Europe unveils its digital grand plan

The EU reckons Europe can be a digital leader so long as it does what the European Commission tells it to.

To be fair to the EC this is a pretty ambitious project as it seeks to define the rules, parameters and scope of all the digital ambitions for the entire bloc. It encompasses the European data strategy and its rules for the development of artificial intelligence in such a way that it helps the continent out, but doesn’t result in a Terminator-like dystopia.

“Today we are presenting our ambition to shape Europe’s digital future,” said President of the Commission, Ursula von der Leyen. “It covers everything from cybersecurity to critical infrastructures, digital education to skills, democracy to media. I want that digital Europe reflects the best of Europe – open, fair, diverse, democratic, and confident.”

Democratic eh – who elected you then Ursula? Anyway, the collateral associated with this announcement is predictably encyclopaedic, but if you want you could start here, or here, or here. As if the scope of the project wasn’t broad enough the EC seems to be trying to reconcile a bunch of other trendy political issues like diversity and green stuff while it’s at it.

“We want every citizen, every employee, every business to stand a fair chance to reap the benefits of digitalisation,” said Executive Vice-President for A Europe Fit for the Digital Age, Margrethe Vestager. “Whether that means driving more safely or polluting less thanks to connected cars; or even saving lives with AI-driven medical imagery that allows doctors to detect diseases earlier than ever before.”

“Our society is generating a huge wave of industrial and public data, which will transform the way we produce, consume and live,” said Commissioner for Internal Market, Thierry Breton. “I want European businesses and our many SMEs to access this data and create value for Europeans – including by developing Artificial Intelligence applications. Europe has everything it takes to lead the ‘big data’ race, and preserve its technological sovereignty, industrial leadership and economic competitiveness to the benefit of European consumers.”

It’s hard to know what to make of such a massive initiative. This was clearly the sort of thing Vestager’s role was created for, but what does it mean on the ground? AI clearly needs some kind of global supervision and Europe has plenty of catching up to do with its geopolitical rivals when it comes to the digital economy. We’ll probably have a better sense of how effective this initiative has been in a decade or so.

BT finally unveils its reimagined TV proposition

The aggregator model has taken centre-stage at BT, leveraging its existing capabilities instead of trying to beat the content industry at its own game.

Under Gavin Patterson, BT tried to do something which almost looked impossible. It attempted to disrupt the content industry by not only owning the delivery model for content, but the content itself. It attempted to muscle into an established segment and compete with companies which were built for the content world. It was expensive, complicated and messy, and it failed spectacularly.

BT has not given up on content under new leadership, but it is taking a seemingly more pragmatic and strategic approach. Aside from its own content, Now TV will also be embedded in the BT interface, meaning that customers can now watch, pause, rewind and record premium Sky Entertainment and Sky Sports content. Customers will also be able to integrate Amazon Prime Video and Netflix onto their BT bill, while each element of the bundle can be scaled-up or -down month-by-month.

It is making best use of its assets, and it looks to be a comprehensive and sensible pillar of the convergence strategy.

“Life doesn’t stand still from month to month, so we don’t believe our customers’ TV should either. Our new range of TV packs bring together the best premium services, fully loaded with a wide range of award-winning shows, the best live sports in stunning 4K and the latest must-see films – all with the flexibility to change packs every month – with  quick and easy search to find what you want to watch,” said Marc Allera, CEO of BT’s Consumer division.

BT will ‘own’ some content, it still has the UEFA Champions League broadcast rights after all, but it is picking its battles. The BT TV proposition failed in years gone because it tried to go it alone, but without the broad range of content genres, it looked like a poor attempt to compete with the likes of Sky. In reality, it didn’t need to.

The telcos have a significant advantage over many content companies around the world; they have an existing and trusted billing relationship with the customer. According to the Ovum World Information Series, EE has 30.6 million mobile subscribers and BT has 9.1 million broadband customers. These relationships can be leveraged through the partnership model to realise new profits in a low-risk manner.

BT is in a position of strength. The streaming wars are raging, and the service providers will do almost anything to gain the attention of the consumer, as well as build credibility in the brand. By bundling services into the BT, the OTTs are leveraging the trust which the customer has in the telco billing relationship and gaining eyeballs on the service itself. All they have to do is offer BT a small slice of the profits.

This is the symbiotic relationship in practice. The OTTs gain traction with customers, while BT can complete the convergence objective in a low-risk manner through the aggregator model.

That said, it is somewhat of a retreat from its previous content ambitions.

“This well long overdue move feels like a last-ditch effort to be successful in TV,” said Paolo Pescatore, founder of PP Foresight.

“Aggregation is the holy grail. BT has done a superb job of introducing some novel features and bringing together key services all in one place. This will strongly resonate with users. However, it is unlikely to pose a considerable threat to Sky who in turn will be able to bundle BT Sport into its own packages. In the future expect this new TV platform to be bundled with BT Halo which will further strengthen its premium convergent offering.”

Convergence is a strategy which should be fully embraced by the BT business. Not only has it been proven in other European markets, see Orange in France and Spain, but the depth and breadth of BT’s assets should position it as a clear market leader. With mobile, broadband, public wifi hotspots and content tied into a single bill, as well as partnerships to bolster the experience, BT is heading down the right path. If it can start to build service products on top, such as security, this could start to look like a very competent digital business.

The issue which remains is one of price. The Halo bundle is one few can compete with, but if it is not priced correctly it will not be a success. This does seem to be the issue with the BT consumer business right now, it is pricing itself out of the competition. Convergence is attractive to customers when it is convenient and makes financial sense, but right now it doesn’t seem to.

BT is slowly heading in the right direction. It might have taken years, but it is slowly creating a proposition for the consumer which few should theoretically be able to compete with. If it can merge the business into a single brand and sort out the pricing of its products, it should recapture the market leader position.

World Bank continues mission to make Africa more investable

The World Bank has selected Progressus to head-up the second phase of its ambitious African Regulatory Watch Initiative (RWI).

The African RWI is an interesting and unique project, aiming to tackle some of the more unique challenges faced across the African continent. Despite progress being made in the connectivity field, there are still some very difficult hurdles to overcome to close the digital divide on the continent, as well as place Africa on a level playing field with more developed regions.

The RWI will aim to tackle some of these challenges, such as licensing, spectrum allocation, taxation and tariffs, as well as appropriate regulatory oversight and accountability.

“This is an extremely exciting project,” said Olivier Jacquinot, who heads up RWI at Progressus. “RWI Phase 1 managed to identify some key regulatory levers that pushed forward the development of broadband in some countries. Phase two will deliver an even greater level of analysis – and help keep the African telecoms industry moving forward.”

Despite being managed by the World Bank, the financiers are staying pretty quiet regarding their own drivers and ambitions. That said, it might not be difficult to guess, these are moneymen after all and have some very obvious objectives.

One objective might simply be confidence. Bankers and venture capitalists are always looking for new investments, and the telecommunications industry is proving to be increasingly popular. An initiative which provides an improved and standardised regulatory environment across the continent might well be an important step to providing confidence to invest in the African telecoms and infrastructure industries.

Despite there being great potential for investors on the continent, Africa has several unique challenges. Accessibility, both financial and technological, is a significant one, though an incredibly fragmented and varied regulatory landscape across the continent is an issue.

At AfricaCom in November, MTN CEO Rob Schuter used the acronym CHASE to indicate the major challenges on the continent; Coverage, Handsets, Affordability, Service bundles and Education. Some of these challenges can be addressed through industry initiatives, such as the RWI, though others need much bigger thinking. Making the economics of network deployment or handset accessibility is a significant barrier.

On numerous occasions, more nefarious challenges such as government and regulatory corruption are raised as barriers also. Such rumours will always make investors nervous.

The first phase of the initiative was launched in 2017, and due to the success, the second phase will be launched imminently. 22 regulators have signed up so far, perhaps demonstrating how desperate some of these nations are for external investment; no-one likes being told how to govern or regulate their own sovereign nations after all.

In the second phase, Progressus will introduce the RWI Index. This ranking system will benchmark each of the nations involved in the RWI. The Index will be based on spectrum management, Universal Service Funds management and other Government support measures and regulatory governance.

Africa is a unique continent with some very unique challenges, and this initiative should provide a stable route forward. It isn’t the most revolutionary idea, but there is no need to reinvent the wheel sometimes.

Cloud becomes the golden child as Google reports yet more profit

When looking at the financial results of companies like Google, the question is not whether it has made money, but how much are the bank vaults overflowing.

Financial for the full year demonstrated slightly slowing growth, but few should worry about having to search the sofa for the pennies right now. Over the course of 2019, Google brought in $161.8 million, up 18.3% year-on-year, though it was YouTube and the Google Cloud business units as opposed to the core business which collected the plaudits from the management team.

“Revenues were 2.6 billion for the fourth quarter, up 53% year-over-year, driven by significant growth at GCP and ongoing strong growth and G Suite,” said Alphabet CFO Ruth Porat. “The growth rate of GCP was meaningfully higher than that of cloud overall. GCP growth was led by our infrastructure offerings and our data and analytics platform.”

Company Quarter Revenue (most recent) Year-on-year Growth
Google Cloud $2.6 billion 53%
Microsoft Intelligent Cloud $11.9 billion 27%
Amazon Web Services $9.9 billion 23%

Despite being a business unit which brings in an impressive $10 billion annually, it is impossible not to compare the performance of Google Cloud to AWS and Microsoft Azure. Google is realistically the only rival which can keep pace with the leading pair, though it does appear it is losing pace.

That said, the fortunes of the cloud are only beginning to be realised; this is a marathon not a sprint. Moving forward, the Google team believes strength in AI and software gives it an advantage to provide seamless experiences to users across multiple devices. There is also the blunt force approach to acquiring market share moving forward; Porat highlighted the objective is to triple the size of the cloud sales team.

Over at YouTube, the team is capitalising on the increasingly consumer appetite for video, though also what appears to be a more experimental attitude to subscription. YouTube TV is growing healthily at 2 million, while the core YouTube platform has more than 20 million music and premium paid subscribers.

This is positive momentum, though it will be interesting to see what impact partnerships have on these figures. Google is partnered with Verizon, forming a content option in its bundled products, though rivals are placing a much greater emphasis on these relationships, leaning on an already established link with the consumer, albeit sacrificing some profit in the process.

Perhaps these two business units demonstrate why Google is such an attractive company to investors and potential employees. The core business can do what it does, but Google is always searching for the next big idea. Google Cloud is arguably the most successful graduate of its ‘Moonshot Labs’ initiative, while YouTube is one of the biggest acquisition bargains at $1.65 billion in 2006. It now brings in more than $15 billion annually in ads sales.

During the earnings call, CEO Sundar Pichai pointed to some of the other investments which are absorbing the $26 billion annual R&D budget. Verily and Calico are linking together AI and cloud technologies to improve clinical trials, research, and drug development. Waymo is attempting to scale driverless vehicles in the US. Loon is another Moonshot graduate, endeavouring to stand on its own currently.

Google is one of the most interesting companies around, not only because it is a money-making machine, but the R&D business could produce some gems over the next few years.

The US election will test social media censorship to breaking point

Electoral losers are increasingly blaming social media for their failure, but this year will demonstrate that censorship is not the answer.

Democracy only works if the losers of elections accept defeat, but sadly few are inclined to do so these days. Now we have five stages of electoral grief that are directly analogous to the original Kübler-Ross model. We still have denial, anger and depression, but instead of bargaining we have litigation and acceptance seems to have been replaced with conspiracy theories in which social media plays a central role.

The central concern is that when the electorate votes for the other team it must be because they were mislead in some way, because no rational, fully informed person could fail to recognise the superiority of my team. In the past some blame could be attached to the mainstream media, something the UK Labour party still persists with. In the US, however, Donald Trump’s victory in 2016 despite having the support of no major media, would appear to render that theory obsolete.

Trump was able to prevail because politicians are no longer dependent on the old media to communicate directly with the electorate, thanks to social media. But this significantly lowered barrier to entry into the public sphere also provides fertile ground for electoral losers searching for mitigation and another bite at the cherry.

A favourite on both sides of the pond is to blame ‘the Russians’. While cold war fervour largely shifted its focus to China, Russia remains a strong source of bogeymen. Now it should be noted that there is plenty of evidence of social media bot farms originating from a number of countries, including Russia, that apparently seek to meddle in elections. What is much harder to prove is whether they had any effect on the outcome of elections whatsoever.

The small matter of evidence is never going to stand in the way of those refusing to concede defeat, however, and it has now become conventional wisdom that social media censorship is vital if we are to ever have untainted elections again. Since the US is in the middle of another of its interminable general election campaigns this year, the heat is being turned up on social media and they are being forced to respond.

Last week Twitter announced it was ‘turning on a tool for key moments of the 2020 US election that enables people to report misleading information about how to participate in an election or other civic event.’ The tweet implies the tool has a broader purpose than that, though, as it also includes intimidation and misrepresenting of political affiliation. Already you can see how a simple censorship objective becomes immediately and massively complicated under the weight of interpretation, semantics and generally chasing its tail.

Then you have Google and its subsidiary YouTube blogging about how much they ‘support’ elections, whatever that’s supposed to mean. Again a lot of this focuses on content that is intended to mislead voters, but since electioneering is biased by definition, surely all of it is intended to mislead to some extent. YouTube also reiterates its aim to promote ‘authoritative’ voices, which is code for establishment media and commentariat.

In contrast, Facebook Founder and CEO Mark Zuckerberg is increasingly pushing back on censorship, having tried and failed to walk that tightrope since the Cambridge Analytica scandal. Perhaps motivated by the prospect of an extra four years of Trump, who has made his feelings known on censorship, Zuckerberg is now turning all free speech absolutist on us. Whether that position will survive even the first engagement of the US electoral process remains highly debatable, however.

Early signs of the immense pressure these platform owners will come under are already appearing, with the Democrats mobilising supposed experts to ‘protect’ the electoral process. “Iowa’s first-in-the-nation caucus will mark the DNC’s greatest challenge so far in efforts to guard its presidential contenders from the same fate that befell Hillary Clinton in 2016 when her campaign was upended by a Russian-backed hacking and disinformation effort,” reports the Washington Post in depressingly partisan fashion.

If that WaPo piece is anything to go by everyone is going to be trying to manipulate not only the US Presidential election, but the Democratic primaries too, where non-establishment candidate Bernie Sanders is currently the front-runner. Presumably YouTube doesn’t intend to punish the country’s mainstream media for misleading the electorate, so it seems it will support democracy by censoring everyone else.

As ever, censoring free societies is a game of whack-a-mole, in which policy-making can never hope to keep up with the desire of its people to say what they want. Even if the social media companies are successful in their stated censorship objectives, which they won’t be, the team that loses will still blame them. So they might as well not bother and trust their users to sort the wheat from the chaff. Afterall, they’ve been doing that with mainstream media for years.

Telefónica doubles down on the smart home

Telefónica has created a global unit, known as the Chief Digital Consumer Office (CDCO), which will champion new digital products and services, paying particular attention to the smart home.

Led by Chema Alonso, the team will aim to drive forward the Aura AI digital assistant, as well as continue the creation of the ‘fourth platform’. The initiative will help take Telefónica into the digital era across several areas, but there does seem to be particular attention being paid to the smart home ecosystem.

José Montalvo will become Chief Data Officer, with a primarily focus on the development of the fourth platform project, including integrating new products and services such as Aura onto the platform. David del Val will become Director of Core Innovation, with a particular focus on edge computing. Antonio Guzmán is the Director of Digital Home, tasked with overseeing the development of the smart home and digital services ecosystem.

These are only a few of the names, but it does appear Telefónica is hoping to create a standardised smart home ecosystem for the markets which it currently operates in. This is an incredibly intelligent approach to creating value in the future, and with its global presence, Telefónica can provide competition to other players who are attempting to create a platform to control the smart home ecosystem.

This initiative builds on progress being made in the smart home following the announcement of a partnership with Microsoft at Mobile World Congress last year.

Alongside Microsoft boss Satya Nadella, Telefónica CEO Jose Maria Alvarez-Pallete launched the fourth platform initiative in attempt to own the smart home ecosystem, seemingly learning from the ‘walled garden’ business model which has been so successful for the likes of Facebook.

In this model, Telefónica leverage its relationship with the users, creating a platform for third parties to offer products and services. Telefónica will of course offer its own services, such as content, but why not create revenue by monetizing the link between the user and other companies in the digital economy.

While the smart home is still emerging as a viable segment in the digital economy, this is a very intelligent move from Telefónica . Connected objects are becoming more common, as there will need to be a focal point to manage this ecosystem, but also guarantee security. Telefónica has a trusted relationship with the consumer, a recognised digital assistant and the power of Microsoft as a partner. This is not a guarantee, but at least Telefónica is trying something new under the threat of the connectivity industry becoming commoditised.

Government claims UK cybersecurity sector is surging

Government figures suggest the UK cybersecurity sector is thriving, employing more than 43,000 individuals and estimated to be worth £8.3 billion.

With new regulations forcing companies to invest more in cybersecurity and consumers becoming increasingly aware of the dangers of the digital society, the conditions are right for the sector to thrive. As this is an area which has largely been ignored to date, this is an open opportunity for the aggressive to capture, and it seems the UK has been very successful in doing so.

“It’s great to see our cyber security sector going from strength to strength. It plays a vital role in protecting the country’s thriving digital economy and keeping people safe online,” said Digital Minister Matt Warman.

“We are committed to seeing it grow and are investing £1.9bn over five years through our National Cyber Security Strategy to make sure we lead the way in cyber innovation, develop and attract the best talent.”

Annual revenues for the sector are estimated to have grown 46% over the last two years to £8.3 billion, with the number of cybersecurity firms increasing by 44% to more than 1,200 at the end of 2019. The total number of full-time employees, 43%, has increased by 37% during the same period, with revenue-per-employee reaching an average of £193,500 a year.

Looking at the industry, demand for cybersecurity services is certainly on the rise. A recent report from IDC suggests worldwide spending on security-related hardware, software, and services will be $106.6 billion in 2019, an increase of 10.7% year-on-year. Managed security services, integration services, consulting services, and IT education and training, will see some of the biggest growth, though software, such as identity and digital trust products or security analytics, will also see a significant surge.

With new regulations threatening some very steep fines, GDPR punishments could be as much as €20 million or 3% of global revenues, attitudes are changing as wallets become threatened. For those who are aggressive and innovative enough, there are certainly profits to be made.

One question which some might ask is why the cybersecurity sector is thriving in the UK? There will of course be numerous contributing reasons, but a simple answer might be that the UK is an excellent incubator for start-ups and SMEs.

The UK is often cited as one of the most attractive nations for start-ups in Europe, but also worldwide. Various factors contribute to this image, such as access to a good workforce (both experienced and graduates), excellent transport links, the 6th largest economy in the world, good communications infrastructure and a thriving professional services industry. But in London, businesses have access to one of the worlds most prominent financial centres.

Roughly 30% of Europe’s venture capitalists are based in the UK, accounting for a significant amount of investment funds across the bloc. According to PitchBook, the UK and Ireland accounted for 44.4% of total European fundraising volume through to the end of the third quarter. This accessibility to cash is critical in the early days of a business.

The cybersecurity sector is one which is primed for disruption and start-ups could well find themselves scaling very quickly. Not only is there more regulatory pressure, such as GDPR, to enhance security, but the consumer is becoming increasingly aware of the risks posed by the digital economy. It might not be mainstream yet, but digital security might be factored into buying decisions in the future; businesses will have to invest in this underappreciated sector before too long.

Wearables and services are paying off for Apple

The iPhone is still the biggest contributor to the monstrous profits Apple claws in each quarter, but efforts in wearables and services are balancing out the company.

While Apple is not a company which is going to go bust at any point in the foreseeable future, the dependence on the performance of the iPhone was leaning onto the unhealthy side. With more consumers leaning towards second-hand, refurbished devices, or extending the life of products due to the eye-watering price of new iPhones, there was a threat to profitability.

For the most recent quarter, there are no worries about the profitability of Apple, however. Total revenues for the three-month period, including Christmas sales, stood at $91.8 billion, a 9% increase from the same period in 2019. Net income set a new record of $22.2 billion, while international sales accounted for 61%.

That said, efforts over the last few years to supercharge alternative revenue streams and diversify the profit channels have certainly been paying off. The iPhone is still king at Apple, but it is evolving into a different company.

Quarter Product Revenue Software and Services Revenue Ratio
Q1 2020 79,104 12,715 86.2/13.8
Q1 2019 73,435 10,875 88.2/12.8
Q1 2018 79,768 8,471 90.4/9.6

For the purpose of continuity, we have only selected Q1 for the above comparison. This is a quarter which contains the Christmas period and therefore revenues are almost incomparable to the rest of the year.

As you can see, there is a clear trend of Apple become less reliant on hardware for revenues and profits, with the Software and Services becoming more than a bolt-on bonus for investors. $12.715 billion is an amount most companies would be happy to call group revenues for the year.

Interestingly enough, even in the ‘product’ segment, the team is becoming less reliant on the iPhone to drive revenues and profits.

Quarter iPhone Mac iPad Wearables and Home
Q1 2020 55,957 (60.9%) 7,160 (7.8%) 5,977 (6.5%) 10,010 (10.9%)
Q1 2019 51,982 (61.6%) 7,416 (8.8%) 6,729 (8%) 7,308 (8.7%)
Q1 2018 61,576 (70%) 6,895 (7.9%) 5,862 (6.6%) 5,489 (6.2%)

In short, diversification of revenues is an excellent way forward for the Apple business and demonstrative of the power of the Apple brand.

Apple is a brand which certain consumer identify with, and such is the innovation and creativity of the Apple marketing department, loyalty has been almost cult-like. Cross-selling alternative products when the consumer is so heavily invested in the brand and ecosystem is a much simpler task, this will be one of the reasons Apple’s services division is becoming so successful, but it also explains the growing wearables segment.

Wearables is a family of technologies which has struggled through the years. The first smart watch, in its current form, was released in 2011, though the segment has never really gained the traction to make it an attractive business. Apple has been persisting with its own portfolio of smart watches for years, but it does now appear to have turned a corner.

“Apple Watch had a great start to fiscal 2020, setting an all-time revenue record during the quarter,” CEO Cook said during the earnings call. “It continues to have a profound impact on our customers’ lives and it continues to further its reach as over 75% of the customers purchasing Apple Watch during the quarter were new to Apple Watch.”

Apple is no-longer simply satisfying product refreshment cycles but attracting new customers into the smart watch bonanza. The more smart watch customers there are, the more normalised the product becomes, which then compounds the success, especially with more digital natives entering their 20s and collecting bigger salaries.

Apple is a company which is defined by iPhone. This will not change, such is the success of the product and the importance of the smartphone in today’s society, but diversifying the business was always viewed as critical to expanding the profitability of the firm. Apple is doing a remarkable job of capturing new revenues.

London Police push forward with controversial facial recognition tech

The London Metropolitan Police Service has announced it will begin the operational use of Live Facial Recognition (LFR) technology, despite there still being many critics and concerns.

The technology itself has come under criticism not only for poor performance when identifying individuals, but critics have also suggested this should be deemed as a violation of privacy rights afforded to individuals in democratic societies. Despite an on-going controversial position, the London police force seem to think it has all the bases covered.

“This is an important development for the Met and one which is vital in assisting us in bearing down on violence,” said Assistant Commissioner Nick Ephgrave. “As a modern police force, I believe that we have a duty to use new technologies to keep people safe in London.

“We are using a tried-and-tested technology and have taken a considered and transparent approach in order to arrive at this point. Similar technology is already widely used across the UK, in the private sector. Ours has been trialled by our technology teams for use in an operational policing environment.”

The initiative will start in various London locations the Met believes it will help locate the most serious offenders. The primary focus will be on knife and violent crime. It is unclear whether these deployments will be in permanently at a location, or the officers will be free to move around to other parts of the city.

As individuals pass the relevant cameras, facials maps will be compared to ‘watchlists’ created for specific areas. Should a match be confirmed, the officer will be prompted (not ordered) to approach the individual.

What Ephgrave seems to be conveniently leaving out of the above statements is that the private use of facial recognition technology is either (a) largely in trial period, or (b) highly controversial also.

In August, privacy advocacy group Big Brother Watch unveiled a report which suggested shopping centres, casinos and even publicly owned museums had implemented the technology without public consultation and had even been sharing data with local police forces without consent. This is a worrying disregard to the vitally important privacy principles of the UK.

At European level, the European Commission has been considering new rules which would extend consumer rights to include facial recognition technologies. And in the US, court cases have been raised against implementation in Illinois, while the City of San Francisco has effectively banned the technology unless in the most serious of circumstances.

The London Metropolitan Police Force has said it will delete images which are not matched to individuals on record, though considering police databases have more than 20 million records, this leaves wiggle room. If an arrest is made, the data will be kept for 31 days. Although this is a concession by the Met, Human rights organisations and privacy advocacy groups have continued to suggest such technologies are an intrusion, over-stepping the privileges afforded to the police and eroding the concept of privacy.

Interestingly enough, the same underlying issues are persisting in London; the police force seems to have pushed forward with the introduction of the technology without a comprehensive public consultation. While there is good which can be taken from this technology, there are also grave risks for abuse unless managed very effectively; the general public should be afforded the opportunity to contribute to the debate.

This does seem to be a similar case to the boiling frog. The premise of this fable is that if a frog is put suddenly into boiling water, it will jump out, but if the frog is put in tepid water which is then brought to a boil slowly, it will not perceive the danger and will be cooked to death. The same could be said about facial recognition technology.

Eight trials were conducted by the London Metropolitan Police Force between 2016 and 2018, some with disastrously poor results, though few were widely reported on. In September, the UK High Court ruled facial recognition technologies could be implemented for ‘appropriate and non-arbitrary’ cases. As this is quite a nuanced and subjective way to address the status quo, authorities must be prevented from creeping influence.

Ultimately this does seem like a very brash decision to have been made, but also authorised by the political influencers of the UK. This is not to say facial recognition will not benefit society, or have a positive impact on security, but there is an impact on privacy and a risk of abuse. When there are pros and cons to a decision, it should be opened-up to public debate; we should be allowed to elect whether to sacrifice privacy in the pursuit of security.

The general public should be allowed to have their voice heard before such impactful decisions are made, but it seems the London Metropolitan Police Force does not agree with this statement.

Could Iliad Italia be a victim of Corporate Darwinism?

Iliad’s Italian business unit has lodged complaints with Italian and European regulators regarding network sharing deals, but could these objections be effectively ignored?

While network sharing is a proposition which offers great benefits to cash-strapped telcos in pursuit of the eye-wateringly expensive 5G connectivity dream, it is not without its opponents and critics. Some regulators have become very defensive about the progressive idea, while there are telcos being left out of discussions who are objecting also.

In Belgium, Telenet has raised concerns over a tie-up between Orange and Proximus, while the European Commission prevented O2 and T-Mobile from expanding an existing agreement to include 5G in the Czech Republic. Both of these network sharing partnerships have been halted in the pursuit of maintaining attractive levels of competition, but Iliad’s objections might fall on deaf ears.

Iliad is objecting to network sharing agreements between Wind Tre and Fastweb, as well as another between Telecom Italia and Vodafone Italia. Iliad is the only major telco in Italy not to be in a network sharing discussion. If these partnerships bear fruit, efficiencies will be realised, meaning competitor funds can be redirected elsewhere.

If this is a prediction of the future, Iliad will be in a weakened position to compete in the Italian market, and financial pressures could become too much to justify the venture. Iliad could become a victim of Corporate Darwinism.

The competition versus consolidation conundrum

Competition has been somewhat of a difficult topic of conversation between the regulators and telcos in recent years, primarily because of the polar-opposite opinions on market consolidation. The telcos would like to consolidate to achieve scaled economics, while the regulators want to preserve the number of telcos in each of the markets to maintain competition and encourage investment.

There are pros and cons on either side of the fence, though the regulators do not seem to be shifting. This argument has knock-on effects for network sharing agreements.

Ovum’s Dario Talmesio points out, network sharing could be viewed as consolidation through the backdoor. Combined assets reduces the number of independent networks in the market, and potentially reduces investments and competition.

In the Czech O2 and T-Mobile case, the European Commission suggested as there were only three major players in the market, further combination of assets between two of the parties would present too much of a risk of the third being squeezed out. The same case has been presented by Telenet to the national regulator in Belgium.

Regulators are sensitive to any propositions which would negatively impact competition in a market, but what about markets where the number of telcos could actually be reduced?

How much is too much competition?

While there is no official stance on the number of telcos in a market, the European Commission does not generally approve activities which would reduce the number of telcos below four. Vetoing the O2/Three merger in the UK, or Telia/Telenor in Denmark are two examples, but this might not be the case in Italy.

If regulators were to allow the network sharing agreements to proceed, Iliad would certainly be in a very precarious position, though there would still be four mobile service providers in the country; Telecom Italia, Vodafone Italia, Wind Tre and a Fastweb proposition enabled by its agreement with Wind Tre. This might be deemed enough competition in Italy to maintain a healthy market for the consumer and a financially sustainable one for the telcos.

The four telcos named above are venturing into untested waters here. This presents a new question for the regulators to answer on competition. Theoretically, suitable levels of competition are being sustained, and this network sharing dynamic has been approved by regulators in the past.

In the UK, Three and EE have formed MBNL, while Vodafone and O2 have CTIL. These are passive infrastructure sharing joint ventures, focusing on the rural environments. It is a similar situation which would be created in Italy, and the UK does have a sustainable telco industry. It is evidence that the dynamic could work, with or without Iliad in the mix.

Could this be a case of Corporate Darwinism?

Corporate Darwinism occurs when a market evolves to such a degree that players are either irrelevant or uncompetitive, and therefore go out of business.

The best example of this is Blockbusters. Once a dominant player in the movie rental business, as the distribution of content moved online the proposition of Blockbusters was no-longer relevant, therefore the company did not survive. This is an example of a market evolving to such a degree that the business was no-longer relevant.

The Iliad example is perhaps one where the market evolves to such a degree that the business is no-longer competitive.

If the four remaining mobile service providers have network sharing initiatives driving network deployment, investments can be more intelligently spend (a) on the network, or (b) in other areas of the business.

The shared networks might have a greater geographical footprint, have future-proofed technology and higher performance specs. Theoretically, Iliad would churn subscribers to higher quality rivals. Also, as less money is being spent on network deployment, tariffs could be lower, but profitability could be maintained. Or, more cash could be invested in value-add propositions for products. Rival offerings could look more attractive than Iliad products.

If regulators approve the network sharing agreements between Telecom Italia and Vodafone Italia, alongside Wind Tre and Fastweb, Iliad would find itself in a very difficult position. It become difficult to see the telco surviving in the long-term.

Unfortunately for Iliad, there is a coherent argument to approve the partnerships to drive towards a more sustainable telecoms industry, allowing the telcos to realise efficiencies ahead of the vast expenditure of 5G. The consumer would benefit, as would enterprise customers and the Italian economy on the whole. It might be a case of letting Iliad die out for the greater good of the Italian telecoms sector.