Orange steps further into the convergence game

Orange has announced a new partnership with Groupama, adding another branch to the convergence strategy with a home telesurveillance service.

Everyone in the industry is talking about convergence as a means to improve revenues, but few have created quite a splash in the deep-end as the cannon-balling French telco. This latest partnership with Groupama will see the creation of Protectline, a joint platform for the operation and management of home telesurveillance services.

“The upcoming launch of our home telesurveillance service is an important part of Orange’s multi-service operator strategy,” said Stéphane Richard, CEO of Orange. “To deliver the best product possible, we have again chosen to work with Groupama to pool our skills and resources, following on from our Orange Bank partnership.”

With Orange owning 51% of the new venture, it’s a very clever way for the telco to diversify revenue streams. Groupama is already a well-established player in this segment, but Orange has something which every business wants; a humongous subscriber base to potentially sell added-value services into. This is where this partnership is a stroke of genius and an excellent foundation for future convergence growth.

Orange has built a successful business and large customer base through doing what it does very well. Until recently it has focused exclusively on markets which it has a pedigree in; connectivity. Recently it has explored banking, cyber-security, entertainment and smart home services, though each has relevant-industry partners under-pinning the venture, as well as a direct tie back to the core business.

Protectline is another example of how the Orange business is embracing convergence in a low-risk, high-reward manner. Groupama has the expertise while Orange has the sales and marketing capabilities. Each is supplemented the other, leaning on the skills which are brought to the table. Its sounds incredibly simple, because it is, but it is effective. Of course, you have to wonder why there aren’t more in the industry doing this and the answer is relatively simple.

When splitting the risk, you have to split the spoils. If Protectline becomes a roaring success, Orange can only collect 51% of the riches. This might not sound attractive to other telcos, some of which have chosen to go solo on diversification to varying success; just have a look at BT’s attempt to rock Sky’s dominance in the premium TV segment.

Sky is another which has proven to be successful in the convergence and diversification game, branching out from the core TV services to offer broadband and mobile connectivity offerings. However, similar to the Orange example, the risk has been somewhat removed as the broadband offering runs over Openreach infrastructure and the Sky Mobile is a MVNO. The high-risk elements of these diversification ambitions, the CAPEX heavy infrastructure, has been removed from the equation. Sky focuses on what it does best, maintaining a relationship with its customers.

The buzz around convergence has been dying down a bit recently, as while it is an effective strategy few has realised the bonanza which was initially promised. Orange is one of those few who are reaping the considerable benefit, but only because it is not going alone.

The question which remains is whether Orange can nail the customer experience element. This would have been the big hurdle for the banking product, though it seems to have passed with flying colours. Groupama can take the operational risk away from the telco, but customer experience is slightly different in every vertical; Orange will have to prove its worth by being engaging and intuitive if this is to be a success.

Orange has realised where its strengths are and by offering this massive subscriber base as leverage is any future partnerships, it is proving the low-risk convergence game can be a very profitable one.

58% of UK business can’t detect IoT security breach – study

Digital security vendor Gemalto claims the IoT euphoria might be hitting the UK before its ready, as research shows 58% of businesses are not able to detect a breach.

First and foremost, we need to put a disclaimer on this report. Gemalto is a security company and is thus incentivised do its best scaremongering to drive revenues. The more scared companies are about potential data breaches, and the punishments which follow the incidents, the more likely they are to buy security software. Making the world a big, bad, horrible place is an effective marketing strategy for security vendors.

That said, considering the lax approach most of the industry takes towards security and data protection, we suspect many of the statistics being discussed are pretty accurate.

“The push for digital transformation by organisations has a lot to answer for when it comes to security and bad practices,” said Jason Hart, CTO of Data Protection at Gemalto. “At times it feels organisations are trying to run before they can walk, implementing technology without really understanding what impact it could have on their security.”

The most shocking figure from the report is the 42% of UK companies who are capable of detecting an IoT breach, with only France worse off at 36%. Considering the role IoT has been touted to play over the next few years as 5G hits the streets, this is an incredibly worrying statistic.

While spending on IoT security has increased from 11% of the overall IoT budget to 13%, you have to wonder what direction this money is heading. Perhaps even more concerning for those companies involved, is that 90% of them accept this will be a major buying motivator for customers. At least they are aware that security can have a direct impact on the revenues of the business now, a concept which has taken years to hammer home.

“Given the increase in the number of IoT-enabled devices, it’s extremely worrying to see that businesses still can’t detect if they have been breached,” said Hart. “With no consistent regulation guiding the industry, it’s no surprise the threats – and, in turn, vulnerability of businesses – are increasing. This will only continue unless governments step in now to help industry avoid losing control.”

IoT is set to be one of the biggest winner of the 5G bonanza, while the segment is also predicted to be the major catalyst of 6G. If predictions are anywhere near accurate, 5G networks will soon not be able to cope with the strain of IoT, driving the case for 6G due to the sheer number of ‘things’ connected to the network.

Looking at the predictions, IDC believes the IoT market will grow to be worth more than $1.2 trillion by 2022, with consumer devices expected to account for the largest share at 19%. Ericsson has forecasted the number of cellular IoT connections to reach 3.5 billion in 2023, increasing at a CAGR of 30%.

Security remains a major challenge for the industry, though the buzz around blockchain could provide a suitable means to meet the expectations of the consumer. In the absence of regulation, Gemalto notes the adoption of blockchain technologies has doubled from 9% to 19% in the last 12 months, with 23% of the respondents to this survey believe the technology would be an ideal solution to use for securing IoT devices. 91% who are not using blockchain are considering it for the future.

“Businesses are clearly feeling the pressure of protecting the growing amount of data they collect and store,” said Hart.

“But while it’s positive they are attempting to address that by investing in more security, such as blockchain, they need direct guidance to ensure they’re not leaving themselves exposed. In order to get this, businesses need to be putting more pressure on the government to act, as it is them that will be hit if they suffer a breach.”

While research like this does indicate security is becoming a more serious topic in the world of telecoms and technology, it also confirms there is a very wide gap to close. Security has long been the ugly duckling of the industry, many seemingly choosing to ignore the challenges because they are too difficult to solve, though new regulations such as GDPR has perhaps forced the issue up the agenda.

Interestingly enough, should the telcos get serious about security there would certainly be a revenue generating opportunity to capitalise on. With cyber security incidents and data breaches becoming more prominent in the news, consumers are gradually becoming more aware of the risks of the internet and the emerging digital society. While the industry has played down the risk in recent years, the incidents speak for themselves.

An excellent example of turning this scenario into a business opportunity lies with Orange, the master of the convergence strategy. Here, the team have invested heavily in cyber security capabilities and are now offering security services to customers as a bolt on to other connectivity packages. The move has proven to be a success as while it is generally becoming accepted that 100% secure is impossible nowadays, more people are willing to do something about it.

Security is a topic which has always been in and around the news, but few want to do anything proactive about it. Unfortunately, with the perimeter expanding so rapidly as IoT penetration grows, these statistics are incredibly worrying. Perhaps regulators will get the chance to swing the GDPR stick before too long after all.

EU Advisor tells France to forget about global ‘right to be forgotten’

The Advocate General of the European Court of Justice has given his opinion on the ‘right to be forgotten’ conflict between France and Google, and its good news for the ‘do no evilers’.

Advocate General, Maciej Szpunar, has been pondering the implications of the ‘right to be forgotten’ saga for some months now, and the opinion is relatively simple; France does not have the right to impose its own considerations on a company which operates outside its jurisdiction.

The French regulator can force Google to de-list search results on the grounds of privacy in France, and generally across the EU, though it does not have the authority to impose itself on the companies worldwide footprint. As the Advocate General notes, the repercussions of such a ruling would have too much potential to cause damage in various other scenarios.

The case is somewhat of a tricky one, as it does have implications in the contentious world of privacy/free speech/accountability. And while the European Court of Justice does not have to follow the opinion of the Advocate General, it generally does.

“This is a really important case pitting fundamental rights to privacy against freedom of expression,” said Richard Cumbley, Partner and Global Head of Technology at law firm Linklaters. “The case highlights the continuing conflict between national laws and the Internet which does not respect national boundaries.

“The opinion contains a clear recommendation that the right to remove search results from Google should not have global effect. There are a number of good reasons for this, including the risk other states would also try and supress search results on a global basis. This would seriously affect people’s right to access information.”

The case dates back to the early months of 2018, with the CNIL, France’s data protection watchdog, suggesting the search giant should have to enforce any ‘right to be forgotten’ rulings to all of its domains instead of just that of the home nation of the challenging regulator. Google, and various other free speech advocacy groups, have been suggesting France and the European Union are attempting to impose their own data privacy position on the rest of the world.

Looking at the ramifications, those of us who have more long-term considerations would certainly be thankful of Szpunar’s opinion. As Cumbley points out above, this case could be used as evidence by other nations to supress free speech or opinions which are not in-line with the political climate. Precedent is everything in the legal community, and while it hopefully does not intend to, France may be aiding more authoritarian governments in trying to impose its privacy demands on Google.

What is worth noting is that this opinion is not an official ruling from the European Court of Justice, though it does generally head in the same direction as the Advocate General.

France goes solo in quest to hold Silicon Valley accountable

With some European nations unable to summon up the courage to tackle the infamous creative tax strategies of the internet giants, France has decided to write its own rules.

The topic of a digital tax which would span the length and breadth of the European continent was initially a popular one. Perhaps it was the camaraderie which swept the states into the tides of change, or maybe there as a brief window to score political PR points, though the momentum has not carried through. Initial plans were abandoned, water-down ones vetoed by self-interested nations, and France has had enough.

Announced on French national television, Economy and Finance Minister Bruno Le Maire laid out the new tax plans which will come into play on January 1. Over the course of the next twelve months, Le Maire believes the new structure will generate €500 million for the state.

“The digital giants are the ones who have the money,” said Le Maire. “[the internet players] make considerable profits thanks to French consumers, thanks to the French market, and they pay 14 percentage points of tax less than other businesses.”

It might not be the collective-push back against Silicon Valley which was initially proposed, but it is progress. Waiting for all 28 (soon to be 27) states to agree on a co-ordinated approach would have taken years, such is the bureaucratic struggle and the lobby power of the internet players, so it is quite refreshing for the French to say enough is enough and take a prominent stance against those who have been obviously and unashamedly abusing tax loopholes.

While many would point to the beauty of the European Union, offering scale to negotiate more effective trade deals, the beast has emerged from the shadows in this saga. For any meaningful changes to be implemented, all states would have to agree. This was always going to be a stumbling block. Sweden voiced concerns, unsurprising as Spotify was one of those firms in the crosshair, while Ireland vetoed on the grounds it would potentially damage trade relationships with the US.

Thankfully the French are not scared of said repercussions. Or perhaps we should be more accurate. There might be fear, but that does not mean the French are going to allow the internet players to run wild. The White House might suggest this is a tax aimed at the US economy, but that is irrelevant as far as we are concerned. This is a tax reform which is overdue.

Whether this inspires the other nations to move in the right direction remains to be seen, though the UK might not wait around either. Chancellor of the Exchequer Phillip Hammond has previously stated he, or the UK government, would not wait for the rest of Europe to hold Silicon Valley accountable.

Unfortunately, the most likely outcome is a fractured tax landscape, with some pushing forward more stringent rules and others getting bullied by the expensive lobbyists. This of course undermines the concept of the European Union, but also opens the door a crack for abuse.

The bureaucrats might attempt to colour in all grey areas, but very expensive lawyers in California will be pouring over any new rules attempting to find the weak spot. And in a fractured tax landscape, there is bound to be a few if you look hard enough.

France and Germany give OTTs early Xmas gift in digital tax saga

Europe ambitious plans to hold the internet giants accountable to fair and reasonable taxation have been temporarily scuppered after resistance from several nations, most notably France and Germany.

While Silicon Valley is still not in the clear, the internet giants will be breathing a deep sigh of relief as their hard-working lobbyists are given another couple of months to influence the plans. France and Germany seem to be the main opponents of the aggressive tax assault, drawing up their own suggestions at the G20 Summit which would allow many of the biggest players to continue to dodge the tax man.

The initial plan was relatively simple; hold the internet players accountable to fair and reasonable conditions by implementing a 3% tax on digital revenues realised in EU member states. This would have placed all the current tax dodgers on the block. The Franco-German joint declaration was supposed to be a compromise, answering the initial opposition, but it seems this watered-down version is not going far enough.

While the Franco-German version of the digital tax certainly is much diluted compared to the initial proposals, it has still been resisted by other players who are protecting their own interests. It seems the ‘all for one and one for all’ theoretical attitude of the European Union does not translate directly into Irish or Norwegian.

“Following a thorough analysis of all technical issues, the presidency put forward a compromise text containing the elements that have the most support from member states,” a statement from The European Council reads. “However, at this stage a number of delegations cannot accept the text for political reasons as a matter of principle, while a few others are not satisfied yet with some specific points in the text. That text did not gain the necessary support and was not discussed in detail.”

Unfortunately for the European Union, this is the issue with any material changes made to rules and regulations. A collection of 27 member states certainly creates influence on the global and political stage, though it only takes one detractor to spoil any plans.

Looking at the suggested middle ground, a Franco-German joint declaration made a point which will please some more than others. The objection here is down to the wording of the proposal with France and Germany believing advertising revenues should be targeted, pushing Facebook and Google into the line of fire, as opposed to digital revenues as a generic term.

In France and Germany, some of the world’s largest internet-based businesses would gain a reprieve. Should the new rules target digital advertising revenues specifically, while subscription services, hardware and online marketplaces would escape. The likes of Amazon, Apple and Spotify would be free to continue practising their suspect taxation strategies.

The pattern of affairs here is something which should be pleasing for the internet giants, or at least most of them. What started as an assault on the internet players is starting to look like a very different battle nowadays, leaning much more towards Google and Facebook specifically.

These two might feel a bit victimised, but the ways things are heading it looks like a deal which is accepted by every member state would not be the victory the Brussels bureaucrats originally envisioned. With bureaucrats under pressure to produce a plan, accepted by all member states by March 2019, a lighter touch approach will be needed. We suspect such a plan will be put together, championed as a revolutionary position, though the internet players will be given enough wiggle room to ensure there is no meaningful victory.

What will help internet players sleep at night is the knowledge they only need to get one member state on side to veto the battle plan. Rev up the lobby machine!

Orange hits green button on LTE-M network

Orange has unveiled its Long Term Evolution for Machines (LTE-M) network in France, with plans to launch in Spain and Romania by the end of the year.

Having launched its first LTE-M network in Belgium in May 2018, the French deployment will enable Orange to build new products and services in anticipation of boomtime in the IoT market. Technology will be deployed in each market dependent on the demand for particular services.

Orange will now begin offering services to all enterprise customers who have subscribed to the Orange full IOT offering, focusing particularly on logistical monitoring, telemonitoring, remote assistance and fleet management. The move underpins Orange’s efforts to diversify its core business, with the ‘connected economy’ high up on the list.

With France and Belgium up and running, plans to open up new networks in Spain and Romania, and other tests running throughout Europe, a pan-European offering does offer Orange an edge in the enterprise IOT game. Looking at the enterprise side of Orange, this is certainly an area which has been given attention in recent months.

Back in August, the cloud armoury was given a shot in the arm with the acquisition of  infrastructure and critical application services company Basefarm for €350 million. Alongside the additional skills, with a presence in Norway, Sweden, the Netherlands, Austria and Germany, the pan-European ambitions are being met.

Google fights back against EU plans to impose its regulations on rest of world

Today the European Court of Justice will make a decision which will impact the global digital economy. Does the European Union have the right to impose its own data protection and privacy standards on everyone else?

The one-day hearing has been brought about because of French data protection watchdog, CNIL, pressing for Google to extend the ‘right to be forgotten’ ruling to all of its domains. When such a request is made and accepted, Google will remove content from search results in the relevant domain (e.g. .fr in France for example), but also when users from that country are searching through other domains (e.g. .com or .co.uk). CNIL argues the content should be removed from all domains, irrelevant where the user is based.

“This case could see the right to be forgotten threatening global free speech,” said Thomas Hughes, Executive Director of free speech advocacy group Article 19. “European data regulators should not be allowed to decide what Internet users around the world find when they use a search engine. The CJEU (European Court of Justice) must limit the scope of the right to be forgotten in order to protect the right of Internet users around the world to access information online.”

While it might not seem like the most damning of cases, the ripples from this ruling could quickly become turbulent waves. Google and numerous other free speech advocacy groups argue this is simply France, and the European Union, pursuing their own form of censorship, imposing their own standards on other nations around the world. Should the judges rule in favour of CNIL precedent would be set and precedent can be very dangerous.

If the European Union can force other countries into complying with its regulations, why shouldn’t others?

“If European regulators can tell Google to remove all references to a website, then it will be only a matter of time before countries like China, Russia and Saudi Arabia start to do the same,” said Hughes. “The CJEU should protect freedom of expression not set a global precedent for censorship.”

The question these judges have to answer is a relatively simple one on the surface; should governments and regulators have influence over those who live in their jurisdiction or should they be afforded power over everyone else as well? For us, the answer is incredibly simple as well; no it shouldn’t.

The whole concept of the CNIL argument is contradictory and patronising; it’s a form of digital colonialism, with France assuming it is the moral, ethical and political authority on such matters. If China or Russia were pressing for their rules to be imposed on the international stage, there would be uproar. Of course, the rules in these countries are backwards, though the principle remains the same. France should not be allowed to dictate to other countries around the world.

This is another example of globalisation trends working against the consumer. Companies like Google make use of the grey areas and cracks between the legislative and regulatory regimes of different countries. They take advantage of lighter-touch regulation in some countries, remaining out of reach of those who are more involved. The absence of an international code or ruling authority simply offers the internet players a blank rule book and encourages lawyers to look for loop-holes to ignore regulations in more privacy-sensitive countries. That said, the will of one nation, or a dozen or 28, should not be imposed on the rest of the world.

For Telecoms.com, the decision is a simple one; France should be told to govern its own country and not get involved in jurisdictions which does not concern it. The precedent set would be far too dangerous.

Iliad share price continues to tumble as competition heats up

The share price of French telecoms wild-child Iliad has continued to tumble as lukewarm results fail to impress investors looking for a spark in the broadband business.

Since the turn of the year, the erosion of share price has been quite noticeable. Some companies might be able to accept a small blip in performance, but a 45% decline over the last ninth months will certainly have the executive team shifting uncomfortably. Revenues remained relatively stable, however losing 70,000 subscribers in mobile and 47,000 in broadband over the first half of the year is a worrying trend.

Looking specifically at the financial side of the results, total revenues stood at €2.4 billion, a minor decrease on the same six month period of 2017, with mobile rising 2.4% to just over €1 billion and broadband dropping 2.2% to $1.3 billion. Italy brought in €9 million, though the team has been boasting of reaching 1.5 million subscriptions in early August. This seems to be one of the few bright spots in the six months.

Having kicked off the race to the bottom, causing chaos for the incumbent mobile providers during 2012, Iliad seems to be getting a taste of its own medicine with a competitive market being blamed for the tepid performance. Unfortunately for the telco, the misery is not being equally shared as rivals Orange , SFR and Bouygues Telecom all gained subscribers over the same period. Stability in the revenue column might be an uptick, but investors should be concerned about the first drop in mobile subscriptions since the 2012 launch, and a cash-intensive fibre business which is not hitting the marks.

That said, Iliad caused chaos once and has the potential to do it again.

The management team has excepted this performance is not good enough, though various new initiatives will look to return the business to a new growth cycle. On the mobile side of things, new tariffs have been introduced to diversify the subscriber mix, while incentives have been put in place to upgrade users to the more lucrative 4G contracts. 4G subscriptions did increase by 200,000 over the period, and the team are targeting a 25% market share, though have declined to put any deadlines on the objective. Perhaps this is one of the reasons for a lack of confidence in the business, no commitment to top-line objectives.

In the broadband business, a new promotional campaign with competitive prices has been introduced, as well as a play to catch attention through TV services. The content side is yet to be launched, and it will be interesting to see whether Iliad takes the value add or revenue generation approach to content. We suspect with subscribers numbers going south, a value add proposition would be a much more sensible approach to stemming the consistent flow of customers heading towards the exit.

Orange continues to bang convergence drum

Virgin Media might be struggling to live the convergence dream in the UK, though Orange doesn’t seem to be having any problems as it reports another positive set of results.

Total revenues for the first half came in at €20.2 billion, a year-on-year increase of 0.9%, while operating income grew much more favourable, an increase of 2.8% to €2.35 billion. While this might be the highest profit margin in the industry, Orange has continued to demonstrate it is building for the future investing another €3.36 billion in CAPEX, 16.6% of total revenues delivered over the six month period.

“The 1st half results showed accelerated growth across all the Group’s financial metrics,” said CEO Stéphane Richard. “Revenues grew in all our regions while the strong acceleration in the Group’s adjusted EBITDA, which rose 3.3% during the half, reinforced our strategy of differentiation on the basis of service quality and demonstrated our constant focus on operational efficiency.

“Our investment strategy in fibre and 4G is reflected in the sharp increase in our very high-speed broadband customer base. Orange now has 50 million 4G customers with 13 million in Africa, twice as many as a year ago. In fixed very high-speed broadband, the customer base continued to show particularly strong growth enabling us to reach 5.5 million customers, almost exclusively in fibre.”

Looking at the convergence strategy, the team reported an increase of 9% in convergent offers year-on-year, a total of 10.7 million customers, while the number of SIMs attached to these offers increased to 18 million. Orange often boasts about being the leading convergent player in Europe, and with numbers like these it is hard to argue otherwise.

Spain has continued to be a strong market for the business through this period, and following the conclusion of the spectrum auctions, it is looking to be in a solid position for the 5G race. During the auction, Orange Spain acquired 12 blocks of frequencies, paying €132 million, representing 60 MHz in the priority spectrum band to offer 5G services. Orange is now the only operator in Spain in reach a total of 100 MHz in this spectrum band, which it claims is essential for the development of the new ultra-fast mobile broadband technology.

France targets 2020 5G rollout

French regulator Arcep has laid out its 5G roadmap with ambitions to launch the mobile euphoria in at least one major city by 2020, and provide 5G coverage of the main transport routes by 2025.

The plan, which has been given the thumbs up by both Delphine Gény-Stephann, Secretary of State for Economic Affairs and Finance and Mounir Mahjoubi, Secretary of State for Digital Affairs, will aim to retain French competitiveness in the digital era as Europeans look like they are losing touch with the US and the leading nations in Asia. Along with the headline 2020 and 2025 objectives of the roadmap, Arcep has also outlined the underlying ambitions; free up and allocate radio frequencies, the development of new uses, encourage new infrastructure investments and a communications strategy which will keep the public informed.

Aside from the complicated task of freeing up the 3.4-3.8 GHz, 26 GHz and the 1.5 GHz bands, Arcep will also manage a number of working groups to define the technical conditions for using the bands, to avoid interference between 5G networks and with existing applications, as well establish the allocation procedures and timetable to enable 5G service launches in 2020. Elsewhere, the regulator will also assess the feasibility of network sharing, which might prove to be a complicated task in a market where the telcos are not necessarily on the friendliest of terms.

Although it has been a slow start for the French, there does seem to be some gathering momentum. Arcep opened a 5G Pilot window in January of this year, and has approved 22 trials in the 3.4-3.8 GHz band since that point. The majority of these trials are based in Paris, though Arcep has prioritized cohesion in the ecosystem as a means to success for 5G. Aside from the network sharing ambitions, the regulator is also targeting a mobilisation of the start-up community through briefings and education programmes, ensuring this segment hits the ground running.

Setting out the roadmap for the delivery of 5G is the first step in the right direction, but now comes the complicated jobs for Arcep; making sure everyone does what they are supposed to. Local authorities seem to be playing a more notable role here than in many other areas, perhaps owing to the size of the country and the increased isolation of some communities in comparison to other nations. A necessary step, but making sure these paper pushers do not slow-down the rollout will be a difficult task.