Vodafone Germany tries to placate regulators via wholesale cable deal with Telefónica

Telefónica Deutschland will be able to sell services that run on the combined Vodafone and Unitymedia cable network in Germany, as a remedy measure taken by Vodafone to satisfy EU’s competition concern over its proposed acquisition of Liberty Global.

The two companies announced that they have entered into a definite “cable wholesale agreement” in Germany, whereby Telefónica Deutschland will offer its customers broadband services that use both the Vodafone fixed network and that of Unitymedia. The combined networks cover 23.7 million households and represent a significant upgrade to whatever Telefónica Deutschland customers are currently getting.

“The cable agreement will enable us to connect millions of additional households in Germany with high-speed internet in the future,” said Markus Haas, CEO of Telefónica Deutschland. “By adding fast cable connections, we now have access to an extensive infrastructure portfolio and can offer to even more O2 customers attractive broadband products – including internet-based TV with O2 TV – for better value for money.”

Vodafone’s plan to acquire Liberty Global in Germany (where it trades under the brand Unitymedia), the Czech Republic, Hungary, and Romania, has run into difficulty at the European Union, which raised competition concerns at the end of last year. The Commission was particularly worried that the combined business would deprive the consumers in Germany of access to high speed internet access, and the OTT services carried over it. Vodafone expressed its confidence that it would be able to satisfy the Commission’s demand. Opening its fixed internet access to its competitor is clearly one of the remedies. Also included in the remedy package Vodafone submitted to the Commission was its commitment to ensure sufficient capacity is available for OTT TV distribution.

“Our deal with Liberty Global is transformational in many ways. It is a significant step towards a Gigabit society, which will enable consumers & businesses to access the world of content & digital services at high speeds. It also creates a converged national challenger in four important European countries, bringing innovation & greater choice,” said Nick Read, CEO of Vodafone Group. “We are very pleased to announce today our cable wholesale access agreement with Telefonica DE, enabling them to bring faster broadband speeds to their customers and further enhancing infrastructure competition across Germany.”

Vodafone believed the remedial measures it put in place should sufficiently reassure the Commission that competitions will not suffer after its acquisition of Liberty Global. The company now expects the Commission to undertake market testing of the remedy package it submitted, and to give the greenlight to the acquisition deal covering the four countries by July 2019. It plans to complete the transaction by the end of July. The merger between Vodafone’s and Liberty Global’s operation in The Netherlands was approved by the EU in 2016.

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.

As Nielsen reports shift away from cable TV Netflix announces biggest price hike

A recent Nielsen report on the evolution of US TV viewing habits reveals a 48% increase in the number of households switching entirely to over the air access.

16 million US homes – 14% of households – are now OTA-only, up from just 9% of households 8 years ago. This constituency is split into older viewers (6.6m) looking to save a few bucks by settling for the good, old broadcast antenna option, and younger SVOD (subscription video on demand) subscribers (9.4m), who get everything they need from services like Netflix and therefore see no need to pay for cable.

A significant characteristic of this latter category is a move away from the traditional TV to viewing on mobile devices. These smaller screens tend to lend themselves to solitary viewing rather than the more communal TV experience, something that is greatly facilitated by the on-demand nature of these services.

Nielsen OTA chart

Coinciding with the publication of this report is the announcement from Netflix of its biggest ever price rise in the US. The SVOD giant has been investing more than ever on original programming and has such a massive installed base that it seems to have decided it’s time to start thinking about justifying its massive valuation.

“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” a Netflix spokesperson said in a somewhat redundant statement to Light Reading.

“For many users, Netflix is an indispensable video services,” said Tech, Media & Telco Analyst Paolo Pescatore. “There will not be much backlash (for now). This is certainly one way to increase revenue significantly. It needs to focus on financials as well as subscriber growth. Netflix is following the traditional pay TV model of increasing prices annually. Expect other countries to increase prices over coming months.”

Anecdotally linear TV viewing seems to be a dying phenomenon. Even when families congregate around the living room TV they’re just as likely to watch a DVD or streamed box set and, if this correspondent’s experience is anything to go by, people prefer to do their own thing on tablets. Netflix is currently the boss of that sector so it’s probably free to keep raising prices for a while yet.

Wifi performance is the service provider’s problem whether they like it or not

At the Cable Next-Gen Europe event in London a panel discussed the lessons learned from offering 1 Gbps domestic broadband.

It seems like the only way the ISP industry thinks it can persuade consumers to hand over more of their hard-earned cash is to promise ever-better performance. But consumers can be an awkward bunch and have a nasty habit of expecting that promised boost to be delivered. To make things worse they’re not shy about voicing their displeasure to expensive customer service departments.

They just won’t listen to reason. You can try explaining the problem is at their end thanks to rubbish routers, decrepit devices and unhelpful walls but it falls on deaf ears. As far as they’re concerned they’ve been promised 1 Gbps, they’re not getting it and they want to know what the company that took their money is going to do about it.

The consensus among the panel, which featured ISPs, specialist wifi vendors and a big kit vendor, was that wifi is the ISP’s problem whether they like it or not. A big reason for this is that regular punters aren’t even interested in the various technical challenges involved in delivering the promised bandwidth; they only care about the end result.

Having said that there are a lot of technological solutions to this problem, such as mesh wifi as offered by companies like Plume, which was represented on the panel. Mesh looks like a good answer to coverage problems resulting from the limited range of wifi routers, physical obstructions, etc. It’s quite a trending buzzword in the industry right now but even the mesh vendors were careful not to position it as a panacea.

Similarly successive generations of wifi technology, now belatedly using a more consumer-friendly naming scheme, only address part of the problem. Even if you have a 1 Gbps service and the latest Wi-Fi 6 router, of all your devices still have 802.11g wifi chips, which is apparently still commonplace, then you’re still going to get rubbish performance.

According to a straw poll among the panel it’s not uncommon for there to be 20+ wifi connected devices in a given home, through which CSP customers will assess the quality of their service. For this reason there was a consensus that there will be an explosion in managed wifi services offered by CSPs in the near future.

T-Mobile US declares war on cable incumbents with Layer3 TV acquisition

In a characteristic move, T-Mobile US has announced it intends to disrupt the UK cable market in same way it has the mobile one.

As ever the narrative focuses on what is described as an uncompetitive market that serves is customers poorly. Apparently cablecos are even more despised in the US than mobile operators and TMUS wants to inject a bit of competition into that space by offering its own OTT video service.

The Layer3 acquisition seems to be a relatively small one (the price wasn’t revealed) more about technology than content. As a consequence TMUS expects the deal to go through quickly and to be able to start messing with the likes of Comcast and Cox next year.

“People love their TV, but they hate their TV providers,” said TMUS CEO John Legere. “And worse, they have no real choice but to simply take it – the crappy customer service, clunky technology and outrageous bills loaded with fees! That’s where we come in. We’re gonna fix the pain points and bring real choice to consumers across the country.”

Most of the rest of the announcement is more of this sort of thing, complete with exclamation marks, profanity and hysterical hyperbole. We’re never shy about taking the piss out of the self-parody that is Legere but, to be fair, he seems to have played a blinder here. Anyone who values competition should approve of this move, which you can learn more about in the sometimes hilarious video below.

 

Microsoft and Facebook lay some serious cable

The laying of the ‘highest-capacity’ transatlantic cable by Microsoft and Facebook has been completed in just over a year.

The two tech giants started work on Marea in May 2016 in partnership with Telefónica cable subsidiary Telxius and have completed the work pretty quickly. Marea goes from Virginia Beach on the east coast of the US to Bilbao in northern Spain. It claims to be the highest capacity trans-Atlantic cable – shifting 160 terabits per second.

“Marea comes at a critical time,” said Brad Smith, President of Microsoft. “Submarine cables in the Atlantic already carry 55 percent more data than trans-Pacific routes and 40 percent more data than between the U.S. and Latin America. There is no question that the demand for data flows across the Atlantic will continue to increase and Marea will provide a critical connection for the United States, Spain, and beyond.”

Someone from Facebook pontificated about bringing people together and someone from Telxius said all this extra bandwidth might come in handy, what with streaming video, etc. The cable is also a fair bit further south than many others, which provides a potential connectivity safeguard in the case of natural disasters or other mishaps.

Unstated but presumably critical to their involvement in the project is the fact that both Microsoft and Facebook have major datacenters in Virginia. This is yet another example of tech companies trying to take more ownership of the connectivity challenge.

Elsewhere Ericsson, Telstra and Ciena have successfully encrypted in-transit data travelling at 100Gbps over multi-vendor networks on a trans-pacific cable between LA and Melbourne (or transatlantic if you believe the amusing typo in the email press release).

“This demonstration shows that customer services with large bandwidth requirements can be secured and data transported across virtually any distance and over an underlying network that uses multiple vendors,” said Darrin Webb, Executive Director of International Operations and Services at Telstra. “This means we can provide service consistency regardless of the cable system used. Customers will also be able to protect their data not only at the application layer, but also at the network layer without any reduction in quality.”

Verizon CEO: fixed line is so last year, we’re all about mobile now

Speaking at the Goldman Sachs Communacopia Conference, Verizon CEO Lowell McAdam said he’s no longer interested in big cable M&A.

As recently as the beginning of this year there was talk of a merger between Verizon and cable giant Charter but that came to nought. Verizon is all about 5G now, according to McAdam, who cited the Straight Path acquisition (not to mention taking on former Ericsson CEO Hans Vestberg) as evidence of its seriousness in that respect.

The enhanced mobile broadband that comes with 5G will, of course, require some pretty hefty backhaul. But McAdam seems to think that you can’t beat laying your own fibre cable, as opposed to acquiring pre-built networks, when it comes to getting that sort of thing just right, and flagged up Verizon’s commitment to blow a ton of dough on fibre with Corning to substantiate that point.

“I don’t think there is any debate any more that more and more things are going mobile and less and less things are going fixed line,” said McAdam (as transcribed by Seeking Alpha). “And so we’re positioning the company to what I call skate where the puck is going, to be that digital media company that provides mobility services and high bandwidth speeds to customers, no matter where they are.”

On the topic of 5G McAdam had some interesting things to say regarding the ongoing trials we’re constantly hearing about, specifically on the matter of millimetre wave propagation. “We have seen that the foliage doesn’t impact as much as we thought, we can penetrate more building structures than we thought, we can go higher in buildings than we thought,” he said. “We assume six floors, we’re seeing over 20 floors of elevation in the signal. So we’re encouraged by it.”

On the M&A side McAdam also thinks there’s more value in investing in 5G than in cable. I think right now a lot of the fiber companies; their values are a little fluffy compared to what you can build it for yourself and so that’s the path that we’re on,” he said. “…if you look at the amount of capital that’s moving into mobile; if you look at how every internet company is trying to get deeper ties to mobile, that is going to be the center going forward.”