Openreach dares to contemplate retiring its copper network

UK fixed-line wholesaler Openreach has launched an industry consultation into the switch to ‘full fibre’, which would involve retiring the legacy copper one.

There’s not a lot of point shelling out for a fibre network covering the whole country if a bunch of people don’t use it. Furthermore the cost of maintaining two parallel networks would be prohibitive, so Openreach seems to be saying full fibre will only happen if everyone is fully committed to it. The purpose of this consultation seems to be to chuck that idea out there and see what the rest of the industry, including the government and Ofcom, has to say about it.

“…we’re consulting with broadband providers to decide how and when we upgrade customers to even faster, more reliable and future-proof, full fibre broadband,” said Katie Milligan, MD for Customer, Commercial and Propositions at Openreach. “We believe this consultation is crucial to that process, and it will support further investment from across the industry. We’re really ambitious about upgrading the UK to the fastest, most reliable broadband there is.”

These are the three main areas Openreach wants feedback from UK CSPs on:

  1. How it builds the new network
  2. How the industry should migrate customers smoothly onto the new network
  3. How Openreach should eventually retire the existing copper network

Getting buy-in from the CSPs is vital, of course, because they and their customers are ultimately the ones that will pay for this network. The above points are all essentially about money: how are we going to pay for this network and make everyone use it? On top of those Openreach flagged up a few more specific ‘guiding principles’ that also need to be considered:

  • Building contiguous footprints within its exchange areas to avoid creating new not-spots
  • Working closely with CPs to upgrade every customer in those areas quickly once the new network is built
  • Offering a compelling, simple portfolio of products that supports new retail voice and broadband services
  • Upgrading the large majority of people voluntarily, whilst developing an industry process for late adopters
  • Withdrawing copper-based services progressively
  • Developing a consumer charter with industry and Ofcom that encourages transparent communications to homes and businesses affected, and includes protections for vulnerable customers

In other words those pesky ‘late adopters’ would eventually be given no choice but to upgrade. This is what Openreach had to say about the copper situation: “The process would start with a ‘no move back’ policy for premises connected with FTTP, followed by a ‘stop-sell’ of copper services to new customers, and ultimately a withdrawal in full.”

It seems a bit authoritarian, but if the economics of maintaining the copper network don’t add up then it’s hard to what alternatives there are. The danger of forcing consumers to take a service is that CSPs could take that opportunity to over-charge, so Ofcom will want to keep an eye on that side of things. The government, as ever, will ride on the coat-tails of the process in its never-ending search for cheap political capital.

“We’re building a Britain that’s fit for the future, and our plans for a national full fibre broadband network underpin our modern industrial strategy,”  said Minister for Digital Margot James. “Upgrading to gigabit capable connections will benefit homes and businesses all across the UK. I welcome Openreach’s consultation on how to make this process as simple and efficient as possible whilst ensuring a competitive market is in place for all consumers and infrastructure providers.”

Openreach also recently announced Salisbury is going to become the UK’s first place to get FTTP across an entire town, which will be complete in April 2020. It seems to be setting this up as an exemplar of how great everything can be if we all cooperate on this stuff and reap the consequent connectivity rewards. This consultation will be open until 3 May, after which Openreach will let us know how it went.

Three UK readies assault on broadband market

While its latest financials might not look mind-blowing, Three UK is steading the ship as it casts its eye towards the promised land of convergence and 5G.

Convergence is not really much of a buzzword anymore, such is the accepted nature of the model across the telco industry, though Three is seemingly readying itself for a broader push into broadband segment. The first job is to rebrand Relish, which will happen next month, and the next box to tick will be 5G.

“We are well set up for some transformational shifts in 2019 for our customers and our employees,” said Three UK CEO Dave Dyson. “It will be a year when our customers will start to see the real benefits of the next generation of 5G “mobile” technology, a technology that will not only replace 4G, but will also replace the need for wired broadband services.”

With the new ‘Three Broadband’ branding and a 5G network launching in H2, the Three marketers will have plenty to talk about when attempting to add to the 800,000 broadband customers it already has. In terms of the current state of play, Three said 10% of its current customer base is already ‘converged’ but 5G offers an opportunity to accelerate growth in the broadband business.

The team feels it has an advantage over rivals with its 5G holdings, offering superfast broadband connectivity which is not reliant on fibre. Whether UK consumers are swayed by the Fixed Wireless Access promise remains to be seen.

Looking at the position of the business, it would be fair to describe the last twelve months as healthy without being particularly good. This might not sound the most positive, but the raw materials are certainly in place for Three to make some very strong strides forward.

Total revenues over the last 12 months rose 1% to £2.4 billion, while total network connections reached 11.3 million. 99% of new customers were brought in through Three’s own sales channels, churn is down to 1.1% and net promoter score has reached a new high of +15. Three might not have torn up many trees last year, but the foundations of the business are very healthy.

Looking forward, the team is in the testing stages for its fully-virtualized 5G-ready cloud core network, while there are now 21 data centres live on the network. The business has also signed an agreement with SSE to improve mobile backhaul and 3G spectrum is being continuously re-farmed for 4G. All these initiatives will incrementally improve the customer experience.

“Three is fully embracing a business transformation to take maximum advantage of the opportunities digital businesses enjoy,” said Dyson. “2018 was the year when we set the foundations in place for us to jump up to the next level and become the UK’s best-loved brand by our people and customers, meeting all our customers’ connectivity needs.”

This kind of feels like a ‘calm before the storm’ scenario. Once the broadband rebrand is finished and 5G launched, we feel there will be some very aggressive moves from Three, staying true to its data-orientated roots but heavily integrated convergence messages on-top.

Virgin Media gives some smarts to wifi

Virgin Media has unveiled a new, ‘intelligent’, router which it claims will bring faster speeds to more areas of the home.

With the telco world becoming increasingly utilitised, and advertising authorities rightly cracking down on the ‘creative’ marketing claims, new ideas will certainly be needed to capture the attention of the increasingly demanding consumers. And in fairness to Virgin Media, this is not a bad attempt.

“Delivering ultrafast broadband to help make Britain faster is what we do best at Virgin Media but making sure this translates into reliable in-home connectivity is just as important,” said Richard Sinclair, Executive Director of Connectivity at Virgin Media

“Intelligent WiFi will allow our customers to make the most of their broadband while also helping to easily overcome any connectivity conundrums around the home. With families using more devices than ever before, it’s vital they can all be online whenever needed. Whether it’s streaming UHD movies on Netflix, playing the latest games online or video conferencing, Intelligent WiFi has your back.”

Starting with the intelligence side of the router, should the software work the way it’s supposed to, this could prove to be a very interesting addition. Firstly, Channel Optimisation allows the router to choose the least congested channel to decrease the likelihood of traffic jams. Secondly, a Band Steering feature allows devices to switch between 2.4GHz or 5GHz frequency to optimise performance. Finally, Airtime Fairness suggests bandwidth will be allocated between devices depending on the demands of that device.

The term ‘intelligence’ is thrown around relatively flimsily nowadays, though should the performance of these features be at the desired level, this could prove to be a very useful product.

 

And while the ‘intelligence’ aspects are more likely to enthuse those consumers who are more geekily orientated, a new app to manage the wifi experience is answers a lot of the simple bugbears and first-world problems of connectivity.

One example is sharing wifi passwords. It might not seem like a revolutionary idea but being able to log into the app and simply send the wifi password to a friend or guest will save customers from the inevitable digging around behind the TV. This is not necessarily a feature which will win customers for Virgin Media, but enough of these little quirky features will improve the customer experience and loyalty.

Another area which the app addresses is ubiquitous connectivity. Being connectivity everywhere and all-the-time is a necessity nowadays, though consumers are becoming increasingly cash conscious. Through the app, Virgin Media customers can now connect to any Virgin Media wifi hotspots, of which there are 3.5 million around the UK.

Most importantly for Virgin Media, this take the brand outside of the customers home, and allows the company to support customers through the entire day. This is Virgin Media adding value into the customer’s lives, going beyond the assumed perimeters of a home broadband provider.

“UK consumers have an insatiable appetite for data across a wide range of devices that will continue to grow over time,” said Paolo Pescatore of PP Foresight. “As well faster download speeds, consumers want a better and reliable connection in all parts of their home. This is starting to be a highly sought after service among users.”

BT has been playing in this market for some time, which offers Virgin Media a blueprint for success. Patchy performance and an irritating log-in process perhaps gave the BT wifi play a bad name, though progress has been made across the public wifi space in recent years. Hopefully Virgin Media will have learned these lessons.

With connectivity increasingly heading towards the dreaded limitations of utility, it is becoming increasingly important for telcos to prove they can add value to other aspects of the customers life. This is certainly an interesting play from Virgin Media and should the features work, Virgin Media goes some way in proving it is more than just a utility.

Investment bank backs the BT waiting game

Don’t expect BT to give too much away over the next couple of months, but investment bank Jefferies thinks there is enough there to make the telco a good bet.

The arrival of new BT CEO Philip Jansen has sparked the prospect of the telcos revival, at least from a share price perspective, though Jefferies believes cards will be held very close to the chest for the moment. Don’t expect too much insight on future strategies over the near-future, but the foundations seem steady enough to put BT in a solid position.

The last few years have not made for comfortable reading for many BT investors. In November 2015, share price stood at £4.99. This was not a historical high, but it was a peak in recent memory. Since that point, share price has declined 56% after gains from EE remained elusive, the Openreach position was challenged and a disastrous entry into the content game. Under former-CEO Gavin Patterson, BT entered a slump.

That said, in January BT reported positive results, suggesting the restructuring process implemented over the last 12 months was setting the foundations for recovery. Jansen was entering a business which was in a reasonable position.

“BT welcomes its new CEO with foundations to build on, not a slate to wipe clean,” the Jefferies investor note states.

However, with Jansen’s first earnings call just weeks away, don’t expect too much insight on BT’s future strategy. With Ofcom’s Access Review still yet to see the light of day, it would be “illogical” for BT to make too much of a commitment in the near future.

Depending on the outcome of this review, there might be room for Openreach to consider premiums on FTTP, there might be demands to increase CAPEX, there might be a need to cut Dividend Per Share (DPS). There are too many maybe’s floating around the regulatory uncertainty created by government ambitions to fibre-up 15 million UK homes by 2025.

While there is a suggestion DPS growth might freeze or reverse, this could allow BT to redirect funds towards the CAPEX column at Openreach. This could assist the telco in creating a friendlier relationship with Ofcom, an outcome which would be beneficial for everyone involved.

Jefferies feels there are too many unknowns for the telco to make any concrete commitments moving forward, but in encouraging customers to Buy BT, there is seemingly a lot of confidence.

A post-Brexit Ofcom worries us – Vodafone

With the anti-China rhetoric dominating the headlines in recent months, Brexit chatter has become unfashionable. But with the deadline fast approaching, what will Ofcom look like in the future?

Speaking at a breakfast briefing in London, Vodafone UK Chief Counsel and External Affairs Director Helen Lamprell let loose on the UK regulator. Cell tower height, rural roaming, potential reintroduction of international roaming charges, dark fibre and auction dilemmas, there seemed to be a lot of venting going on.

“The UK remains a challenging environment [regulatory], one of the most challenging in the world,” said Lamprell. “But we are seeing positive change.”

The issue which Vodafone is keeping an eye-on is Brexit. According to Lamprell, Ofcom is one of the most conservative regulators throughout the bloc, though when it is freed from the tethers of the Body of European Regulators for Electronic Communications (BEREC), there is a risk it could become even more so.

There isn’t necessarily one massive bugbear from the telco, but several little aggravations which all combine to a much larger nuisance. Let’s have a look at mast height to start with.

Everyone wants signal, but no-one wants towers

As it stands, UK cell towers are limited to 25 metres in height. This obviously doesn’t take into account those masts which are placed on the top of buildings, just the actual structure itself. In most cases, this doesn’t have a massive material impact on operations, such is the population density of the UK, but when you look at countryside locations it becomes a much larger discussion.

Part of the up-coming 5G spectrum auctions will place coverage obligations on telcos. This is a reasonable request by the government, as telcos have shown they will not bridge the digital divide on their own, though as it stands 99% of the UK population is currently covered. Geographical coverage is no-where near this figure, though as there is little commercial gain from providing coverage to these remote locations, reaching the 90% objective is difficult.

One way which this could be done is by providing exemptions to the 25-metre limit in certain situations, such as the countryside, as CTO Scott Petty pointed out, for every 10-metres you go up the coverage ring is doubled.

All four of the major UK MNOs (EE, O2, Vodafone and Three) are meeting with the Department of Digital, Culture, Media and Sport (DCMS) this afternoon, and this will be a point on the agenda. Should these exemptions be granted, it opens the door for shared infrastructure also, as the main cost of these structures is civil engineering and construction, not the equipment on the tower. Both of these developments combined would aid the telcos in reaching the geographical coverage objectives.

This brings us onto another interesting point raised by Lamprell, rural roaming.

My restless, roaming spirit would not allow me to remain at home very long

“Rural roaming takes away our incentive to invest,” Lamprell said. “It’s a really, really dumb idea.”

Three are one of the companies pushing for rural roaming, but as the Vodafone team points out, it is the only MNO which hasn’t built out its rural infrastructure. However, should rural roaming be introduced it would cause a stalemate for investment.

As Petty points out, why would any MNO invest in its own infrastructure when it could force its way onto a competitor’s? All the telcos would be sitting on the starting line, waiting for another to twitch first, such is the pressure on the CAPEX spreadsheet column when investing in future-proofed infrastructure.

Moving onto the international roaming question, Vodafone is staying pretty agile right now. As it stands, the status quo will be maintained, though the team will react to the commercial realities of a post-Brexit landscape. Currently, as a member of the European Union, Vodafone is protected from surcharges when it comes to termination charges, though those protections will end with Brexit.

Vodafone has quite a significant European footprint, in most cases there is little to worry about, but for those territories which fall outside the Vodafone stomp, negotiations will have to take place.

There are several countries, Estonia is an example, which has higher termination rates than the UK. If the reality of a post-Brexit world is Vodafone is swallowing up too many charges from international calls/SMS/data, roaming charges might have to re-introduced in certain markets. This is all very theoretical currently however Ofcom will prevent Vodafone from replicating these charges from the European nations. Vodafone is sitting and waiting for the realities of Brexit right now, though it will not be a broad-brush approach.

“Our position today is to maintain the position we are in, but we will have to evaluate the situation at the time,” said Lamprell.

Ignore Luke, the Dark Side is great

Dark fibre. It used to be a popular conversation, but everyone seems to have forgotten about it recently.

Not Lamprell.

The focus of Ofcom over the last 12 months or so has been on opening-up ducts and poles, and while this certainly is progress, it only addresses part of the problem. Dark fibre is an aspect of the regulatory landscape which could add significant benefits to the industry but has seemingly become unfashionable.

Dark fibre, fibre cabling which is not currently being utilised by Openreach, could answer the backhaul demands of the increasingly congested networks quickly and efficiently. Mainly as it is already there. There is no need to dig up roads, apply for planning permission or procure new materials, it could be as simple as flicking a switch.

Openreach resistance and Ofcom’s aggressive focus on ducts and poles is perhaps missing a trick.

Going, going, maybe not yet

The UK is currently in somewhat of an unusual and unprecedented situation. It is one of the nations leading the world into the 5G. This is not to say it is in a podium position, but compared to the 4G era, the UK is sitting pretty.

Part of the reason for this has been early auctions to divvy up spectrum assets, however, moving forward there are some irregularities which is causing some head-scratching.

Later this year, Ofcom will kick-start another auction which will see 120 Mhz of spectrum in the 3.6-3.8 GHz bands, as well as 80 MHz in the 700 MHz band go up for sale. For both Lamprell and Petty, this auction doesn’t make sense. These are two bands which will be used for different purposes (coverage and speed) so why auction them off together.

If Vodafone had known this was going to happen back in April 2018, during the first spectrum auction, it might have altered its strategy.

“We could end up with a very fragmented spectrum situation,” said Petty.

From the team’s perspective, it seems Ofcom has only just woken up to the coverage demands of the UK government, and is using this auction as a blunt tool to meet the objectives. From an engineering perspective it doesn’t seem to make much sense to Vodafone.

“We are not happy with the rules,” said Lamprell. “But it’s rare for us all [MNOs] to be happy.”

Looking good but looking suspect

The UK is currently in a good position ahead of the 5G bonanza from an engineering perspective. With test hubs being set up around the country and telcos who are acting proactively, the UK looks like an attractive environment to invest in for R&D. It is by no-means leading the global 5G race, but it is in a healthy position.

However, political and regulatory uncertainty are a threat to this perception. The activities and culture of both DCMS and Ofcom over the next couple of months will has a significant impact on the 5G fortunes of the UK, as well as the ability to attract new talent, companies and investment.

Telcos need to seriously think about how to sell to consumers

Following the news that Sky has been slapped on the wrist for misleading claims during a 2018 advertising campaign, marketers need to have a long and hard think about whether they are doing a good job.

The most recent assault against the marketing strategies of the telcos comes from the Advertising Standards Authority (ASA), with the group ruling Sky’s push to suggest customers would be able to receive stronger wifi signal throughout the house because of its routers, was misleading. The campaign features characters from ‘The Incredibles’ franchise, running across TV and through mainstream press.

The campaign was originally challenged by BT and Virgin Media, with both suggesting the claims were misleading as there was no way to substantiate the assertion. And the ASA agreed. In some cases, Sky’s router might be able to improve wifi signal throughout the home, but due to the breadth of different homes, each with their own structural design, it is an impossible claim to justify. The ad was far too generalist and deemed misleading.

“Unfortunately for Sky, its promise of a strong wifi signal all over your house has been shown to be misleading, and while it is by no means unique in falling foul of the ASA, it will be stung by this ruling the regulator has upheld against it,” said Dani Warner of uSwitch.com.

“Broadband providers are no longer allowed to make such exaggerated claims about potential speeds following the ASA’s major clampdown at the end of 2017, so they have had to become more imaginative in how they stand out from the pack with their advertising.”

This is an area the ASA has been quite hot on in recent years; telcos should not be allowed to make such generalist claims, intentionally misleading customers over performance. Especially in an age where advertising can be personalised on such a dramatic scale, at best it is lazy and incompetent, at worst it is directly and intentionally lying.

What is worth noting is that Sky can potentially boost signal throughout the home, though additional equipment would be required to make this possible. This is not mentioned during the advertising campaign however. The ASA ruled that some of the claims made in the ad could be substantiated, however it is no longer allowed to run in its current form.

Sky incredibles

This is of course not the only area where telcos are being challenged in the world of advertising. ‘Fibre’ claims are another, the ‘up-to’ metric has been removed and the telcos are being forced to detail speeds during peak times. Another factor to consider is the up-coming 5G service. Do any of the telcos have a clue how they are going to sell the service to consumers, as we do not believe the idea of ‘bigger, faster, meaner’ will not work, at least for the first few years.

Starting with the ‘up to’ claim, this is one which plagued the consumer for years. Masses of customers were duped into buying promised services which could only be delivered to a fraction. Thankfully, the ASA changed rules, forcing the telcos to be more accurate in how they communicate with potential customers.

Not only did this ruling mean the ‘up to’ claim had to be avoided, but it also forced the telcos to claim speeds during peak times. This also more readily informs the consumer of services which they are likely to experience, as opposed to the dreamland which most telcos seem to think we live in.

The term ‘fibre’ and ‘full-fibre’ has also been challenged, though telcos can still get away with some nefarious messaging. Irrelevant of whether there is fibre in the connection, and there generally always will be at some point, the ‘last mile’ is where the difference is made to broadband speeds. If it is copper, you will never get the same experience as fibre, however, telcos are still able to mention fibre in advertising.

The ASA has done some work to clear this up, in all fairness, though we still feel there is opportunity to abuse the trust of the consumer. And the telcos have shown that when there is an opportunity to be (1) at best lazy or (2) at worst directly misleading, they will take it.

The final area which we want to discuss takes us into the world of mobile and 5G. The telcos have always leant on the idea of ‘faster, bigger, meaner’ to sell new services to customers, or lure subscriptions away from competitors, but 5G presents a conundrum for the marketers; do consumer need faster speeds right now?

EE

4G delivers a good experience to most, and if it doesn’t, there generally is a good reason for this (i.e. congestion, interference, remote location, indoor etc.). 4G will continue to improve both in terms of speed and coverage over the next few years, and as it stands, there are few (if any) services which supersede what 4G is or will be capable of.

Another factor to consider is the price. Many consumers will want the fastest available, even if they don’t need it, but the premium placed on 5G contracts might be a stumbling block. EE has already hinted 5G will be more expensive than 4G, though details have not been released yet. In the handsets segment, consumers have shown they are more cash conscious, especially when there is little to gain through upgrades, and this is heading across to the tariffs space as purchasing savviness increases.

“I don’t think there are many great telco brands out there most consumers see them more as a utility,” said Ed Barton, Chief Analyst at Ovum. “T-Mobile USA is an exception with their customer champion, ‘un-carrier’ positioning but there no branding even approaching the effectiveness of, say, Apple’s.

“If 5G is sold only as a faster G, sales will be slow and it’s up to the entire ecosystem to create the apps, services and use cases which can only exist because of 5G network capabilities. These will probably rely on some combination of edge computing, high volume data transfer, low latency and maybe network slicing. An early use case is domestic broadband however as 5G networks evolve the use cases should proliferate relatively quickly.”

If consumers are becoming more cash conscious and have perfectly agreeable speeds on their 4G subscriptions, the old telco marketing playbook might have to be torn-up. The big question is whether the ideas are there to make the 5G dream work. Differentiation is key, but few telcos have shown any genuinely interesting ideas to differentiate.

Priority

One excellent example is over at O2 with its Priority initiative. Through partnerships with different brands, restaurants, gig venues and companies, customers are given freebies every week (a Nero coffee on a Tuesday) or special discounts periodically (£199 trip to Budapest). It leverages O2’s assets, the subscription base, allowing O2 to add value to both sides of the equation without monstrous expense. This has been a less prominent aspect of O2 advertising in recent years; perhaps the team is missing a trick.

Another, less successful, example of differentiation is getting involved with the content game. BT has been pursuing this avenue for years, though this expensive bet has seemingly been nothing more than a failure, with former CEO Gavin Patterson heading towards the door as a result.

This is not to say content cannot be a differentiator however. The content aggregator business model is one which leverages the exclusive relationship telcos have with their subscribers, streaming-lining the fragmented content landscape into a single window. Again, it uses assets which the telco already has, adding value to both sides of the equation. It also allows the telcos to get involved in the burgeoning content world without having to adopt a risky business model (content ownership) to challenge the existing and dominant members of the ecosystem.

In France, Orange is a making a place for ownership of the customers ‘smart ecosystem’, offering new services such as storage and security, while the same play is being made by Telefonica in South America through Aura. These offerings will offer differentiation, as well as an opportunity to make more revenues through third-party services. It’s a tough segment, as it will put them head-to-head with the likes of Google and Amazon’s digital assistants, but it is a differentiator.

By having these initiatives in place, marketers have something unique to go to market with, enticing consumers with promises which are genuinely different.

Three is a company which is taking a slightly different approach, hitting the consumers appetite for more data as opposed to speeds. Here, the team is leaning on ‘binge-watching’ trends, offering huge data bundles, but you have to wonder whether this is sustainable in the long-run when it comes to profitability and customer upgrades. There is only so long a company can persist in the ‘race to the bottom’.

Go Binge

“There are too many claims in an attempt to stand out in a crowded market,” said Paolo Pescatore, Tech, Media & Telco Analyst at PP Foresight.

“This is not the first time and wont be the last. It will only proliferate with the rollout of fibre broadband and 5G services. Consumers are happy to pay for the service they’ve signed up for, not to be misled. In essence, telcos are struggling to differentiate beyond connectivity. There’s a role for a provider to be novel and provide users with value through additional services and features.”

With the ASA chipping away at what marketers can and cannot say, as well as the traditional playbook becoming dated and irrelevant, telcos need to take a new approach to selling services to the consumer. The winners of tomorrow will not necessarily be the ones with the best network, O2 currently sits at the bottom of the rankings but has the largest market share in the UK, but the telco who can more effectively communicate with consumers.

5G offers an opportunity for telcos to think differently, as does the emergence of the smart ecosystem. Other product innovations, such as AI-driven routers, which can intelligently manage bandwidth allocation in the home, could be used as a differentiator, but it won’t be long before these become commonplace.

At the moment, all the bold claims being made by telcos, each competing the game of one-up-manship, are merging into white noise. The telcos have lost the trust of the consumer, many of which has cottoned onto the claims being nothing more than chest-beating. The telcos need to get smarter, and it will be interesting to see whether there are any unique approaches to capture the imagination of today’s cash conscious, technologically aware and savvy consumer.

Failure to do so, and the telcos might as well start calling themselves utilities.

Ciena bags 20.5% growth perhaps thanks to Huawei dilemma

Optical networking company Ciena posted positive results for the first quarter of 2019, with total revenues of $778.5 million beating analyst expectations.

There have been whispers in corners of various conferences that a Huawei ban could benefit some, and it may well be having a positive impact for Ciena. While there are numerous other companies which would compete with Huawei in the optical equipment segment, with Ciena one of the few ‘pure-play’ companies it might have a more notable impact on the financials.

That said, irrelevant of where the favourable fortune has come from investors will be happy. $778.5 million represents a 20.5% year-on-year increase for the first quarter, while nearly all geographical markets have shown healthy growth.

“We began fiscal 2019 with a very strong first quarter performance, including outstanding top and bottom line growth as well as continued market share gains,” said Gary Smith, CEO of Ciena. “We believe that the combination of our leading innovation and positive industry dynamics will enable us to further extend our leadership position.”

Net income for the quarter stood at $33.6 million, though this is incomparable to the same period of 2018 which registered a loss of $473.4 million thanks to President Donald Trump’s US tax reform.

Looking at the regions, in the US, a market which now accounts for 62% of the company’s total revenues, the earnings grew just over 20% to $485.5 million, while 20% growth was also registered in the APAC region. The big success story however was in Europe, where the team grew the business by 32% to $129.2 million. This is still only 16.6% of the total haul for Ciena, but more geographical diversification will certainly be welcomed.

For Ciena, Europe could be a very interesting market over the next couple of months. With Huawei coming under increasing scrutiny globally, telcos will look to further diversify supply chains to add more resilience and protect themselves from potential government bans. While the anti-China rhetoric being spouted out by the White House is losing momentum, the European Union is reportedly looking some sort of ban, even if this puts the Brussels bureaucrats at odds with some member states.

For such vast investments, telcos will be looking for certainty and consistency from government policies. When looking at Huawei as a potential vendor, telcos will naturally be nervous, even if they don’t want to admit it.

With Huawei’s ban set to have little impact on the US market, it is not a major supplier to the market historically, the Europe could be a hidden goldmine for Ciena.

Interestingly enough, this scenario also seems to be paying off dividend in the APAC markets as well. Smith notes the success in the APAC region has come from Australia, Japan and Korea, three markets where Huawei has either been explicitly banned or is receiving a rather frosty welcome.

Liberty Global offloads Swiss business for $6.3 billion

Liberty Global has continued its great withdraw from the European markets with another sale, this time convincing Sunrise its 1 million Swiss customers are worth $6.3 billion.

Announcing the deal alongside its financial results, it does look to be a good deal for Liberty Global. This is a business which has been going through somewhat of a restructure, attempting to find profit in a challenging industry by refocusing resources, though it now appears the years of aggressive acquisitions and expansion have not paid off.

“The past fourteen months have been transformational for Liberty Global,” said CEO Mike Fries. “After two decades of buying, building and growing world-class cable operations in Europe, we have announced or completed transactions in six of our twelve markets at premium valuations.”

While $6.3 billion certainly pales in comparison to some of the mega-acquisitions we’ve seen in recent years, it might be worth putting a bit of context around this transaction.

UPC Switzerland has passed just over 2.3 million homes across the country, this is more than 50% of Swiss homes, currently commanding a subscriber base of 1.1 million. The video offering currently has a subscriber base of just over 1 million subscribers (645,000 of which are premium) and mobile subscriptions total 146,000.

Whether these figures justify the $6.3 billion which Sunrise is handing over we’ll let you decide, though just as a point of comparison BT bought EE, and its 30 million mobile subscribers, for £12.5 billion in 2014.

For Sunrise, such an acquisition will add buoyancy to already positive momentum. Over the last three months, Sunrise realised 42,300 postpaid net adds, UPC Switzerland was 8,500 by comparison, while Internet and TV subscribers rose by 8.3% and 14.1% year-on-year respectively.

Infrastructure commission warns UK government over lacklustre ambition

The National Infrastructure Commission (NIC) has issued a warning to the UK Government over its infrastructure ambitions, seemingly worried that Minister’s think the job is done.

“There is a real and exciting chance available to ensure the UK benefits from world-class infrastructure, particularly through the forthcoming National Infrastructure Strategy – a first for this country,” said Chairman of the National Infrastructure Commission Sir John Armitt.

“We cannot afford for Ministers to take their eye off the ball. With this issue at the heart of the Industrial Strategy, I would urge the Government to adopt the recommendations from our National Infrastructure Assessment, and use this to offer industry the long-term, fully-costed infrastructure plan they need.”

While various committees and departments have been readying the red-tape with reviews, assessments and consultations, Armitt fears the job is only part finished. The National Infrastructure Commission recommends infrastructure plans for the next three decades should be in place to ensure the UK is future-proofed for the digital economy, a much longer-term ambition than has been set forward by the government currently.

With the National Infrastructure Strategy set to be published over the next couple of months, we’ll get a clearer picture of the ambitions of the Government. This document has been pitched as a playbook to guarantee the economic prosperity of the UK, though it seems the NIC is worried momentum might be lost should the plans be limited to a shorter period of time.

Fibre connectivity is one area which has been mentioned by the NIC, as while there are targets from the government and Ofcom for the mid-2020s and 2033, these are relatively broad. The next stage of the plan, once 15 million homes have been ‘fibred up’, should be to extend the infrastructure into the rural communities. Unless the Government formalises this progression to the next stage, there is of course a risk of telcos going ‘off-piste’ and serving their own interests.

This scenario is perfectly understandable and perhaps the very reason the Government has to cast an eye onto the far-distant horizon. Telcos are commercial organizations after all, favouring upgrades in areas where there is a more immediate ROI. This is what created the digital divide in the first place, and without regulation to hold the telcos accountable, they will naturally favour investments in the more densely urbanised areas.

What is worth noting is that Armitt’s comments are not supposed to be a damning indictment of the progress made thus far. Steps forward to ensure UK infrastructure is in an appropriate position have been made, though the question is whether the momentum will be continued to ensure the continued success of the UK in the global economy beyond the documented stages.

To counter Armitt’s point, formulating plans for such long periods of time can create a rigid regime which does allow for reactionary measures. Who knows what the world will look like in a couple of years’ time; any plans will have to flexible enough to allow adaptability. It is a tricky equation to balance.

For anyone in the telecommunications and telco world, this is a bit of a recurring theme. Digital communications is a hot topic right now, such is the enthusiasm created by 5G, though the political interest peaks and troughs. The same political hype ramped up ahead of 3G and 4G before dying off. Soon enough another cause to champion will emerge, though should the NIC’s recommendations be taken on board, you would hope the regulatory framework has been put in place to ensure structured progression.

Vodafone turns to wifi innovation to bolster broadband business

Vodafone has announced the launch of a new smart home network which it hopes will address a frustration of many consumers around the world; suspect wifi.

The new routers will not only allow for extenders to be placed around the house, potentially eliminating not-spots hidden in various rooms, but cloud-based algorithms will allow for more dynamic and intelligent allocation of connectivity resources.

“We know that the vast majority of people’s broadband issues are actually down to poor Wi-Fi signals in their homes – around a quarter of calls into customer care are about Wi-Fi issues,” said Ahmed Essam, Vodafone Group’s Chief Commercial and Strategy Officer. “Super WiFi is a simple way to address these problems and give our customers the best possible connection in every room of their house, every day of the week.”

As it stands, most broadband routers are pretty dumb devices. Bandwidth is split evenly to the devices which are connected to the router, irrelevant as to what the devices are doing. In this ‘dumb’ world, your TV which might be streaming a HD movie, will be allocated the same amount of bandwidth as a laptop which is only checking emails. Its not a very efficient way to do connectivity.

Cloud-based self-learning algorithms mean the network is constantly improving over time, adjusting automatically to deliver the best possible connection to each type of device, whether it is a mobile, laptop or connected TV. This makes a lot of sense when you consider the difference in checking WhatsApp and watching Stranger Things, while the equation might become a little bit more complicated with the connected revolution gathering momentum.

The introduction of smart speakers and energy meters might just be the beginning. While the idea of a connected fridge has been around for years, with a supporting ecosystem quickly emerging behind the products, there might be a bigger appetite for such futuristic living. With more devices fighting for connectivity attention from the router, this might be a solution. The ‘dumb’ status quo, putting the TV and the fridge on par, is clearly not a good option.

This is certainly a good move forward for Vodafone, and we look forward to the routers coming to the UK in the next couple of months, with the Spaniards getting the attention first and foremost.