Three bolsters wholesale ambitions with Pareteum partnership

Three UK has announced a new partnership with Platform-as-a-Service provider Pareteum as it searches for new revenues in the wholesale segment.

The multi-year partnership with Pareteum will see the telco push further into the wholesale world, with the ambition to attract new mobile and IOT services onto the new network. For a company which is almost exclusively known for consumer operations, the growing appetite for connectivity in every aspect and element of today’s society is an attractive prospect to grow revenues.

“We are really excited about the opportunity that this partnership delivers,” said Darren King Head of Wholesale Business Development. “We have significant growth ambition in the IoT and Enterprise Communications markets and Pareteum brings global scale and proven capabilities.”

To provide some context, whole connections currently account for roughly 12% of the traffic which is currently traversing over the Three network. Considering the telco believes capacity on its network could increase by 28X over the coming years, there is an opportunity for Three to bag additional profits.

Across the Three business, there has been a push into new areas. Perhaps the source of these ambitions can be linked back to the connectivity landscape; the smartphone market has exceeded 100% of the UK population and consumers want to see their monthly bills come down, while expecting more from the tariffs. It is becoming increasingly difficult to make money if you are a business which is purely focused on the mobile segment.

While this does not create the most comfortable of pictures for MNOs, the Three management team have set high expectations over the next few years; the business is expected to double in size. This means double the connections on the network, double the number of subscribers, double the annual and double EBITDA.

To meet these expectations enterprise is an area of growth, the UK Broadband team is working hard in the campus network space, fixed-wireless access takes it into the broadband arena, there are already 800,000 subscribers, and King’s efforts here will bolster efforts in the wholesale segment. If Three is to meet the monstrous objectives, all of these ventures will have to be on-point.

And while it is still early days, there is progress being made. There is currently a dedicated team of 40, working alongside other employees in the wider Three business, while numerous partnerships are already in place. In search of growth in the enterprise IOT world, Three Wholesale currently has partnerships in place with the likes of Gamma, ARM, Wireless Logic and AT&T.

However, it is in the consumer MVNO segment which the Pareteum partnership enables. The current relationship with SuperDrug is an excellent example. This is an organization which has ambitions to offer connectivity orientated products to its customers, but it doesn’t have the know-how. Pareteum can provide the platform, Three the network and both can aid with the business.

For Three, the challenge here will be to enter into a market which is already incredibly competitive. It is coming late to the party, though there are certainly some interesting elements to the Three business. The team constantly talks about the advantages of its contiguous spectrum assets and a nationwide footprint of 20 datacentres enable the team to create edge solutions closer to the customer. With low latency soon to become a demand of customers, this could certainly add some muscle to the Three network.

With 5G on the horizon, and the IOT segment continuing to gather steam, connectivity is forcing its way into almost every business model and product design. Three has certainly outlined some bold ambitions, and the only way it can live up to these promises is through the business diversification which is gathering momentum.

Verizon buys into alternative realities

Verizon has announced the acquisition of Jaunt XR, adding augmented and virtual reality smarts to its media division.

While few details about the deal have been unveiled, the deal will add an extra element to a division which has been under considerable pressure in recent months. The Verizon diversification efforts have proven to be less than fruitful to date, though this appears to be another example of throwing money at a disastrous situation.

“We are thrilled with Verizon’s acquisition of Jaunt’s technology,” said Mitzi Reaugh, CEO of Jaunt XR. “The Jaunt team has built leading-edge software and we are excited for its next chapter with Verizon.”

Jaunt XR will join the troubled media division of Verizon which has been under strain in recent months. The ambition was to create a competitor to Google and Facebook to secure a slice of the billions of dollars spent on digital advertising. On the surface it is a reasonable strategy, but like so many good ideas, the execution was somewhat wanting.

Since the acquisition of Yahoo, Verizon has had to deal with the after-effects of a monumental data breach, write off $4.6 billion of the money it spent on the transaction, spend big to secure a distribution deal with the NFL and cut 7% of its staff. The first few years of living the digital advertising dream has been nothing short of a nightmare.

Looking at the financials, during the last quarter the media division reported $1.8 billion in revenues. This was down 2.9% from the previous year and accounted for only 2% of the total revenues brought in across the group.

With Jaunt XR brought into the media family, new elements could be introduced to the portfolio. Details have not been offered just yet, though with VR, and more recently, AR expertise, there is an opportunity to create immersive, engaging content for the mobile-orientated aspects of the business.

This transaction will certainly add variety and depth to the services and products in the media portfolio, but soon enough you have to question whether Verizon is throwing good money after bad. This has not been a fruitful venture for the team thus far.

IBC 2019: Are the nuances of the content world being understood by telcos?

The traditional telco business model is being commoditised, this is not new news, but with more telcos seeking to drive value through content, do they understand the nuances of consumer behaviour?

Once again at IBC in Amsterdam, it is an OTT which is grabbing attention. This should come as little surprise considering the disruption which this fraternity is thrusting on the world of telecoms, media and technology, though here it is more than gratuitous. Cécile Frot-Coutaz, the head of YouTube’s EMEA business, outlined why these companies are leading the way; a fundamental and intrinsic understanding of today’s consumer and the consumer-driven market trends.

This is perhaps why the telcos and traditional media companies are struggling to adapt to a world dominated by millennials, generation Z and digital natives. They appreciate society is changing but have perhaps not correctly balanced the formula to fit cohesively and efficiently into the new paradigm.

This conundrum is most relevant in the content world. Telcos need to factor this complex and nuanced segment into the business model, but how, where, why and when is a tricky question. Many telcos want to do something completely new and very drastic, but the simplest ideas are often the best ones; how can connectivity be used to augment and enhance the fast-growing, fascinating, complicated and profitable content space?

From our perspective, telcos need to diversify, but the best way to do that is figure how connectivity can enhance growing businesses and segments. This might sound like an obvious statement, however the evidence is the nuances are being missed.

Take AT&T for example. This is a company which desperately wants to diversify to take advantage of the digital economy. One way in which it feels it can do this is through the acquisition of Time Warner, a $107 billion bet to own content, create a streaming platform and drive another avenue of engagement with the consumer. Sounds sensible enough, but why take such a risk when there are opportunities closer to home.

Another strategy is more evident in Europe where telcos are attempting to create partnerships with the streaming giants to embed the distribution of these services through their own platforms. See Sky’s integration of Netflix or Vodafone’s work with Amazon Prime. Again, it is a perfectly reasonable approach, but does this future-proof the business against the trends of tomorrow?

These are two approaches which will attract plaudits, but we would like to take the strategy closer to home once again.

During her presentation, Frot-Coutaz pointed to several trends which could define the content world of tomorrow, and it is a perfect opportunity for the telcos to add value.

Firstly, let’s have a look at the consumer of today and tomorrow. Millennials and Generation Z have fundamentally changed the way in which the media world operates, and content is consumed. Not only is it increasingly mobile-driven, but there are new channels emerging every single day. Technology is second-nature to these consumers, and this is shaping the world of tomorrow.

Another interesting point from Frot-Coutaz is the fragmentation of content. One of the objectives of YouTube is not only to own content channels, but to empower the increasing number of content creators who are emerging in the digital world. If the content creators make more money, so does YouTube.

Frot-Coutaz claims that the number of YouTube channels which generate more than $100,000 per annum has increased 30% from 2017 to 2018. These trends are highly likely to continue, further fragmenting the content landscape.

This is where owning content or embedding popular streaming services into platforms becomes problematic. Consumer trends suggest the variety of channels through which the user is consuming content is increasing not decreasing. Embedding Netflix into a platform is an attractive move, but it is only attractive to those who have an interest in Netflix. If connectivity solutions can be offered to consumers to simplify and enhance the consumption of content, agnostic of the platform, there is a catch-all opportunity.

Although Netflix and Amazon Prime might be the content platforms on everyone’s lips for the moment, the number of ways in which consumers engage content is gathering significant momentum. There are new challengers in the streaming world (Disney+ or Apple TV), traditional social media (Facebook or Twitter), challenger social media (Tik Tok) AVOD channels (YouTube), traditional conversational websites (Reddit), messaging platforms and who knows what else in the 5G era. What about the VR/AR platforms which could potentially emerge soon enough?

This is a nuance, not a drastic change in thinking, but it is an important one to understand. Do telcos want to be the owner of content, the distributor or the delivery model. Admittedly, the delivery model is not the sexiest in comparison, but it might hold the most value in the long-run.

Another way to think about this taking the example of Killing Eve, the BBC spy thriller. Is there more long-term value in the eyes of the consumer in owning the content, owning the distribution channel or owning the connectivity services which fuel consumption and engagement through all channels?

The best means of differentiation have always been the ones which are closest to home. If you look at the likes of Google, Microsoft and Amazon, these are future-proofed companies because they are taking their current services and creating contextual relevance. There might be examples which undermine this point, but the general claim holds strong.

At Google, the team diversified their business through the acquisition of Android. This evolution took Google from the PC screen and onto mobile, but it is an extension of the advertising business model in a different context. The same could be said about YouTube. A video platform is drastically different from a search engine, but the underlying business model is the same; identifying the needs of the consumer and serving relevant commercial content.

The telcos are looking to do the same thing, but perhaps there needs to be more of a focus on a proactive evolution of the business rather than reactive. The telcos are playing catch-up on the consumption of video through mobile and a shift to OTT distribution, but the current approach is perhaps too narrowly focused. Focusing on the core business of connectivity delivery is more of a catch-all approach, factoring in future trends and the increasingly fragmented digital society.

This is a very easy statement to make, the complications will be on creating products which encapsulate these trends and offer an opportunity for telcos to grow ARPU. We are sitting very comfortable in the commentary box here as opposed to in the trenches with the product development teams, but the nuances of content are there to be taken advantage of.

Elliot set to challenge AT&T leadership over media strategy – report

The apparent anointing of John Stankey as the next AT&T CEO is reportedly what prompted Elliott to announce its activist intentions.

Right now this insight comes courtesy of the WSJ alone, which has chatted to some people who think they know what they’re talking about. The report says AT&T Randall Stephenson plans to call it a day soon and has been grooming his mate John Stankey to take over. Stankey was recently promoted the specially-created role of COO, which would be easy to view as a stepping stone to CEO, especially since most of the company now seems to report directly to the COO.

Shortly after activist investor firm Elliott Management announced it had acquired a significant shareholding in AT&T and intended to use that position to pressure the AT&T management into making changes that it reckons will significantly boost the share price. That is the ultimate aim of activist investors like Elliott, which are sometimes referred to as vulture funds.

The WSJ piece mainly seeks to flesh out Elliot’s objectives. It claims the closed, cronyish succession plan is what provoked Elliott into breaking cover and going public with its concerns. The continued promotion of Stankey is considered to be symptomatic of a botched approach to AT&T’s strategy of diversifying towards media, as he has been put in charge of it all, rather than leaving it to the media experts already in place at the acquired companies.

Elliott has rich form in messing with the grand plans or corporate execs, having recently succeeded in preventing Vivendi from controlling Italian operator group TIM while only owning a quarter of it. AT&T is an order of magnitude larger but the same principles apply. If Elliott can convince other AT&T shareholders that its plans for the company will give them a better return than those of Stephenson and Stankey then it could initiate a proxy battle for control of the company.

The handling of the DirecTV acquisition seems to be especially derided by Elliott, which seems to think AT&T should cut its losses and flog it. But its complaints don’t seem to stop there, with Stankey’s control of WarnerMedia apparently a source of grievance too. A lot rests on AT&T’s imminent SVOD service, HBO Max, which will have to succeed in a very competitive market to reassure its investors.

Apple credit card is up-and-running

As promised by CEO Tim Cook during the last earnings call, the Apple Card is set to debut this month, with the team already taking applications from consumers.

To start with, randomly selected Apple customers who signed up months ago have gotten access, though the team is now building a list of iLifers who would like to receive the card upon full-launch. To start with, the credit card will only be available to US citizens, though we can’t imagine it will be too long before the ambitious Applers spread their wings internationally.

For Apple, this is another step towards decreasing reliance on the iPhone, a product which has dominated the profitability column for quite some time. In the years of gluttony, few would have complained about this reliance, but nowadays, with smartphone shipments slowing down globally, the desire for diversification has intensified.

Working alongside Goldman Sachs, Apple has said customers can register their interest in the card in less than a minute, which perhaps seems irresponsible considering the seriousness of applying for credit. This little dose of reality will create little concern for either partner, both of whom will be relying on consumer over-indulgence to fuel profits.

That said, there are some interesting gimmicks being included with the service.

When using the card, all purchases will appear in the customers app, as is norm for the industry, but graphics will offer greater insight into spending habits. As you can see below, the distribution of colour on the card image and the graphs below detail how you are spending your money. Pink is for entertainment, yellow for shopping and orange for food, it is an interesting way to display purchasing patterns.

Apple Card

Other features include cash back and lower interest rates, though it is missing some of the perks which are so heavily hyped with traditional credit card providers.

What will be interesting to see over the next couple of months is the receptiveness of customers to a smartphone manufacturer entering into the financial world. Apple has one of the most admired brands worldwide and a cult-like following of customers, but whether this translates into something as important as financial services remains to be seen.

BT sells fleet management business and diversification opportunity

Just as almost every telco is searching for new ways to diversify and target non-core revenues, BT has decided to sell its Fleet Solutions business unit.

Financial details of the transaction have not been unveiled, but asset management group Aurelius have purchased the fleet management services business from BT. The telco has suggested the transaction will enable the team to focus investments and attention on more core activities. However, this divestment seems to fly in the face of trends, with telcos looking to secure additional revenues beyond the traditional.

“The acquisition of BT Fleet Solutions by Aurelius is an exciting and significant step forward in its development and will deliver for its customers, people and the BT Group,” said Gerry McQuade, CEO of BT’s Enterprise unit.

“Over the past five years, our Fleet business has grown into a multi-award-winning market leader in the sector. The unrivalled expertise and experience of its people in managing and maintaining complex fleets has been key to this success.”

With 65 in-house garages, 500 partner facilities and 950 employees, BT Fleet Solutions manages more than 80,000 vehicles for over 26 blue chip customers across the UK. Although this is business which is far removed from the core business of telecommunications, it could have been viewed as a path for the telco to offer services above and beyond traditional enterprise connectivity, especially as more fleets look to IOT to manage operations more effectively.

Fleet management is an area which has been suggested as one which could benefit from the spreading wings of connectivity and the blossoming world of IOT. More vehicles are being connected and monitored year-on-year, presenting an opportunity for telcos to expand revenues and expertise beyond traditional battle-grounds. This is where we are slightly confused by the transaction.

Of course, fleet management is more than connectivity. The nuts and bolts of the business are nuts and bolts, a completely different segment than where BT’s heritage lies. However, this was a foot in the door, an established presence in an enterprise vertical which the connectivity business could build on and offer customised solutions. Telcos are looking for ways and means to validate connectivity in new applications and services, and this could have been a way to do so.

However, it does seem the telco is doubling down on core business activities as opposed to exploring new options to diversify.

“With BT’s renewed focus on investing in the best fixed and mobile networks in the UK, and with BT Fleet Solutions well positioned to achieve further growth, the time is right for the business to find a new home,” said McQuade.

This is where the transaction becomes more understandable. BT, and all the other telcos for that matter, are under considerable pressure to boost the connectivity foundations of the UK. Money will have to be spent on deploying new infrastructure, both fixed and mobile, to ensure networks can meet the standards set forth by ambitious government targets. You only have to look at Prime Minister Boris Johnson’s recent objective of 100% full-fibre coverage by 2025, potentially cutting eight years off previous targets, to understand this pressure.

We understand the short- and mid- terms demands on BT, as well as the financial pressures it is currently facing, however we can’t help but feel this is a missed opportunity.

Telcos are searching for ways to engage the verticals with solutions which go beyond traditional connectivity solutions, and the BT Fleet Solutions business unit looked to be the perfect foundations to aggressively seek new revenues with customisable solutions built on IOT, AI and edge computing.

Unlimited data is inevitable with 5G, but try telling operators that

We’re quickly moving into the 5G era and many assume the concept of unlimited data bundles will be commonplace, but how will the telcos fare in this new world?

As it stands, the telcos are under pressure. This is not to say they are not profitable, but many shareholders will question whether they are profitable enough. Tight margins and a squeeze on core revenue streams are common enough phrases when describing telco balance sheets, but this could get a lot worse when you factor in unlimited data packages.

As Paolo Pescatore of PP Foresight pointed out, when you offer unlimited data you are effectively killing off any prospect of revenue growth per subscriber in the future. In some markets, there are still fortunes to be made, but in some, such as the UK where 4G subscription penetration is north of 100%, where are you going to make the growth revenues from when consumers are demanding more for less?

More consumers are seeking unlimited or higher data allocations but are not willing to pay for the experience. Some MNOs might be able to resist, but the more rivals who offer such tariffs the more the rest will be forced into line. It’s the race to the bottom which is profitable in the short-term, but growth will end quickly. The price per GB is only heading one direction and unlimited data allocations will end the prospect of upgrading customers.

O2 fighting for air

This is the conundrum which the telcos are facing in the UK right now. All four have announced their 5G intentions and all four are promising big gains when it comes to the next era of connectivity.

Starting with O2, the only one of the four MNOs not to have released 5G pricing to date, this is a telco which looks to be in the most uncomfortable position. Over the last few quarters, the management team has boasted of increased subscriber numbers, but this can only go on for so long in the consumer world. Soon enough, a glass ceiling will be met and then the team will have to search for new revenues elsewhere.

This is of course assuming it plans to go down the route of unlimited data, it might want to stick with the status quo. That said, if everyone else does, it will not be able to fight against the tide for fear of entering the realm of irrelevance.

The issue here is one of differentiation. The idea of attracting new customers by offering ‘bigger, meaner, faster’ data packages will soon end and telcos will have to talk about something else. O2 does have its Priority loyalty programme, but with rivals launching their own version this USP will fade into the noise.

Differentiation and convergence are two words which have been thrown around a lot over the last few years, though O2 has thus far resisted. Last year, CEO Mark Evans suggested he was not bought into the convergence trend and would continue as a mobile-only telco, though this opinion does seem to be softening.

If O2 is going to be competitive in the almost inevitable era of unlimited data, it will have to source growth revenues from somewhere. It is making a push into the enterprise connectivity world, which will bring new profits to the spreadsheets, though does it want its consumer mobile business to stand still?

Bundles of fun

This is where the other telcos in the UK have perhaps got more of a running start in the 5G era. EE has its connectivity assets in broadband and wifi to add value, as well as a content business of some description. Three is already known as the data-intensive brand, while its FWA push will take it into some interesting connectivity bundling options. Vodafone also has FWA, a fibre partnership with CityFibre and is arguably the leader in the enterprise connectivity market. The rivals are offering more than mobile connectivity as a stand-alone product.

Looking at Vodafone to begin with, the recent announcement is certainly an interesting one. The innovative approach to pricing, tiering tariffs on speeds not data allocation, will attract some headlines, while it is also super-charging its own loyalty programme, VeryMe. It has secured content partnerships with the likes of Sky, Amazon, Spotify and gaming company Hatch, while its FWA offering also includes a free Amazon Alexa for those who sign-up early enough.

Combining the FWA product or its fibre broadband service, courtesy of CityFibre, also gives them the ‘connectivity everywhere’ tag, a strength of BTs in recent years, to allow them to communicate and sell to customers in a different way. Perhaps it is missing a content play to complete the convergence bundle, but it is in a strong position to tackle the 5G world and seek additional revenues should the unlimited craze catch.

The same story could be said of Three. With the acquisition of UK Broadband, it has forced itself into the convergence game and kicked off the ‘race to the bottom’ with an unlimited 5G data offer. As long as you have a Three 4G contract, you can get 5G for no additional cost, assuming you have a 5G compatible phone of course.

Three’s strength and weakness lies in its reputation. It is known for being the best telco if you have an insatiable data appetite, this works very well for the 5G era, though it is also known for having a poor network. Three regularly features at the bottom of the network performance rankings, especially outside of the big cities where it has not done nearly enough to satisfy demands.

This will of course change over the next couple of months. Three is working to improve its network with additional sites and a new Nokia 5G core, however it will have to do a lot to shake off the reputation is has acquired over the last few years.

EE is perhaps the most interesting of the four. It has lost its position as the market share leader when it comes to 4G subscriptions, but it does have the reputation for being the best in terms of performance throughout the country. It is regularly the fastest for download speeds, but its 5G pricing is by far the most expensive to be released so far.

That said, with the BT assets it has for wifi and broadband, as well as the content options, there is plenty for the consumer to be interested in. Should BT be forced to readdress the pricing conundrum, it might not have the fear regarding a glass ceiling on revenues as there are plenty of other products to engage the consumer. It will be able to find additional revenues elsewhere.

MVNO no you didn’t

Outside of the MNOs, you might also start to see some competition. MVNOs are nothing more than ‘also rans’ today, but Sky has officially entered the 5G race. This is an interesting competitor, one who could cause chaos to the status quo.

Firstly, understand mobile is not the primary business for Sky. This is an add-on, where it is seeking to drive additional revenues and attract more customers through bundled services. It is the leader in the UK when it comes to premium content and has a thriving broadband unit also. Sky can add services on top of connectivity to make itself seem more attractive than the traditional mobile service providers.

Then again, there are only a couple of MVNOs who can pose this challenge. Sky is one, while there are persistent rumours Amazon wants to get involved with the connectivity game and Google has its own Fi service. These are also companies who are at the mercy of the MNOs in terms of the commercial agreement with the MVNOs, so damage is likely to be limited unless one network owner decides to go down the wholesale infrastructure route.

But you cannot ignore these companies. They are cash-rich, constantly searching for new ways to make money and have incredible relationships with the consumer. They are also the owners of platforms and/or services which are very attractive to the mass market; bundling could be taken into a new context with these firms.

Diversity is our strength

This is of course only looking at the services which are common throughout telco diversification plans today, there are other options. Orange has launched a bank, has experimented in energy services and is making a move towards the smart home in partnership with Deutsche Telekom. Over in Asia, gaming is an important element of many telcos relationships with consumers and this trend is becoming much more prominent in the European markets also.

Elsewhere, the smart home could certainly offer more opportunities for telcos to add-value to an emerging ecosystem, while the autonomous vehicles offers another opportunity and so does IOT. The issue which many of these telcos are facing is competition from the OTTs. Arguably, the battle for control of the smart home might already have been won by the OTTs, though the same could be said for autonomous vehicles and IOT.

In many of the emerging segments, telcos will remain a connectivity partner though they certainly need more than that. This will remain a consistent stream of revenue, though it will also sleepwalk telcos to utilitisation. In IOT, as an example, the major cloud players are crafting business units to engage enterprise businesses for edge and IOT services; this is a market which the telcos would love to capitalise on for both enterprise and consumer services.

Security is another which is increasingly becoming a possibility. The concept of cybersecurity is generating more headlines and consumers are becoming more aware to the dangers of the digital world. Arguably, the telcos are in the strongest position to generate revenue from this segment; there is trust in the brand and they have largely avoided all the scandals which are driving the introduction of new regulation.

Unlimited data is certainly not commonplace today, but with the services of tomorrow promising to gobble up data at an unfathomable pace, it would surprise few to see more people migrating to these tariffs. The question is how you make money once you have migrated everyone.

Diversification and the acquisition of new products is not a simple task, but then again, it is becoming increasingly difficult to imagine how single revenue stream telcos will be able to survive in the world of tomorrow.

 

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Breaking down the Supply Chain Review Statement

Although there was very little said during the Supply Chain Review statement yesterday, there are some interesting developments worth keeping an eye on.

Speaking to the House of Commons, Secretary of State for the Department of Digital, Culture, Media and Sport Jeremy Wright did as most expected he would and dodged the Huawei decision. Although we were promised a decision by March, the slippery politician has managed to create enough breathing room to get him through to September.

Despite some being disappointed by a lack of clarity on the competitive landscape for UK communications infrastructure, there were a few takeaways.

There’s no avoiding interference from Transatlantic geo-politics

Every politician will tell you decisions are made dependent on what is best for the British people alone, but it is impossible to avoid the US here. The White House and its aggressive policies are causing havoc around the world, including here in the UK.

Fundamentally, without a decision on Huawei there is no clarity for investment and progress into the digital economy will falter.

Wright said a decision on Huawei would be made irrespective of the political influences of the US, but US interference is unavoidable.

“The hon. Gentleman has said that he is concerned to ensure that this should be a decision about the interests of the UK and not the priorities of the US Administration, and I understand that,” Wright said in response to the suggestion the US has too much influence from Tom Watson, Shadow Secretary of State for Culture, Media and Sport.

“I can give him the assurance that decisions we take will be decisions in the best interests of the United Kingdom, but he knows that this is a hugely interconnected sector and it simply is not possible to make sensible judgments about telecommunications without recognising those interconnections.”

With Huawei being placed on the Entity List the performance, resilience and security of its products might be impacted in the future. Wright has said he will not make a decision on Huawei until he has all the facts, and the relationship between China and the US is a huge factor in this.

Kicking the can to avoid irritating the new boss

Despite there being pressure from influential Parliamentary groups and the telco industry to make a decision, it was always highly unlikely Wright was going to say anything until his new boss has taken residence in No.10 Downing Street.

Boris Johnson is the new Prime Minister and he will want to put his own mark on proceedings. The Huawei decision is an important one, not only for UK 5G infrastructure, but because it will impact the relationship with the US. BoJo has already shown himself as somewhat of a pet of the President and will most likely want to nurture this relationship as only he knows how.

Wright does not want to jump the gun on making a decision and potentially irritating the new boss, especially when there is a potential promotion around the corner.

David Guake, the Justice Secretary, has resigned. Education Minister Anne Milton has gone. Chancellor of the Exchequer Philip Hammond has publicly stated he would quit if BoJo won. Rory Stewart, the Secretary of State for International Development, formally announced his resignation over Twitter at 11.18am. And finally, it is highly likely Foreign Secretary Jeremy Hunt, BoJo’s opponent for PM, will be shifted elsewhere.

“The reality is that this statement is just a lot of words to confirm further delay. Why are the decisions now being left in the gift of the new Prime Minister? Is this just another case of putting the Tory party before the country?” SNP MP Alan Brown questioned.

As one of the few politicians who managed to remain neutral during the proceedings, Wright could find himself heading up a new department before too long.

Security framework will make UK more secure

This is perhaps the most encouraging snippet to emerge from a relatively shallow statement overall; security requirements will be heightened for everyone.

“Fundamentally, we must make a decision on the basis of what is in our security interests, but he is also right that if we were to focus solely on one company or country, we would miss the broader important point that our telecoms supply chain must be resilient and secure, regardless of where equipment comes from, because risk may transfer from place to place and our population is entitled to expect that the approach we take puts security at its heart, wherever the equipment comes from,” Wright stated.

Although there are few details available regarding the new security requirements, Wright has suggested there will be a more stringent framework set in place and on-going assessments to ensure standards are being maintained. This will be applicable to every supplier, irrelevant of where they have come from.

To start with, this will be a voluntary scheme for the telcos, but soon enough it will be cemented in place through legislation. This takes time, but it is encouraging that the Government recognises threats can come from anywhere, everyone has a globalised supply chain and cybercriminals are becoming much more capable.

If policies have the position of 100% secure is impossible and everyone is a potential threat, risk mitigation levels should be set higher. This is the best possible means to achieve a resilient and secure network, capable of dealing with threats irrelevant as to their origin or intention.

Vendor diversification is nothing but a smokescreen

It might sound like a wonderful plug, but suggesting the UK is going to encourage diversification in the supply chain is nothing but a distraction to attract PR points for DCMS.

“In addition, we must have a competitive, sustainable and diverse supply chain if we are to drive innovation and reduce the risk of dependency on individual suppliers,” Wright said.

“The Government will therefore pursue a targeted diversification strategy, supporting the growth of new players in the parts of the network that pose security and resilience risks. We will promote policies that support new entrants and the growth of smaller firms.”

During the statement, Wright promised work will be done to enable smaller and more innovative players to contribute to the 5G euphoria. This sounds good and, in theory, addresses a long-standing problem in the telco world, but let’s not get ahead of ourselves.

The telco industry has been attempting to create a more diverse supply chain for years, as well as adapting procurement models to ensure smaller companies can weave through the red-tape maze. There has been little progress to date and intervention from DCMS is unlikely to reap any material changes.

You also have to wonder whether Wright is tackling the challenge head-on. Wright pointed to funding which has been directed towards the West Midlands and other innovation hubs, however this is not the problem which the telco industry has been facing. The limited supply chain is most harmful in places like the access network or core. This is where there are so few suppliers and competition has been impacting the cost of deployment.

Wright might be encouraging diversification and growth for start-ups, but don’t be fooled by this statement; he is not directly tackling the biggest competition challenge the industry faces.

Long-overdue legislative overhaul and Ofcom empowerment

The legislative and regulatory landscape has needed an update for years and Wright is promising one. Not only would this put the security framework into law, it will also ensure Ofcom has the right powers to be effective in the digital economy.

“We will pursue legislation at the earliest opportunity to provide Ofcom with stronger powers to allow for the effective enforcement of the telecoms security requirements and to establish stronger national security backstop powers for Government,” Wright said.

Until the new legislation is put in place, Government and Ofcom will work with all telecoms operators to secure adherence to the new requirements on a voluntary basis.”

Many of the rules which govern the telecoms and technology industry have been written for a bygone era. This is an outcome which is largely unavoidable when you consider the speed at which progress develops nowadays. However, rules need to be brought into the 21st century.

Legislation will offer the Government more influence over commercial communications infrastructure while Ofcom will have its teeth sharpened. It’s a long-overdue update.

Not much said, but potential to progress

Overall, there was little said by Wright in terms of material progress, but there is enough evidence the UK is creeping forward toward contextual relevance. We saw hints of progress yesterday, but realistically, the new Prime Minister and his administration will dictate evolution over the coming months and years.

AT&T gets streaming with HBO Max

Gone are the days when the consumer could get all the content they wanted in one place as AT&T’s WarnerMedia joins the streaming landgrab.

With Netflix, Amazon Prime, Hulu, Disney, HBO and numerous other streaming services on the market before too long, the fragmentation of content is looking like it could be a serious problem for the consumer. Whether splitting the spoils has an overarching negative impact on the segments profits remains to be seen, but customers wallets can only be pushed so far; how many streaming services can each customer be expected to have?

That said, AT&T is in a strong position with this proposition. In HBO, it owns a lot of promising content already, playing into consumer nostalgia, and it does seem to be heading in the right direction in terms of original programming.

“HBO Max will bring together the diverse riches of WarnerMedia to create programming and user experiences not seen before in a streaming platform,” said Robert Greenblatt, Chairman of WarnerMedia Entertainment and Direct-To-Consumer.

“HBO’s world-class programming leads the way, the quality of which will be the guiding principle for our new array of Max Originals, our exciting acquisitions, and the very best of the Warner Bros. libraries, starting with the phenomenon that is ‘Friends’.”

With the service set to debut in Spring 2020, AT&T is promising 10,000 hours of programming from the outset. Full series of ‘Fresh Prince of Bel Air’, ‘Friends’ and ‘Pretty Little Liars’ will feature in the content library, as well as new dramas such as ‘Batwoman’ and ‘Katy Keene’.

Looking at future Max Original series, the list is quite extensive. ‘Dune: The Sisterhood’ is an adaptation of Brian Herbert and Kevin Anderson’s book based in the world created by Frank Herbert’s book Dune. ‘Lovecraft Country’ is a horror series based on a novel by Matt Ruff. ‘The Plot Against America’ will be a reimagined history based on Phillip Roth’s novel.

The ingredients are all in place to ensure AT&T makes a sustained stab at cracking the streaming market which has been dominated by the OTTs to date. There are a couple of questions which remain however.

Firstly, pricing. Can executives price the service competitively while also sustaining investments in content? Secondly, experience. Will the platform meet the high-expectations set by consumers thanks to the high-bar set by Netflix? And finally, culture. Will AT&T allow WarnerMedia to operate as a media business or will it impose the traditional mentality of telcos onto the business?

AT&T has bet big on the content world and it can ill-afford to fluff its lines on its debut. Having signed an $85 billion deal to acquire Time Warner and spent what seems like decades battling various government departments to authorise the transaction, the telco will need to see some ROI sooner rather than later.

The question is whether the momentum in the streaming world can be sustained. Platforms like Netflix, Hulu and Amazon Prime were attractive in the early days because there was consolidation of content onto a single library. With more streaming services becoming available, the fragmentation of content might well become a problem before too long. Consumers will have to make choices on what service to subscribe to, limiting the profits of the individual providers.

The days of subscribing to everything might be a thing of the past before too long; wallets can only be pushed so far.

Diversification into profitable segments is certainly a sensible strategy in the days of meagre connectivity profits, but $85 billion is a lot to spend on a hunch.

Verizon continues quest to correct content car crash

The Verizon mission to conquer the content world has been anything but a smooth ride to date, and now it is reportedly searching for a buyer for Tumblr.

According to the Wall Street Journal, Verizon executives are on the search to offload the platform. The Verizon Media Group has been under considerable pressure in recent months, as the promise of value through content and diversification has eluded the telco.

Looking at the most recent earnings call, Verizon Media Group revenue was $1.8 billion, down 7.2% year-on-year for the quarter. Declines in desktop advertising were primarily blamed, with the dip continuing to more than offset growth in mobile and native advertising. Considering the effort the telco had to exert to acquire Yahoo, not to mention the headaches it had to endure, some might have hoped there would be more immediate value.

The last couple of months have seen Verizon attempt to make money from the mockery, with a particular focus on job cuts. In January, it was announced 7% of the media unit’s workforce, some 800 roles, would be sacrificed to the gods of profits, and now it seems Tumblr is being marshalled to the alter.

What is worth noting is this is a platform which has promise.

After being acquired by Yahoo during 2013 for $1.1 billion, Verizon inherited Tumblr through the much mangled $4.8 billion acquisition of Yahoo in 2017. Although some might struggle to understand what Tumblr does, the all-encompassing blogging platform currently has 465.4 million blogs and 172 billion posts.

Tumblr is a tricky one to understand what it actually does, but instead of trying to pigeon hole it into a definition perhaps the better approach would be to let it just be itself. Tumblr defines itself as a blank canvas, allowing users to post text, photos, GIFs, videos, live videos and audio, or pretty much anything the user wants to.

Perhaps this is why Verizon has struggled with the brand and presumably failing to realise the potential. Telcos generally cultivate traditional and relatively closed-minded cultures. With Tumblr just being itself, rather than fitting into a tidy tick-box exercise, Verizon may be struggling to communicate the value to customers or even devise an out-of-the-box business model to monetize it effectively.

This assessment is perhaps supported by where the media business has seen success. Financial news for example, or the delivery of sports content. These are not exactly complex business models to understand, more difficult to deliver however, as they are more functional. These are the areas CFO Matt Ellis was boasting about during the earnings call.

While there has not been any official commitment or denial to the rumours from Verizon so far, there does seem to be some appetite from the industry. According to Buzzfeed, Pornhub VP Corey Price is ‘extremely interested’ in potentially acquiring Tumblr, promising to re-discover the NSFW edge, one of the factors which drove the popularity of Tumblr during the early days.

The future of Tumblr might be a bit hazy for the moment, but one thing is clear. Verizon is mapping out a very effective usecase on how not to diversify into the content world.