives for TIP. Firstly, decouple hardware and software to bring down the price of connectivity infrastructure. This will, in theory, accelerate the rollout of said infrastructure into the regions were ROI has been hard to find. Secondly, open up black boxes in developed markets to improve the quality of connectivity. Both of these objectives are about improving the experience of the internet for all, providing an equal connectivity experience for the masses.

“We need to innovate at the speed of software upgrades not hardware replacement cycles,” said Telefonica’s David Del Val Latorre, one of the TIP Board members.

It does sound too good to be true, but you have to understand the Facebook business model. Unlike it neighbours in Silicon Valley, Facebook has not been the most successful when it comes to diversification. Almost every dollar flowing back to Zuckerberg’s piggy back is derived from the walled garden advertising business model. Facebook captures the audience on its platform, and then charges third-parties to access them. It is an incredibly successful business model, but it has its limitations; you can only serve so many adverts to one person. For Facebook’s rise to continue, new users need to be found.

Facebook’s Next Billion Users initiative is a perfect example of this. With developing markets approaching an advertising glass ceiling, new users need to be found to fuel the advertising machine. For this to happen, connectivity infrastructure needs to be rolled out into the regions where it isn’t. To tackle these tough environments and regions of low-ARPU, new connectivity solutions need to be developed to offer the telcos ROI. Hence TIP.

Of course Facebook is not on its own. Del Val Latorre is leading the TIP and Telefonica efforts to being OpenRAN to South America and connect an additional 100 million customers. Vodafone is doing the same in India and claims to be able to lower TCO by 30% for certain projects. There are now nine community labs around the world, including two in Brazil, and an additional seven field projects. Deutsche Telekom is running its own project in Hungary. Even Nokia has a member on the board, despite the TIP mission destroying part of its own business model. Ericsson isn’t a member though…

Of course, “this is not a Facebook thing, we are one member,” Jay Parikh, Head of Engineering and Infrastructure at Facebook, reminded the audience.

The TIP mission statement might sound like something out of a cheesy PR playbook, and this might be the case, but it is being genuine.

FCC drafts in external opinion to figure out the T-Mobile-Sprint conundrum

Perhaps realising the gravity of the situation, the FCC has drafted in outside help to assess the impact of the T-Mobile-Sprint merger on the US economy.

David Sibley will help the team as an outside consultant reporting into David Lawrence, who is leading the merger taskforce. This should not be seen as an unusual move from the FCC, though perhaps such external opinions should have been brought in earlier considering the impact this merger will have on the telco landscape and competition.

“We are fortunate that Professor Sibley is bringing his considerable economic experience and expertise to bear in this review,” said FCC Chairman Ajit Pai. “Rigorous economic analysis plays an important role in all of the Commission’s work and will be essential to a thorough investigation into whether approval of this transaction would be in the public interest.”

This is the big question. The merger will bring the number of national telcos down from four to three, but is this a good or bad move. There are arguments on both sides.

The bad side of the argument is a simple one. Removing one of the major telcos from the ecosystem will reduce competition and hurt the consumer through higher pricing due to a lack of choice. This is not a complicated point to make and a genuine concern, especially in a country like the US which where telcos do not operate everywhere. The risk of monopolies or duopolies in certain areas increases.

On the positive side, while the number of massive telcos decreases, competition increases as the merged entity would offer a more valid threat to AT&T and Verizon through the combined scale. T-Mobile US CEO John Legere often refers to AT&T and Verizon as the duopoly, and while this is an exaggeration, they are miles ahead of T-Mobile and Sprint in third and fourth place. T-Mobile and Sprint are not at the right scale to compete with the leaders individually, but together the merged organization would offer greater scale. The theory here is reducing competitors would make the market more competitive, therefore better for the consumer.

This is the conundrum which the FCC needs to decide on. Evidence and experts will be aplenty on both sides of the argument, though Sibley certainly adds some expertise to the team.

Sibley is currently the John Michael Stuart Centennial Professor of Economics at the University of Texas at Austin. Prior this role, Sibley worked Head of the Economics Research Group at Bell Communications Research, as well as the Deputy Assistant Attorney General for Economic Analysis in the Antitrust Division of the US Department of Justice. He also represented the US in OECD discussions.

As it stands, the merger shot clock is currently on pause, with the FCC deciding it does not want to be rushed. The approval or rejection of mergers and acquisitions are targeted to be completed within a 180-day window, though the FCC is offered the luxury of taking longer if it is a particularly complicated case. This is proving to be one, with the FCC requesting input from competitors of the pair recently, most notably from players outside the mobile ecosystem, suggesting it is investigating the impact on such segments as broadband.

EE holds onto Opensignal MNO crown

EE has held onto its position as the best performing UK MNO according to the latest figures from Opensignal.

For 4G download performance, EE maintained its leadership position with average download speeds of 29 Mbps between June and August, while it also led in upload speed, latency and availability. This is not to say there weren’t improvements elsewhere, Vodafone grew its average 4G download to 21.9 Mbps, though Three’s dropped with the telco slipping down to third place in the performance rankings.

4G might not have been a fruitful playground for Three, but it did steal the top-spot for 3G speeds off EE. With average speeds of 7.8 Mbps it edged just ahead of EE at 7.2 Mbps, though this will come as little comfort as telcos increasingly look to re-farm 3G spectrum to bolster 4G performance.

Interestingly enough, O2 is still maintaining its position as the leading telco in terms of market share, despite a damning review of the telco from Opensignal. O2 sat in last place for all categories aside from latency (3G and 4G) and availability, where it was second behind EE. O2 might arguably have the weakest network in the UK, the power of promotions seems to counter this position. The Priority loyalty programme is perhaps proving its worth in gold here.

While many will preach the benefits of having the best network, these figures show it’s not always about being the fastest.

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